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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
KILROY REALTY CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Maryland 95-4598246
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(State of incorporation or organization) (IRS Employer Identification No.)
2250 East Imperial Highway, Suite 1200 El Segundo,
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California 90245
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(Address of principal executive offices) (Zip Code)
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If this form relates to the If this form relates to the registration
registration of a class of of a class of securities pursuant to
securities pursuant to Section Section 12(g) of the Exchange Act
12(b) of the Exchange Act and is pursuant to General Instruction
and is effective pursuant to A(d) please check the following box. [_]
General Instruction A(c)
please check the following
box. [X]
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Preferred Share Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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Item 1. Description of Securities to be Registered.
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Preferred Share Purchase Rights
On October 2, 1998, the Board of Directors of Kilroy Realty
Corporation (the "Company") adopted a Preferred Share Purchase Rights Plan (the
"Rights Plan").
In connection with the Rights Plan, the Board of Directors of the
Company declared a dividend of one preferred share purchase right (the "Rights")
for each outstanding share of common stock, par value $.01 per share (the
"Common Shares"), of the Company outstanding at the close of business on October
15, 1998 (the "Record Date"). Each Right will entitle the registered holder
thereof, after the Rights become exercisable and until October 2, 2008 (or the
earlier redemption, exchange or termination of the Rights), to purchase from the
Company one one-hundredth (1/100th) of a share of Series B Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), at a price
of $71.00 per one one-hundredth (1/100th) of the Preferred Share, subject to
certain anti-dilution adjustments (the "Purchase Price").
Until the earlier to occur of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
(or, in the case of John B. Kilroy, Sr., the Company's Chairman, John B. Kilroy,
Jr., the Company's President and Chief Executive Officer, and Kilroy Industries,
and their respective affiliates, more than 21%) of the Common Shares (an
"Acquiring Person") or (ii) ten (10) business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement or announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in the beneficial ownership by a
person or group of 15% or more (or, in the case of John B. Kilroy, Sr., the
Company's Chairman, John B. Kilroy, Jr., the Company's President and Chief
Executive Officer, and Kilroy Industries, and their respective affiliates, more
than 21%) of the Common Shares (the earlier of (i) and (ii) being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate. The Rights will be transferred with and only with the Common
Shares until the Distribution Date or earlier redemption or expiration of the
Rights. The Board of Directors will not be permitted to postpone the
exerciseability and transferability of the Rights. As soon as practicable after
such time, separate certificates ("Right Certificates") would be issued to
holders of record of the Common Shares as of the close of business on the
Distribution Date and, subject to the termination of the right of redemption,
the Rights would become exercisable and transferable. Right Certificates
initially would represent the right to purchase one Common Share for each Common
Share currently outstanding.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per Common Share. In the event of
liquidation, dissolution or winding up of the Company, the
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holders of the Preferred Shares will be entitled to a preferential liquidation
payment of $100 per share plus any accrued but unpaid dividends but will be
entitled to an aggregate payment of 100 times the payment made per Common Share.
Each Preferred Share will have 100 votes and will vote together with the Common
Shares. In the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share. Preferred Shares will not be
redeemable. The Rights will be protected by customary anti-dilution provisions.
Because of the nature of the Preferred Share's dividend, liquidation and voting
rights, the value of one one-hundredth of a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common Share.
In the event a person or group becomes an Acquiring Person, or if the
Company were the surviving corporation in a merger with an Acquiring Person or
any affiliate or associate of an Acquiring Person and the Common Shares were not
changed or exchanged, each holder of a Right, other than Rights that are or were
acquired or beneficially owned by the Acquiring Person (which Rights will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two times the then current
Purchase Price of one Right. The number of Rights associated with each Common
Share will be adjusted in the event the Company distributes Common Shares as
dividends, or declares a split or reverse split in the number of shares of
Common Stock. In the event that, after a person has become an Acquiring Person,
the Company were acquired in a merger or other business combination transaction
or more than 50% of its assets or earning power were sold, proper provision
shall be made so that each holder of a Right shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the then
current Purchase Price of one Right.
At any time after a Person becomes an Acquiring Person and prior to
the earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the then
outstanding Common Shares, the Company may exchange the Rights (other than
Rights owned by an Acquiring Person which have become void), in whole or in
part, for Common Shares having an aggregate value equal to the difference
between the value of the Common Shares issuable upon exercise of the Rights and
the Purchase Price payable upon such exercise.
The Rights may be redeemed in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price") by the Board of Directors at any time
prior to the time a person becomes an Acquiring Person. The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The Rights will expire at the close of business on October 2, 2008
(unless earlier redeemed, exchanged or terminated). ChaseMellon Shareholder
Services, L.L.C. will serve as the Rights Agent.
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The Purchase Price payable, and the number of one one-hundredths of a
Preferred Share or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to holders of the
Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares or convertible securities at less than the current market price
of the Preferred Shares or (iii) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness, cash, securities or assets
(excluding regular periodic cash dividends at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or, in case
regular periodic cash dividends have not theretofore been paid, at a rate not in
excess of 50% of the average net income per share of the Company for the four
quarters ended immediately prior to the payment of such dividend, or dividends
payable in Preferred Shares (which dividends will be subject to the adjustment
described in clause (i) above)) or of subscription rights or warrants (other
than those referred to above).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement dated as of October 2,
1998 between the Company and the Rights Agent (the "Rights Agreement") may be
amended by the Board of Directors of the Company for so long as the Rights are
then redeemable, and after the Rights are no longer redeemable, the Company may
amend or supplement the Rights Agreement in any manner that does not adversely
affect the interests of the holder of the Rights.
One Right will be distributed to stockholders of the Company for each
Common Share owned of record by them on October 15, 1998. As long as the Rights
are attached to the Common Shares, the Company will issue one Right with each
new Common Share so that all such shares will have attached Rights. The Company
has agreed that, from and after the Distribution Date, the Company will reserve
400,000 Preferred Shares initially for issuance upon exercise of the Rights.
The Rights are designed to assure that all of the Company's
stockholders receive fair and equal treatment in the event of any proposed
takeover of the Company and to guard against partial tender offers, open market
accumulations and other abusive tactics to gain control of the Company without
paying all stockholders a control premium. The Rights will cause substantial
dilution to a person or group that acquires 15% or more of the Company's stock
on terms not approved by the Company's Board of Directors. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors at any time prior to the first date that a Person or group
has become an Acquiring Person.
The foregoing description of the Rights is qualified in its entirety
by reference to the Rights Agreement which is attached as an exhibit to this
Form 8-A.
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Item 2. Exhibits
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4.1 Rights Agreement, dated as of October 2, 1998 between Kilroy
Realty Corporation and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent, which includes the form of Articles
Supplementary of the Series B Junior Participating Preferred
Stock of Kilroy Realty Corporation as Exhibit A, the form of
Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned hereunto duly
authorized.
KILROY REALTY CORPORATION
Dated: October 8, 1998 By /s/ Tyler H. Rose
----------------------------
Tyler H. Rose
Senior Vice President and Treasurer
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EXHIBIT INDEX
4.1 Rights Agreement, dated as of October 2, 1998 between Kilroy
Realty Corporation and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent, which includes the form of Articles
Supplementary of the Series B Junior Participating Preferred
Stock of Kilroy Realty Corporation as Exhibit A, the form of
Right Certificate as Exhibit B and the Summary of Rights to
Purchase Preferred Shares as Exhibit C.
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EXHIBIT 4.1
================================================================================
KILROY REALTY CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
Rights Agreement
Dated as of October 2, 1998
================================================================================
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RIGHTS AGREEMENT
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Rights Agreement, dated as of October 2, 1998, between Kilroy Realty
Corporation, a Maryland corporation (the "Company"), and ChaseMellon Shareholder
Services L.L.C., as Rights Agent (the "Rights Agent").
RECITALS
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WHEREAS, on October 2, 1998, the Board of Directors of the Company
adopted this Agreement, and has authorized and declared a dividend of one
preferred share purchase right (a "Right") for each Common Share (as defined in
Section 1.6) of the Company outstanding at the close of business on October 15,
1998 (the "Record Date") and has authorized and directed the issuance of one
Right (subject to adjustment as provided herein) with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date and the Expiration Date (as such terms are defined in
Sections 3.1 and 7.1), each Right initially representing the right to purchase
one one-hundredth (subject to adjustment) of a share of Series B Junior
Participating Preferred Stock (the "Preferred Shares") of the Company having the
rights, powers and preferences set forth in the form of Articles Supplementary
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth PROVIDED, HOWEVER, that Rights may be issued with respect
to Common Shares that shall become outstanding after the Distribution Date and
prior to the Expiration Date in accordance with Section 22.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
1.1. "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding but shall not include (i) an Exempt Person (as
such term is hereinafter defined) or (ii) an Existing Holder (as such term is
hereinafter defined), unless and until such time as such Existing Holder shall
become the Beneficial Owner of more than 21% of the Common Shares of the Company
then outstanding. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
(or, in the case of an Existing Holder, more than 21%) of the Common Shares of
the Company then outstanding; provided, however, that if a Person shall become
the Beneficial Owner of 15% or more (or, in the case of an Existing Holder, more
than 21%) of the Common Shares of the Company then outstanding solely by reason
of share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of one or more additional Common Shares of
the Company (other than pursuant to a dividend or
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distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an "Acquiring Person" unless
upon becoming the Beneficial Owner of such additional Common Shares of the
Company such Person does not beneficially own 15% or more (or, in the case of an
Existing Holder, more than 21%) of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1.1, has become such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an "Acquiring Person"
or (B) such Person was aware of the extent of its Beneficial Ownership of Common
Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement), and without any intention of changing or
influencing control of the Company, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, as defined pursuant to the foregoing provisions
of this Section 1.1, then such Person shall not be deemed to be or have become
an "Acquiring Person" at any time for any purposes of this Agreement. For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date
of this Agreement.
1.2. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations, under
the Exchange Act, as in effect on the date of this Agreement.
1.3. A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately, or only after the passage of time, compliance
with regulatory requirements, fulfillment of a condition or otherwise) pursuant
to any agreement, arrangement or understanding, whether or not in writing (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, (w) securities tendered pursuant to a tender
or exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or
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exchange, (x) securities which such Person has a right to acquire upon the
exercise of Rights at any time prior to the time that any Person becomes an
Acquiring Person, (y) securities issuable upon the exercise of Rights from and
after the time that any Person becomes an Acquiring Person if such Rights were
acquired by such Person or any of such Person's Affiliates or Associates prior
to the Distribution Date or pursuant to Section 3.1 or Section 22 ("Original
Rights") or pursuant to Section 11.9 or Section 11.15 with respect to an
adjustment to Original Rights or (z) as determined from time to time by
resolution duly adopted by the Board of Directors applicable to securities
acquired by such Person, securities which such Person or any of such Person's
Affiliates or Associates may acquire, does or do acquire or may be deemed to
have the right to acquire, pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of such Person's Affiliates
or Associates) if such agreement has been approved by the Board of Directors of
the Company prior to such Person becoming an Acquiring Person; or (B) the right
to vote pursuant to any agreement, arrangement or understanding (whether or not
in writing); PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security under this clause (B) if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) and with respect to
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or consent as
described in the proviso to Section 1.3(ii)(B)) or disposing of any securities
of the Company;
PROVIDED, HOWEVER, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section 1.3), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.
1.4. "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
1.5. "close of business" on any given date shall mean 5:00 p.m.,
California time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 p.m., California time, on the next succeeding
Business Day.
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1.6. "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such other Person or, if such Person is a Subsidiary (as such
term is hereinafter defined) of another Person, the Person or Persons which
ultimately control such first-mentioned Person, and which has issued and
outstanding such capital stock, equity securities or equity interest.
1.7. "Exempt Person" shall mean: (i) the Company or any Subsidiary
of the Company, in each case including, without limitation, its fiduciary
capacity, (ii) any employee benefit plan of the Company or of any Subsidiary of
the Company, or (iii) any entity or trustee holding shares of capital stock of
the Company for or pursuant to the terms of any such plan, or for the purpose of
funding other employee benefits for employees of the Company or any Subsidiary
of the Company.
1.8. "Existing Holder" shall mean John B. Kilroy, Sr., John B.
Kilroy, Jr. and Kilroy Industries, a California corporation, and each of their
respective Affiliates and Associates.
1.9. "Person" shall mean any individual, partnership, joint venture,
limited liability company, firm, corporation, unincorporated association, trust
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
1.10. "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that an Acquiring Person has become such or that discloses information
which reveals the existence of an Acquiring Person or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person.
1.11. "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interests is owned, of record or beneficially, directly or indirectly,
by such Person.
1.12. A "Trigger Event" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.
1.13. The following terms shall have the meanings defined for such
terms in the Sections set forth below:
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<CAPTION>
Term Section
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Adjustment Shares 11.1.2
common stock equivalent 11.1.3
</TABLE>
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<TABLE>
<S> <C>
Company Recitals
current per share market price 11.4
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.1
Exchange Consideration 27
Expiration Date 7.1
Final Expiration Date 7.1
Nasdaq 9
Original Rights 1.3
Preferred Shares Recitals
Principal Party 13.2
Purchase Price 4
Record Date Recitals
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.1
Rights Agent Recitals
Security 11.4.1
Spread 11.1.3
Substitution Period 11.1.3
Summary of Rights 3.2
Trading Day 11.4.1
</TABLE>
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more co-Rights
Agents, the respective duties of the Rights Agent and any co-Rights Agent shall
be as the Company shall determine. Contemporaneously with such appointment, if
any, the Company shall notify the Rights Agent thereof.
Section 3. Issuance of Right Certificates.
-------------------------------
3.1. Rights Evidenced by Share Certificates. Until the earlier of
--------------------------------------
(i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business
Day after the date of the commencement of, or first public announcement of the
intent of any Person (other than an Exempt Person) to commence, a tender or
exchange offer the consummation of which would result in any Person (other than
an Exempt Person) becoming an Acquiring Person (the earlier of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights (unless
earlier expired, redeemed or terminated) will be evidenced (subject to the
provisions of Section 3.2) by the certificates for Common Shares registered in
the names of the holders thereof (which
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certificates for Common Shares shall also be deemed to be Right Certificates)
and not by separate certificates, and (y) the Rights (and the right to receive
certificates therefor) will be transferable only in connection with the transfer
of the underlying Common Shares. The preceding sentence notwithstanding, prior
to the occurrence of a Distribution Date specified as a result of an event
described in clause (ii) (or such later Distribution Date as the Board of
Directors of the Company may select pursuant to this sentence), the Board of
Directors may postpone, one or more times, the Distribution Date which would
occur as a result of an event described in clause (ii) beyond the date set forth
in such clause (ii). Nothing herein shall permit such a postponement of a
Distribution Date after a Person becomes an Acquiring Person, except as a result
of the operation of the third sentence of Section 1.1. As soon as practicable
after the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign and the Company (or, if requested, the Rights Agent) will
send, by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date (other than any
Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the
address of such holder shown on the records of the Company, one or more
certificates for Rights, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right (subject to adjustment as provided herein)
for each Common Share so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
3.2. Summary of Rights. On the Record Date or as soon as practicable
-----------------
thereafter, the Company will send or cause to be sent a copy of a Summary of
Rights to Purchase Preferred Shares, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the close of business on the Record
Date at the address of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of the close of
business on the Record Date, until the Distribution Date (or the earlier
Expiration Date), the Rights will be evidenced by such certificates for Common
Shares registered in the names of the holders thereof together with a copy of
the Summary of Rights and the registered holders of the Common Shares shall also
be registered holders of the associated Rights. Until the Distribution Date (or
the earlier Expiration Date), the surrender for transfer of any certificate for
Common Shares outstanding at the close of business on the Record Date, with or
without a copy of the Summary of Rights, shall also constitute the transfer of
the Rights associated with the Common Shares represented thereby.
3.3. New Certificates After Record Date. Certificates for Common
----------------------------------
Shares which become outstanding (whether upon issuance out of authorized but
unissued Common Shares or transfer or exchange of outstanding Common Shares)
after the Record Date but prior to the earliest of the Distribution Date or the
Expiration Date, shall have impressed, printed, stamped, written or otherwise
affixed onto them the following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in an Agreement between Kilroy Realty Corporation (the
"Company") and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
dated as of October 2, 1998, as the same may be amended from time to time
(the "Agreement"), the
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terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a
copy of the Agreement without charge after receipt of a written request
therefor. AS DESCRIBED IN THE AGREEMENT, RIGHTS WHICH ARE OWNED BY,
TRANSFERRED TO OR HAVE BEEN OWNED BY ACQUIRING PERSONS OR ASSOCIATES OR
AFFILIATES THEREOF (AS DEFINED IN THE AGREEMENT) SHALL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Expiration Date), the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificates,
except as otherwise provided herein, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Notwithstanding this Section 3.3, the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and
--------------------------
the forms of election to purchase shares, certification and assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or trading system on which the Rights may from time to time be listed
or quoted, or to conform to usage. Subject to the terms and conditions hereof,
the Right Certificates, whenever issued, shall be dated as of the Record Date,
and shall show the date of countersignature by the Rights Agent, and on their
face shall entitle the holders thereof to purchase such number of one one-
hundredths of a Preferred Share as shall be set forth therein at the price per
one one-hundredth of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board of
Directors, the Chief Executive Officer, President, any Vice President or its
Treasurer, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be countersigned, either
manually or by facsimile signature, by an authorized signatory of the Rights
Agent, but it shall not be necessary
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<PAGE>
for the same signatory to countersign all of the Right Certificates hereunder.
No Right Certificate shall be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
- ---------------------------------------------------------------------
to the provisions of Section 7.5, Section 11.1.2 and Section 14, at any time
after the close of business on the Distribution Date, and at or prior to the
close of business on the Expiration Date, any Right Certificate or Right
Certificates (other than Right Certificates representing Rights that have become
void pursuant to Section 11.1.2 or that have been exchanged pursuant to Section
27) may be transferred, split up or combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up or combine or exchange any
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender, together with any required form of assignment and
certificate duly completed, the Right Certificate or Right Certificates to be
transferred, split up or combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate or Right Certificates until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate or Right Certificates
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall countersign and deliver to the person entitled thereto a Right Certificate
or Right Certificates, as the case may be, as so requested. The Company may
require payment from the holders of Right Certificates of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up or combination or exchange of such Right Certificates.
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<PAGE>
Subject to the provisions of Section 11.1.2, at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
7.1. Exercise of Rights. Subject to Section 11.1.2 and except as
------------------
otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price for the
total number of one one-hundredths of a Preferred Share (or other securities,
cash or other assets) as to which the Rights are exercised, at or prior to the
time (the "Expiration Date") that is the earliest of (i) the close of business
on October 2, 2008 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 (the "Redemption Date"), (iii) the
closing of any merger or other acquisition transaction involving the Company
pursuant to an agreement of the type described in Section 13.3, at which time
the Rights are deemed terminated, or (iv) the time at which the Rights are
exchanged as provided in Section 27.
7.2. Purchase. The Purchase Price for each one one-hundredth of a
--------
Preferred Share pursuant to the exercise of a Right shall be initially $71.00,
shall be subject to adjustment from time to time as provided in Sections 11, 13
and 26 and shall be payable in lawful money of the United States of America in
accordance with Section 7.3.
7.3. Payment Procedures. Upon receipt of a Right Certificate
------------------
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the aggregate Purchase
Price for the total number of one one-hundredths of a Preferred Share to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder of such Right Certificate in accordance with Section 9, in cash or
by certified or cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i)(A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent) certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of Preferred Shares issuable upon exercise of the
Rights hereunder with a depository agent, requisition from the depositary agent
depositary receipts representing interests in such number of one one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the
9
<PAGE>
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of the
issuance of fractional shares in accordance with Section 14 or otherwise in
accordance with Section 11.1.3, (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate. In the event that the Company is obligated to
issue other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11.1.3, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
7.4. Partial Exercise. In case the registered holder of any Right
----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14.
7.5. Full Information Concerning Ownership. Notwithstanding
-------------------------------------
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder of Rights upon the occurrence of any purported exercise as set forth in
this Section 7 unless the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. The
---------------------------------------------
Company covenants and agrees that from and after the Distribution Date it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares (and, following the occurrence of a Trigger Event, out of its
authorized and unissued Common Shares or other securities or out of its shares
held in its treasury) the number of Preferred Shares (and, following the
occurrence
10
<PAGE>
of a Trigger Event, Common Shares and/or other securities) that will be
sufficient to permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) issuable upon the exercise
of Rights may be listed on any national securities exchange or traded in the
over-the-counter market and quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") (including the National
Market or Small Cap Market), the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed or admitted to trading on such exchange or quoted
on Nasdaq upon official notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance of
Preferred Shares upon the exercise of Rights, to register and qualify such
Preferred Shares under the Securities Act and any applicable state securities or
"Blue Sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates for Preferred Shares (or Common Shares and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the
11
<PAGE>
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
Section 10. Preferred Shares Record Date. Each person in whose name
----------------------------
any certificate for Preferred Shares (or Common Shares and/or other securities,
as the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
--------------------------------------------------------
of Rights. The Purchase Price, the number of Preferred Shares or other
- ---------
securities or property purchasable upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
11.1. Post-Execution Events.
---------------------
11.1.1. Corporate Dividends, Reclassifications, Etc. In the event
-------------------------------------------
the Company shall at any time after the date of this Agreement (A) declare and
pay a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11.1, the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital
12
<PAGE>
stock of the Company issuable upon exercise of one Right. If an event occurs
which would require an adjustment under both Section 11.1.1 and Section 11.1.2,
the adjustment provided for in this Section 11.1.1 shall be in addition to, and
shall be made prior to, the adjustment required pursuant to, Section 11.1.2.
11.1.2. Acquiring Person Events; Triggering Events. Subject to
------------------------------------------
Sections 23.1 and 27, in the event that a Trigger Event occurs, then, from and
after the first occurrence of such event, each holder of a Right, except as
provided below, shall thereafter have a right to receive, upon exercise thereof
at a price per Right equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable (without giving effect to this Section 11.1.2), in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (without giving effect to this
Section 11.1.2) and (y) dividing that product by 50% of the current per share
market price of the Common Shares (determined pursuant to Section 11.4) on the
first of the date of the occurrence of, or the date of the first public
announcement of, a Trigger Event (the "Adjustment Shares"); PROVIDED that the
Purchase Price and the number of Adjustment Shares shall thereafter be subject
to further adjustment as appropriate in accordance with Section 11.6; PROVIDED
FURTHER, that nothing contained in this Section 11.1.2 shall limit or otherwise
diminish the power of the Board of Directors to postpone the Distribution Date
pursuant to Section 3.1. Notwithstanding the foregoing, upon the occurrence of a
Trigger Event, any Rights that are or were acquired or beneficially owned by (1)
any Acquiring Person or any Associate or Affiliate thereof, (2) a transferee of
any Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (3) a transferee of any
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of this Section 11.1.2, and subsequent
transferees, shall become void without any further action, and any holder
(whether or not such holder is an Acquiring Person or an Associate or Affiliate
of an Acquiring Person) of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement or otherwise. The
Company shall not enter into any transaction of the type described in this
Section 11.1.2 if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any arrangements which, as a
result of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. From and after the
Trigger Event, no Right Certificate shall be issued pursuant to Section 3 or
Section 6 that represents Rights that are or have become void pursuant to the
provisions of this paragraph, and any Right Certificate delivered to the Rights
Agent that
13
<PAGE>
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be canceled.
The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11.1.2 are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to any Acquiring Person or its
Affiliates, Associates or transferees hereunder.
From and after the occurrence of an event specified in Section 13.1,
any Rights that theretofore have not been exercised pursuant to this Section
11.1.2 shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11.1.2.
11.1.3. Insufficient Shares. The Company may at its option
-------------------
substitute for a Common Share issuable upon the exercise of Rights in accordance
with the foregoing Section 11.1.2 a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share. In the event that upon the occurrence of one or more
of the events listed in Section 11.1.2 above there shall not be sufficient
Common Shares authorized but unissued, or held by the Company as treasury
shares, to permit the exercise in full of the Rights in accordance with the
foregoing Section 11.1.2, the Company shall take all such action as may be
necessary to authorize additional Common Shares for issuance upon exercise of
the Rights, PROVIDED, HOWEVER, that if the Company determines that it is unable
to cause the authorization of a sufficient number of additional Common Shares,
then, in the event the Rights become exercisable, the Company, with respect to
each Right and to the extent necessary and permitted by applicable law and any
agreements or instruments in effect on the date hereof to which it is a party,
shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), over (2) the
Purchase Price (such excess, the "Spread") and (B) with respect to each Right
(other than Rights which have become void pursuant to Section 11.1.2), make
adequate provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Preferred Shares or other equity securities of the Company (including, without
limitation, shares, or fractions of shares, of preferred stock which, by virtue
of having dividend, voting and liquidation rights substantially comparable to
those of the Common Shares, the Board of Directors of the Company has deemed in
good faith to have substantially the same value as Common Shares) (each such
share of preferred stock or fractions of shares of preferred stock constituting
a "common stock equivalent")), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing having an aggregate value equal
to the Current Value, where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors of the Company; PROVIDED, HOWEVER, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the first occurrence of one of the events listed in
Section 11.1.2 above, then the Company shall be obligated to deliver, to the
extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date hereof to which it is a party, upon the
14
<PAGE>
surrender for exercise of a Right and without requiring payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary, such
number or fractions of Preferred Shares (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in good faith
that it is unlikely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended and re-extended to the extent necessary, but not
more than ninety (90) days following the first occurrence of one of the events
listed in Section 11.1.2 above, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period as may be
extended, the "Substitution Period"). To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentences of
this Section 11.1.3, the Company (x) shall provide that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11.1.3, the
value of a Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger
Event and the value of any "common stock equivalent" shall be deemed to have the
same value as the Common Shares on such date. The Board of Directors of the
Company may, but shall not be required to, establish procedures to allocate the
right to receive Common Shares upon the exercise of the Rights among holders of
Rights pursuant to this Section 11.1.3. Actions of the Company pursuant to this
Section 11.1.3 shall be taken by the vote of a majority of the Board of
Directors.
11.2. Dilutive Rights Offering. In case the Company shall fix a
------------------------
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
securities having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred stock")) or securities convertible into Preferred
Shares or equivalent preferred stock at a price per Preferred Share or per share
of equivalent preferred stock (or having a conversion or exercise price per
share, if a security convertible into or exercisable for Preferred Shares or
equivalent preferred stock) less than the current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4) on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
and shares of equivalent preferred stock outstanding on such record date plus
the number of Preferred Shares and shares of equivalent preferred stock which
the aggregate offering price of the total number of Preferred Shares and/or
shares of equivalent preferred stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the
number of Preferred Shares and shares of equivalent preferred stock outstanding
on such record date plus the number of additional Preferred Shares and/or
15
<PAGE>
shares of equivalent preferred stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); PROVIDED, HOWEVER, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares and shares of equivalent preferred stock owned by or held for the account
of the Company or any Subsidiary of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
11.3. Distributions. In case the Company shall fix a record date
-------------
for the making of a distribution to all holders of the Preferred Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness, cash, securities or assets (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A))) or convertible securities, or
subscription rights or warrants (excluding those referred to in Section 11.2),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price of the Preferred Shares (as determined pursuant to Section 11.4) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets,
securities or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4); PROVIDED, HOWEVER,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
16
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11.4. Current Per Share Market Value.
------------------------------
11.4.1. General. For the purpose of any computation hereunder, the
-------
"current per share market price" of any security (a "Security" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, HOWEVER, that in the event that the current per share market
price of the Security is determined during any period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the ex-
dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
"current per share market price" shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Security selected by the Board of Directors of the Company. If on any
such date no such market maker is making a market in the Security, the fair
value of the Security on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day. If the Security is not publicly held or not so listed
or traded, or if on any such date the Security is not so quoted and no such
market maker is making a market in the Security, "current per share market
price" shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company or, if at the time of such determination there
is an Acquiring Person, by a nationally recognized investment banking firm
selected by the Board of Directors, which shall have the duty to make such
determination in a reasonable and objective manner, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.
11.4.2. Preferred Shares. Notwithstanding Section 11.4.1, for the
----------------
purpose of any computation hereunder, the "current per share market price" of
the Preferred Shares shall be determined in the same manner as set forth above
in Section 11.4.1 (other than the last sentence thereof). If the current per
share market price of the Preferred Shares cannot be determined in the
17
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manner described in Section 11.4.1, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the current per share market
price of the Common Shares (as determined pursuant to Section 11.4.1). If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, or if on any such date neither the Common Shares nor the
Preferred Shares are so quoted and no such market maker is making a market in
either the Common Shares or the Preferred Shares, "current per share market
price" of the Preferred Shares shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, or, if at the time of
such determination there is an Acquiring Person, by a nationally recognized
investment banking firm selected by the Board of Directors of the Company, which
shall have the duty to make such determination in a reasonable and objective
manner, which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For purposes of this
Agreement, the "current per share market price" of one one-hundredth of a
Preferred Share shall be equal to the "current per share market price" of one
Preferred Share divided by 100.
11.5. Insignificant Changes. No adjustment in the Purchase Price
---------------------
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price. Any adjustments which by reason of this
Section 11.5 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one-hundred thousandth of a
Preferred Share or the nearest one-hundredth of a Common Share or other share or
security, as the case may be.
11.6. Shares Other Than Preferred Shares. If as a result of an
----------------------------------
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1,
11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the provisions of Sections 7, 9, 10,
13 and 14 with respect to the Preferred Shares shall apply on like terms to any
such other shares.
11.7. Rights Issued Prior to Adjustment. All Rights originally
---------------------------------
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8. Effect of Adjustments. Unless the Company shall have
---------------------
exercised its election as provided in Section 11.9, upon each adjustment of the
Purchase Price as a result of the calculations made in Sections 11.2 and 11.3,
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a Preferred Share (calculated to the nearest
18
<PAGE>
one-hundred thousandth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
11.9. Adjustment in Number of Rights. The Company may elect on or
------------------------------
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share issuable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-hundredth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11.9, the Company may, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
11.10. Right Certificates Unchanged. Irrespective of any adjustment
----------------------------
or change in the Purchase Price or the number of one one-hundredths of a
Preferred Share issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
share and the number of one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued hereunder.
11.11. Par Value Limitations. Before taking any action that would
---------------------
cause an adjustment reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares or other shares of capital stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary
19
<PAGE>
in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares or other such shares at such adjusted Purchase
Price.
11.12. Deferred Issuance. In any case in which this Section 11
-----------------
shall require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date of that number of Preferred Shares and shares of other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the Preferred Shares and shares of other capital stock or other
securities, assets or cash of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
11.13. Reduction in Purchase Price. Anything in this Section 11 to
---------------------------
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares
at less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or exchangeable
for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Preferred Shares
shall not be taxable to such stockholders.
11.14. Company Not to Diminish Benefits of Rights. The Company
------------------------------------------
covenants and agrees that after the earlier of the Shares Acquisition Date or
Distribution Date it will not, except as permitted by Section 23, Section 26 or
Section 27, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
11.15. Adjustment of Rights Associated with Common Shares.
--------------------------------------------------
Notwithstanding anything contained in this Agreement to the contrary, in the
event that the Company shall at any time after the date hereof and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding Common
Shares payable in Common Shares, (ii) effect a subdivision or consolidation of
the outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares), or (iii) combine the outstanding
Common Shares into a greater or lesser number of Common Shares, then in any such
case, the number of Rights associated with each Common Share then outstanding,
or issued or delivered thereafter but prior to the Distribution Date or in
accordance with Section 22 shall be proportionately adjusted so that the number
of Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction, the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of
20
<PAGE>
the event and the denominator of which shall be the total number of Common
Shares outstanding immediately following the occurrence of such event. The
adjustments provided for in this Section 11.15 shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 or 13, the
- ------
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
13.1. Certain Transactions. In the event that, from and after the
--------------------
first occurrence of a Trigger Event, directly or indirectly, (A) the Company
shall consolidate with, or merge with and into, any other Person and the Company
shall not be the continuing or surviving corporation, (B) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares of the Company
shall be changed into or exchanged for stock or other securities of the Company
or any other Person or cash or any other property, or (C) the Company shall
sell, exchange, mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, exchange, mortgage or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more wholly-owned
Subsidiaries of the Company in one or more transactions each of which complies
with Section 11.14), then, and in each such case, proper provision shall be made
so that (i) each holder of a Right (other than Rights which have become void
pursuant to Section 11.1.2) shall thereafter have the right to receive, upon the
exercise thereof at a price per Right equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the first occurrence of a Trigger
Event (as subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8,
11.9 and 11.12), in accordance with the terms of this Agreement and in lieu of
Preferred Shares or Common Shares, such number of validly authorized and issued,
fully paid, non-assessable and freely tradable Common Shares of the Principal
Party (as such term is hereinafter defined) not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (x) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
11.12) and (y) dividing that product by 50% of the
21
<PAGE>
then current per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11.4) on the date of consummation of such
consolidation, merger, sale or transfer; PROVIDED, that the price per Right so
payable and the number of Common Shares of such Principal Party so receivable
upon exercise of a Right shall thereafter be subject to further adjustment as
appropriate in accordance with Section 11.6 to reflect any events covered
thereby occurring in respect of the Common Shares of such Principal Party after
the occurrence of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; PROVIDED that, upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Purchase Price as provided
in this Section 13.1, such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such transaction, owned the Common Shares of the Principal Party
receivable upon the exercise of a Right pursuant to this Section 13.1, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property. The Company shall not consummate
any such consolidation, merger, sale or transfer unless prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement confirming that the requirements of this Section
13.1 and Section 13.2 shall promptly be performed in accordance with their terms
and that such consolidation, merger, sale or transfer of assets shall not result
in a default by the Principal Party under this Agreement as the same shall have
been assumed by the Principal Party pursuant to this Section 13.1 and Section
13.2 and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party, at its own expense, shall
(1) prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date and similarly comply with
applicable state securities laws;
(2) use its best efforts, if the Common Shares of the Principal Party
shall be listed or admitted to trading on the New York Stock Exchange or on
another national securities exchange, to list or admit to trading (or continue
the listing of) the Rights and the securities purchasable upon exercise of the
Rights on the New York Stock Exchange or such securities
22
<PAGE>
exchange, or, if the Common Shares of the Principal Party shall not be listed or
admitted to trading on the New York Stock Exchange or a national securities
exchange, to cause the Rights and the securities receivable upon exercise of the
Rights to be authorized for quotation on Nasdaq or on such other system then in
use;
(3) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act; and
(4) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject to
purchase upon exercise of outstanding Rights.
In case the Principal Party has provision in any of its authorized
securities or in its articles of incorporation or bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or
common stock equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11.4) or
securities exercisable for, or convertible into, Common Shares or common stock
equivalents of such Principal Party at less than such then current market price
(other than to holders of Rights pursuant to this Section 13), or (ii) providing
for any special payment, taxes or similar provision in connection with the
issuance of the Common Shares of such Principal Party pursuant to the provision
of Section 13, then, in such event, the Company hereby agrees with each holder
of Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
The Company covenants and agrees that it shall not, at any time after
the Trigger Event, enter into any transaction of the type described in clauses
(A) through (C) of this Section 13.1 if (i) at the time of or immediately after
such consolidation, merger, sale, transfer or other transaction there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (ii) prior to, simultaneously with or
immediately after such consolidation, merger, sale, transfer or other
transaction, the stockholders of the Person who constitutes, or would
constitute, the Principal Party for purposes of Section 13.2 shall have received
a distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (iii) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the Rights. The
provisions of this Section 13 shall similarly apply to successive transactions
of the type described in clauses (A) through (C) of this Section 13.1.
23
<PAGE>
13.2. Principal Party. "Principal Party" shall mean:
---------------
(i) in the case of any transaction described in (A) or (B) of
the first sentence of Section 13.1: (1) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (2) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding or (y) if the Person that is the other party
to the merger does not survive the merger, the Person that does survive the
merger (including the Company if it survives) or (z) the Person resulting from
the consolidation; and
(ii) in the case of any transaction described in (C) of the
first sentence in Section 13.1, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons is the
issuer of Common Shares having the greatest aggregate market value of shares
outstanding;
PROVIDED, HOWEVER, that in any such case described in the foregoing clause (i)
or (ii) of this Section 13.2, if the Common Shares of such Person are not at
such time or have not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, then (1) if such Person is a
direct or indirect Subsidiary of another Person the Common Shares of which are
and have been so registered, the term "Principal Party" shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such Persons
is the issuer of Common Shares having the greatest aggregate market value of
shares outstanding, or (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all of such joint
venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.
13.3. Approved Acquisitions. Notwithstanding anything contained
---------------------
herein to the contrary, upon the consummation of any merger or other acquisition
transaction of the type described in clause (A), (B) or (C) of Section 13.1
involving the Company pursuant to a merger or other acquisition agreement
between the Company and any Person (or one or more of such Person's Affiliates
or Associates) which agreement has been approved by the Board of Directors of
the Company prior to any Person becoming an Acquiring Person, this Agreement and
the rights of holders of Rights hereunder shall be terminated in accordance with
Section 7.1.
24
<PAGE>
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
14.1. Cash in Lieu of Fractional Rights. The Company shall not be
---------------------------------
required to issue fractions of Rights or to distribute Right Certificates which
evidence fractional Rights (except prior to the Distribution Date in accordance
with Section 11.15). In lieu of such fractional Rights, there shall be paid to
the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14.1, the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the current market
value of the Rights on such date shall be the fair value of the Rights as
determined in good faith by the Board of Directors of the Company, or, if at the
time of such determination there is an Acquiring Person, by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company, which shall have the duty to make such determination in a reasonable
and objective manner, which determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
14.2. Cash in Lieu of Fractional Preferred Shares. The Company
-------------------------------------------
shall not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share) upon exercise or exchange of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; PROVIDED, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised or exchanged as herein provided an amount in
cash equal to the same fraction of the current per share market price of one
Preferred Share (as
25
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determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.
14.3. Cash in Lieu of Fractional Common Shares. The Company shall
----------------------------------------
not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares upon the exercise or
exchange of Rights. In lieu of such fractional Common Shares, the Company shall
pay to the registered holders of the Right Certificates with regard to which
such fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common Share
(as determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.
14.4. Waiver of Right to Receive Fractional Rights or Shares. The
------------------------------------------------------
holder of a Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise or exchange
of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement, except the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce this Agreement, and may institute and maintain any suit, action
or proceeding against the Company to enforce this Agreement, or otherwise
enforce or act in respect of his right to exercise the Rights evidenced by such
Right Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person (including, without limitation, the Company) subject to this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) as of and after the Distribution Date, the Right
Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer
with all required certifications completed; and
26
<PAGE>
(c) the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Shares certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder in accordance with a fee schedule to be mutually agreed upon and, from
time to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company shall indemnify the Rights Agent for, and hold it harmless against, any
loss, liability, claim or expense ("Loss") arising out of or in connection with
its duties under this Agreement, including the costs and expenses of defending
itself against any Loss, unless such Loss shall have been determined by a court
of competent jurisdiction to be a result of the Rights Agent's gross negligence
or intentional misconduct. The obligations of the Company under this section
shall survive the termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or the Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any corporation or limited liability company into which the Rights
- -----
Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation or limited liability company resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation or limited liability company
27
<PAGE>
succeeding to the corporate trust or stock transfer business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, PROVIDED that such corporation or
limited liability company would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
20.1 Legal Counsel. The Rights Agent may consult with legal counsel
-------------
selected by it (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
20.2. Certificates as to Facts or Matters. Whenever in the
-----------------------------------
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board of Directors, the Chief Executive Officer,
the President, the Chief Financial Officer, any Vice President, the Treasurer,
the Secretary or any Assistant Treasurer or Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
20.3. Standard of Care. The Rights Agent shall be liable hereunder
----------------
only for its own negligence, bad faith or willful misconduct. In no case,
however, will the Rights Agent be
28
<PAGE>
liable for special, indirect, incidental or consequential loss or damages of any
kind whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the possibility of such damages.
20.4. Reliance on Agreement and Right Certificates. The Rights
--------------------------------------------
Agent shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Right Certificates (except as to
its countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the Company
only.
20.5. No Responsibility as to Certain Matters. The Rights Agent
---------------------------------------
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 11.1.2) or any adjustment required under the provisions of
Sections 3, 11, 13, 23 or 27 or responsible for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when so
issued, be validly authorized and issued, fully paid and nonassessable.
20.6. Further Assurance by Company. The Company agrees that it will
----------------------------
perform, execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.
20.7. Authorized Company Officers. The Rights Agent is hereby
---------------------------
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman of the Board of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Agreement, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer or for any delay in acting
while waiting for these instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable to the Company for any action
taken by, or omission of, the Rights Agent in accordance with a
29
<PAGE>
proposal included in any such application on or after the date specified therein
(which date shall not be less than three business days after the date any such
officer actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking of any such
action (or the effective date in the case of omission), the Rights Agent shall
have received written instructions in response to such application specifying
the action to be taken or omitted.
20.8. Freedom to Trade in Company Securities. The Rights Agent and
--------------------------------------
any stockholder, director, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
20.9. Reliance on Attorneys and Agents. The Rights Agent may
--------------------------------
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, omission, default, neglect or
misconduct, PROVIDED that reasonable care was exercised in the selection and
continued employment thereof.
20.10. Incomplete Certificate. If, with respect to any Rights
----------------------
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has not been
completed to certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof), the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with the
Company.
20.11. Rights Holders List. At any time and from time to time after
-------------------
the Distribution Date, upon the request of the Company, the Rights Agent shall
promptly deliver to the Company a list, as of the most recent practicable date
(or as of such earlier date as may be specified by the Company), of the holders
of record of Rights.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares and/or Preferred Shares, as applicable,
by registered or certified mail. Following the Distribution Date, the Company
shall promptly notify the holders of the Right Certificates by first-class mail
of any such resignation. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares and/or Preferred Shares, as applicable, by registered
or certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
30
<PAGE>
incapable of acting, the resigning, removed, or incapacitated Rights Agent shall
remit to the Company, or to any successor Rights Agent designated by the
Company, all books, records, funds, certificates or other documents or
instruments of any kind then in its possession which were acquired by such
resigning, removed or incapacitated Rights Agent in connection with its services
as Rights Agent hereunder, and shall thereafter be discharged from all duties
and obligations hereunder. Following notice of such removal, resignation or
incapacity, the Company shall appoint a successor to such Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of the State of New
York or the State of California (or any other state of the United States so long
as such corporation is authorized to do business as a banking institution in the
State of New York or California) in good standing, having an office in the State
of New York or the State of California, which is authorized under such laws to
exercise stock transfer or corporate trust powers and is subject to supervision
or examination by Federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $10
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
and/or Preferred Shares, as applicable, and, following the Distribution Date,
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the Expiration Date, the Company shall, with respect to Common Shares
so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded as of the Distribution Date, or
upon exercise, conversion or exchange of securities issued by the Company or
Kilroy Realty, L.P., a Delaware limited partnership, prior to the Distribution
Date, issue Rights Certificates representing the appropriate number of Rights in
connection with such
31
<PAGE>
issuance or sale (which, in the case of Common Shares issued upon the exercise,
conversion or exchange or securities issued by Kilroy Realty, L.P., shall be
issued pursuant to the provisions of the Third Amended and Restated Agreement of
Limited Partnership of Kilroy Realty, L.P., dated as of April 17, 1998, as
amended); PROVIDED, HOWEVER, that (i) no such Right Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate would be issued and
(ii) no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption.
----------
Section 23.1. Right to Redeem. The Board of Directors of the
---------------
Company may, at its option, at any time prior to a Trigger Event, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"), and
the Company may, at its option, pay the Redemption Price in Common Shares (based
on the "current per share market price," determined pursuant to Section 11.4, of
the Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors may be made effective at such time, on such
basis and subject to such conditions as the Board of Directors in its sole
discretion may establish. Notwithstanding anything contained in this Agreement
to the contrary, the Rights shall not be exercisable following a transaction or
event described in Section 11.1.2 prior to the expiration or termination of the
Company's right of redemption hereunder.
Section 23.2. Redemption Procedures. Immediately upon the action of
---------------------
the Board of Directors of the Company ordering the redemption of the Rights (or
at such later time as the Board of Directors may establish for the effectiveness
of such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. The Company shall promptly give public notice of such redemption;
PROVIDED, HOWEVER, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. The Company shall promptly
give, or cause the Rights Agent to give, notice of such redemption to the
holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates (other than Existing Holders) may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 27, and other than in
connection with the purchase, acquisition or redemption of Common Shares prior
to the Distribution Date.
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Section 24. Notice of Certain Events. In case the Company shall
------------------------
propose at any time after the earlier of the Shares Acquisition Date and the
Distribution Date (a) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the
payment of such dividends, or a stock dividend on, or a subdivision, combination
or reclassification of the Common Shares), or (b) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (d) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to
a merger or other acquisition agreement of the type described in Section
1.3(ii)(A)(z)), or (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to declare or pay any dividend on the Common Shares payable
in Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, in accordance with Section 25,
a notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares, whichever shall be the earlier.
In case any event set forth in Section 11.1.2 or Section 13 shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to the Rights Agent and to each holder of a Right Certificate,
in accordance with Section 25, a notice of the occurrence of such event, which
notice shall describe the event and the consequences of the event to holders of
Rights under Section 11.1.2 and Section 13, and (ii) all references in this
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Notwithstanding anything in this Agreement to the contrary, prior to
the Distribution Date a filing by the Company with the Securities and Exchange
Commission shall
33
<PAGE>
constitute sufficient notice to the holders of securities of the Company,
including the Rights, for purposes of this Agreement and no other notice need be
given.
Section 25. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Kilroy Realty Corporation
2250 E. Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Corporate Secretary
Subject to the provisions of Section 21 and Section 24, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
400 S. Grand Avenue
Los Angeles, California 90071
Attention: James Kirkland
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing Common
Shares) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 26. Supplements and Amendments. For so long as the Rights
--------------------------
are then redeemable, the Company may in its sole and absolute discretion, and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of any holders
of Rights or Common Shares. From and after the time that the Rights are no
longer redeemable, the Company may, and the Rights Agent shall, if the Company
so directs, from time to time supplement or amend this Agreement without the
approval of any holders of Rights (i) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or (ii) to make any other changes or provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable, including but not limited to extending the Final
Expiration Date; PROVIDED, HOWEVER, that no such supplement or amendment shall
adversely affect the interests of the holders of Rights as such (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no
such supplement or amendment may cause the Rights again to become redeemable or
cause this Agreement again to become amendable other than in accordance with
this sentence; PROVIDED FURTHER, that the right of the Board of Directors to
extend the Distribution Date shall not require any amendment or
34
<PAGE>
supplement hereunder. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Without limiting the foregoing, at any time prior
to such time as any Person becomes an Acquiring Person, the Company and the
Rights Agent may amend this Agreement to lower the thresholds set forth in
Sections 1.1 and 3.1 to not less than the greater of (i) any percentage greater
than the largest percentage of the outstanding Common Shares then known by the
Company to be beneficially owned by any Person (other than an Exempt Person) and
(ii) 10%.
Section 27. Exchange.
--------
27.1. Exchange of Common Shares for Rights. The Board of Directors
------------------------------------
of the Company may, at its option, at any time after the occurrence of a Trigger
Event, exchange Common Shares for all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11.1.2) by exchanging at an exchange ratio
of that number of Common Shares having an aggregate value equal to the Spread
(with such value being based on the current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger
Event) per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such amount per
Right being hereinafter referred to as the "Exchange Consideration").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Acquiring Person shall have become
the Beneficial Owner of 50% or more of the Common Shares then outstanding. From
and after the occurrence of an event specified in Section 13.1, any Rights that
theretofore have not been exchanged pursuant to this Section 27.1 shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 27.1. The exchange of the Rights by the Board
of Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
27.2. Exchange Procedures. Immediately upon the action of the Board
-------------------
of Directors of the Company ordering the exchange for any Rights pursuant to
Section 27.1 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive the Exchange Consideration. The Company
shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange shall state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
the Rights that have become void pursuant to the provisions of Section 11.1.2)
held by each holder of Rights.
35
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27.3. Insufficient Shares. The Company may at its option
-------------------
substitute, and, in the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit an exchange of
Rights for Common Shares as contemplated in accordance with this Section 27, the
Company shall substitute to the extent of such insufficiency, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Preferred Shares or fraction thereof (or equivalent preferred stock, as such
term is defined in Section 11.2) such that the current per share market price
(determined pursuant to Section 11.4) of one Preferred Share (or equivalent
preferred share) multiplied by such number or fraction is equal to the current
per share market price of one Common Share (determined pursuant to Section 11.4)
as of the date of such exchange.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Determination and Actions by the Board of Directors. The
---------------------------------------------------
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or amend this Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that are done or
made by the Board of Directors of the Company in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of Maryland and for all purposes shall be governed by and construed in
accordance with the laws of such State
36
<PAGE>
applicable to contracts to be made and performed entirely within such State;
PROVIDED, HOWEVER, that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely with such State.
Section 33. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Heading. Descriptive headings of the several
-------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
KILROY REALTY CORPORATION
By /s/ Jeffrey C. Hawken
----------------------
Jeffrey C. Hawken
Executive Vice President and Chief
Operating Officer
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By /s/ James Kirkland
------------------
James Kirkland
Assistant Vice President
Attest:
/s/ Derek Lenington
- ----------------------
Derek Lenington
Vice President
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<PAGE>
EXHIBIT A
---------
FORM OF
ARTICLES SUPPLEMENTARY
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
KILROY REALTY CORPORATION
_____________________________
Kilroy Realty Corporation, a Maryland corporation (the "Company")
having its principal office in the State of Maryland located at c/o Ballard
Spahr Andrews & Ingersoll, LLP, 300 E. Lombard Street, Baltimore, City Maryland
21202 (the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland (the "Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Company (the "Board of Directors") by Article IV of the
Articles of Amendment and Restatement of the Company filed with the Department
on January 21, 1997, as supplemented (the "Charter") and Section 2-105(a)(9) of
the Maryland General Corporation Law (the "MGCL"), the Board of Directors, by
resolutions duly adopted on October 2, 1998 has classified 400,000 shares of the
authorized but unissued Preferred Stock, par value $.01 per share, of the
Company ("Preferred Stock") as a separate class of Preferred Stock designated as
"Class B Junior Participating Preferred Stock", setting the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, terms and conditions of
redemption and other terms and conditions, as set forth in Article Second of
these Articles Supplementary, and authorizing the issuance of up to 400,000
shares of Class B Junior Participating Preferred Stock.
SECOND: The class of Preferred Stock of the Corporation created by
the resolutions duly adopted by the Board of Directors of the Corporation and
referred to in Article FIRST of these Articles Supplementary shall have the
following designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions and limitations as to distributions,
qualifications, terms and conditions of redemption and other terms and
conditions (which, upon any restatement of the Charter, may be made a part of
Article IV, with any necessary or appropriate changes to the enumeration or
lettering of the provisions hereof):
Section 1. Designation and Amount. The shares of such class shall be
----------------------
designated as "Class B Junior Participating Preferred Stock" (the
"Class B Preferred Stock") and
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the number of shares constituting the Class B Preferred Stock shall be four
hundred thousand (400,000). Such number of shares may be increased or decreased
by resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Class B Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Company convertible into Class B
Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
Subject to the prior and superior rights of the holders of any shares
of any class or series of stock of this Company ranking prior and superior to
the Class B Preferred Stock with respect to dividends, the holders of shares of
Class B Preferred Stock, in preference to the holders of common stock, par value
$.01 per share (the "Common Stock"), of the Company, and of any other stock
ranking junior to the Class B Preferred Stock, shall be entitled to receive,
when, as and if authorized by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Class B Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Class B Preferred Stock.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Class B Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
The Company shall declare a dividend or distribution on the Class B
Preferred Stock as provided in paragraph (A) of this Section 2 immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
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Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Class B
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
Dividends shall begin to accrue and be cumulative on outstanding
shares of Class B Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Class B Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Class B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Class B Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Class B Preferred
-------------
Stock shall have the following voting rights:
Subject to the provision for adjustment hereinafter set forth, each
share of Class B Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Company having
general voting rights. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which holders of
shares of Class B Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Except as otherwise provided herein, in any other Articles
Supplementary creating a class or series of Preferred Stock or any similar
stock, the holders of shares of Class B Preferred Stock and the holders of
shares of Common Stock and any other shares of stock of the Company having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Company having general voting rights.
Except as set forth herein, or as otherwise provided by law, holders
of Class B Preferred Stock shall have no special voting rights and their consent
shall not be required (except
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to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
Whenever quarterly dividends or other dividends or distributions
payable on the Class B Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Class B Preferred Stock outstanding shall have
been paid in full, the Company shall not:
declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class B Preferred Stock;
declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Class B Preferred Stock, except dividends
paid ratably on the Class B Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
except pursuant to the provisions of the Charter providing for
limitations or restrictions on ownership of stock of the Company which are,
expressly or by implication, to protect the status of the Company as a Real
Estate Investment Trust under the Internal Revenue Code, redeem or purchase or
otherwise acquire for consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Class B
Preferred Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Company ranking junior (both as to dividends and upon dissolution,
liquidation or winding up) to the Class B Preferred Stock; or
redeem or purchase or otherwise acquire for consideration any shares
of Class B Preferred Stock, or any shares of stock ranking on a parity with the
Class B Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes, and except pursuant to the provisions of the Charter providing for
limitations or restrictions on ownership of stock of the Company which are,
expressly or by implication, to protect the status of the Company as a Real
Estate Investment Trust under the Internal Revenue Code.
The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company
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could, under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Class B Preferred Stock
-----------------
purchased or otherwise acquired by the Company in any manner whatsoever shall
become authorized but unissued shares of Preferred Stock, without further
designation, and may be reissued as part of a new class or series of Preferred
Stock subject to the conditions and restrictions on issuance set forth herein,
in the Charter, or in any other Articles Supplementary creating a class or
series of Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
liquidation, dissolution or winding up of the Company, voluntary or otherwise,
no distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Class B Preferred Stock unless, prior thereto, the holders of shares of
Class B Preferred Stock shall have received an amount per share (the "Series C
Liquidation Preference") equal to $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Class B
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Class B Preferred Stock, except distributions made ratably on the Class B
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which holders of shares of
Class B Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are outstanding immediately
prior to such event.
In the event, however, that there are not sufficient assets available
to permit payment in full of the Series C Liquidation Preference and the
liquidation preferences of all other classes and series of stock of the Company,
if any, that rank on a parity with the Class B Preferred Stock in respect
thereof, then the assets available for such distribution shall be distributed
ratably to the holders of the Class B Preferred Stock and the holders of such
parity shares in proportion to their respective liquidation preferences.
Neither the merger or consolidation of the Company into or with
another company nor the merger or consolidation of any other company into or
with the Company shall
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be deemed to be a liquidation, dissolution or winding up of the Company within
the meaning of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Company shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Class B Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Class B Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. Except pursuant to the provisions of the
-------------
Charter providing for limitations or restrictions on ownership of stock of the
Company which are, expressly or by implication, to protect the status of the
Company as a Real Estate Investment Trust under the Internal Revenue Code, the
shares of Class B Preferred Stock shall not be redeemable by the Company.
Section 9. Rank. The Class B Preferred Stock shall rank, with
----
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, junior to all other classes and series
of the Company's Preferred Stock, except to the extent that any such other
classes or series specifically provides that it shall rank on a parity with or
junior to the Class B Preferred Stock.
Section 10. Amendment. At any time any shares of Class B Preferred
---------
Stock are outstanding, the Charter of the Company shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Class B Preferred Stock, as set forth herein, so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Class B Preferred Stock, voting separately as a single
class.
Section 11. Fractional Shares. Class B Preferred Stock may be issued
-----------------
in fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Class B Preferred Stock.
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Section 12. Restrictions on Transfer, Acquisition and Redemption of
-------------------------------------------------------
Shares.
- ------
(A) Definitions. For the purposes of this Section 12 of these Articles
-----------
Supplementary, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Class B Preferred
Stock by a Person (whether the interest in Class B Preferred Stock is
held directly or indirectly, including by a nominee) who is or would
be treated as an owner of such Class B Preferred Stock either actually
or constructively through the application of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Beneficial Ownership Limit" shall mean 7.0% (by value or by
number of shares, whichever is more restrictive) of the outstanding
shares of Class B Preferred Stock of the Company.
"Charitable Beneficiary" shall mean one or more beneficiaries of
a Trust, as determined pursuant to Section 12(C)(6) of these Articles
Supplementary, each of which shall be an organization described in
Section 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"Constructive Ownership" shall mean ownership of Class B
Preferred Stock by a Person (whether the interest in Class B Preferred
Stock is held directly or indirectly, including by a nominee) who is
or would be treated as an owner of such Class B Preferred Stock either
actually or constructively through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have the correlative meanings.
"Constructive Ownership Limit" shall mean 9.8% (by value or by
number of shares, whichever is more restrictive) of the outstanding
shares of Class B Preferred Stock of the Company.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales price of the
Class B Preferred Stock reported on the New York Stock Exchange on the
trading day immediately preceding the relevant date, or if the Class B
Preferred Stock is not then traded on the New York Stock Exchange, the
last reported sales price of the Class B Preferred Stock on the
trading day immediately preceding the relevant date as reported on any
exchange or quotation system over which the Class B Preferred
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Stock may be traded, or if the Class B Preferred Stock is not then
traded over any exchange or quotation system, then the fair market
value of the Class B Preferred Stock on the relevant date as
determined in good faith by the Board of Directors of the Company.
"MGCL" shall mean the Maryland General Corporation Law, as
amended from time to time, and any successor statute hereafter
enacted.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust qualified
under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint
stock company or other entity; but does not include an underwriter
acting in a capacity as such in a public offering of shares of Class B
Preferred Stock provided that the ownership of such shares of Class B
Preferred Stock by such underwriter would not result in the Company
being "closely held" within the meaning of Section 856(h) of the Code,
or otherwise result in the Company failing to qualify as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer (or other event) which results in a transfer to a
Trust, as provided in Section 12(B)(2) of these Articles
Supplementary, the Purported Record Transferee, unless the Purported
Record Transferee would have acquired or owned shares of Class B
Preferred Stock on behalf of another Person, who is the beneficial
transferee or owner of such shares, in which case such Person shall be
the Purported Beneficial Transferee.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer (or other event) which results in a transfer to a
Trust, as provided in Section 12(B)(2) of these Articles
Supplementary, the Person who would have been the record holder of the
shares of Class B Preferred Stock if such Transfer had been valid
under Section 12(B)(1) of these Articles Supplementary.
"REIT" shall mean a real estate investment trust under Sections
856 through 860 of the Code, and, for purposes of taxation of the
Company under applicable state law, analogous provisions of the law of
such state.
"Restriction Termination Date" shall mean the first day after the
date hereof on which the Board of Directors of the Company determines
that it is no longer in the best interests of the Company to attempt
to, or continue to, qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Class B Preferred Stock, including (i)
the granting of any option or entering into any agreement for the
sale, transfer or other disposition of Class B Preferred Stock or (ii)
the sale, transfer, assignment or other disposition of any
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securities or rights convertible into or exchangeable for Class B
Preferred Stock, whether voluntary or involuntary, whether such
transfer has occurred of record or beneficially or Beneficially or
Constructively (including but not limited to transfers of interests in
other entities which result in changes in Beneficial or Constructive
Ownership of Class B Preferred Stock), and whether such transfer has
occurred by operation of law or otherwise.
"Trust" shall mean each of the trusts provided for in Section
12(C) of these Articles Supplementary.
"Trustee" shall mean any Person, unaffiliated with the Company, a
Purported Beneficial Transferee, or a Purported Record Transferee,
that is appointed by the Company to serve as trustee of a Trust.
(B) Restriction on Ownership and Transfers.
--------------------------------------
(1) Prior to the Restriction Termination Date:
(a) except as provided in Section 12(I) of these Articles
Supplementary, no Person shall Beneficially Own shares of Class B Preferred
Stock in excess of the Beneficial Ownership Limit;
(b) except as provided in Section 12(I) of these Articles
Supplementary, no Person shall Constructively Own shares of Class B Preferred
Stock in excess of the Constructive Ownership Limit;
(c) no Person shall Beneficially Own or Constructively Own
shares of Class B Preferred Stock which, taking into account any other capital
stock of the Company Beneficially Owned or Constructively Owned by such Person,
would result in the Company being "closely held" within the meaning of Section
856(h) of the Code (without regard to whether the ownership interest is held
during the last half of a taxable year), or otherwise failing to qualify as a
REIT (including but not limited to Constructive Ownership that would result in
the Company owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the
Company (either directly or indirectly through one or more partnerships) from
such tenant would cause the Company to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).
(2) If, prior to the Restriction Termination Date, any Transfer
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the New York Stock Exchange ("NYSE")) or other event
occurs that, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Class B Preferred Stock in violation of Section
12(B)(1) of these Articles Supplementary, (1) then that number of shares of
Class B Preferred Stock that otherwise would cause such Person to violate
Section 12(B)(1) of these Articles Supplementary (rounded up to the nearest
whole share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 12(C), effective as of
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the close of business on the business day prior to the date of such Transfer or
other event, and such Person shall thereafter have no rights in such shares or
(2) if, for any reason, the transfer to the Trust described in clause (1) of
this sentence is not automatically effective as provided therein to prevent any
Person from Beneficially Owning or Constructively Owning shares of Class B
Preferred Stock in violation of Section 12(B)(1) of these Articles
Supplementary, then the Transfer of that number of shares of Class B Preferred
Stock that otherwise would cause any Person to violate Section 12(b)(1) shall be
void ab initio, and such Person shall have no rights in such shares.
(3) Notwithstanding any other provisions contained herein, prior to
the Restriction Termination Date, any Transfer of Class B Preferred Stock
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE) that, if effective, would result in the
capital stock of the Company being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution) shall be void ab
initio, and the intended transferee shall acquire no rights in such Class B
Preferred Stock.
(C) Transfers of Class B Preferred Stock in Trust.
---------------------------------------------
(1) Upon any purported Transfer or other event described in Section
12(B)(2)of these Articles Supplementary, then that number of shares of Class B
Preferred Stock that otherwise would cause a violation of Section 12(B)(1)
(rounded up to the nearest whole share) shall be deemed to have been transferred
to the Trustee in his capacity as trustee of a Trust for the exclusive benefit
of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be
deemed to be effective as of the close of business on the business day prior to
the purported Transfer or other event that results in a transfer to the Trust
pursuant to Section 12(B)(2). The Trustee shall be appointed by the Company and
shall be a Person unaffiliated with the Company, any Purported Beneficial
Transferee, or any Purported Record Transferee. Each Charitable Beneficiary
shall be designated by the Company as provided in Section 12(C)(6) of these
Articles Supplementary.
(2) Class B Preferred Stock held by the Trustee shall be issued and
outstanding Class B Preferred Stock of the Company. The Purported Beneficial
Transferee or Purported Record Transferee shall have no rights in the shares of
Class B Preferred Stock held by the Trustee. The Purported Beneficial Transferee
or Purported Record Transferee shall not benefit economically from ownership of
any shares held in trust by the Trustee, shall have no rights to dividends and
shall not possess any rights to vote or other rights attributable to the shares
of Class B Preferred Stock held in the Trust.
(3) The Trustee shall have all voting rights and rights to dividends
with respect to Class B Preferred Stock held in the Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend
or distribution paid prior to the discovery by the Company that shares of Class
B Preferred Stock have been transferred to the Trustee shall be paid by the
recipient thereof to the Trustee upon demand, and any dividend or distribution
declared but unpaid shall be paid when due to the Trustee with respect to such
Class B Preferred Stock. Any dividends or distributions so paid over to the
Trustee shall be held in trust for the Charitable Beneficiary. The Purported
Record Transferee and Purported Beneficial Transferee shall have no voting
rights with respect to the Class B Preferred Stock held in the Trust and,
subject to Maryland
A-10
<PAGE>
law, effective as of the date the Class B Preferred Stock has been transferred
to the Trustee, the Trustee shall have the authority (at the Trustee's sole
discretion) (i) to rescind as void any vote cast by a Purported Record
Transferee with respect to such Class B Preferred Stock prior to the discovery
by the Company that the Class B Preferred Stock has been transferred to the
Trustee and (ii) to recast such vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary; provided, however,
that if the Company has already taken irreversible corporate action, then the
Trustee shall not have the authority to rescind and recast such vote.
Notwithstanding any other provision of these Articles Supplementary to the
contrary, until the Company has received notification that the Class B Preferred
Stock has been transferred into a Trust, the Company shall be entitled to rely
on its share transfer and other stockholder records for purposes of preparing
lists of stockholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of stockholders.
(4) Within 20 days of receiving notice from the Company that shares
of Class B Preferred Stock have been transferred to the Trust, the Trustee of
the Trust shall sell the shares of Class B Preferred Stock held in the Trust to
a Person, designated by the Trustee, whose ownership of the shares of Class B
Preferred Stock will not violate the ownership limitations set forth in Section
12(B)(1). Upon such sale, the interest of the Charitable Beneficiary in the
shares of Class B Preferred Stock sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Purported Record Transferee and
to the Charitable Beneficiary as provided in this Section 12(C)(4). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee or the Purported Beneficial Transferee for the
shares of Class B Preferred Stock in the transaction that resulted in such
transfer to the Trust or, to the extent that neither the Purported Record
Transferee nor the Purported Beneficial Transferee gave fair value for such
shares of Class B Preferred Stock, the Market Price of such shares of Class B
Preferred Stock on the day of the event which resulted in the transfer of the
shares of Class B Preferred Stock to the Trust and (2) the price per share
received by the Trustee (net of any commissions and other expenses of sale) from
the sale or other disposition of the shares of Class B Preferred Stock held in
the Trust. Any net sales proceeds in excess of the amount payable to the
Purported Record Transferee shall be immediately paid to the Charitable
Beneficiary together with any dividends or other distributions thereon. If,
prior to the discovery by the Company that shares of such Class B Preferred
Stock have been transferred to the Trustee, such shares of Class B Preferred
Stock are sold by a Purported Record Transferee then (i) such shares of Class B
Preferred Stock shall be deemed to have been sold on behalf of the Trust and
(ii) to the extent that the Purported Record Transferee or the Purported
Beneficial Transferee received an amount for such shares of Class B Preferred
Stock that exceeds the amount that such Purported Record Transferee or the
Purported Beneficial Transferee was entitled to receive pursuant to this Section
12(C)(4), such excess shall be paid to the Trustee upon demand.
(5) Class B Preferred Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Company, or its designee, at a price
per share equal to the lesser of (i) the price paid by the Purported Record
Transferee or the Purported Beneficial Transferee for the shares of Class B
Preferred Stock in the transaction that resulted in such transfer to the Trust
or, if neither the Purported Record Transferee or the Purported Beneficial
Transferee gave value for the
A-11
<PAGE>
Market Price of such shares of Class B Preferred Stock on the day of the event
which resulted in the transfer of such shares of Class B Preferred Stock to the
Trust, and (ii) the Market Price on the date the Company, or its designee,
accepts such offer. The Company shall have the right to accept such offer until
the Trustee has sold the shares of Class B Preferred Stock held in the Trust
pursuant to Section 12(C)(4). Upon such a sale to the Company, the interest of
the Charitable Beneficiary in the shares of Class B Preferred Stock sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee and any dividends or other distributions held by the
Trustee with respect to such Class B Preferred Stock shall thereupon be paid to
the Charitable Beneficiary.
(6) By written notice to the Trustee, the Company shall designate one
or more nonprofit organizations to be the Charitable Beneficiary of the interest
in the Trust such that (i) the Class B Preferred Stock held in the Trust would
not violate the restrictions set forth in Section 12(B)(1) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.
(D) Remedies For Breach. If the Board of Directors or a committee
-------------------
thereof (or other designees if permitted under the MGCL) shall at any time
determine in good faith that a Transfer or other event has taken place in
violation of Section 12(B) of these Articles Supplementary or that a Person
intends to acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Class B Preferred Stock of the
Company in violation of Section 12(B) of these Articles Supplementary, the Board
of Directors or a committee thereof (or other designees if permitted under the
MGCL) shall take such action as it deems advisable to refuse to give effect or
to prevent such Transfer, including, but not limited to, causing the Company to
redeem shares of Class B Preferred Stock, refusing to give effect to such
Transfer on the books of the Company or instituting proceedings to enjoin such
Transfer; provided, however, that any Transfers (or, in the case of events other
than a Transfer, ownership or Constructive Ownership or Beneficial Ownership) in
violation of Section 12(B)(1) of these Articles Supplementary, shall
automatically result in the transfer to a Trust as described in Section 12(B)(2)
and any Transfer in violation of Section 12(B)(3) shall automatically be void ab
initio irrespective of any action (or non-action) by the Board of Directors.
(E) Notice of Restricted Transfer. Any Person who acquires or attempts to
-----------------------------
acquire shares of Class B Preferred Stock in violation of Section 12(B) of these
Articles Supplementary, or any Person who is a Purported Beneficial Transferee
or Purported Record Transferee such that an automatic transfer to a Trust
results under Section 12(B)(2) of these Articles Supplementary, shall
immediately give written notice to the Company of such event and shall provide
to the Company such other information as the Company may request in order to
determine the effect, if any, of such Transfer or attempted Transfer on the
Company's status as a REIT.
(F) Owners Required To Provide Information. Prior to the Restriction
--------------------------------------
Termination Date each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Class B Preferred Stock and each Person (including the
shareholder of record) who is holding Class B Preferred Stock for a beneficial
owner or Beneficial Owner or Constructive Owner shall provide to
A-12
<PAGE>
the Company such information that the Company may request, in good faith, in
order to determine the Company's status as a REIT.
(G) Remedies Not Limited. Nothing contained in these Articles
--------------------
Supplementary (but subject to Section 12(M) of these Articles Supplementary)
shall limit the authority of the Board of Directors to take such other action as
it deems necessary or advisable to protect the Company and the interests of its
shareholders by preservation of the Company's status as a REIT.
(H) Ambiguity. In the case of an ambiguity in the application of any of
---------
the provisions of this Section 12 of these Articles Supplementary, including any
definition contained in Section 12(A), the Board of Directors shall have the
power to determine the application of the provisions of this Section 12 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of Section 12(M) of these Articles Supplementary). In the event
Section 12 requires an action by the Board of Directors and these Articles
Supplementary fail to provide specific guidance with respect to such action, the
Board of Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Section 12. Absent a
decision to the contrary by the Board of Directors (which the Board may make in
its sole and absolute discretion), if a Person would have (but for the remedies
set forth in Section 12(B)) acquired Beneficial or Constructive Ownership of
Class B Preferred Stock in violation of Section 12(B)(1), such remedies (as
applicable) shall apply first to the shares of Class B Preferred Stock which,
but for such remedies, would have been actually owned by such Person, and second
to shares of Class B Preferred Stock which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Class B
Preferred Stock based upon the relative number of the shares of Class B
Preferred Stock held by each such Person.
(I) Exceptions.
----------
(1) Subject to Section 12(B)(1)(c), the Board of Directors, in its
sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning Class B Preferred Stock in excess of the Beneficial
Ownership Limit if the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
individual's Beneficial Ownership of such Class B Preferred Stock will violate
the Beneficial Ownership Limit or that any such violation will not cause the
Company to fail to qualify as a REIT under the Code, and agrees that any
violation of such representations or undertaking (or other action which is
contrary to the restrictions contained in Section 12(B) of these Articles
Supplementary) or attempted violation will result in such Class B Preferred
Stock being transferred to a Trust in accordance with Section 12(B)(2) of these
Articles Supplementary.
(2) Subject to Section 12(B)(1)(c), the Board of Directors, in its
sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Class B Preferred Stock in excess of the Constructive
Ownership Limit if such Person does not and represents that it will not own,
actually or Constructively, an interest in a tenant of the Company (or a tenant
of any entity owned in whole or in part by the Company) that would cause the
Company to own, actually or Constructively more than a 9.8% interest (as set
forth in Section 856(d)(2)(B) of the Code) in
A-13
<PAGE>
such tenant and the Company obtains such representations and undertakings from
such Person as are reasonably necessary to ascertain this fact and agrees that
any violation or attempted violation will result in such Class B Preferred Stock
being transferred to a Trust in accordance with Section 12(B)(2) of these
Articles Supplementary. Notwithstanding the foregoing, the inability of a Person
to make the certification described in this Section 12(I)(2) shall not prevent
the Board of Directors, in its sole discretion, from exempting such Person from
the limitation on a Person Constructively Owning Class B Preferred Stock in
excess of the Ownership Limit if the Board of Directors determines that the
resulting application of Section 856(d)(2)(B) of the Code would affect the
characterization of less than 0.5% of the gross income (as such term is used in
Section 856(c)(2) of the Code and analogous provisions of applicable state law)
of the Company in any taxable year, after taking into account the effect of this
sentence with respect to all other Class B Preferred Stock to which this
sentence applies.
(3) Prior to granting any exception pursuant to Sections 12(I)(1) or
(2) of these Articles Supplementary, the Board of Directors may require a ruling
from the Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole
discretion, as it may deem necessary or advisable in order to determine or
ensure the Company's status as a REIT.
(J) Preemptive Rights. No holder of shares of Class B Preferred Stock
-----------------
shall have any preemptive or preferential right to subscribe or to purchase any
additional shares of any class, or any bonds or convertible securities of any
nature.
(K) Legend. Each certificate for Class B Preferred Stock shall bear
------
substantially the following legends:
Class of Stock
--------------
"THE COMPANY IS AUTHORIZED TO ISSUE STOCK OF MORE THAN ONE CLASS,
CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED STOCK. THE
BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF ANY CLASS OF THE PREFERRED STOCK BEFORE THE ISSUANCE
OF SHARES OF SUCH CLASS OF PREFERRED STOCK. THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER, ON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE
INFORMATION REQUIRED BY SECTION 2-211(B) OF THE CORPORATIONS AND
ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE
DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING
POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH
CLASS WHICH THE COMPANY HAS THE AUTHORITY TO ISSUE AND, IF THE COMPANY IS
AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS AND SERIES, (I) THE
A-14
<PAGE>
DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF
EACH CLASS OR SERIES TO THE EXTENT SET, AND (II) THE AUTHORITY OF THE BOARD
OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR
SERIES. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE
COMPANY (THE "CHARTER"), A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO
EACH STOCKHOLDER WHO SO REQUESTS. REQUESTS FOR SUCH WRITTEN STATEMENT
MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE.
Restriction on Ownership and Transfer
-------------------------------------
THE SHARES OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK (THE "CLASS B
PREFERRED STOCK") REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE
PURPOSE OF THE COMPANY'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY
PROVIDED IN THE ARTICLES SUPPLEMENTARY FOR THE CLASS B PREFERRED STOCK, (I)
NO PERSON MAY BENEFICIALLY OWN SHARES OF THE COMPANY'S CLASS B PREFERRED
STOCK IN EXCESS OF 7.0% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE) OF THE OUTSTANDING CLASS B PREFERRED STOCK OF THE COMPANY;
(II) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE COMPANY'S CLASS B
PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING CLASS B PREFERRED STOCK
OF THE COMPANY; (III) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
CLASS B PREFERRED STOCK THAT WOULD RESULT IN THE COMPANY BEING "CLOSELY
HELD" UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO
FAIL TO QUALIFY AS A REIT; AND (IV) NO PERSON MAY TRANSFER CLASS B
PREFERRED STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE
COMPANY BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY
OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN
CLASS B PREFERRED STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY
OR CONSTRUCTIVELY OWN CLASS B PREFERRED STOCK IN EXCESS OF THE ABOVE
LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. IF ANY OF THE
RESTRICTIONS ON TRANSFER
A-15
<PAGE>
OR OWNERSHIP ARE VIOLATED, THE CLASS B PREFERRED STOCK REPRESENTED HEREBY
WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT
OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE COMPANY MAY
REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT
OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS,
ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE
VOID AB INITIO. ALL TERMS IN THIS LEGEND DEFINED IN THE ARTICLES
SUPPLEMENTARY FOR THE CLASS B PREFERRED STOCK, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN SUCH
ARTICLES SUPPLEMENTARY, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF CLASS B
PREFERRED STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY
BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE."
Instead of the foregoing legend, the share certificate may state that the
Company will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.
(L) Severability. If any provision of this Section 12 or any application
------------
of any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
(M) NYSE. Nothing in this Section 12 shall preclude the settlement of any
----
transaction entered into through the facilities of the NYSE. The fact that the
settlement of any transaction is so permitted shall not negate the effect of any
other provision of this Section 12 and any transferee in such a transaction
shall be subject to all the provisions and limitations of this Section 12.
(N) Applicability of Section 12. The provisions set forth herein under
---------------------------
Section 12 shall apply to the Class B Preferred Stock notwithstanding any
contrary provisions of the Class B Preferred Stock provided for elsewhere in
these Articles Supplementary.
Section 13. No Conversion Rights. The holders of the Class B
--------------------
Preferred Stock shall not have any rights to convert such shares into shares of
any class or series of stock of the Company or to any other securities of, or
interest in, the Company.
A-16
<PAGE>
Section 14. No Sinking Fund. No sinking fund shall be established
---------------
for the retirement or redemption of the Class B Preferred Stock.
Section 15. No Preemptive Rights. No holder of shares of Class B
--------------------
Preferred Stock shall have any preemptive or preferential right to subscribe
for, or to purchase, any additional shares of stock of the Company of any class
or series, or any other security of the Company which the Company may issue or
sell.
THIRD: These Articles Supplementary have been approved by the Board
of Directors in the manner and by the vote required by law.
FOURTH: The undersigned President and Chief Executive Officer of the
Company acknowledges these Articles Supplementary to be the corporate act of the
Company and, as to all matters of fact required to be verified under oath, the
undersigned President acknowledges that to the best of his or her knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be executed in its name and on its behalf by its President, and
attested to by its Secretary, on this 2nd day of October, 1998.
KILROY REALTY CORPORATION
By:________________________________
Name:
Title:
[SEAL]
ATTEST:
____________________________________
Name:
Title:
A-17
<PAGE>
EXHIBIT B
---------
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER OCTOBER 2, 2008 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO AN
AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(z) OF THE AGREEMENT.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT, AND TO EXCHANGE ON
THE TERMS SET FORTH IN THE AGREEMENT. UNDER CERTAIN CIRCUMSTANCES
---------------------------
(SPECIFIED IN SECTION 11.1.2 OF THE AGREEMENT), RIGHTS BENEFICIALLY OWNED
-------------------------------------------------------------------------
BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS DEFINED IN THE AGREEMENT), OR
--------------------------------------------------------------------------
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID AND WILL NO
--------------------------------------------------------------------------
LONGER BE TRANSFERABLE.
----------------------
Right Certificate
KILROY REALTY CORPORATION
This certifies that __________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of October 2, 1998, as the same may be amended from time to
time (the "Agreement"), between Kilroy Realty Corporation, a Maryland
corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date and prior to 5:00 P.M. (California time) on October
2, 2008, at the offices of the Rights Agent, or its successors as Rights Agent,
designated for such purpose, one one-hundredth of a fully paid, nonassessable
share of Series B Junior Participating Preferred Stock, par value $.01 per share
(the "Preferred Shares") of the Company, at a purchase price of $71.00 per one
one-hundredth of a Preferred Share, subject to adjustment (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase and certification duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-hundredths of a
Preferred Share which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
October 2, 1998 based on the Preferred Shares as constituted at such date.
Capitalized terms used in this Right Certificate without definition shall have
the meanings ascribed to them in the Agreement. As provided in the Agreement,
the Purchase Price and the number of Preferred Shares which may be purchased
upon the exercise of the Rights evidenced by this Right Certificate are subject
to modification and adjustment upon the happening of certain events.
B-1
<PAGE>
This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Right Certificates. Copies of the Agreement are
on file at the principal offices of the Company and the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the offices of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of one one-hundredths of a Preferred Share as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Agreement, the Board of Directors
may, at its option, (i) redeem the Rights evidenced by this Right Certificate at
a redemption price of $.01 per Right at any time prior to a Trigger Event or
(ii) exchange Common Shares for the Rights evidenced by this Certificate, in
whole or in part.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions of Preferred Shares which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depository receipts), but in lieu
thereof a cash payment will be made, as provided in the Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Agreement.
If any term, provision, covenant or restriction of the Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of the Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
B-2
<PAGE>
This Right Certificate shall not be valid or binding for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of October 15, 1998.
Attest: KILROY REALTY CORPORATION
By ______________________ By _________________________________
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent
By_____________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address
of transferee)
Rights evidenced by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
__________________________ Attorney, to transfer the within Right Certificate on
the books of the within-named Company, with full power of substitution.
Dated: ___________________________
______________________________
Signature
Signature Guaranteed:
___________________________________
Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.
B-4
<PAGE>
________________________________________________________________________________
The undersigned hereby certifies that:
(1) the Rights evidenced by this Right Certificate are not
beneficially owned by and are not being assigned to an Acquiring Person or an
Affiliate or an Associate thereof; and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned did not acquire the Rights evidenced by this Right Certificate
from any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof.
Dated: ________________________
______________________________
Signature
B-5
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To: KILROY REALTY CORPORATION
The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights (or such other
securities or property of the Company or of any other Person which may be
issuable upon the exercise of the Rights) and requests that certificates for
such shares be issued in the name of:
____________________________________________________________
(Please print name and address)
____________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
____________________________________________________________
(Please print name and address)
____________________________________________________________
Dated: __________________
______________________________
Signature
Signature Guaranteed:
_________________________
Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.
B-6
<PAGE>
The undersigned hereby certifies that:
(1) the Rights evidenced by this Right Certificate are not
beneficially owned by and are not being assigned to an Acquiring Person or an
Affiliate or an Associate thereof; and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned did not acquire the Rights evidenced by this Right Certificate
from any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof.
Dated:_______________
______________________________
Signature
________________________________________________________________________________
NOTICE
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The signature in the foregoing Form of Assignment and Form of Election
to Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or Form of Election to Purchase is not completed, the Company will
deem the beneficial owner of the Rights evidenced by this Right Certificate to
be an Acquiring Person or an Affiliate or Associate hereof and such Assignment
or Election to Purchase will not be honored.
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EXHIBIT C
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As described in the Rights Agreement, Rights which are
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held by or have been held by an Acquiring Person or Associates
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or Affiliates thereof (as defined in the Rights Agreement) and certain
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transferees thereof shall become null and void and will no longer be
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transferable.
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SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On October 2, 1998 the Board of Directors of KILROY REALTY CORPORATION
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each share of common stock, $.01 par value (the "Common Shares"),
of the Company outstanding at the close of business on October 15, 1998 (the
"Record Date"). As long as the Rights are attached to the Common Shares, the
Company will issue one Right (subject to adjustment) with each new Common Share
so that all such shares will have attached Rights. When exercisable, each Right
will entitle the registered holder to purchase from the Company one one-
hundredth of a share of Series B Junior Participating Preferred Stock (the
"Preferred Shares") at a price of $71.00 per one one-hundredth of a Preferred
Share, subject to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Rights Agreement, dated as of October 2, 1998,
as the same may be amended from time to time (the "Agreement"), between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
(or, in the case of John B. Kilroy, Sr., the Company's Chairman, John B. Kilroy,
Jr., the Company's President and Chief Executive Officer, and Kilroy Industries,
and their respective Affiliates and Associates, more than 21%) of the Common
Shares (an "Acquiring Person") or (ii) ten (10) business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement or announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more (or, in the case of John B.
Kilroy, Sr., John B. Kilroy, Jr. and Kilroy Industries, and their respective
Affiliates and Associates, more than 21%) of the Common Shares (the earlier of
(i) and (ii) being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificate together with a copy of
this Summary of Rights.
The Agreement provides that until the Distribution Date (or earlier
redemption exchange, termination, or expiration of the Rights), the Rights will
be transferred with and only with the Common Shares. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the close of business on the Record Date upon transfer
or new issuance of the Common Shares will contain a notation incorporating the
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Agreement by reference. Until the Distribution Date (or earlier redemption,
exchange, termination or expiration of the Rights), the surrender for transfer
of any certificates for Common Shares, with or without such notation or a copy
of this Summary of Rights, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on October 2, 2008, subject to the Company's right to extend
such date (the "Final Expiration Date"), unless earlier redeemed or exchanged by
the Company or terminated.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per Common Share. In the event of
liquidation, dissolution or winding up of the Company, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $100 per share (plus any accrued but unpaid dividends) but will be entitled
to an aggregate payment of 100 times the payment made per Common Share. Each
Preferred Share will have 100 votes and will vote together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. Preferred Shares will
not be redeemable. These Rights are protected by customary antidilution
provisions. Because of the nature of the Preferred Share's dividend,
liquidation and voting rights, the value of one one-hundredth of a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
In the event that a Person becomes an Acquiring Person or if the
Company were the surviving corporation in a merger with an Acquiring Person or
any affiliate or associate of an Acquiring Person and the Common Shares were not
changed or exchanged, each holder of a
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Right, other than Rights that are or were acquired or beneficially owned by the
Acquiring Person (which Rights will thereafter be void), will thereafter have
the right to receive upon exercise that number of Common Shares having a market
value of two times the then current Purchase Price of the Right. In the event
that, after a person has become an Acquiring Person, the Company were acquired
in a merger or other business combination transaction or more than 50% of its
assets or earning power were sold, proper provision shall be made so that each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price of the Right, that number of shares
of common stock of the Acquiring Company which at the time of such transaction
would have a market value of two times the then current Purchase Price of the
Right.
Once a Person has become an Acquiring Person and prior to the
acquisition by such Acquiring Person of 50% or more of the outstanding Common
Shares, the Board of Directors may cause the Company to exchange the Rights
(other than Rights owned by an Acquiring Person which will have become void), in
whole or in part, for Common Shares at an exchange rate based on the value of
the Common Shares at that time (subject to adjustment).
No adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No
fractional Preferred Shares or Common Shares will be issued (other than
fractions of Preferred Shares which are integral multiples of one one-hundredth
of a Preferred Share, which may, at the election of the Company, be evidenced by
depository receipts), and in lieu thereof, a payment in cash will be made based
on the market price of the Preferred Shares or Common Shares on the last trading
date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price") by the Board of Directors at any time
prior to a Trigger Event, on such basis as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Any of the provisions of the Agreement may be amended by the Board of
Directors of the Company for so long as the Rights are then redeemable, and
after the Rights are no longer redeemable, the Company may amend or supplement
the Agreement in any manner that does not adversely affect the interests of the
holders of the Rights.
A copy of the Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K. A copy of
the Agreement is available free of charge from the Company. This summary
description of the Rights does not
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purport to be complete and is qualified in its entirety by reference to the
Agreement, which is incorporated herein by reference.
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