As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 333-50805
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ON
FORM S-4/A
----------------
CARRAMERICA REALTY CORPORATION
--------------------------------------------------------------
(Exact Name of Primary Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
Maryland 6798 52-1796339
-------- ---- ----------
<S> <C> <C>
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of Incorporation or Organization) Classification Code Number)
</TABLE>
CARRAMERICA REALTY, L.P.
-----------------------------------------------------------------
(Exact Name of Additional Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
Delaware 6798 52-1976308
-------- ---- ----------
<S> <C> <C>
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of Incorporation or Organization) Classification
Code Number)
</TABLE>
1850 K Street, N.W., Suite 500
Washington, D.C. 20006
(202) 729-7500
--------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrants' Principal Executive Offices)
Brian K. Fields
Chief Financial Officer
CarrAmerica Realty Corporation
1850 K St., N.W., Suite 500
Washington, D.C. 20006
(202) 729-7500
---------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------
Copies to:
J. Warren Gorrell, Jr., Esq.
David W. Bonser, Esq.
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
(202) 637-5600
Approximate date of commencement of proposed sale to the public: As soon as
possible after the effective date of this Amendment.
================================================================================
The Registrants hereby amend the Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrants shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 2, 1998
PROSPECTUS
[CarrAmerica Logo]
CARRAMERICA REALTY CORPORATION
CARRAMERICA REALTY, L.P.
Offer to Exchange
6.625% Exchange Notes due 2005 for
Any and All Outstanding 6.625% Notes due 2005
and
6.875% Exchange Notes due 2008 for
Any and All Outstanding 6.875% Notes due 2008
The Exchange Offer and Withdrawal Rights Will Expire at 5:00 p.m.,
New York City Time, on August [ ], 1998, Unless Extended
CarrAmerica Realty Corporation, a Maryland corporation (the "Company"),
and CarrAmerica Realty, L.P., a Delaware limited partnership (the "Guarantor"
and, together with the Company, the "Issuers"), hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange $1,000 principal amount of the Company's 6.625% Exchange Notes due 2005
(the "New Seven-Year Notes") for each $1,000 principal amount of the Company's
issued and outstanding 6.625% Notes due 2005 (the "Old Seven-Year Notes" and,
together with the New Seven-Year Notes, the "Seven-Year Notes") and $1,000
principal amount of the Company's 6.875% Exchange Notes due 2008 (the "New
Ten-Year Notes") for each $1,000 principal amount of the Company's issued and
outstanding 6.875% Notes due 2008 (the "Old Ten-Year Notes" and, together with
the New Ten-Year Notes, the "Ten-Year Notes"). All of such Notes are guaranteed
by the Guarantor. As of the date of this Prospectus, there were outstanding
$100,000,000 principal amount of Old Seven-Year Notes and $100,000,000 principal
amount of Old Ten-Year Notes (collectively, the "Old Notes"). The terms of the
New Seven-Year Notes and the New Ten-Year Notes (collectively, the "New Notes"
and, together with the Old Notes, the "Notes") are identical in all material
respects to the Old Notes, except that the New Notes will be freely transferable
by their holders (except as described herein). The New Notes evidence the same
debt as the Old Notes and will be issued and entitled to the same benefits under
the Indenture relating to the Old Notes.
Interest on the Notes is payable semiannually on March 1 and September
1 of each year, commencing September 1, 1998. Holders who exchange their Old
Notes for New Notes in the Exchange Offer will receive interest accrued on their
Old Notes and interest accrued on their New Notes in one interest payment,
payable on September 1, 1998. The Notes are redeemable, in whole or in part, at
the option of the Company at any time at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed plus (ii) accrued interest
thereon to the date of redemption plus (iii) the Make-Whole Amount (as defined),
if any. The Notes are senior unsecured obligations of the Company and rank
equally with each other and with the Company's other unsecured and
unsubordinated indebtedness. The Company's obligations under the Notes are
unconditionally guaranteed by the Guarantor. The Notes are effectively
subordinated to mortgages and other secured indebtedness of the Company and the
Guarantor as well as to indebtedness and other liabilities of the Company's and
the Guarantor's subsidiaries.
The Old Notes originally were issued and sold on February 23, 1998 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on the exemptions provided in Section 4(2) of and
Rule 144A under the Securities Act. The Issuers are making the Exchange Offer in
reliance on positions of the staff of the U.S. Securities and Exchange
Commission (the "SEC") set forth in certain no-action letters issued to other
parties in other transactions. The Issuers have not sought their own no-action
letter, however, and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the
(Cover continued on next page)
---------------------
See "Risk Factors" beginning on page 9 for a discussion of certain risk
factors that should be considered by holders before deciding whether or not to
tender their Old Notes in the Exchange Offer.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July , 1998.
<PAGE>
(Cover continued from previous page)
Exchange Offer. Based upon such positions of the SEC staff, the Issuers believe
that the New Notes issued in the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by the holders thereof
(other than a holder that is a broker-dealer, as set forth below, or an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in a distribution of such New
Notes. Holders of Old Notes accepting the Exchange Offer are required to
represent to the Issuers in the Letter of Transmittal that such conditions have
been met. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuers will use their reasonable
best efforts to make this Prospectus available to any such broker-dealer for use
in connection with any such resale for such period of time as broker-dealers
must deliver a prospectus, up to 90 days after the consummation of the Exchange
Offer.
The New Notes are new securities for which there currently is no
trading market. The Issuers do not intend to apply for listing of the New Notes
on any securities exchange or for quotation through any automated quotation
system. The Initial Purchasers (as defined) have advised the Company that they
currently intend to make a market in the New Notes after the Exchange Offer as
permitted by applicable laws and regulations, although they are not obligated to
do so and may discontinue any market making activity at any time without notice.
Accordingly, there can be no assurance that a trading market for the New Notes
will develop or, if one does develop, that it will be sustained. If an active
trading market for the New Notes fails to develop or be sustained, the trading
price of the New Notes could be materially adversely affected.
Any Old Notes not tendered and accepted in the Exchange Offer will
remain subject to the existing restrictions on transfer of the Old Notes, and
the Issuers will have no further obligations to the holders (other than to the
Initial Purchasers) of such Old Notes to provide for their registration under
the Securities Act. It is not expected that a trading market in the Old Notes
will develop while they are subject to restrictions on transfer. In addition, a
holder's ability to sell Old Notes could be adversely affected to the extent
that Old Notes are tendered and accepted in the Exchange Offer.
The Issuers will accept for exchange any and all Old Notes that are
validly tendered and not withdrawn on or before 5:00 p.m., New York City time,
on the date the Exchange Offer expires, which will be August [ ], 1998 (the
"Expiration Date"), unless the Exchange Offer is extended by the Issuers in
their sole discretion, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended. Tenders of Old
Notes may be withdrawn at any time before 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum amount
of Old Notes being tendered for exchange, but the Exchange Offer is subject to
certain conditions that may be waived by the Issuers and to certain other terms
and conditions. Old Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Issuers have agreed to pay all of the expenses
incurred by them in connection with the Exchange Offer.
The Issuers will not receive any cash proceeds from the issuance of the
New Notes in the Exchange Offer.
This Prospectus, together with the Letter of Transmittal, is being
first sent to all registered holders of Old Notes on or about July [ ], 1998.
<PAGE>
TABLE OF CONTENTS
Information Incorporated by Reference................. 2
Available Information................................. 2
Summary............................................... 3
Risk Factors.......................................... 9
The Exchange Offer.................................... 17
Description of Notes.................................. 23
Note Guarantees .................................... 31
Certain Federal Income Tax Consequences............... 32
The Company........................................... 33
Capitalization........................................ 37
Ratios of Earnings to Fixed Charges.................... 37
Recent Developments................................... 37
Plan of Distribution.................................. 39
Legal Matters......................................... 39
Experts............................................... 39
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The documents listed below have been filed by the Issuers with
the U.S. Securities and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and are incorporated
herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
3. The Company's Current Reports on Form 8-K/A filed on January 7, 1998
and on Form 8-K filed on February 5, 1998 (and an amendment thereto on
Form 8-K/A filed on February 11, 1998), February 18, 1998 (two
reports), April 3, 1998, April 8, 1998, April 16, 1998, April 28, 1998,
May 7, 1998 and July 1, 1998.
4. The Guarantor's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
5. The Guarantor's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
6. The Guarantor's Current Reports on Form 8-K filed on January 15,
1998, February 18, 1998 (two reports), February 19, 1998, and February
23, 1998.
All documents filed with the SEC after the filing of this Prospectus by
each of the Company and the Guarantor pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act and before termination of the Exchange Offer shall be
deemed to be incorporated by reference in this Prospectus and be a part hereof
from the time of filing of such document.
Any statement in this Prospectus or in a document incorporated or
deemed to be incorporated by reference in this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that
another statement in a subsequently filed document that is incorporated or
deemed to be incorporated by reference in this Prospectus modifies or supersedes
the first statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. Subject to the foregoing, all information appearing in this
Prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference.
AVAILABLE INFORMATION
The Issuers will provide without charge to any person to whom a copy of
this Prospectus is delivered, upon their written or oral request, a copy of any
or all of the documents incorporated by reference in this Prospectus (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference in such documents). Written requests for such copies should be
addressed to Secretary, CarrAmerica Realty Corporation, 1850 K St., N.W.,
Suite 500, Washington, D.C. 20006, telephone number (202) 729-7500.
The Issuers are subject to the informational requirements of the
Exchange Act, and, in accordance therewith, file reports and other information
with the SEC. Such reports and other information can be inspected at the Public
Reference Rooms maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the following regional offices of the SEC: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such information can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Certain of such information
may be accessed electronically at the SEC's World Wide Web site at
http://www.sec.gov. In addition, the Company's Common Stock and certain classes
of its Preferred Stock are listed on the New York Stock Exchange and the reports
filed by the Company with the SEC and other information concerning
<PAGE>
the Company can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The Issuers have filed with the SEC a registration statement on
Form S-4 (the "Registration Statement"), of which this Prospectus is a part,
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the SEC.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the securities offered hereby, reference is hereby
made to the Registration Statement and such exhibits and schedules, which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission and accessed electronically at
the SEC's World Wide Web site at the addresses set forth in the previous
paragraph.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates or requires otherwise, references in this
Prospectus to the "Company" are to CarrAmerica Realty Corporation, a Maryland
corporation, and its subsidiaries, references to the "Guarantor" are to
CarrAmerica Realty, L.P., a Delaware limited partnership, and references to the
"Issuers" are to the Company and the Guarantor collectively.
Special Note Regarding Forward-Looking Statements
Certain statements in this Prospectus and in the documents incorporated
by reference herein, including those set forth under "Risk Factors" herein,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company and its
affiliates or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
national and local economic, business and real estate conditions that will,
among other things, affect demand for office properties, availability and
creditworthiness of tenants, the level of lease rents and the availability of
debt and equity capital for both tenants and the Company, adverse changes in
real estate markets including, among other things, competition with other
companies, risks of real estate acquisition and development (including the
failure of pending acquisitions to close and pending developments to be
completed on time and within budget), actions, strategies and performance of
affiliates that the Company may not control, governmental actions and
initiatives, and environmental/safety requirements.
The Company
The Company is a fully integrated, self-administered and self-managed
publicly-traded real estate investment trust ("REIT") that focuses primarily on
the acquisition, development, ownership and operation of office properties in
select suburban markets across the United States. As of March 31, 1998, the
Company owned interests in 258 operating properties containing approximately
20.1 million square feet of office space located in 16 markets, 49 properties
under construction that will contain approximately 4.3 million square feet of
office space, and land and options to acquire land that are expected to support
the future development of up to 5.2 million square feet of office space. As of
March 31, 1998, the Company's consolidated operating properties were 95.3%
leased.
The following table provides an overview of the Company's portfolio by
market as of March 31, 1998:
<TABLE>
<CAPTION>
OPERATING PROPERTIES DEVELOPMENT
---------------------------------- ---------------------------
PERCENT FUTURE
OF TOTAL SQUARE BUILDABLE TOTAL
SQUARE SQUARE FOOTAGE UNDER SQUARE POTENTIAL
MARKET NUMBER FOOTAGE FOOTAGE CONSTRUCTION FOOTAGE(1) SQUARE FOOTAGE(2)
- ----------------------------------------- ------ ---------- ---------- ------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Northern California:
San Francisco Bay Area................. 70 4,763,000 23.8% 1,030,000 154,000 5,947,000
Sacramento............................. 8 315,000 1.6 -- -- 315,000
Metropolitan Washington, D.C.:
Downtown............................... 9 2,137,000 10.6 -- 221,000 2,358,000
Suburban............................... 7 1,273,000 6.3 323,000 -- 1,596,000
Southern California:
Orange County/Los Angeles.............. 31 1,465,000 7.3 -- 136,000 1,601,000
San Diego.............................. 7 448,000 2.2 182,000 157,000 787,000
Suburban Atlanta......................... 44 1,964,000 9.8 204,000 211,000 2,379,000
Suburban Chicago......................... 10 1,575,000 7.8 91,000 627,000 2,293,000
Southeast Denver......................... 12 1,189,000 5.9 275,000 452,000 1,916,000
Suburban Dallas.......................... 11 1,333,000 6.6 840,000 499,000 2,672,000
Suburban Phoenix......................... 9 1,093,000 5.4 137,000 367,000 1,597,000
Suburban Seattle......................... 19 879,000 4.4 327,000 286,000 1,492,000
Suburban Austin, Texas................... 9 640,000 3.2 620,000 971,000 2,231,000
Suburban Salt Lake City.................. 8 463,000 2.3 122,000 121,000 706,000
Boca Raton, Florida...................... 2 441,000 2.2 188,000 388,000 1,017,000
Tampa, Florida........................... -- -- -- -- 202,000 202,000
Suburban Portland, Oregon................ 2 126,000 0.6 -- 444,000 570,000
------ ---------- ---------- ------------- ---------- -----------------
Total.................................. 258 20,104,000 100.0% 4,339,000 5,236,000 29,679,000
------ ---------- ---------- ------------- ---------- -----------------
------ ---------- ---------- ------------- ---------- -----------------
</TABLE>
- ------------------
(1) Represents estimated buildable square footage with respect to land held for
future development (including land subject to options and excluding square
footage under construction) as available under current zoning and
entitlements, subject to approval of plans and other governmental actions
and certain other conditions. There can be no assurance that the Company
will commence or complete future development on any parcel of land held for
future development, or that the future buildable square footage with respect
to any such parcel of land will not change due to factors beyond the
Company's control.
(2) Equals the sum of Square Footage, Square Footage Under Construction and
Future Buildable Square Footage.
3
<PAGE>
The Company has maintained a strategic alliance with Security Capital
U.S. Realty, a European real estate company (together with its wholly-owned
subsidiary, "SC-USREALTY") since November 1995. As of April 30, 1998,
SC-USREALTY owned approximately 39.9% of the outstanding common stock, par
value $.01 per share ("Common Stock"), of the Company (36.2% on a fully
diluted basis).
The Company and its predecessor, The Oliver Carr Company, have been in
the real estate business in the Washington, D.C. metropolitan area for more than
35 years. In late 1995, the Company shifted its focus from downtown Washington,
D.C. to a national business strategy. The Company provides a full range of real
estate services through a staff of over 1,800 employees located throughout the
United States. See "The Company."
Selected Financial Information
The following table sets forth selected financial and operating
information for the Company as of and for the years ended December 31, 1997,
1996 and 1995. This information is derived from and should be read in
conjunction with the audited financial statements of the Company, which
statements have been audited by KPMG Peat Marwick LLP, independent public
accountants, and are incorporated in this Prospectus by reference. In addition,
the following table sets forth selected financial and operating information for
the Company as of and for the three months ended March 31, 1998, which
information is derived from the unaudited financial statements of the Company.
The following selected financial and operating information should be
read in conjunction with the discussion under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's most
recent annual report on Form 10-K and quarterly report on Form 10-Q incorporated
herein by reference:
4
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ --------------------------------------
1998 1997 1996 1995
------------ ------------ ---------- --------
(unaudited)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Real estate operating revenue:
Rental revenue.......................... $ 100,329 $ 325,502 $ 154,165 $ 89,539
Real estate service revenue............. 2,990 15,998 12,512 11,315
OmniOffices Executive Suites Revenue.... 15,648 17,865
Real estate operating expenses:
Property operating expenses............. 32,516 114,826 51,927 31,579
Interest expense........................ 17,161 51,528 31,630 21,873
Executive Suites Operating Expenses..... 13,854 15,728
General and administrative expenses..... 6,439 21,839 15,228 10,711
Depreciation and amortization........... 23,643 76,958 38,264 18,495
Net income............................... 44,509 78,132 24,318(1) 12,067(1)
Dividends paid to common stockholders.... 27,749 97,195 42,914 23,344
PER SHARE DATA:
Basic net income before extraordinary
item................................... $ 0.60 $ 1.23 $ 0.90 $ 0.90
Diluted net income before extraordinary
item................................... 0.59 1.23 0.90 0.90
Dividends paid to common stockholders.... .4625 1.75 1.75 1.75
Weighted average shares outstanding(2)... 62,788 59,597 26,999 13,338
BALANCE SHEET DATA (AT PERIOD END):
Real estate, before accumulated
depreciation............................ $2,907,688 $ 2,689,499 $1,539,998 $480,589
Real estate, after accumulated
depreciation............................ 2,713,264 2,505,233 1,420,341 381,716
Total assets............................. 3,044,627 2,744,060 1,536,564 458,860
Mortgages payable........................ 575,577 590,645 440,449 317,374
Senior Unsecured Notes................... 475,000 275,000
Other indebtedness....................... 259,301 163,301 215,000
Total indebtedness....................... 1,309,878 1,028,946 655,449 317,374
Minority interest........................ 91,706 74,955 50,597 34,850
Total stockholders' equity............... 1,560,625 1,552,697 787,478 95,543
OTHER DATA:
Net cash provided by operating
activities.............................. 83,119 $ 138,628 $ 82,300 $ 35,277
Net cash used by investing activities.... (318,828) (1,004,284) (876,947) (81,635)
Net cash provided by financing
activities.............................. 236,735 861,864 813,067 37,113
Funds from operations before minority
interest of the Unitholders of Carr
Partnerships(3)......................... $ 50,563 $ 153,262 $ 64,496(1) $ 33,190(1)
Weighted average shares and Units
outstanding(4).......................... 67,255 62,116 32,263 18,157
Number of properties (at period end)..... 258 243 159 13
Square footage (in thousands, at period
end).................................... 20,104 19,104 12,430 3,326
Percent leased (at period end)........... 95.3% 95.9% 93.6% 93.5%
EBITDA(5)................................ $ 67,929 $ 215,499 $ 99,428 $ 57,652
Ratio of EBITDA to interest expense...... 3.96x 4.18x 3.14x 2.64x
Fixed charge coverage ratio............... 1.91x 2.01x 1.74x 1.75x
</TABLE>
<PAGE>
- --------------------
(1) Net income and funds from operations include non-recurring deductions of
approximately $2.3 million and $1.9 million in 1996 and 1995, respectively,
related to the write-off of the 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.
(2) Weighted average shares outstanding used in calculating net income (loss)
per share includes Common Stock and stock equivalents and, when dilutive,
stock options and units of partnership interest.
(3) The Company believes that funds from operations is helpful to investors as
a measure of the performance of an equity REIT because, along with cash
flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures, and to
fund other cash needs. In accordance with the final National Association of
Real Estate Investment Trusts (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 are calculated to
reflect funds from operations on the same basis. In calculating its funds
from operations, the Company adds back to net income the amortization
expense associated with the goodwill related to the purchase of the assets
of OmniOffices, Inc., by an affiliate of the Company. The Company
calculates its funds from operations by combining the funds from operations
from its real estate operations, calculated in accordance with NAREIT's
definition of funds from operations, and the earnings before depreciation,
amortization and deferred taxes of the Company's executive suites business,
excluding operating losses from centers under development. The Company's
funds from operations may not be comparable to funds from operation
reported by other REITs that do not define the term in accordance with the
current NAREIT definition, or that interpret the current NAREIT definition
differently from the way the Company interprets it. Funds from operations
does not represent net income or cash flow generated from operating
activities in accordance with generally accepted accounting principles and,
as such, should not be considered an alternative to net income as an
indication of the Company's performance or to cash flow as a measure of
liquidity or the Company's ability to make distributions.
5
<PAGE>
(4) Includes shares of Common Stock and convertible preferred stock outstanding
plus units of partnership interest in the Guarantor and Carr Realty, L.P.,
a majority-owned subsidiary of the Company ("Carr Realty, L.P."), that the
holders thereof have a right to have redeemed for cash equal to the value
of a share of Common Stock for each unit redeemed or, at the option of the
Company, for shares of Common Stock on a one-for-one basis. Such units
include non-dividend paying units.
(5) EBITDA is calculated as net operating income before minority interest,
gain on sale of assets and extraordinary items, plus interest expense,
depreciation and amortization, and income taxes, if any.
The Exchange Offer
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The Exchange Offer.......................... The Issuers are offering to exchange up to $100,000,000 aggregate principal amount of
the Company's 6.625% Exchange Notes due 2005 and up to $100,000,000 aggregate
principal amount of the Company's 6.875% Exchange Notes due 2008 (the "New Notes")
for up to $100,000,000 aggregate principal amount of the Company's outstanding 6.625%
Notes due 2005 and up to $100,000,000 aggregate principal amount of the Company's
outstanding 6.875% Notes due 2008 (the "Old Notes"), respectively, on a $1,000
principal amount for $1,000 principal amount basis.
Procedures for Tendering Old Notes.......... See "The Exchange Offer--Procedures for Tendering Old Notes."
Minimum Condition........................... The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange, but Old Notes may be tendered only in denominations of
$1,000 or integral multiples thereof.
Expiration.................................. The Exchange Offer will expire at 5:00 p.m., New York City time, on August [ ],
1998, or such later date and time to which it is extended. Any Old Notes not accepted
for exchange for any reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
Exchange Date............................... The date of acceptance of the Old Notes for exchange will be the first business day
following the Expiration Date.
Withdrawal Rights........................... A tender of Old Notes in the Exchange Offer may be withdrawn at any time before the
Expiration Date.
Federal Income Tax
Consequences.............................. There should be no federal income tax consequences to a holder exchanging Old Notes
for New Notes in the Exchange Offer, and a holder will have the same adjusted basis
and holding period in the New Notes as the holder had in the Old Notes. See "Certain
Federal Income Tax Consequences."
Use of Proceeds............................. The Issuers will not receive any cash proceeds from the issuance of the New Notes in
the Exchange Offer.
Exchange Agent.............................. Bankers Trust Company is serving as Exchange Agent in connection with the Exchange
Offer.
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Effect on Holders of Old Notes.............. Upon the acceptance of Old Notes for exchange in the Exchange Offer, holders of Old
Notes will have no further registration or other rights, except in certain limited
circumstances, under the Registration Rights Agreement dated February 23, 1998 (the
"Registration Rights Agreement") among the Issuers and J.P. Morgan Securities Inc.,
Goldman, Sachs & Co. and Lehman Brothers Inc. (the "Initial Purchasers"). Holders of
Old Notes who do not tender them in the Exchange Offer will continue to be entitled
to all the rights applicable thereto under the Indenture dated as of February 23,
1998 among the Issuers and Bankers Trust Company, as trustee (the "Trustee"), which
relates to both the Old Notes and the New Notes (the "Indenture"), but will continue
to be subject to the restrictions on transfer of the Old Notes provided for in the
Old Notes and in the Indenture. See "Risk Factors--Consequences of Failure to
Exchange."
</TABLE>
The New Notes
The terms of the New Notes will be identical in all material respects
(including principal amount, interest rate, maturity and ranking) to the
terms of the Old Notes for which they are exchanged, except that the New
Notes will be freely transferable except as described herein. See "The
Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes."
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Notes Offered............................ Up to $100,000,000 aggregate principal amount of 6.625% Exchange Notes due 2005 and
up to $100,000,000 aggregate principal amount of 6.875% Exchange Notes due 2008.
Maturity Date............................ The New Seven-Year Notes will mature on March 1, 2005 and the New Ten-Year Notes will
mature on March 1, 2008.
Scheduled Interest
Payment Dates.......................... March 1 and September 1, commencing September 1, 1998. Holders whose Old Notes are
accepted for exchange will receive interest on such Old Notes accrued from February
23, 1998, the date of issuance of the Old Notes, to the date of the issuance of the
New Notes, with such interest payable with the first interest payment on the New
Notes. Consequently, holders who exchange their Old Notes for New Notes will receive
the same interest payment payable on September 1, 1998 (the first interest payment
date with respect to the Old Notes and the New Notes) that they would have received
had they not accepted the Exchange Offer.
Optional Redemption...................... The New Notes will be redeemable, in whole or in part, at any time, at the option of
the Company at a redemption price equal to the sum of (i) the principal amount of the
Notes being redeemed plus (ii) accrued interest thereon to the date of redemption
plus (iii) the Make-Whole Amount
</TABLE>
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(as defined), if any. See "Description of Notes--Optional Redemption."
Ranking.................................. The New Notes will be senior unsecured obligations of the Company and rank equally
with each other and with the Company's other unsecured and unsubordinated
indebtedness. The New Notes will be effectively subordinated to mortgages and other
secured indebtedness of the Company and the Guarantor as well as to indebtedness and
other liabilities of the Company's and the Guarantor's subsidiaries. As of March 31,
1998, the Company had approximately $1.310 billion of indebtedness, of which
approximately $575.6 million was mortgage indebtedness.
Covenants................................ The Indenture for the New Notes, among other things, contains restrictions (with
certain exceptions) on the ability of the Company and its Subsidiaries (as defined)
to: (i) incur Indebtedness (as defined) in excess of 60% of their assets; (ii) incur
Indebtedness secured by Encumbrances (as defined) in excess of 40% of their assets;
(iii) incur Indebtedness of Consolidated Income Available for Debt Service (as
defined) in excess of 1.5 times debt service for the four most recent fiscal
quarters; and (iv) own Total Unencumbered Assets (as defined) equal to less than 150%
of Unsecured Indebtedness (as defined) of the Company and its Subsidiaries on a
consolidated basis.
Risk Factors............................. Holders should carefully consider the matters set forth under "Risk Factors" before
deciding whether or not to tender their Old Notes in the Exchange Offer.
Note Guarantees.......................... The obligations of the Company under the New Notes are unconditionally guaranteed by
the Guarantor. The obligations of the Guarantor on the Notes (the "Note Guarantees")
are unsecured obligations of the Guarantor, and are limited so as to avoid being
considered as a fraudulent conveyance under applicable law. See "Note Guarantees."
</TABLE>
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RISK FACTORS
Holders of Old Notes should carefully consider, among other factors,
the matters described below before deciding whether or not to tender their Old
Notes in the Exchange Offer.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
in the Exchange Offer will continue to be subject to the existing restrictions
on transfer of the Old Notes as set forth in the legend thereon, and, except in
certain limited circumstances applying to the Initial Purchasers only, the
Issuers will have no further obligations to provide for the registration of the
Old Notes under the Securities Act. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the registration provisions
of the Securities Act and applicable state securities laws. The Issuers do not
intend to register the Old Notes under the Securities Act. The Issuers believe
that, based upon positions taken by the staff of the SEC, New Notes issued in
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
or otherwise transferred by the holder thereof (other than a holder that is a
broker-dealer, as set forth below, or an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in a distribution of such New Notes. Eligible holders wishing to
accept the Exchange Offer must represent to the Issuers in the Letter of
Transmittal that such conditions have been met and must represent, if such
holder is not a broker-dealer, or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, that neither such holder
nor the person receiving such New Notes, if other than the holder, is engaged in
or intends to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must represent that the Old Notes tendered in exchange therefor
were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Issuers
will use their reasonable best efforts to make this Prospectus, as amended or
supplemented, available to any such broker-dealer for use in connection with any
such resale for such period of time as broker-dealers must deliver a prospectus,
up to 90 days after the consummation of the Exchange Offer. See "Plan of
Distribution." To comply with any applicable securities laws of certain
jurisdictions, however, the New Notes may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or an exemption
from registration or qualification is available and is complied with. The
Issuers currently do not intend to take any action to register or qualify the
New Notes for resale in any such jurisdictions. In addition, the tender of Old
Notes pursuant to the Exchange Offer will reduce the principal amount of the Old
Notes outstanding, which may have an adverse effect upon, and increase the
volatility of, the market price of the Old Notes due to a reduction of
liquidity.
Absence of Public Market
The New Notes are new securities for which there currently is no
trading market. The Issuers do not intend to apply for listing of the New Notes
on any securities exchange or for quotation through any automated quotation
system. The Initial Purchasers have advised the Company that they currently
intend to make a market in the New Notes after the Exchange Offer as permitted
by applicable law and regulations, although they are not obligated to do so and
may discontinue any market
9
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making activity at any time without notice. Accordingly, there can be no
assurance that a market for the New Notes will develop or, if one does develop,
that it will be sustained. If an active trading market for the New Notes fails
to develop or be sustained, the trading price of the New Notes could be
materially adversely affected.
Effective Subordination of Notes
The Company derives a significant portion of its operating income from
its subsidiaries. The holders of the Notes will have no direct claim against the
subsidiaries (except the Guarantor) for payment under the Notes. The Company
must rely to a significant extent on dividends and other payments from its
subsidiaries (or must raise funds in public or private equity or debt offerings
or sell assets) to generate the funds necessary to meet its obligations,
including the payment of principal and interest on the Notes. If the dividends
and other payments from subsidiaries were insufficient to meet such obligations,
there could be no assurance that the Company's operating income would be
sufficient to meet such obligations (or that the Company would be able to obtain
such funds on acceptable terms or at all).
The Notes will be effectively subordinated in right of payment to all
existing and future indebtedness and liabilities of the Company's subsidiaries
(except certain existing and future indebtedness and liabilities of the
Guarantor). In addition, the Indenture permits the Company and its subsidiaries
(including the Guarantor) to incur additional indebtedness, both secured and
unsecured, provided certain conditions are met. See "Description of Notes--
Certain Convenants." Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company's
subsidiaries, the holders of any indebtedness of the Company's subsidiaries
(except certain existing and future indebtedness and liabilities of the
Guarantor) will be entitled to payment thereof from the assets of such
subsidiaries prior to the holders of any general unsecured obligation of the
Company, including the Notes.
The Notes will be unsecured and will be effectively subordinated to any
secured indebtedness of the Company and to the value of the assets securing such
indebtedness. The Indenture permits the Company and its subsidiaries to incur
additional secured indebtedness provided certain conditions are met. See
"Description of Notes--Certain Covenants." Consequently, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceeding with
respect to the Company, the holders of any secured indebtedness will be entitled
to proceed against the collateral that secures such secured indebtedness and
such collateral will not be available for satisfaction of any amounts owed under
the Company's unsecured indebtedness, including the Notes.
The guarantee of the Notes by the Guarantor is an unsecured obligation
of the Guarantor, and (i) is effectively subordinated to mortgage and other
secured indebtedness of the Guarantor and (ii) ranks equally with a guarantee of
earlier notes of the Company by the Guarantor and the Guarantor's other
unsecured and unsubordinated indebtedness.
Real Estate Investment Risks
General. Investments in real property are subject to varying degrees of
risk. The yields available from equity investments in real estate and the
Company's ability to service debt will depend in large part on the amount of
income generated, expenses incurred and capital expenditures required by its
real property investments. The Company's income from office properties may be
adversely affected by a number of factors, including the general economic
climate and local real estate conditions, an over-supply of, or a reduction in
demand for, office space in the areas where its properties are located and the
attractiveness of the properties to tenants. Income from properties and real
estate values also are affected by such factors as the cost of compliance with
government regulation, including zoning and tax laws and the potential for
liability under applicable laws. Certain significant expenditures associated
with each equity investment by the Company in a property (such as operating
expenses and capital expenditures costs) may not be reduced when circumstances
cause a reduction in income from the property.
Renewal of Leases and Reletting of Space. The Company is subject to the
risks that upon expiration of leases for space located at its properties, the
space may not be relet or, if relet, the terms of the renewal or reletting
(including the cost of required renovations or concessions to tenants) may be
less favorable than current lease terms. Although the Company has established an
annual budget for renovation and reletting costs that it believes is reasonable
in light of each property's situation, no assurance can be given that this
budget will be sufficient to cover these costs. If the Company is unable
promptly to relet or renew leases for all or substantially all of the space at
its properties, if the rental rates upon such renewal or reletting are
significantly lower than expected, or if the Company's reserves for these
purposes prove inadequate, then the Company's cash provided by operating
activities and ability to make expected distributions to stockholders or debt
service payments may be adversely affected.
Possible Environmental Liabilities. Under various federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous
substances released at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with the contamination. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. The owner or operator
of a site may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the site. The
Company has not been notified by any governmental authority of any material
non-compliance, liability or other claim in connection with any of its
properties, and the Company is not aware of any other material environmental
condition with respect to any of its properties. No assurance, however, can be
given that no prior owner created any material environmental condition not known
to the Company, that no material environmental condition with respect to any
property has occurred during the Company's ownership thereof, or that future
uses or conditions (including, without limitation, changes in applicable
environmental laws and regulations) will not result in imposition of
environmental liability against the Company.
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Real Estate Financing Risks
Debt Financing. The Company is subject to the risks associated with debt
financing, including the risk that the cash provided by the Company's operating
activities will be insufficient to meet required payments of principal and
interest, the risk of rising interest rates on any floating rate debt of the
Company that is not hedged, the risk that the Company will not be able to repay
or refinance existing indebtedness (which generally will not have been fully
amortized at maturity) or that the terms of such refinancing will not be as
favorable as the terms of existing indebtedness. In the event the Company is
unable to secure refinancing of such indebtedness on acceptable terms, the
Company might be forced to dispose of properties upon disadvantageous terms,
which might result in losses to the Company, or to obtain financing at
unfavorable terms, either of which might adversely affect the cash flow
available for distribution to stockholders or meet debt service obligations. In
addition, if a property or properties are mortgaged to secure payment of
indebtedness and the Company is unable to meet required mortgage payments, the
mortgage securing the property could be foreclosed upon by, or the property
could be otherwise transferred to, the mortgagee with a consequent loss of
income and asset value to the Company.
Degree of Leverage. At March 31, 1998, on a consolidated basis, the
Company's total indebtedness was approximately $1.310 billion and the ratio of
its total indebtedness to total assets (excluding intangibles) was 41.3%. The
degree to which the Company is leveraged could have important consequences to
holders of the Notes, including affecting the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, development or other general corporate purposes and making the
Company more vulnerable to a downturn in its business or the economy generally.
Acquisition and Development Risks
The Company intends to continue acquiring and developing office properties
in markets where it believes that such acquisition or development is consistent
with the business strategies of the Company. Acquisitions entail risks that
investments will fail to perform in accordance with expectations and that
judgments with respect to the costs of improvements to bring an acquired
property up to standards established for the market position intended for that
property will prove inaccurate, as well as general investment risks associated
with any new real estate investment. See '--Real Estate Investment Risks' above.
New office development also is subject to a number of risks, including, but not
limited to, construction delays or cost overruns that may increase project
costs, financing risks as described above, the failure to meet anticipated
occupancy or rent levels, failure to receive required zoning, occupancy and
other governmental permits and authorizations and changes in applicable zoning
and land use laws, which may result in the incurrence of development costs in
connection with projects that are not pursued to completion. In addition,
because the Company must distribute 95% of its taxable income in order to
maintain its qualification as a REIT, the Company anticipates that new
acquisitions and developments will be financed primarily through periodic equity
and debt offerings, lines of credit or other forms of secured or unsecured
financing. If permanent debt or equity financing is not available on acceptable
terms, further acquisitions or development activities may be curtailed or cash
available for distribution to stockholders or to meet debt service obligations
may be adversely affected.
Change in Business Strategy; Risks Associated with the Acquisition of
Substantial New Properties
In November 1995, the Company shifted its emphasis from downtown
Washington, D.C. properties toward a more national business strategy, focusing
primarily on office properties in suburban growth markets across the United
States. This change represented a significant shift in the business strategy of
the Company. Although the Company's Board of Directors (the 'Board') believes
that such a shift in strategy was warranted in light of the opportunities
available to the Company, there is no assurance that the Company's efforts to
implement its national business strategy will continue to be successful.
Consistent with the Company's strategy of acquiring office properties in
suburban growth markets, the Company has significantly expanded its portfolio of
office properties since November 1995. These
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properties have a relatively short operating history under the Company's
management and they may have characteristics or deficiencies unknown to the
Company affecting their valuation or revenue potential.
Substantial Ownership of Common Stock
As of April 30, 1998, SC-USREALTY owned approximately 39.9% of the
outstanding shares of the Company's Common Stock (36.2% of the Common Stock on
a fully diluted basis), and SC-USREALTY has the right to nominate a
proportionate number of the directors of the Board based upon its ownership of
stock on a fully-diluted basis, rounded down to the nearest whole number (but in
no event more than 40% of the directors). As a result, SC-USREALTY is the
largest single stockholder of the Company, while no other stockholder is
permitted to own more than 5% of the Company's Common Stock, subject to certain
exceptions set forth in the Articles of Incorporation or approved by the Board.
Although certain standstill provisions preclude SC-USREALTY from increasing its
percentage interest in the Company above 45% until at least April 30, 2001
(subject to certain exceptions) and the Company's charter preclude SC-USREALTY
from increasing such percentage interest thereafter, and SC-USREALTY agreed to
certain limitations on its voting rights with respect to its shares of Common
Stock, SC-USREALTY nonetheless has a substantial influence over the affairs of
the Company. This concentration of ownership in one stockholder could
potentially be disadvantageous to other stockholders' interests. In addition, so
long as SC-USREALTY owns at least 25% of the outstanding Common Stock of the
Company on a fully diluted basis, SC-USREALTY will be entitled (except in
certain limited circumstances), upon compliance with certain specified
conditions, to a participation right to purchase or subscribe for, either as
part of such issuance or in a concurrent issuance, a total number of shares of
Common Stock or Preferred Stock, as the case may be, equal to up to 30% (or 35%
in certain circumstances) of the total number of shares or of Common Stock or
Preferred Stock, as applicable, proposed to be issued by the Company.
Limitations on Corporate Actions
In conjunction with the transaction in which SC-USREALTY acquired its
initial interest in the Company (the "SC-USREALTY Transaction"), the Company
agreed to certain limitations on its operations, including restrictions relating
to incurrence of additional indebtedness, retention of third-party managers for
the Company's properties, investments in properties other than office buildings,
issuances of limited partnership interests ("CRLP Units") of Carr Realty, L.P.,
a partnership that owns certain of the Company's properties, and certain other
matters. The Company may take actions relating to these matters only with the
consent of SC-USREALTY. In addition, the Company is contractually obligated to
abide by certain limitations on the amount of assets that it owns indirectly
through other entities and the manner in which it conducts its business
(including the types of assets that it can acquire and own and the manner in
which such assets are operated). The Company also is obligated to use reasonable
efforts to effect all dispositions of assets in transactions that are tax-free
exchanges and do not generate "capital gain dividends" to stockholders of the
Company. These limitations (which generally were designed to address special
U.S. tax considerations applicable to foreign corporations such as SC-USREALTY
under the Internal Revenue Code) limit the flexibility of the Company to
structure transactions that might otherwise be advantageous to the Company, and
may impair the Company's ability to conduct its business in the future.
In addition, in connection with the acquisition of certain properties by
CarrAmerica Realty, L.P. and Carr Realty, L.P., the Company is restricted in its
ability to dispose of such properties in taxable transactions or to refinance
such properties.
Conflicts of Interest
Certain members of the Board and officers of the Company own CRLP Units
and, thus, may have interests that conflict with stockholders with respect to
business decisions affecting the Company and Carr Realty, L.P. In particular, a
holder of CRLP Units may suffer different and/or more adverse tax consequences
than the Company upon the sale or refinancing of some of the properties owned by
Carr
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Realty, L.P. as a result of unrealized gain attributable to certain properties.
These CRLP Unit holders and the Company, therefore, may have different
objectives regarding the appropriate pricing and timing of a sale or refinancing
of properties. Although the Company, as the sole general partner of Carr Realty,
L.P., has the exclusive authority to determine whether and on what terms to sell
or refinance an individual property, these CRLP Unit holders might seek to
influence the Company not to sell or refinance a property, even though such sale
might otherwise be financially advantageous to the Company, or may seek to
influence the Company to refinance a property with a higher level of debt than
would be in the best interests of the Company.
Management, Leasing and Brokerage Risks
The Company is subject to the risks associated with the property
management, leasing and brokerage businesses. These risks include the risk that
management contracts or service agreements with third-party owners will be lost
to competitors, that a property will be sold and the Company will lose the
contract, that contracts will not be renewed upon expiration or will not be
renewed on terms consistent with current terms and that leasing and brokerage
activity generally may decline. Each of these developments could adversely
affect the ability of the Company to make expected distributions to stockholders
or debt service payments.
Lack of Voting Control of Operating Subsidiaries; Other Special Considerations
Related to OmniOffices
Lack of Voting Control. The Company does not have voting control of
Carr Real Estate Services, Inc. ("Carr Services, Inc."), CarrAmerica
Development, Inc. ("CarrAmerica Development"), OmniOffices, Inc. ("OmniOffices")
or OmniOffices (UK) Limited ("Omni UK"), and may acquire economic interests in
similarly structured companies in the future (collectively, the "Operating
Subsidiaries"). (Certain provisions in the Code prohibit the Company from owning
a significant portion of the voting stock of an Operating Subsidiary, as
described in "--Administration's Proposed Changes to REIT Asset Test" below.)
Carr Services, Inc., which conducts primarily fee-based management and leasing,
has capital stock which is divided into two classes: voting common stock,
approximately 92% and 8% of which is held by The Oliver Carr Company ("OCCO")
and Carr Realty, L.P., respectively; and nonvoting common stock, approximately
96% and 4% of which is held by Carr Realty, L.P. and OCCO, respectively. OCCO,
as the holder of 92% of the voting common stock, has the ability to elect the
board of directors of Carr Services, Inc. CarrAmerica Development, which
conducts primarily fee-based development, has capital stock which is divided
into two classes: voting common stock, 96% and 4% of which is held by OCCO and
the Company, respectively; and nonvoting common stock, 100% of which is held by
the Company. OCCO, as the holder of 96% of the voting common stock, has the
ability to elect the board of directors of CarrAmerica Development. Oliver T.
Carr, Jr., who is Chairman of the Board of the Company and a significant
stockholder of the Company, beneficially owns a majority of the voting stock of
OCCO, which controls the election of directors of Carr Services, Inc. and
CarrAmerica Development. OmniOffices, which provides executive office suites to
commercial customers, has capital stock which is divided into two classes:
voting common stock and nonvoting common stock. The voting stock is owned 17% by
OCCO, 35% by SC-USREALTY and 48% by an entity owned by the Company's six current
executive officers. The nonvoting common stock is owned entirely by the Company.
The holders of the voting common stock control the ability to elect the board of
directors of OmniOffices. Omni UK, which provides executive office suites to
international commercial customers, has capital stock which is divided into two
classes: voting common stock and nonvoting common stock. The voting stock is
owned by OmniOffices and two individuals and the nonvoting stock is owned by the
Company. OmniOffices, as the holder of a majority of the voting stock, controls
the ability to elect the members of the board of directors of Omni UK.
Although neither the right of Carr Realty, L.P. or the Company, as
applicable, to receive distributions with respect to its equity interest in each
Operating Subsidiary nor the terms of the promissory notes made by such
Operating Subsidiary and held by Carr Realty, L.P. or the Company, as
applicable, can be changed by the holder of the majority of the voting common
stock of such Operating Subsidiary, the Company will not be able to elect
directors of any Operating Subsidiary, and its ability to influence the
day-to-day decisions of each Operating Subsidiary is limited. As a result, the
board of directors and management of each Operating Subsidiary may implement
business policies or decisions that might not have been implemented by persons
elected by the Company and that are adverse to the interests of the Company or
that lead to adverse financial results, which could adversely impact the
Company's operating income and funds from operations.
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Lack of Liquidity for Stock. None of the Operating Subsidiaries is a
public company, and there is no market for the equity securities held by the
Company or Carr Realty, L.P. in any Operating Subsidiary. Consequently, neither
the Company nor Carr Realty, L.P. has ready ability to liquidate its holdings in
any Operating Subsidiary.
Constraints on Growth of OmniOffices. Certain provisions in the Code
prohibit the Company from having an investment in any Operating Subsidiary that
has a value in excess of 5% of the value of the Company's gross assets. These
provisions will limit the ability of OmniOffices to grow its business without
jeopardizing the Company's REIT qualification or, alternatively, incurring third
party debt (which may have to be guaranteed by the Company) or bringing into
OmniOffices additional investors. As of March 31, 1998, the Company's investment
in OmniOffices was such that the Company currently is precluded from making
substantial additional investments (either in the form of equity or a loan) in
OmniOffices. There can be no assurance that OmniOffices will be able to obtain
such third-party financing (or obtain it on attractive terms) or that suitable
additional investors can be identified. Limitations on the Company's ability to
fund additional growth of OmniOffices may preclude (or delay) OmniOffices from
pursuing growth opportunities that might otherwise be in its best interest.
It is possible that the Company could elect in the future to dispose of
part or all of its equity interest in OmniOffices, including through a
distribution of the stock of OmniOffices to the Company's stockholders; however,
the Company is subject to certain contractual restrictions with SC-USREALTY that
could preclude or restrict such a distribution or other disposition. In
addition, the income from such a disposition would not qualify for purposes of
the 75% gross income test applicable to REITs, which could limit the ability of
the Company to dispose of all of its interest in OmniOffices (through a
distribution to stockholders or otherwise) in a single transaction. Finally,
because of tax-related considerations specific to SC-USREALTY and SC-USREALTY's
indirect interest in OmniOffices through the Company, OmniOffices has agreed to
conduct its business subject to certain constraints, even though these
constraints may have the effect of precluding OmniOffices from undertaking
transactions that would be in the best interests of its other stockholders,
including the Company. Any reduction by the Company of its investment in
OmniOffices would correspondingly reduce the Company's right to receive
distributions from OmniOffices.
Administration's Proposed Changes to REIT Asset Test. In order to qualify
as a REIT, the Company, at the close of each quarter of its taxable year, must
not own more than 10% of the outstanding voting securities of any issuer, other
than a qualified REIT subsidiary (a "QRS") or another REIT (for a more detailed
discussion of this and other REIT qualification requirements. The Clinton
Administration's February 1998 budget proposal includes a proposal to amend the
10% voting securities test by prohibiting a REIT from owning more than 10% of
the vote or value of all classes of stock of any corporation (other than a QRS
or another REIT). Stock owned by the Company in corporations prior to the
effective date of the proposal generally would be "grandfathered" (i.e., with
respect to such grandfathered stock, the REIT would be subject only to the
existing 10% voting securities test described above). However, if the
corporation in which such grandfathered stock is held were to engage in a new
trade or business or acquire substantial new assets, the grandfathered status
would terminate with respect to such stock.
Because the Company owns the majority of the nonvoting stock of each of the
Operating Subsidiaries, the Company would not satisfy the proposed 10% value
limitation with respect to its stock interests in the Operating Subsidiaries.
However, as the Clinton Administration's proposal is currently drafted, stock
currently held by the Company in the Operating Subsidiaries should be
grandfathered. If any of the Operating Subsidiaries, however, were to engage in
new trades or businesses or acquire substantial new assets (or the Company were
to make a significant additional equity investment in an Operating Subsidiary),
then the stock held by the Company in such Operating Subsidiary would lose its
grandfathered status and the Company would fail to qualify as a REIT. Moreover,
the Company would not be able to own more than 10% of the vote or value of any
corporation (other than a QRS or another REIT) formed after the effective date
of the proposal. Thus, if enacted as currently drafted, the proposal would
materially impede the ability of the Company to engage in new activities or to
expand substantially its
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current activities, such as the executive office suites business and the
property development and management businesses.
Changes in Policies
The major policies of the Company, including its policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by its Board. The Board may amend or revise
these and other policies from time to time without a vote of the stockholders of
the Company. A change in these policies could adversely affect the Company's
financial condition, results of operations, funds available for distributions to
stockholders, debt service or the market price of the Notes. The Company cannot
change its policy of seeking to maintain its qualification as a REIT without the
approval of the holders of a majority of the Common Stock.
Certain Tax Risks
Tax Liabilities as a Consequence of the Failure to Qualify as a REIT. The
Company believes that it has been organized and has operated so as to qualify
for taxation as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), commencing with its taxable year ended December 31, 1993, and intends
to continue to so operate. No assurance, however, can be given that the Company
has qualified for taxation as a REIT or will be able to remain so qualified.
Qualification as a REIT involves the application of highly technical and complex
Code provisions as to which there are only limited judicial and administrative
interpretations. Certain facts and circumstances that may be wholly or partially
beyond the Company's control may affect its ability to qualify or to continue to
qualify as a REIT. In addition, no assurance can be given that new legislation,
Treasury Regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to the Company's qualification as
a REIT or the federal income consequences of such qualification to the Company.
If the Company fails to qualify as a REIT, it will be subject to federal income
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates and it will not be entitled to a deduction for dividends
paid to its stockholders. In addition, unless entitled to relief under certain
statutory provisions, the Company would be disqualified from taxation as a REIT
for the four taxable years following the year during which qualification is
lost. The additional tax incurred in such event would significantly reduce the
cash flow available for distribution to shareholders and to meet debt service
obligations.
REIT Distribution Requirements and Potential Impact of Borrowings. To
obtain the favorable tax treatment associated with qualifying as a REIT under
the Code, the Company generally is required each year to distribute to its
shareholders at least 95% of its real estate investment trust taxable income. In
addition, the Company will be subject to a 4% nondeductible excise tax on the
amount, if any, by which certain distributions paid by it with respect to any
calendar year are less than the sum of 85% of its ordinary income, 95% of its
capital gain net income and 100% of its real estate investment trust taxable
income from prior years that is not deemed to have been distributed under the
Code. Differences in timing between the receipt of income, the payment of
expenses and the inclusion of such income and the deduction of such expenses in
arriving at taxable income (of the Company or its subsidiaries), or the effect
of nondeductible capital expenditures, the creation of reserves or required debt
or amortization payments, could require the Company, directly or through its
subsidiaries, to borrow funds on a short-term basis to meet the distribution
requirements that are necessary to achieve the tax benefits associated with
qualifying as a REIT. In such instances, the Company might need to borrow funds
in order to avoid adverse tax consequences even if management believed that the
prevailing market conditions were not otherwise favorable for such borrowings.
Other Tax Liabilities. Even if the Company qualifies as a REIT, the Company
and certain of its subsidiaries will be subject to certain federal, state, local
and foreign taxes on its income and property.
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Restrictions on Acquisition and Change in Control
Various provisions of the Company's charter restrict the possibility for an
acquisition or change in control of the Company, even if such acquisition or
change in control were in the stockholders' interest, including the ownership
limits discussed above, the staggered terms of the Company's directors and the
ability of the Board to authorize the issuance of preferred stock without
stockholder approval.
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THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering Old Notes
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Issuers will accept for exchange Old Notes
that are validly tendered on or before the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on August [ ], 1998; provided, however, that if the Issuers,
in their sole discretion, have extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $200,000,000 aggregate principal
amount of the Old Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about the date set forth on the
cover page to all holders of Old Notes at the addresses set forth in the
security register with respect to Old Notes maintained by the Trustee. The
Issuers' obligation to accept Old Notes for exchange in the Exchange Offer is
subject to certain conditions as set forth under "Certain Conditions to the
Exchange Offer" below.
The Issuers expressly reserve the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of any tenders of Old Notes, by giving oral or written
notice of such extension to the Exchange Agent (as defined below) and notice of
such extension to the holders as described below. During any such extension, all
Old Notes previously tendered will remain subject to the Exchange Offer and may
be accepted for exchange by the Issuers. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holders thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer. The Issuers also expressly reserve the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "Certain Conditions to the Exchange Offer."
The Issuers will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of a
press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Holders of Old Notes do not have any appraisal or dissenters' rights
under the Maryland General Corporation Law, the Delaware Revised Uniform Limited
Partnership Act or the Indenture in connection with the Exchange Offer. The
Issuers intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
Procedures for Tendering Old Notes
Except as set forth below, in order for Old Notes to be validly
tendered in the Exchange Offer, Bankers Trust Company (the "Exchange Agent")
must receive a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message (as defined in the next paragraph),
together with any required signature guarantees and other required documents, at
one of the addresses set forth below under "Exchange Agent," on or before the
Expiration Date. In addition, either (i) the Exchange Agent must receive the
certificates for such Old Notes, (ii) such Old Notes must be tendered pursuant
to the procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or before the Expiration Date,
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or (iii) the guaranteed delivery procedures described below must be complied
with. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF EACH HOLDER. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
The term "Agent's Message" means a message transmitted by the
Depository Trust Company ("DTC") to, and received by, the Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has received
an express acknowledgement from the tendering participant, which acknowledgement
states that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Company may enforce the Letter of
Transmittal against such particpant.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of a
firm or other entity identified in SEC Rule 17Ad-15 as an "eligible guarantor
institution," including (as such terms are defined therein) (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution"). In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantees must be by an Eligible Institution. If Old Notes are registered
in the name of a person other than the person signing the Letter of Transmittal,
the Old Notes surrendered for exchange must be endorsed, or be accompanied, by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Issuers in their sole discretion, duly executed by the
registered holder and signed exactly as the name or names of the registered
holder or holders appear on the Old Notes and with any signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuers in their sole discretion, which determination shall be final and
binding. The Issuers reserve the absolute right to reject any and all tenders of
any particular Old Notes not properly tendered or to not accept any particular
Old Notes the acceptance of which might, in the judgment of the Issuers or their
counsel, be unlawful. The Issuers also reserve the absolute right in their sole
discretion to waive any defects or irregularities or conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Old Notes in the Exchange Offer). The interpretation of the terms and
conditions of the Exchange Offer as to any particular Old Notes either before or
after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Issuers shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with the tenders of
Old Notes for exchange must be cured within such reasonable period of time as
the Issuers determine. Neither the Issuers, the Exchange Agent nor any other
person is under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor will any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or separate written
instruments of transfer or exchange are signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Issuers, submit proper evidence
satisfactory to the Issuers of the person's authority to so act.
By tendering, each holder will represent to the Issuers that, among
other things, (i) the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, (ii) neither the holder nor
any other person has an arrangement or understanding with any person to
participate in a distribution of such New Notes, (iii) if the holder is not a
broker-dealer, or is a broker-dealer but
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<PAGE>
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any other person is engaged in or intends to participate
in a distribution of such New Notes and (iv) neither the holder nor any other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
either of the Issuers. If the tendering holder is a broker-dealer (whether or
not it is also an "affiliate") that will receive New Notes for its own account
in exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it will be required to acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the holder will
not be deemed to admit that it is an "Underwriter" within the meaning of the
Securities Act.
Book-Entry Transfer
Any financial institution that is a participant in the DTC system may
utilize DTC's Automated Tender Offer Program ("ATOP") to tender Old Notes. The
Exchange Agent will make a request to establish a book-entry transfer facility
at DTC for purposes of the Exchange Offer promptly after the date of this
Prospectus. Financial institution participants in DTC's system may make
book-entry delivery of Old Notes by causing the book-entry transfer facility to
transfer such Old Notes into the Exchange Agent's account in accordance with the
book-entry transfer facility's ATOP procedures for transfer. The exchange for
the Old Notes so tendered will only be made, however, after timely confirmation
of such book-entry transfer of Old Notes into the Exchange Agent's account, and
timely receipt by the Exchange Agent of an Agent's Message and any other
documents required by the Letter of Transmittal.
Guaranteed Delivery Procedures
If a registered holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will not permit
such holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or before the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Issuers (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates of all
physically tendered Old Notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a book-entry confirmation, as the case may be, and
all other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time before the Expiration
Date.
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For a withdrawal to be effective, a written notice of withdrawal must
be received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person who tendered the Old Notes to be withdrawn, identify the Old Notes to be
withdrawn (including the principal amount of such Old Notes), include a
statement that such holder is withdrawing its election to have such Old Notes
exchanged and the name of the registered holder of such Old Notes, and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Issuers that the person withdrawing the tender
has succeeded to the beneficial ownership of the Old Notes being withdrawn. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, before the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the book-entry transfer facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes that have been tendered for exchange but that are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility in accordance with the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such book-entry transfer facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "Procedures for
Tendering" above at any time on or before the Expiration Date.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Issuers will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the New Notes promptly after acceptance
of the Old Notes. See "Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Issuers will be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Issuers have given
oral or written notice thereof to the Exchange Agent.
In all cases, delivery of New Notes in exchange for Old Notes that are
tendered and accepted for exchange in the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, (ii) a Letter of Transmittal (or facsimile thereof) or Agent's
Message in lieu thereof, properly completed and duly executed, with any required
signature guarantees, and (iii) any other documents required by the Letter of
Transmittal. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if certificates
representing Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfers into the Exchange Agent's account at the
book-entry transfer facility in accordance with the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
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<PAGE>
Certain Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, the Issuers
will not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, such acceptance or issuance would violate applicable
law or any interpretation of the staff of the SEC.
The foregoing condition is for the sole benefit of the Issuers and may
be asserted by the Issuers regardless of the circumstances giving rise to such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Issuers will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order is threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
Exchange Agent
Bankers Trust Company has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver to:
BANKERS TRUST COMPANY, EXCHANGE AGENT
By Mail:
BT Services Tennessee, Inc.
P.O. Box 292737
Nashville, Tennessee 37229-2737
(registered or certified mail recommended)
By Hand:
Bankers Trust Company
Corporate Trust & Agency Group
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
By Overnight Courier:
BT Services Tennessee, Inc.
Corporate Trust & Agency Group
Reorganization Group
648 Grassmere Park Road
Nashville, Tennessee 37211
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By Facsimile:
(615) 835-3701 (Confirm by Telephone: (615) 835-3572)
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
Fees and Expenses
The principal solicitation of acceptances of the Exchange Offer is
being made by mail; however, additional solicitations may be made by telecopy,
telephone, in person or by other means by officers and regular employees of the
Issuers and their affiliates. No additional compensation will be paid to any
such officers and employees who engage in soliciting tenders. The Issuers will
not make any payment to brokers, dealers, or others soliciting acceptances of
the Exchange Offer. The Issuers, however, will pay the Exchange Agent reasonable
and customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Issuers.
Transfer Taxes
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Issuers to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
in the Exchange Offer will continue to be subject to the restrictions on
transfer of the Old Notes as set forth in the legend thereon and, except in
certain limited circumstances, will no longer have any registration rights with
respect to the Old Notes. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Issuers do not intend to register the Old Notes under
the Securities Act or any state securities laws. The Issuers believe that, based
upon positions taken by the staff of the SEC, the New Notes issued in the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by each holder thereof (other than a broker-dealer, as set
forth below, and any such holder who is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holder's New Notes are acquired in the ordinary course of the holder's
business and the holder has no arrangement or understanding with any person to
participate in a distribution of such New Notes. If any holder has any
arrangement or understanding with respect to a distribution of the New Notes to
be acquired in Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes must acknowledge that it
will deliver a prospectus in connection with any resale of the New Notes. See
"Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or qualified for sale in any such jurisdiction
or an exemption from registration or qualification is available and the terms
and conditions of the exemption are satisfied. The Company does not currently
intend to take any action to register or qualify the New Notes for resale in any
jurisdiction.
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DESCRIPTION OF NOTES
The Old Notes have been issued, and the New Notes will be issued, under
the Indenture, which is an agreement among the Company, the Guarantor and the
Trustee. A copy of the Indenture has been filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and is
incorporated by reference herein. See "Available Information." The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Notes are summaries
of certain provisions thereof, do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the Indenture
and the Notes. Capitalized terms used but not defined herein have the respective
meanings set forth in the Indenture. As used under this heading, the term
"Company" means CarrAmerica Realty Corporation and not any of its subsidiaries
unless otherwise expressly stated or the context otherwise requires.
General
The Notes constitute two series for purposes of the Indenture. The
Seven-Year Notes are limited to an aggregate principal amount of $100,000,000,
and the Ten-Year Notes are limited to an aggregate principal amount of
$100,000,000. The Notes are direct, senior unsecured obligations of the Company
and rank equally with each other and with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. The Notes are
effectively subordinated to mortgages and other secured indebtedness of the
Company and to indebtedness and other liabilities of the Company's Subsidiaries.
Accordingly, this prior indebtedness would have to be satisfied in full before
holders of the Notes would be able to realize any value from encumbered
properties or properties held by Subsidiaries (as defined below).
As of March 31, 1998, the Company had approximately $1.310 billion of
outstanding indebtedness, of which approximately $575.6 million was secured by
properties owned directly or indirectly by the Company. See "Capitalization."
The Company may incur additional indebtedness, including secured indebtedness,
subject to the provisions described below under "--Certain
Covenants--Limitations on Incurrence of Indebtedness."
The Notes are guaranteed as to principal, premium, if any, and interest
by the Guarantor, as described below under "Note Guarantees."
The Notes may only be issued in fully registered form in minimum
denominations of $1,000 and integral multiples thereof.
Principal and Interest
The Seven-Year Notes bear interest at 6.625% per annum and will mature
on March 1, 2005; the Ten-Year Notes bear interest at 6.875% per annum and will
mature on March 1, 2008. The Notes bear interest from their original date of
issue or from the immediately preceding Interest Payment Date (as defined below)
to which interest has been paid, payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on September 1, 1998 (each, an "Interest
Payment Date"), to the persons in whose name the applicable Notes are registered
in the Security Register on the preceding February 15 or August 15 (whether or
not a Business Day, as defined below), as the case may be (each, a "Regular
Record Date"). Interest on the Notes is computed on the basis of a 360-day year
of twelve 30-day months.
The New Notes will bear interest from their date of issuance. The
Company will issue the New Notes promptly after expiration of the Exchange Offer
and acceptance of the Old Notes tendered for the New Notes. Holders of Old Notes
whose Old Notes are accepted for exchange will receive interest on such Old
Notes accrued from February 23, 1998, the date of issuance of the Old Notes, to
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the date of issuance of the New Notes, with such interest payable with the first
interest payment on the New Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest payment on September 1, 1998
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
If any Interest Payment Date or Stated Maturity falls on a day that is
not a Business Day, the required payment is to be made on the next Business Day
as if it were made on the date the payment was due and no interest will accrue
on the amount so payable for the period from and after the Interest Payment Date
or the Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banks in the City of New York or in the City of Chicago are required or
authorized by law, regulation or executive order to close.
The Notes are payable at the corporate trust office or agency
maintained for that purpose in the City of New York, New York, or elsewhere as
provided in the Indenture (the "Paying Agent"), provided that, at the option of
the Company, payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the Security Register or by wire
transfer of funds to that person at an account maintained within the United
States.
Certain Covenants
Under the Indenture, neither the Company nor any Subsidiary may incur
any Indebtedness (as defined below) if, immediately after giving effect to the
incurrence of that additional Indebtedness and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Indebtedness of the
Company and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum of (without duplication) (i) the Total
Assets (as defined below) of the Company and its Subsidiaries as of the end of
the calendar quarter covered in the Company's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
SEC (or, if the filing is not permitted under the Exchange Act, with the
Trustee) before the incurrence of the additional Indebtedness and (ii) the
purchase price of any real estate assets or mortgages receivable acquired and
the amount of any securities offering proceeds received (to the extent that the
proceeds were not used to acquire real estate assets or mortgages receivable or
used to reduce Indebtedness), by the Company or any Subsidiary since the end of
the calendar quarter, including those proceeds obtained in connection with the
incurrence of the additional Indebtedness.
In addition to the foregoing limitation on the incurrence of
Indebtedness, neither the Company nor any Subsidiary may incur any Indebtedness
secured by any Encumbrance upon any of the property of the Company or any
Subsidiary if, immediately after giving effect to the incurrence of the
additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Company and
its Subsidiaries on a consolidated basis which is secured by any Encumbrance on
property of the Company or any Subsidiary is greater than 40% of the sum of
(without duplication) (i) the Total Assets of the Company and its Subsidiaries
as of the end of the calendar quarter covered in the Company's Annual Report on
Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most recently
filed with the SEC (or, if the filing is not permitted under the Exchange Act,
with the Trustee) before the incurrence of the additional Indebtedness and (ii)
the purchase price of any real estate assets or mortgages receivable acquired
and the amount of any securities offering proceeds received (to the extent that
the proceeds were not used to acquire real estate assets or mortgages receivable
or used to reduce Indebtedness), by the Company or any Subsidiary since the end
of the calendar quarter, including those proceeds obtained in connection with
the incurrence of the additional Indebtedness.
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The Company and its Subsidiaries may not at any time own Total
Unencumbered Assets (as defined below) equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Indebtedness (as defined below) of
the Company and its Subsidiaries on a consolidated basis.
In addition to the foregoing limitations on the incurrence of
Indebtedness, neither the Company nor any Subsidiary may incur any Indebtedness
if the ratio of Consolidated Income Available for Debt Service (as defined
below) to the Annual Service Charge (as defined below) for the four consecutive
fiscal quarters most recently ended before the date on which the additional
Indebtedness is to be incurred shall have been less than 1.5:1 on a pro forma
basis after giving effect thereto and to the application of the proceeds
therefrom, and calculated on the assumption that (i) the Indebtedness and any
other Indebtedness incurred by the Company and its Subsidiaries since the first
day of the four-quarter period and the application of the proceeds therefrom,
including Indebtedness to refinance other Indebtedness, had occurred at the
beginning of the period, (ii) the repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of the
four-quarter period had been repaid or retired at the beginning of that period
(except that, in making the computation, the amount of Indebtedness under any
revolving credit facility is to be computed based upon the average daily balance
of the Indebtedness during that period), (iii) in the case of Acquired
Indebtedness (as defined below) or Indebtedness incurred in connection with any
acquisition since the first day of the four-quarter period, the related
acquisition had occurred as of the first day of the period with the appropriate
adjustments with respect to the acquisition being included in the pro forma
calculation, and (iv) in the case of any acquisition or disposition by the
Company or its Subsidiaries of any asset or group of assets since the first day
of the four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, the acquisition or disposition and any related repayment of
Indebtedness had occurred as of the first day of the period with the appropriate
adjustments with respect to the acquisition or disposition being included in the
pro forma calculation.
As used herein, and in the Indenture:
"Acquired Indebtedness" means Indebtedness of a person (i) existing at
the time the person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from the person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, the person becoming a
Subsidiary or that acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any person or the
date the acquired person becomes a Subsidiary.
"Annual Service Charge" for any period means the aggregate interest
expense for the period in respect of, and the amortization during the period of
any original issue discount of, Indebtedness of the Company and its Subsidiaries
and the amount of dividends which are payable during the period in respect of
any Disqualified Stock.
"Capital Stock" means, with respect to any person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of the person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted, and minus amounts which have been added,
for the following (without duplication): (i) interest expense on Indebtedness of
the Company and its Subsidiaries; (ii) provision for taxes of the Company and
its Subsidiaries based on income; (iii) amortization of debt discount; (iv)
provisions for gains and losses on properties and property depreciation and
amortization; (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for the period;
and (vi) amortization of deferred charges.
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"Disqualified Stock" means, with respect to any person, any Capital
Stock of the person which by the terms of that Capital Stock (or by the terms of
any security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for Capital Stock which is not Disqualified Stock or the
redemption price of which may, at the option of that person, be paid in Capital
Stock which is not Disqualified Stock), in each case on or before the Stated
Maturity of the Notes; provided, however, that equity interests whose holders
have (or will have after the expiration of an initial holding period) the right
to have such equity interests redeemed for cash in an amount determined by the
value of the Common Stock (including, without limitation, certain equity
interests in the Guarantor and Carr Realty, L.P.) do not constitute Disqualified
Stock.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items, and property
valuation losses, net, as reflected in the financial statements of the Company
and its Subsidiaries for the period determined on a consolidated basis in
accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security
interest of any kind, except any mortgage, lien, charge, pledge or security
interest of any kind which secures debt of the Guarantor owed to the Company.
"Indebtedness" of the Company or any Subsidiary means any indebtedness
of the Company or any Subsidiary, whether or not contingent, in respect of (i)
borrowed money or indebtedness evidenced by bonds, notes, debentures or similar
instruments, (ii) borrowed money or indebtedness evidenced by bonds, notes,
debentures or similar instruments secured by any Encumbrance existing on
property owned by the Company or any Subsidiary, (iii) reimbursement obligations
in connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property or
services, except any such balance that constitutes an accrued expense or trade
payable, or all conditional sale obligations or obligations under any title
retention agreement, (iv) the amount of all obligations of the Company or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock, and (v) any lease of property by the Company or any
Subsidiary as lessee which is reflected on the Company's consolidated balance
sheet as a capitalized lease in accordance with GAAP, to the extent, in the case
of items of indebtedness under (i) through (iv) above, that any such items
(other than letters of credit) would appear as a liability on the Company's
consolidated balance sheet in accordance with GAAP, and also includes, to the
extent not otherwise included, any obligation of the Company or any Subsidiary
to be liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), Indebtedness of
another person (other than the Company or any Subsidiary) (it being understood
that Indebtedness shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or the Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Subsidiary" means a corporation, partnership or other entity a
majority of the voting power of the voting equity securities or the outstanding
equity interests of which are owned, directly or indirectly, by the Company or
by one or more other Subsidiaries of the Company. For the purposes of this
definition, "voting equity securities" means equity securities having voting
power for the election of directors, whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.
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"Total Assets" as of any date means the sum of (i) the Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money determined in accordance with GAAP (but excluding
intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the Company
and its Subsidiaries on that date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Company or any Subsidiary.
The Indenture also contains certain other covenants which require the
Company to maintain its corporate existence, maintain the condition of the
Company's material properties and insurance on properties against loss or
damage, pay or discharge all taxes, assessments, charges and claims, provide
certain financial information to holders of the Notes and limit the ability of
each of the Company and the Guarantor to merge, consolidate or convey all or
substantially all of their assets.
Optional Redemption
The Notes may be redeemed at any time at the option of the Company, in
whole or in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus (ii) accrued interest thereon to the
redemption date plus (iii) the Make-Whole Amount (as defined below), if any,
with respect to those Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in the notice, the Notes will cease to bear
interest on the date fixed for the redemption specified in the notice and the
only right of the holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes is to be given to
holders of the Notes at their addresses, as shown in the Security Register, not
more than 60 nor less than 30 days before the date fixed for redemption. The
notice of redemption is required to specify, among other items, the Redemption
Price and the principal amount of the Notes held by the holder to be redeemed.
If less than all of the Notes are to be redeemed at the option of the
Company, the Company must notify the Trustee at least 45 days before the giving
of the notice of redemption to the holders of the Notes (or such shorter period
as is satisfactory to the Trustee) of the aggregate principal amount of Notes to
be redeemed and their redemption date. The Trustee is required to select, in
such manner as it deems fair and appropriate, Notes to be redeemed in part.
Notes may be redeemed, in part, in the minimum authorized denomination for Notes
or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of the redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of the dollar if the redemption or accelerated
payment had not been made, determined by discounting, on a semi-annual basis,
the principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date the notice of redemption is given or declaration
of acceleration is made) from the respective dates on which the principal and
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interest would have been payable if the redemption or accelerated payment had
not been made, over (ii) the aggregate principal amount of the Notes being
redeemed or paid.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields
under the respective headings "This Week" and "Last Week" published in the
Statistical Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the remaining life to
maturity of the applicable Notes, as of the payment date of the principal being
redeemed or paid. If no maturity exactly corresponds to that maturity, yields
for the two published maturities most closely corresponding to that maturity are
to be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate is to be interpolated or extrapolated from those yields on a
straight-line basis, rounding in each of the relevant periods to the nearest
month. For purposes of calculating the Reinvestment Rate, the most recent
Statistical Release published before the date of determination of the Make-Whole
Amount is to be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if the
statistical release is not published at the time of any determination of the
Make-Whole Amount, then such other reasonably comparable index which shall be
designated by the Company.
Global Securities
The Notes may be issued in fully-registered form only.
Each series of the New Notes will be evidenced by one or more global
Notes (the "Global Securities"), which will be deposited with, or on behalf of,
The Depository Trust Company, New York, New York ("DTC") and registered in the
name of Cede & Co. ("Cede"), as DTC's nominee.
Holders of the New Notes who are not participants in DTC
("Participants") may beneficially own interests in a Global Security held by DTC
only through Participants, including certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly, and have
indirect access to the DTC system ("Indirect Participants"). So long as Cede, as
the nominee of DTC, is the registered owner of any Global Security, Cede for all
purposes will be considered the sole holder of such Global Security. Except as
provided below, owners of beneficial interests in a Global Security will not be
entitled to have certificates registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form, and
will not be considered the holder thereof.
Neither the Issuers nor the Trustee (nor any registrar or paying agent)
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised the Company that it will
take any action permitted to be taken by a holder of Notes only at the direction
of one or more Participants whose accounts are credited with DTC interests in a
Global Security.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants in
deposited securities through electronic book-entry changes to accounts of its
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corpora-
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tions and certain other organizations. Certain of such Participants (or their
representatives), together with other entities, own DTC. The rules applicable to
DTC and its Participants are on file with the SEC.
Purchases of Notes under the DTC system must be made by or through
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note (a "Beneficial Owner")
is in turn to be recorded on the Participants' and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Notes,
except in the event that use of the book-entry system for the Notes is
discontinued.
The deposit of Notes with DTC and their registration in the name of
Cede effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Notes; DTC's records reflect only the identity
of the Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Global Security.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Principal and interest payments on the Notes will be made to DTC by
wire transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC or the Issuers, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Company or the Guarantor, as the
case may be, disbursement of such payments to Participants is the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants. Neither the Issuers
nor the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to the
Company. In the event that DTC notifies the Company that it is unwilling or
unable to continue as depository for any Global Security or if at any time DTC
ceases to be a clearing agency registered as such under the Exchange Act when
DTC is required to be so registered to act as such depository and no successor
depository shall have been appointed within 90 days of such notification or of
the Company becoming aware of DTC's ceasing to be so registered, as the case may
be, certificates for the relevant Notes will be printed and delivered in
exchange for interests in such Global Security. Any Global Security that is
exchangeable pursuant to
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the preceding sentence shall be exchangeable for relevant Notes registered in
such names as DTC shall direct. It is expected that such instructions will be
based upon directions received by DTC from its Participants with respect to
ownership of beneficial interests in such Global Security.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates representing the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuers believe to be reliable,
but the Issuers do not take responsibility for the accuracy thereof.
Events of Default
The Indenture provides that the following events are "Events of
Default" with respect to the Notes: (a) default for 30 days in the payment of
any interest due and payable on any Notes; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Notes when due
and payable; (c) (i) default in the performance, or breach, of any other
covenant or warranty of the Company or the Guarantor contained in the Indenture
with respect to the Notes, or (ii) the failure by any Subsidiary to comply with
the provisions of the covenants described under "Certain Covenants--Limitations
on Incurrence of Indebtedness" above, in each case, continued for 60 days after
written notice as provided in the Indenture; (d) default under any bond,
debenture, note, or other evidence of indebtedness for money borrowed by the
Company or any of its Subsidiaries (including obligations under leases required
to be capitalized on the balance sheet of the lessee under GAAP) representing
recourse indebtedness or indebtedness guaranteed by such party in an aggregate
principal amount in excess of $5,000,000, or under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or any of its
Subsidiaries (including the leases) representing recourse indebtedness or
indebtedness guaranteed by such party in an aggregate principal amount in excess
of $5,000,000, whether the indebtedness existed at the date of the Indenture or
was created afterwards, which default shall have resulted in the indebtedness
becoming or being declared due and payable before the date on which it would
otherwise have become due and payable, or the obligations being accelerated,
without the acceleration having been rescinded or annulled; and (e) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Company or any Significant Subsidiary or
for all or substantially all of the property of the Company or any Significant
Subsidiary. The Term "Significant Subsidiary" has the meaning ascribed to the
term in Regulation S-X promulgated by the SEC under the Securities Act.
If an Event of Default described in clause (e) above relating to the
Company or any Significant Subsidiary occurs, the principal amount of, and the
Make-Whole Amount (if any) on, all outstanding Notes will become due and payable
without any declaration or other act on the part of the Trustee of the holders.
Defeasance and Covenant Defeasance
The Company may discharge any and all of its obligations to holders of
the Notes at any time ("defeasance"), but may not thereby avoid its duty to
register the transfer or exchange of the Notes, to replace any temporary,
mutilated, destroyed, lost or stolen Notes or to maintain an office or agency in
respect of the Notes. The Company may instead be released from the obligations
imposed by certain provisions of the Indenture (which contain the covenants
described above limiting incurrence of indebtedness and other matters) and omit
to comply with such provisions without creating an Event of Default ("covenant
defeasance"). Defeasance or covenant defeasance may be effected only if, among
other things: (i) the Company irrevocably deposits with the Trustee cash or
Government Obligations (as defined in the Indenture), as trust funds, an amount
certified to be sufficient to pay at maturity (or upon redemption) the
principal, premium, if any, and interest on the outstanding
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Notes and (ii) the Company delivers to the Trustee an opinion of counsel to the
effect that the holders of the Notes will not recognize income, gain or loss for
United States federal income tax purposes as a result of such defeasance or
covenant defeasance and that defeasance or covenant defeasance will not
otherwise alter such holders' United States federal income tax treatment of
principal, premium and interest payments on the Notes. In the case of a
defeasance, such opinion must be based on a ruling of the IRS or a change in
United States federal income tax law occurring after the date of the Indenture,
since such a result would not occur under current tax law.
No Personal Liability of Shareholders, Officers or Directors
The Indenture provides that no recourse may be had against any past,
present or future shareholder, officer or director of the Company, the Guarantor
or any successor entity under or upon any obligation, covenant or agreement
contained in the Indenture or in any Note, or because of any indebtedness
evidenced thereby.
Note Guarantees
The Notes are guaranteed irrevocably and unconditionally as to
principal, premium, if any, and interest by the Guarantor, as described below
under "Note Guarantees."
Same-Day Settlement and Payment
All payments of principal and interest in respect of Notes in the form
of Global Securities will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing house or next-day funds. In contrast,
Notes represented by a Global Security will trade in DTC's Same-Day Funds
Settlement System until maturity or until the Notes are issued in certificated
form, and secondary market trading activity in such Notes will therefore be
required by DTC to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
Governing Law
The Indenture is governed by and is to be construed in accordance with
the laws of the State of New York.
NOTE GUARANTEES
The Notes are guaranteed irrevocably and unconditionally as to
principal, premium, if any, and interest by the Guarantor. If the Company
defaults in the payment of the principal of or premium or interest on the Notes
when and as the same becomes due, whether upon maturity, acceleration, call for
redemption, or otherwise, the Guarantor is required promptly to make such
payment in full, without the necessity of action by the Trustee or any holder.
The Indenture provides that the Guarantor is to be released from its obligations
as guarantor under the Notes under certain circumstances. The obligations of the
Guarantor under its guarantee will be limited so as to avoid their performance
being considered a fraudulent conveyance under applicable law.
The Guarantor is a partnership in which the Company indirectly serves
as sole general partner and owned, as of March 31, 1998, approximately
87.6% of the partnership interests.
The Note Guarantees are unsecured obligations of the Guarantor and rank
equally with each other, with the Guarantor's guarantees of other debt
securities of the Company, and with the Guarantor's other unsecured and
unsubordinated indebtedness. The Guarantees are effectively subordinated to any
mortgage and other secured indebtedness of the Guarantor and its subsidiary. See
"Capitalization--Debt Financing."
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The Guarantor was organized in March 1996. Its activities include the
acquisition, development, ownership and operation of office properties,
primarily in select suburban growth markets across the United States. The
Guarantor's portfolio, as of March 31, 1998 consisted of (i) 56 operating
properties containing approximately 5.0 million square feet of office space
located in Austin, Texas, Southeast Denver, suburban Dallas, suburban Salt Lake
City, suburban Chicago, suburban Phoenix, suburban Seattle, San Francisco Bay
Area and Orange County/Los Angeles California, (ii) twelve projects under
construction that will contain approximately 1.2 million square foot of office
space, and (iii) land and options to acquire land that will support the
development of up to 1.4 million square feet of office space. The Guarantor's
properties owned as of March 31, 1998 were 96.3% leased as of that date. Each
of these properties is wholly owned by the Guarantor.
The Guarantor is subject to the informational requirements of the
Exchange Act, and files reports and other information with the SEC. See
"Available Information."
The Guarantor is capitalized through the issuance of units of limited
partnership interest ("Partnership Units"). As of March 31, 1998, the partners'
capital in the Guarantor was approximately $401 million. The Company indirectly
serves as the sole general partner of the Guarantor by reason of its ownership
of all the outstanding capital stock of the Guarantor's general partner,
CarrAmerica Realty GP Holdings, Inc., a Delaware corporation ("GP Holdings"). GP
Holdings owns a 1.0% general partner interest (in the form of Partnership Units)
in the Guarantor. In addition, the Company, through its wholly owned subsidiary,
CarrAmerica Realty LP Holdings, Inc., a Delaware corporation, owned an 86.6%
limited partnership interest (in the form of Partnership Units) in the Guarantor
as of March 31, 1998. The remaining Partnership Units are owned by persons who
received Partnership Units in connection with the contribution to the Guarantor
of interests in certain Properties. The Guarantor has approximately 65
employees, including approximately 50 on-site employees.
Generally, the Company currently acquires office properties through the
Guarantor if they are located in its Austin, Texas, Southeast Denver, suburban
Dallas and suburban Salt Lake City target markets. In addition, the Company
currently utilizes the Guarantor as the acquisition vehicle in transactions
where some or all of the sellers desire to receive consideration in the form of
partnership interests rather than cash. As of March 31, 1998, such transactions
have been effected in the Southeast Denver, suburban Austin, Texas, suburban
Salt Lake City, suburban Chicago, suburban Phoenix and Orange County/Los
Angeles, California markets. The Company currently expects that future
acquisitions will be effected through the Guarantor in the circumstances
described above, although there can be no assurance that the Company will elect
to acquire any additional office properties through the Guarantor, or that the
Company will not acquire office properties through the Guarantor under different
circumstances. All such decisions will be made by the Company, either directly
or indirectly.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain U.S. federal income tax
considerations applicable to the exchange of Old Notes for New Notes. This
discussion is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change, possibly retroactively. The discussion does
not cover all aspects of federal income taxation that may be relevant to holders
of the Notes, in light of their specific circumstances, particularly holders who
own 10% or more of the stock of the Company or holders subject to special
treatment under the federal income tax laws (such as insurance companies,
financial institutions, tax exempt organizations, foreign persons and taxpayers
subject to the alternative minimum tax). It also does not address state, local,
foreign or other tax laws.
32
<PAGE>
Exchange of Notes
The exchange of Old Notes for New Notes in the Exchange Offer should
not be treated as an "exchange" for U.S. federal income tax purposes because the
New Notes should not be considered to differ materially in kind or extent from
the Old Notes and because the exchange will occur by operation of the terms of
the Old Notes. As a result, there should be no federal income tax consequences
to holders exchanging Old Notes for New Notes in the Exchange Offer, and a
holder will have the same adjusted basis and holding period in the New Notes as
it had in the Old Notes immediately before the exchange.
EACH HOLDER SHOULD CONSULT HIS OR HER TAX OWN ADVISOR IN DETERMINING
THE FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR
HOLDER OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES.
THE COMPANY
The Company is a fully integrated, self-administered and self-managed
publicly-traded REIT that focuses primarily on the acquisition, development,
ownership and operation of office properties in select suburban growth markets
across the United States. As of March 31, 1998, the Company owned (i) interests
in 258 operating properties containing approximately 20.1 million square feet of
office space located in 16 markets, (ii) 49 properties under construction that
will contain approximately 4.3 million square feet of office space, and (iii)
land or options to acquire land that are expected to support the future
development of up to 5.2 million square feet of office space. As of March 31,
1998, the Company's consolidated operating properties were 95.3% leased.
The Company has maintained a strategic alliance with SC-USREALTY since
November 1995. As of April 30, 1998, SC-USREALTY owned approximately 39.9% of
the outstanding Common Stock of the Company (36.2% on a fully diluted basis).
The Company and its predecessor, The Oliver Carr Company, have been in
the real estate business in the Washington, D.C. metropolitan area for more than
35 years. In late 1995, the Company shifted its focus from downtown Washington,
D.C. to a national business strategy. The Company provides a full range of real
estate services through a staff of over 1,800 employees located throughout the
United States.
The Company is a Maryland corporation that was formed in July 1992. The
principal executive offices of the Company are located at 1850 K St., N.W.,
Suite 500, Washington, D.C. 20006, and its telephone number is (202) 729-7500.
Business Strategy
The Company's primary business objectives are to achieve long-term
sustainable per share cash flow growth and to maximize stockholder value through
a strategy of (i) acquiring, developing, owning and operating office properties
primarily in suburban markets throughout the United States that exhibit strong,
long-term growth characteristics and (ii) maintaining and enhancing a national
operating system that provides corporate users of office space with a mix of
products and services to meet their workplace needs at both the national and
local level. The Company has focused its investments primarily in suburban
markets throughout the United States because it believes that the suburban
markets provide growth oriented companies and their employees with workplace
locations which have lower operating costs, greater convenience and a higher
quality of life than traditional central business distinct locations.
Target Markets. The Company has focused its acquisition and development
activity in markets of the United States, which generally possess strong
long-term growth characteristics. Within these markets, the Company is targeting
specific submarkets in which (i) operating costs for businesses are relatively
low, (ii) long-term population and job growth generally are expected to exceed
the national average, (iii) large, well-educated employment pools exist, and
(iv) barriers to entry exist for new supplies of office space.
33
<PAGE>
The Company has established a local presence in each of its existing
target markets through its investment activity and through the relationships
established by its experienced market officers. The Company's target markets
include the following: San Francisco Bay Area; Sacramento; metropolitan
Washington, D.C.; suburban Atlanta; suburban Chicago; Southeast Denver; suburban
Dallas; suburban Seattle; Orange County/Los Angeles; San Diego; suburban Austin,
Texas; suburban Salt Lake City; suburban Phoenix; Tampa, Florida; Boca Raton,
Florida; and suburban Portland, Oregon.
For each identified target market, the Company has established a set of
general guidelines and physical characteristics to evaluate acquisition
opportunities. All investment decisions are driven by real estate research,
focusing on variables such as composition of economic base, rate and composition
of job growth and supply and demand fundamentals. The Company's goal is to
become one of the major owners and operators of office space in each of its
selected target markets. By achieving such critical mass, the Company believes
that it is able to better serve its customers' needs, realize certain operating
efficiencies and achieve sustainable long-term per share cash flow growth and
maximize stockholder value.
As of March 31, 1998 the distribution of the Company's operating
properties (on a rentable square foot basis) was as follows: 40% in its Pacific
region, primarily in suburban Seattle and the California markets of Silicon
Valley, Pleasanton, San Mateo, Orange County, Los Angeles and San Diego; 29% in
its Southeast region, primarily in metropolitan Washington, D.C., suburban
Atlanta and Boca Raton, Florida; 13% in its Mountain region, primarily in
suburban Salt Lake City, southeast Denver and suburban Phoenix; and 18% in its
Central region, primarily in suburban Chicago, suburban Dallas and suburban
Austin. Downtown Washington, D.C., which represented 100% of the Company's
portfolio in 1993, accounted for approximately 11% of the Company's portfolio
(on a rentable square foot basis) as of March 31, 1998.
Operating Property Acquisitions. In November 1995, the Company
implemented a major initiative to acquire operating properties in order to
establish the operating platform for its national business strategy. Between
January 1, 1996 and March 31, 1998, the Company acquired 243 operating
properties containing approximately 17.0 million square feet of office space.
These properties were acquired for an aggregate purchase price of approximately
$1.9 billion. See "Recent Developments."
Development Program. Development of office properties program is
becoming an increasingly important component of the Company's growth strategy as
attractive acquisition opportunities diminish due to the influx of capital into
the office property market. The Company believes that long-term investment
returns resulting from properties generally will exceed those from properties it
acquires, and the Company will not assume significantly increased investment
risks. The Company minimizes its development risk by employing extensively
trained and experienced development personnel, by avoiding the assumption of
significant entitlement risk in conjunction with land acquisitions and by
entering into guaranteed maximum price (GMP) construction contracts with
seasoned and credible contractors. Most importantly, the Company carefully
analyzes the supply and demand characteristics of a target market before
commencing inventory development in the market. In general, the Company will
only undertake inventory development (which excludes properties under
construction that have been substantially pre-leased) in markets with strong
real estate fundamentals, and the Company generally will construct office
buildings attractive to a wide range of office users. The Company's
research-driven development program enables it to tailor its development
activities in each target market, from inventory development, to build-to-suit
projects, to holding land for future development. From January 1, 1997 to March
31, 1998, the Company placed in service nine development properties containing
approximately 780,000 square feet of office space. The total cost of these
development properties was $99.1 million and the Company expects that the first
year stabilized unlevered return of these properties will be 11.7%. In addition,
as of March 31, 1998, the Company had an additional 49 properties under
construction that will contain approximately 4.3 million square feet of office
space. Furthermore, because the Company's development projects will typically be
between 125,000 and 150,000 square feet in size, these projects individually are
not significant to the Company. The Company does not intend to have
concentrations of inventory development exceeding 250,000 rentable square feet
in any of its target markets at any given time. Although the Company has no
pre-set leasing guidelines for inventory development, on average, the Company
expects that its development projects, in the aggregate, at any time will be
between 60% and 75% leased or committed. The Company's research-driven
development program enables it to tailor its development activities in each
target market, from inventory development to build-to-suit projects to holding
raw land for future opportunities.
34
<PAGE>
Investments in Land for Future Development. The Company believes that
acquiring land to support future development provides it with a competitive
advantage in responding to customers' needs for office space in markets with low
vacancy rates, barriers to entry for new supplies of office space and increasing
rental rates. The Company also believes that the long-term investment returns
available to it on office properties it develops generally will exceed those of
office property acquisition opportunities currently available to the Company. In
addition to its portfolio of operating properties and projects currently under
development, the Company owned or controlled, as of March 31, 1998, land in 15
of its target markets that is expected to support future development of up to
5.2 million square feet. The Company believes that acquiring land to support
future development provides it with a competitive advantage in responding to
customers' needs for office space in markets with low vacancy rates.
National Operating System. As part of its business strategy, the
Company has developed and is continuing to enhance a national operating system
to provide nationally coordinated customer service, marketing and development.
The Company's national operating system consists of three components: (i) a
Market Officer Group, currently consisting of eleven market officers focused on
developing and maintaining strong local relationships with the Company's
customers and the brokerage community and identifying investment opportunities
for the Company; (ii) a Corporate Services Group, which, is dedicated to
marketing the Company's products and services to a targeted list of major
corporate users of office space; and (iii) a National Development Group, which
is responsible for developing office properties, build-to-suit facilities and
business parks. The Company's national operating system is designed to provide
corporate users of office space with a mix of products and services to meet
their workplace needs at both the national and local levels. The Company
believes that through its existing portfolio of operating properties, property
development opportunities and land acquired for future development, the Company
can generate incremental demand through the relocation and expansion needs of
many of its customers, both within a single target market and in multiple target
markets.
Market Officer Group. The Market Officer Group currently consists of 11
market officers who cover the 16 target markets in which 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, market officers are cognizant
of and responsive to customers' relocation or expansion needs. The market
officers have extensive knowledge of local conditions in their respective
markets and, therefore, are invaluable in identifying attractive investment
opportunities in their markets. In addition, through their contact with
customers, market officers are well positioned to help the Corporate Services
Group identify customers with new build-to-suit and multi-market requirements.
Corporate Services Group. The Company established the Corporate
Services Group in 1997. This group is 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. The Corporate Services
Group acts as a primary point of contact for national customers, coordinating
all of the office space the Company offers and giving corporate customers the
opportunity to address their national space requirements efficiently and
economically.
National Development Group. The National Development Group is
responsible for developing suburban office properties, build-to-suit facilities
and business parks. The Company's development team currently has over 40
professionals consisting of architects, engineers and construction professionals
across the United States who have an average of over 15 years of experience
developing office properties. This team of development professionals oversees
every aspect of 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. The Company
believes that, the National Development Group's expertise has given the Company
a competitive edge in marketing its facilities and services to customers.
Executive Office Suites Business. In August 1997, OmniOffices, Inc.
("OmniOffices"), an affiliate of the Company, acquired substantially all of the
assets of OmniOffices Group, Inc. and its subsidiaries for an aggregate purchase
price of approximately $50 million in cash. These assets included 28 executive
office suite centers containing approximately 1,650 office suites located in 14
markets across the United States. In addition, as of May 31, 1998, OmniOffices
has acquired an additional 62 executive office suite centers for approximately
$ million in cash. These additional 62 executive office suite centers
contain approximately 3,837 office suites located in various cities across the
country, and are currently operated as franchises of the HQ(R) executive office
suite network, the largest operator of executive suites.
The "executive office suites" business typically involves leasing
20,000 to 30,000 square feet of an office building from the owner and outfitting
that space with 60 to 70 individual offices (known as office suites) that are
leased on a relatively short-term basis (i.e., one year or less) to customers
who generally utilize one to three offices at a time. OmniOffices generally
provides these customers with administrative support services (e.g.,
secretarial, duplicating, fax and receptionist services), conference and
training facilities, video conferencing, travel arrangements and catering
arrangements. The Company believes that approximately 60% of the current demand
being generated for executive office suites originates from national and
multi-national companies. The Company believes that this line of business has
significant potential for growth because the demand for executive office suites
is likely to increase as companies seek greater flexibility and alternative
workplace solutions for their staffing and business plan requirements. The
Company believes that its position as the only national office property owner
and operator providing both traditional, long-term office space and (through
OmniOffices) flexible, short-term workplace options provides it with a
competitive advantage in meeting the evolving needs of growing companies.
OmniOffices expects to continue expanding its operations through a
program encompassing both acquisitions and the creation of new executive office
suite centers. OmniOffices has financed its recent acquisitions primarily
through debt and equity investments by the Company. (In conformance with
limitations under the tax laws relating to REITs, OmniOffices is structured as a
taxable "C" corporation in which the Company owns 95% of the economic interest,
but none of the voting stock.) Because the tax laws relating to REITs limit the
amount of investment by the Company in OmniOffices to 5% of the Company's total
assets (or approximately $150 million), future growth of OmniOffices likely will
be financed through third-party debt financing (some or all of which may be
guaranteed by the Company) or equity investments by others (possibly including
public investors).
Asset Optimization. As a component of its business strategy, the
Company may dispose of assets that become inconsistent with its long-term
strategic or return objectives or where market conditions for disposition are
favorable. The Company would then redeploy the proceeds of such dispositions
into other office properties (utilizing tax-deferred exchanges where possible).
Consistent with this strategy, during 1997, the Company disposed of seven
properties containing approximately 664,000 square feet for approximately $68
million in value. The Company recognized a gain of $5.4 million in conjunction
with these transactions. In addition, in January 1998, the Company disposed of
an additional property containing 267,000 square feet for approximately $78
million in value, resulting in a gain of $43.8 million. The Company also may
consider disposing of additional properties or interests in properties, some of
which may be significant. The Company, however, has agreed with SC-USREALTY to
use its reasonable efforts to dispose of properties only through tax-deferred
exchanges (and the Company also is subject to other similar restrictions with
respect to certain properties acquired by CarrAmerica Realty, L.P. and Carr
Realty, L.P.).
Financing Strategy
In order to meet its capital requirements at a reasonable cost, the
Company will require access to diverse sources of capital, including the common
and preferred stock markets, the private market for operating partnership units,
and the public and private debt markets. In order to ensure access to these
capital sources, the Company's financial strategy is predicated on conservative
financial policies.
Common Stock, including operating partnership units that may be
redeemed for shares of Common Stock, is and will continue to be the largest
component of the Company's capital structure. Between January 1996 and May
1998, the Company raised more than $1.6 billion from the sale of shares of
Common
35
<PAGE>
Stock and $43.5 million from the issuance of operating partnership units. Of
the total Common Stock sold since SC-USREALTY'S initial investment in the
Company in November 1995, SC-USREALTY has purchased $333 million, or
approximately 29%. The Company expects that SC-USREALTY will continue to
participate in future Common Stock offerings, although it is not obligated to do
so.
To date, preferred stock has been only a small component of the
Company's capital structure. As of March 31, 1998, the Company had 780,000
shares of Series A Cumulative Convertible Redeemable Preferred Stock
outstanding, 8,000,000 shares of Series B Cumulative Redeemable Preferred Stock
outstanding, 6,000,000 depositary shares of Series C Cumulative Redeemable
Preferred Stock and 2,000,000 depositary shares of Series D Cumulative
Redeemable Preferred Stock outstanding. The Company currently does not expect
that its preferred stock capitalization will exceed 20% of its total equity
capitalization. See "Recent Developments--Financing Activity."
Debt from the public and private debt markets is also a key component
of the Company's capital structure. The Company currently has $475 million in
unsecured notes outstanding, including the Old Notes. In formulating its debt
capitalization strategy, the Company considers a number of factors, including
the benefits of Company-based financings versus asset-specific financings,
floating rate debt exposure, debt maturity management, coverage ratios and total
debt outstanding as compared to asset values. Although the Company may from time
to time assume mortgage debt in connection with property acquisitions, the
Company, in accordance with its debt capitalization strategy, plans to primarily
utilize Company-based financings in the form of long-term, unsecured, fixed rate
bonds, rather than asset-specific mortgage financings. The maturities of bonds
issued will be staggered in order to produce normalized maturities and therefore
mitigate refinancing risk. For short-term debt capitalization, the Company will
continue to utilize its unsecured, floating rate, revolving line of credit to
provide the necessary capital for acquisitions and development. With respect to
floating rate debt exposure, the Company plans to keep its average unhedged
floating rate debt outstanding to an amount less than 10% of total asset value.
The Company expects to continue operating with adequate debt service coverage
ratios and to continue maintaining a sufficient pool of unencumbered assets to
service the Company's unsecured debt.
The Company's financing strategy may be changed from time to time by
its Board of Directors without the consent of its stockholders or other
securityholders.
Real Estate Services
The Company generally provides real estate operating services for its
properties. In certain circumstances, however, such as during a transitional
period following the acquisition of a property, the Company may use a
third-party real estate service provider. As of March 31, 1998, the Company
provided its own real estate operating services for 17.5 million square feet (or
98%) of its portfolio. The Company, through certain subsidiaries, also provides
fee-based real estate services for related and unrelated parties.
36
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 on an historical basis.
<TABLE>
<CAPTION>
March 31, 1998
--------------
Historical
--------------
(in thousands)
<S> <C>
Mortgage Debt $ 590,645
Lines of credit 159,500
Senior Unsecured Notes due 2004, 2005, 2007 and 2008 275,000
Other liabilities 91,263
-----------
Total liabilities 1,116,408
Minority Interest 74,955
Stockholders' equity:
Preferred Stock, $.01 par value; 15,000,000 shares authorized:
Series A Preferred Shares, 780,000 issued and outstanding 8
Series B Preferred Shares, 8,000,000 issued and outstanding 80
Series C Depositary Preferred Shares, 6,000,000 issued and
outstanding 6
Series D Depositary Preferred Shares, 2,000,000 shares issued
and outstanding 2
Common Stock, $.01 par value, 90,000,000 shares authorized; 600
68,564,745 shares issued and outstanding;
Additional paid-in capital 1,629,214
Cumulative dividends paid in excess of net income (77,213)
-----------
Total stockholders' equity 1,552,697
-----------
Total capitalization $ 2,744,060
===========
</TABLE>
Debt Financing
As of March 31, 1998, certain of the Company's 243 operating office
properties that were consolidated for financial statement purposes were subject
to existing mortgage indebtedness in an aggregate principal amount of $591
million (encumbering 61 of such properties), and unsecured indebtedness of
approximately $159.5 million, which bore a floating interest rate. As of
March 31, 1998, the Company's fixed rate debt (comprising an aggregate
principal amount of $591 million) bears an effective weighted average interest
rate of 8.1% and a weighted average maturity of 5.9 years (assuming loans
callable before maturity are called as early as possible).
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the period from
February 16, 1993 (commencement of operations) to December 31, 1993, for the
years ended December 31, 1994, 1995, 1996 and 1997 and for the three months
ended March 31, 1998 were 1.91x, 1.81x, 1.75x, 1.74x, 2.01x and 1.91x,
respectively.
The Guarantor's ratios of earnings to fixed charges for the period from
March 6, 1996 (commencement of operations) to December 31, 1996, for the year
ended December 31, 1997 and for the three months ended March 31, 1998 were
1.58x, 1.90x and 2.56x, respectively.
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. For this purpose, earnings consist of income (loss)
before gains from sales of property and extraordinary items plus fixed charges.
Fixed charges consist of interest expense (including interest costs
capitalized), the amortization of debt issuance costs and rental expense deemed
to represent interest expense.
RECENT DEVELOPMENTS
Recent Acquisitions and Development Activity
Between January 1, 1997 and March 31, 1998, the Company invested
approximately $1.0 billion ($807 million in cash, the assumption of $183
million of debt and the issuance of $26.0 million in partnership interests
("Units")) in 97 operating properties containing approximately 7.8 million
square feet and in land held for future development which is expected to support
the development of approximately 6.7 million square feet. On certain parcels of
land acquired between January 1, 1997 and March 1, 1998, the Company developed
and placed into service five properties containing an aggregate of approximately
346,000 square feet and placed under construction 37 properties which will
contain an aggregate of approximately 3.2 million square feet. The table below
provides certain information by market regarding the operating properties
acquired between January 1, 1997 and March 31, 1998:
37
<PAGE>
Purchase
Price Number of Rentable
Region/Market (in millions) Properties Square Feet
------------------------ ------------ ------------- -----------
SOUTHEAST REGION
Suburban Atlanta $ 67.6 6 709,000
Boca Raton, Florida 42.8 1 279,000
PACIFIC REGION
San Francisco Bay Area 313.3 29 2,007,000
Sacramento 34.6 8 314,000
Orange County/Los Angeles 79.9 7 489,000
San Diego 35.6 5 325,000
Suburban Portland, Oregon 9.0 1 81,000
Suburban Seattle 51.0 8 438,000
CENTRAL REGION
Suburban Chicago 92.8 6 707,000
Suburban Austin 15.6 2 171,000
Suburban Dallas 93.8 9 936,000
MOUNTAIN REGION
Suburban Salt Lake City 50.1 8 463,000
Southeast Denver 17.1 1 161,000
Suburban Phoenix 112.6 6 714,000
======== ===== =========
Total $1,015.8 97 7,794,000
======== ====== =========
The following table provides certain information regarding the
Company's acquisition of land (including land subject to options), all of which
was acquired between January 1, 1997 and March 31, 1998:
Square Feet Future
Under Buildable
Region/Market Construction Square Footage
------------------------------ ---------------- ----------------
Pacific Region:
San Francisco Bay Area 1,030,000(1) --
Suburban Portland, Oregon --(2) 444,000
Orange County/Los Angeles -- 136,000
San Diego 182,000 157,000
Suburban Seattle 279,000 286,000
---------- ---------
Subtotal 1,491,000 1,023,000
---------- ---------
Mountain Region:
Southeast Denver -- 128,000
Suburban Salt Lake City 122,000 121,000
Suburban Phoenix 137,000 367,000
---------- ---------
Subtotal 259,000 616,000
---------- ---------
Central Region:
Suburban Dallas 840,000 499,000
---------- ---------
Subtotal 840,000 499,000
---------- ---------
Southeast Region:
Suburban Washington, D.C. 323,000 --
Downtown Washington, D.C. -- 221,000
Boca Raton, Florida 188,000 388,000
Tampa, Florida -- 202,000
Suburban Atlanta 76,000 211,000
---------- ---------
Subtotal 587,000 1,022,000
---------- ---------
TOTAL 3,177,000 3,160,000
========== =========
-----------
(1) Excludes Baytech Business Park which was purchased in 1997 and
placed in service in January 1998.
(2) Excludes RadiSys II which was purchased in 1997 and placed in
service in December 1997.
Financing Activity
Between January 1, 1997 and May 31, 1998, the Company completed
offerings of shares of Common Stock to the public and SC-USREALTY for aggregate
net proceeds of approximately $551 million. In August 1997, the Company sold
shares of preferred stock to institutional investors for net proceeds of
approximately $194 million. In November 1997 and December 1997, the Company sold
depositary shares of preferred stock for net proceeds of approximately $145
million and $48 million, respectively.
38
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
in the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making or other trading
activities. The Issuers will make this Prospectus, as amended or supplemented,
available to any such broker-dealer for use in connection with any such resale
for a period of up to 90 days after the consummation of the Exchange Offer. The
Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or in a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resales may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For period of 90 days after the consummation of the Exchange
Offer the Company will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to
indemnify each broker-dealer reselling New Notes pursuant to this Prospectus,
and their officers, directors and controlling persons, against certain
liabilities in connection with the offer and sale of the New Notes, including
liabilities under the Securities Act, or to contribute to payments that such
broker-dealers may be required to make in respect thereof.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon by
Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of CarrAmerica
Realty Corporation and subsidiaries as of December 31, 1997 and 1996 and for
each of the years in the three-year period ended December 31, 1997 and the
financial statements and schedule of CarrAmerica Realty L.P. as of December 31,
1997 and 1996 and for the year ended December 31, 1997 and the period from March
6, 1996 (date of inception) to December 31, 1996, have been incorporated herein
by reference in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The Historical Summary of Revenue and Direct Operating Expenses of
Golden Gateway Commons, incorporated by reference in this prospectus, to the
extent and for the period indicated in their report, has been incorporated
herein in reliance on the report of Coopers & Lybrand L.L.P.
(PricewaterhouseCoopers LLP after June 30, 1998), independent accountants, given
on authority of that firm as experts in accounting and auditing.
39
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Company's officers and directors are and will be indemnified under
Maryland and Delaware law, the charter and by-laws of the Company, the
partnership agreement of Carr Realty, L.P. and the partnership agreement of the
Guarantor.
The charter and by-laws of the Company require the Company, to the
fullest extent permitted by Section 2-418 of the Maryland General Corporation
Law (the "MGCL") as in effect from time to time, to indemnify any person who is
or was, or is the personal representative of a deceased person who was, a
director or officer of the Company against any judgments, penalties, fines,
settlements and reasonable expenses and any other liabilities; provided that,
unless applicable law otherwise requires, indemnification shall be contingent
upon a determination by the Board (by a majority vote of a quorum consisting of
directors who are not at the time parties to the proceeding or, if such a quorum
cannot be obtained, then by a majority vote of a committee of the Board
consisting solely of two or more directors who are not at the time parties to
the proceeding and who were duly designated to act in the matter by a majority
vote of the full Board in which the designated directors who are parties may
participate) or by special legal counsel selected by the Board that
indemnification is proper in the circumstances because such director or officer
has met the applicable standard of conduct prescribed by Section 2-418(b) of the
MGCL.
Under Maryland law, a corporation formed in Maryland is permitted to
limit, by provision in its charter, the liability of directors and officers so
that no director or officer of the corporation will be liable to the corporation
or to any stockholder for money damages except to the extent that (i) the
director or officer actually received an improper benefit in money, property or
services, for the amount of the benefit or profit in money, property or services
actually received, or (ii) a judgment or other final adjudication adverse to the
director or officer is entered in a proceeding based on a finding in a
proceeding that the director's or officer's action was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding.
The partnership agreement of Carr Realty, L.P. also provides for
indemnification of the Company and its officers and directors against any and
all losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of the
partnership as set forth in the partnership agreement in which any indemnitee
may be involved, or is threatened to be involved, unless it is established that
(i) the act or mission of the indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty, (ii) the indemnitee actually received an
improper personal benefit in money, property or services, or (iii) in the case
of a criminal proceeding, the indemnitee had cause to believe that the act or
omission was unlawful. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the indemnitee did not meet the
requisite standard of conduct set forth in the respective partnership agreement
section on indemnification. The termination of any proceeding by conviction or
upon a plea of nolo contendere or its equivalent, or an entry of an order of
probation before judgment creates a rebuttable presumption that the indemnitee
acted in a manner contrary to that specified in the indemnification section of
the partnership agreement. Any indemnification pursuant to the Carr Realty, L.P.
partnership agreement may only be made out of the assets of the partnership.
II-1
<PAGE>
In general, the partnership agreement of the Guarantor provides for
indemnification of each Indemnitee (as hereinafter defined) against any losses,
claims, damages, liabilities, joint or several, expenses (including legal fees
and expenses), judgments, fines, settlements, and other amounts that relate to
the operations of the partnership in which such Indemnitee may be involved, or
is threatened to be involved, as a party or otherwise, unless it is established
that: (i) the act or omission of the Indemnitee was material to the matter
giving rise to the proceeding and either was committed in bad faith or was the
result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Under certain circumstances,
reasonable expenses incurred by an Indemnitee who is a party to a proceeding may
be paid or reimbursed by the Guarantor in advance of the final disposition of
the proceeding. In general, an "Indemnitee" is (i) any person made a party to a
proceeding by reason of his status as (A) the general partner (i.e., GP
Holdings) or an affiliate of the general partner (e.g., CarrAmerica and LP
Holdings), (B) a limited partner of the Guarantor, and (C) a director or officer
of an entity described in (A), and (ii) such other persons (including affiliates
of the general partner or the Guarantor) as the general partner may designate
from time to time (whether before or after the event giving rise to potential
liability) in its sole and absolute discretion.
GP Holdings' officers and directors are and will be indemnified under
Delaware law and the charter and bylaws of GP Holdings. The charter and bylaws
of GP Holdings require GP Holdings, to the fullest extent authorized by the
Delaware General Corporation Law (the "DGCL") as in effect from time to time, to
indemnify any person who is or was, or is the legal representative a person who
was, a director or officer of GP Holdings against any expenses, liabilities and
losses, as long as the person seeking indemnification in connection with a
proceeding was authorized by the board of directors of GP Holdings.
Under Delaware law, a corporation formed in Delaware is permitted to
limit, by provision in its bylaws, the liability of directors and officers so
that no director or officer of GP Holdings shall be liable to GP Holdings or to
any shareholder for money damages except liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
The exhibits to this Registration Statement are listed in the
Exhibit Index, which appears immediately after the signature
page and is incorporated herein by this reference.
(b) Financial Statement Schedules
The Consolidated Real Estate and Accumulated Depreciation
Schedule of the Company as of December 31, 1997 is found at
page S-1 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated herein by
reference.
II-2
<PAGE>
The Consolidated Real Estate and Accumulated Depreciation
Schedule of the Guarantor as of December 31, 1997 is found at
page S-1 of the Guarantor's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and incorporated herein by
reference.
All other schedules are omitted because they are not
applicable, or because the required information is included in
the financial statements of the Company or the Guarantor or
notes thereto incorporated herein by reference.
(c) Reports, Opinions and Appraisals
Not Applicable.
Item 22. Undertakings
The undersigned registrants hereby undertake that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
annual report of a registrant pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the provisions discussed in Item 20 or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each of the registrants will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
after the effective date of this Registration Statement through the date of
responding to the request.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned registrants hereby undertake to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants
have duly caused this Amendment to be signed on their behalf by the undersigned,
thereunto duly authorized, in Washington, D.C., on July 2, 1998.
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Brian K. Fields
-----------------------------------
Brian K. Fields
Chief Financial Officer
CARRAMERICA REALTY, L.P.,
a Delaware limited partnership
By: CarrAmerica Realty GP Holdings, Inc.,
its general partner
By: /s/ Brian K. Fields
-----------------------------------
Brian K. Fields
Chief Financial Officer
Pursuant to the requirements of the Securities Act, this Amendment
has been signed by the following persons in the capacities indicated below on
July 2, 1998:
Name Title
---- -----
* Chairman of the Board and Director of the
- ----------------------------- Company
Oliver T. Carr, Jr.
* President and Chief Executive Officer and
- ----------------------------- Director of the Company; President
Thomas A. Carr (Principal Executive Officer) and
Director of GP Holdings
II-4
<PAGE>
/s/ Brian K. Fields Chief Financial Officer (Principal
- ----------------------------- Financial and Accounting Officer) of the
Brian K. Fields Company; Chief Financial Officer
(Principal Financial and Accounting
Officer), Treasurer, Vice President
and Director of G.P. Holdings
* Director of the Company
- -----------------------------
Andrew F. Brimmer
* Director of the Company
- -----------------------------
A. James Clark
* Director of the Company
- -----------------------------
Todd W. Mansfield
* Director of the Company
- -----------------------------
Caroline McBride
* Director of the Company
- -----------------------------
William D. Sanders
* Director of the Company
- -----------------------------
Wesley S. Williams
* Director of GP Holdings
- -----------------------------
Philip L. Hawkins
*By: /s/ Brian K. Fields
-----------------------
Brian K. Fields
As Attorney-in-Fact
(See Exhibit 24.1)
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Amendment and Restatement of Articles of
Incorporation of the Company (incorporated by
reference to the same numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996)
3.2 Articles of Amendment of Amendment and Restatement
of Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed July 1,
1998).
3.3 Second Amendment and Restatement of By-laws of
the Company (incorporated by reference to Exhibit
3.1 to the Company's Current Report on Form 8-K
filed February 12, 1997)
3.4 Articles Supplementary relating to 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)
3.5 Articles Supplementary relating to Series B
Cumulative Redeemable Preferred Stock dated August
8, 1997 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997)
3.6 Articles Supplementary relating to Series C
Cumulative Redeemable Preferred Stock dated October
30, 1997 (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K dated
and filed on November 6, 1997)
3.7 Articles Supplementary relating to Series D
Cumulative Redeemable Preferred Stock dated
December 17, 1997 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form
8-K dated December 16, 1997 and filed on December
19, 1997)
3.8 Second Amended and Restated Agreement of Limited
Partnership of the Guarantor, dated May 9, 1997
(incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997)
3.9 First Amendment to Second Amended and Restated
Agreement of Limited Partnership of the Guarantor,
dated October 6, 1997 (incorporated by reference to
Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997)
3.10 Second Amendment to Second Amended and Restated
Agreement of Limited Partnership of the Guarantor,
dated October 6, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997)
3.11 Third Amendment to Second Amended and Restated
Agreement of Limited Partnership of the Guarantor,
dated October 6, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997)
4.1 Indenture, dated as of July 1, 1997, by and among
the Company, as Issuer, CarrAmerica Realty, L.P.,
as Guarantor, and Bankers Trust Company, as
Trustee, relating to the Company's 7.20% Notes due
2004 and 7.375% Notes due 2007 (incorporated by
reference to Exhibit 4.1 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30,
1997)
4.2 Indenture, dated as of February 23, 1998, by and
among the Company, as Issuer, CarrAmerica Realty,
L.P., as Guarantor, and Bankers Trust Company, as
Trustee, relating to the Company's 6.625% Notes due
2005 and 6.875% Notes due 2008 (incorporated by
reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1997)
5.1* Opinion of Hogan & Hartson L.L.P.
10.1 Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated May
9, 1997 (incorporated by reference to Exhibit 10.1
to the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 1997)
10.2 First Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated October 6, 1997 (incorporated
by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
10.3 Second Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated December 12, 1997 (incorporated
by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-L for the fiscal year
ended December 31, 1997)
10.4 Third Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated December 31, 1997 (incorporated
by reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
10.5 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)
10.6 1993 Carr Realty Option Plan (incorporated by
reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-11, No. 33-53626)
10.7 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-8, No.
33-92136)
10.8 1997 Stock Option and Incentive Plan (incorporated
by reference to Exhibit 10.5 to the Company's
annual report on Form 10-K for the year ended
December 31, 1996)
10.9 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 to the
Company's Registration Statement on Form S-11, No.
33-53626)
10.10 Promissory Note from Carr Realty, L.P. to the
Northwestern Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.27 to the
Company's Registration Statement on Form S-11, No.
33-72974)
10.11 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 to the
Company's Registration Statement on Form S-11, No.
33-72974)
10.12 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 filed
November 6, 1995)
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 to 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 to
Security Capital U.S. Realty's Schedule 13D dated
April 30, 1996)
10.15 Third Amended and Restated Credit Agreement, dated
March 11, 1998 by and among CarrAmerica Realty
Corporation, Carr Realty, L.P., CarrAmerica Realty,
L.P., Morgan Guaranty Trust Company of New York,
Commerzbank Aktiengesellschaft, New York Branch,
NationsBank, N.A., Wells Fargo Bank, National
Association, Bank of America National Trust and
Savings Association, and the other banks listed
therein (incorporated by reference by reference to
Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1997)
10.16 First Amendment to Third Amended and Restated
Agreement of Limited Partnership of Carr Realty,
L.P., dated January 22, 1998 (incorporated by
reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
10.17 Second Amendment to Third Amended and Restated
Agreement of Limited Partnership of Carr Realty,
L.P., dated February 17, 1998 (incorporated by
reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
12.1** Computation of Ratios of Earnings to Fixed Charges
of the Company and the Guarantor
21.1 List of Subsidiaries of the Company (incorporated
by reference to Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
21.2 List of Subsidiaries of the Guarantor (incorporated
by reference to Exhibit 21.1 to the Guarantor's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
23.1** Consent of KPMG Peat Marwick LLP
23.2* Consent of Hogan & Hartson L.L.P. (included in
Exhibit 5.1)
23.3** Consent of PricewaterhouseCoopers LLP
24.1* Powers of Attorney
25.1** Statement of Eligibility of Trustee on Form T-1
99.1 Certificate of Incorporation of CarrAmerica Realty
GP Holdings (incorporated by reference to Exhibit
99.1 to the Guarantor's Registration Statement on
Form 10 filed on August 27, 1997)
99.2 Bylaws of CarrAmerica Realty GP Holdings
(incorporated by reference to Exhibit 99.2 to the
Guarantor's Registration Statement on Form 10 filed
on August 27, 1997)
99.3* Form of Letter of Transmittal
99.4* Form of Notice of Guaranteed Delivery
99.5* Instruction to Registered Holder and/or Book-Entry
Transfer of Participant
99.6* Form of Letter to Clients
99.7* Form of Letter to Registered Holders and Depository
Trust Company Participants
---------------------
* Previously filed.
** Filed herewith.
Exhibit 12.1
CARRAMERICA REALTY CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
<TABLE>
<CAPTION>
March 31,
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Net Income before Minority Interest............. $ 53,056 $ 87,013 $29,534 $17,284 $17,821 $ 6,004
Add:
Extraordinary Charges......................... $ -- $ -- $ 484 $ -- $ -- $ 5,613
Fixed Charges, excluding Capital Interest..... $ 18,452 $ 55,893 $32,946 $22,579 $21,880 $12,768
Deduct:
Gain of Sale of Assets........................ $(25,931) $ (5,420) $ -- $ -- $ -- $ --
-------- ------- ------- ------- ------- -------
$ 45,577 $137,486 $63,258 $39,863 $39,701 $24,385
======== ======== ======= ======= ======= =======
Fixed Charges:
Interest Expense.............................. $ 17,161 $51,528 $31,630 $21,873 $21,366 $12,436
Interest Capitalized.......................... $ 5,692 $14,266 $ 2,664 $ 226 $ -- $ --
Amortization of Deferred Financing Costs...... $ 865 $ 2,138 $ 1,003 $ 365 $ 208 $ 101
Rent Deemed as Interest....................... $ 111 $ 532 $ 313 $ 341 $ 306 $ 231
Preferred Stock Dividends..................... $ -- $ -- $ -- $ -- $ -- $ --
-------- ------- ------- ------- ------- -------
Total Fixed Charges....................... $ 23,829 $68,464 $36,388 $22,805 $21,880 $12,768
======== ======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges.............. 1.91 2.01 1.74 1.75 1.81 1.91
</TABLE>
CARRAMERICA REALTY, L.P.
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
March 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS)
Net Income before Minority Interest............ $ 6,951 $ 16,693 $ 1,527
Add:
Extraordinary Charges........................ $ -- $ -- $ --
Fixed Charges, excluding Capital Interest.... $ 3,458 $ 6,816 $ 1,475
Deduct:
Gain of Sale of Assets....................... $ 416 $ (5,067) $ --
------- -------- -------
$10,825 $ 18,442 $ 3,002
======= ======== =======
Interest Expense............................. $ 3,451 $ 6,792 $ 1,475
Interest Capitalized......................... $ 769 $ 2,909 $ 431
Amortization of Deferred Financing Costs..... $ -- $ -- $ --
Rent Deemed as Interest...................... $ 7 $ 24 $ --
Preferred Stock Dividends.................... $ -- $ -- $ --
-------- ------- -------
Total Fixed Charges...................... $ 4,227 $ 9,725 $ 1,906
======== ======= =======
Ratio of Earnings to Fixed Charges............. 2.56 1.90 1.58
Exhibit 23.1
The Board of Directors
CarrAmerica Realty Corporation
The Partners
CarrAmerica Realty, L.P.:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement
on Form S-4.
KPMG Peat Marwick LLP
Washington, D.C.
July 2, 1998
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
CarrAmerica Realty Corporation on Form S-4/A (File No. 333-50805) of our report
dated June 9, 1998, on our audit of the Historical Summary of Revenue and Direct
Operating Expenses of Golden Gateway Commons for the year ended December 31,
1997, which report is included in the Company's Current Report on Form 8-K
filed July 1, 1998. We also consent to the reference to our firm under the
caption "Experts."
PricewaterhouseCoopers LLP
San Francisco, California
July 2, 1998
Exhibit 25.1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
-------------------------------------------------
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
- ---------------------------------------- ------------------
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
- -------------------- ----------
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
-------------------------------------------------------
(Name, address and telephone number of agent for service)
---------------------------------
CARRAMERICA REALTY CORPORATION
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
MARYLAND 52-1796339
----------------------------- ---------------
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
1850 K STREET, N.W., SUITE 500
WASHINGTON, D.C. 20006
------------------------------
(Address, including zip code of
Principal executive offices)
6.625% Exchange Notes due 2005
6.875% Exchange Notes due 2008
Guarantees of 6.625% Exchange Notes due 2005
Guarantees of 6.875% Exchange Notes due 2008
--------------------------------------------
(Title of the indenture securities)
===============================================================================
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority
to which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of
Bankers Trust Company dated August 7, 1990,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate
of Amendment of the Organization Certificate
of Bankers Trust Company dated June 19,
1997, copy attached.
Exhibit 2 - Certificate of Authority to commence
business - Incorporated herein by reference
to Exhibit 2 filed with Form T-1 Statement,
Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise
corporate trust powers Incorporated herein
by reference to Exhibit 2 filed with Form
T-1 Statement, Registration No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust
Company, as amended on November 18, 1997.
Copy attached.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company
required by Section 321(b) of the Act.
Incorporated herein by reference to Exhibit
4 filed with Form T-1 Statement,
Registration No. 22-18864.
Exhibit 7 - The latest report of condition of
Bankers Trust Company dated as of December
31, 1997. Copy attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 6th day
of May, 1998.
BANKERS TRUST COMPANY
By: /s/ Sandra J. Shaffer
------------------------
Sandra J. Shaffer
Assistant Vice President
-4-
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the
City of New York, this 27th day of June in the Year of our Lord one thousand
nine hundred and ninety-seven.
/s/ Manuel Kursky
------------------------------
Deputy Superintendent of Banks
-5-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into
One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
-6-
<PAGE>
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
/s/ James T. Byrne, Jr.
--------------------------------
James T. Byrne, Jr.
Managing Director
/s/ Lea Lahtinen
---------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
/s/ Lea Lahtinen
---------------------------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
/s/ Sandra L. West
- --------------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
-7-
<PAGE>
BY-LAWS
NOVEMBER 18, 1997
Bankers Trust Company
New York
<PAGE>
BY-LAWS
of
Bankers Trust Company
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall
be held at the office of the Company in the Borough of Manhattan, City of New
York, on the third Tuesday in January of each year, for the election of
directors and such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated
by statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present,
either in person or by proxy, stockholders owning a majority of the capital
stock of the Company, in order to constitute a quorum, except at special
elections of directors, as provided by law, but less than a quorum shall have
power to adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief
Executive Officer or, in his absence, the President or, in their absence, the
senior officer present, shall preside at meetings of the stockholders and shall
direct the proceedings and the order of business. The Secretary shall act as
secretary of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its
corporate powers exercised by a Board of Directors consisting of such number of
directors, but not less than ten nor more than twenty-five, as may from time to
time be fixed by resolution adopted by a majority of the directors then in
office, or by the stockholders. In the event of any increase in the number of
directors, additional directors may be elected within the limitations so fixed,
either by the stockholders or within the limitations imposed by law, by a
majority of directors then in office. One-third of the number of directors, as
fixed from time to time, shall constitute a quorum. Any one or more members of
the Board of Directors or any Committee thereof may participate in a meeting of
the Board of Directors or Committee thereof by means of a conference telephone
or similar communications equipment which allows all persons participating in
the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual
meeting of the stockholders and until their successors are elected and have
qualified. No person who shall have attained age 72 shall be eligible to be
elected or re-elected a director. Such director may, however, remain a director
of the Company until the next annual meeting of the stockholders of Bankers
Trust New York Corporation (the Company's parent) so that such director's
retirement will coincide with the retirement date from Bankers Trust New York
Corporation.
-2-
<PAGE>
No Officer-Director who shall have attained age 65, or earlier
relinquishes his responsibilities and title, shall be eligible to serve as a
director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the
Board of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for the
balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the
Board of Directors. In his absence, the Chief Executive Officer or, in his
absence, such other director as the Board of Directors from time to time may
designate shall preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations
for the conduct of its meetings and the management of the affairs of the Company
as it may deem proper, not inconsistent with the laws of the State of New York,
or these By-Laws, and all officers and employees shall strictly adhere to, and
be bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held
from time to time on the third Tuesday of the month. If the day appointed for
holding such regular meetings shall be a legal holiday, the regular meeting to
be held on such day shall be held on the next business day thereafter. Special
meetings of the Board of Directors may be called upon at least two day's notice
whenever it may be deemed proper by the Chairman of the Board or, the Chief
Executive Officer or, in their absence, by such other director as the Board of
Directors may have designated pursuant to Section 3 of this Article, and shall
be called upon like notice whenever any three of the directors so request in
writing.
SECTION 6. The compensation of directors as such or as members of
committees shall be fixed from time to time by resolution of the Board of
Directors.
-3-
<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board
consisting of not less than five directors who shall be appointed annually by
the Board of Directors. The Chairman of the Board shall preside at meetings of
the Executive Committee. In his absence, the Chief Executive Officer or, in his
absence, such other member of the Committee as the Committee from time to time
may designate shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent
permitted by law all of the powers of the Board of Directors, except when the
latter is in session, and shall keep minutes of its proceedings, which shall be
presented to the Board of Directors at its next subsequent meeting. All acts
done and powers and authority conferred by the Executive Committee from time to
time shall be and be deemed to be, and may be certified as being, the act and
under the authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the
Committee may act only by the concurrent vote of not less than one-third of its
members, at least one of whom must be a director other than an officer. Any one
or more directors, even though not members of the Executive Committee, may
attend any meeting of the Committee, and the member or members of the Committee
present, even though less than a quorum, may designate any one or more of such
directors as a substitute or substitutes for any absent member or members of the
Committee, and each such substitute or substitutes shall be counted for quorum,
voting, and all other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by
resolution adopted by a majority of the entire Board of Directors which shall
consist of such number of directors, who are not also officers of the Company,
as may from time to time be fixed by resolution adopted by the Board of
Directors. The Chairman shall be designated by the Board of Directors, who shall
also from time to time fix a quorum for meetings of the Committee. Such
Committee shall conduct the annual directors' examinations of the Company as
required by the New York State Banking Law; shall review the reports of all
examinations made of the Company by public authorities and report thereon to the
Board of Directors; and shall report to the Board of Directors such other
matters as it deems advisable with respect to the Company, its various
departments and the conduct of its operations.
In the performance of its duties, the Audit Committee may employ or
retain, from time to time, expert assistants, independent of the officers or
personnel of the Company, to make studies of the Company's assets and
liabilities as the Committee may request and to make an examination of the
accounting and auditing methods of the Company and its system of internal
protective controls to the extent considered necessary or advisable in order to
determine that the operations of the Company, including its fiduciary
departments, are being audited by the General Auditor in such a manner as to
provide prudent and adequate protection. The Committee also may direct the
General Auditor to make such investigation as it deems necessary or advisable
with respect to the Company, its various departments and the conduct of its
operations. The Committee shall hold regular quarterly meetings and during the
intervals thereof shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any
other Committees as may seem necessary, and from time to time to suspend or
continue the powers and duties of such Committees. Each Committee appointed
pursuant to this Article shall serve at the pleasure of the Board of Directors.
-4-
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice Chairmen,
one or more Executive Vice Presidents, one or more Senior Managing Directors,
one or more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive
Officer of the Company who may also hold the additional title of Chairman of the
Board, President, Senior Vice Chairman or Vice Chairman and such person shall
have, subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee,
to the Board of Directors for the determination of the program of the internal
audit function and the evaluation of the adequacy of the system of internal
controls. Subject to the Board of Directors, the General Auditor shall have and
may exercise all the powers and shall perform all the duties usual to such
office and shall have such other powers as may be prescribed or assigned to him
from time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
-5-
<PAGE>
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General Auditor shall have the duty of reporting
independently of all officers of the Company to the Audit Committee at least
quarterly on any matters concerning the internal audit program and the adequacy
of the system of internal controls of the Company that should be brought to the
attention of the directors except those matters responsibility for which has
been vested in the General Credit Auditor. Should the General Auditor deem any
matter to be of special immediate importance, he shall report thereon forthwith
to the Audit Committee. The General Auditor shall report to the Chief Financial
Officer only for administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive
Officer and, through the Audit Committee, to the Board of Directors for the
systems of internal credit audit, shall perform such other duties as the Chief
Executive Officer may prescribe, and shall make such examinations and reports as
may be required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such
plan or plans of position evaluation and salary administration as shall be
approved from time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the
Chairman of the Board, the Chief Executive Officer or any person authorized for
this purpose by the Chief Executive Officer, shall appoint or engage all other
employees and agents and fix their compensation. The employment of all such
employees and agents shall continue during the pleasure of the Board of
Directors or the Executive Committee or the Chairman of the Board or the Chief
Executive Officer or any such authorized person; and the Board of Directors, the
Executive Committee, the Chairman of the Board, the Chief Executive Officer or
any such authorized person may discharge any such employees and agents at will.
-6-
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by
Section 7018 of the New York Banking Law, indemnify any person who is or was
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, whether involving any actual or alleged breach of duty,
neglect or error, any accountability, or any actual or alleged misstatement,
misleading statement or other act or omission and whether brought or threatened
in any court or administrative or legislative body or agency, including an
action by or in the right of the Company to procure a judgment in its favor and
an action by or in the right of any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise, which any director or officer of the Company is
servicing or served in any capacity at the request of the Company by reason of
the fact that he, his testator or intestate, is or was a director or officer of
the Company, or is serving or served such other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement, and costs, charges and
expenses, including attorneys' fees, or any appeal therein; provided, however,
that no indemnification shall be provided to any such person if a judgment or
other final adjudication adverse to the director or officer establishes that (i)
his acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the
Company is permitted to provide indemnification or the advancement of expenses
by applicable law, whether pursuant to rights granted pursuant to, or provided
by, the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance
to any person referred to in Section 1 the funds necessary for payment of
expenses, including attorneys' fees, incurred in connection with any action or
proceeding referred to in Section 1, upon receipt of a written undertaking by or
on behalf of such person to repay such amount(s) if a judgment or other final
adjudication adverse to the director or officer establishes that (i) his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate in the circumstances, such person shall be unable
to obtain indemnification from such other enterprise or its insurer.
-7-
<PAGE>
SECTION 5. Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as a matter of right pursuant to this
Article V may elect to have the right to indemnification (or advancement of
expenses) interpreted on the basis of the applicable law in effect at the time
of occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or
advancement of expense pursuant to this Article V (i) is a contract right
pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
Company and the director or officer, (ii) is intended to be retroactive and
shall be available with respect to events occurring prior to the adoption
hereof, and (iii) shall continue to exist after the rescission or restrictive
modification hereof with respect to events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding of the
character described in Section 1 shall be entitled to indemnification only as
provided in Sections 1 and 3, notwithstanding any provision of the New York
Banking Law to the contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company,
the counterpart dies of which shall be in the charge of the Secretary of the
Company and such officers as the Chairman of the Board, the Chief Executive
Officer or the Secretary may from time to time direct in writing, to be affixed
to certificates of stock and other documents in accordance with the directions
of the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a
specified occasion and for a specified transaction or transactions, for the use
of a printed or engraved facsimile seal of the Company.
-8-
<PAGE>
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon
the books of the Company by the registered holder in person, or by power of
attorney, duly executed, witnessed and filed with the Secretary or other proper
officer of the Company, on the surrender of the certificate or certificates of
such shares properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall
be deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the
Board of Directors at any meeting, or by the stockholders at any annual or
special meeting, provided notice thereof has been given.
-9-
<PAGE>
I, Kevin Weeks, Assistant Vice President of Bankers Trust Company, New
York, New York, hereby certify that the foregoing is a complete, true and
correct copy of the By-Laws of Bankers Trust Company, and that the same are in
full force and effect at this date.
/s/ Kevin Weeks
------------------------
ASSISTANT VICE PRESIDENT
DATED: 4/16/98
-10-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
-------------------------|
| C400 |
-----------------------------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------|
<S> <C> |<C>
ASSETS | / / / / / / / / / / / / / / / / / / |
1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / / / / / / / / |
a. Noninterest-bearing balances and currency and coin (1) ............ | 0081 2,121,000 |1.a.
b. Interest-bearing balances (2) ..................................... | 0071 4,770,000 |1.b.
2. Securities: | / / / / / / / / / / / / / / / / / / |
a. Held-to-maturity securities (from Schedule RC-B, column A) ........ | 1754 0 |2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)....... | 1773 4,015,000 |2.b.
3. Federal funds sold and securities purchased under agreements to resell.. | 1350 28,927,000 |3.
4. Loans and lease financing receivables: | / / / / / / / / / / / / / / / / / / |
a. Loans and leases, net of unearned income (from Schedule | / / / / / / / / / / / / / / / / / / |
RC-C) ....................................... RCFD 2122 17,692,000 | / / / / / / / / / / / / / / / / / / |4.a.
b. LESS: Allowance for loan and lease losses... RCFD 3123 659,000 | / / / / / / / / / / / / / / / / / / |4.b.
c. LESS: Allocated transfer risk reserve ...... RCFD 3128 0 | / / / / / / / / / / / / / / / / / / |4.c.
d. Loans and leases, net of unearned income, | / / / / / / / / / / / / / / / / / / |
allowance, and reserve (item 4.a minus 4.b and 4.c) ................ | 2125 17,033,000 |4.d.
5. Trading Assets (from schedule RC-D) ................................... | 3545 45,488,000 |5.
6. Premises and fixed assets (including capitalized leases) ............... | 2145 766,000 |6.
7. Other real estate owned (from Schedule RC-M) ........................... | 2150 188,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies | |
(from Schedule RC-M) ................................................... | 2130 58,000 |8.
9. Customers' liability to this bank on acceptances outstanding ........... | 2155 633,000 |9.
10. Intangible assets (from Schedule RC-M) ................................. | 2143 83,000 |10.
11. Other assets (from Schedule RC-F) ...................................... | 2160 5,957,000 |11.
12. Total assets (sum of items 1 through 11) ............................... | 2170 110,039,000 |12.
---------------------------------------------
</TABLE>
- --------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
-11-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC--Continued ---------------------------------------------|
Dollar Amounts in Thousands | / / / / / / / / Bil Mil Thou
- ------------------------------------------------------------------------------------------------- -----------------------------|
LIABILITIES | / / / / / / / / / / / / / / / / / / / |
13. Deposits: | / / / / / / / / / / / / / / / / / / / |
a. In domestic offices (sum of totals of columns A and C | |
from Schedule RC-E, part I) | RCON 2200 24,608,000 |
(1) Noninterest-bearing(1) ....RCON 6631 2,856,000........ | / / / / / / / / / / / / / / / / / / / |
(2) Interest-bearing ..........RCON 6636 21,752,000........ | / / / / / / / / / / / / / / / / / / / |
b. In foreign offices, Edge and Agreement subsidiaries, | / / / / / / / / / / / / / / / / / / / |
and IBFs (from Schedule RC-E part II) | RCFN 2200 20,529,000 |
(1) Noninterest-bearing .......RCFN 6631 2,122,000........ | / / / / / / / / / / / / / / / / / / / |
(2) Interest-bearing ..........RCFN 6636 18,407,000........ | / / / / / / / / / / / / / / / / / / / |
14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 13,777,000 |
15. a. Demand notes issued to the U.S. Treasury ........................... | RCON 2840 0 |
b. Trading liabilities (from Schedule RC-D)............................ | RCFD 3548 24,968,000 |
16. Other borrowed money (includes mortgage indebtedness and | |
obligations under capitalized leases): | / / / / / / / / / / / / / / / / / / / |
a. With a remaining maturity of one year or less ...................... | RCFD 2332 5,810,000 |
b. With a remaining maturity of more than one | |
year through three years........................................... | A547 4,702,000 |
c. With a remaining maturity of more than three years.................. | A548 1,750,000 |
17. Not Applicable. | / / / / / / / / / / / / / / / / / / / |
18. Bank's liability on acceptances executed and outstanding .............. | RCFD 2920 633,000 |
19. Subordinated notes and debentures (2).................................. | RCFD 3200 1,307,000 |
20. Other liabilities (from Schedule RC-G) ................................ | RCFD 2930 5,961,000 |
21. Total liabilities (sum of items 13 through 20) ........................ | RCFD 2948 104,045,000 |
22. Not Applicable | / / / / / / / / / / / / / / / / / / / |
| / / / / / / / / / / / / / / / / / / / |
EQUITY CAPITAL | / / / / / / / / / / / / / / / / / / / |
23. Perpetual preferred stock and related surplus ......................... | RCFD 3838 1,000,000 |
24. Common stock .......................................................... | RCFD 3230 1,352,000 |
25. Surplus (exclude all surplus related to preferred stock) .............. | RCFD 3839 540,000 |
26. a. Undivided profits and capital reserves ............................. | RCFD 3632 3,526,000 |
b. Net unrealized holding gains (losses) on | |
available-for-sale securities ...................................... | RCFD 8434 ( 45,000) |
27. Cumulative foreign currency translation adjustments ................... | RCFD 3284 ( 379,000) |27.
28. Total equity capital (sum of items 23 through 27) ..................... | RCFD 3210 5,994,000 |28.
29. Total liabilities and equity capital (sum of items 21 and 28).......... | RCFD 3300 110,039,000 |29.
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</TABLE>
Memorandum
<TABLE>
<CAPTION>
<S> <C> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that Number
best describes the most comprehensive level of auditing work performed ----------------
for the bank by independent external | RCFD 6724 N/A | M.1
auditors as of any date during 1996 ................................. ----------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required
by state chartering authority)
</TABLE>
- --------------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
-12-
