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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO FORM 8-A
ON FORM 8-A /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
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(Exact name of registrant as specified in its charter)
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Maryland 95-4598246
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(State of incorporation or organization) (IRS Employer Identification No.)
2250 East Imperial Highway, Suite 1200
El Segundo, 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 of a class of registration of a class of securities
securities pursuant to Section pursuant to Section 12(g) of the
12(b) of the Exchange Act and is Exchange Act and is pursuant to
effective pursuant to General General Instruction A(d) please check
Instruction A(c) please check the the following box. [ ]
following box. [X]
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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Common Stock, par value $.01 per share New York Stock Exchange
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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 Registrant's Securities to be Registered.
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We have summarized below the material terms and provisions of our common
stock. For more detail you should refer to our charter, which we have previously
filed with the SEC and which we incorporate by reference as an exhibit to this
registration statement.
Common stock.
General. Our charter authorizes us to issue 150,000,000 shares of common
stock, par value $0.01 per share. As of December 31, 1998, we had 27,639,210
shares of common stock issued and outstanding. The 27,639,210 outstanding shares
excludes the 4,200,868 shares of common stock, as of December 31, 1998, which we
may issue at our option in exchange for presently outstanding common units which
are tendered for redemption to Kilroy Realty, L.P.
Shares of our common stock which are issued and outstanding:
. are entitled to one vote per share on all matters presented to
stockholders generally for a vote, including the election of
directors, with no right to cumulative voting;
. do not have any conversion rights;
. do not have any exchange rights;
. do not have any sinking fund rights;
. do not have any redemption rights;
. do not have any appraisal rights;
. do not have any preemptive rights to subscribe for any of our
securities;
. are duly authorized, fully paid and nonassessable; and
. are subject to restrictions on ownership and transfer.
We may pay distributions on shares of common stock, subject to the
preferential rights of, when issued, our Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and any other series or class of
capital stock which we may issue in the future. However, we may only pay
distributions when our board of directors authorizes a distribution out of
legally available funds. We make, and intend to continue to make, quarterly
distributions on outstanding shares of common stock.
Our board of directors may:
. reclassify any unissued shares of common stock into other classes
or series of capital stock;
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. establish the number of shares in each such class or series of
capital stock;
. establish any preference rights, conversion rights and other
rights, including voting powers, of each such class or series of
capital stock;
. establish restrictions, such as limitations and restrictions on
ownership, dividends or other distributions of each such class or
series of capital stock; and
. establish qualifications and terms or conditions of redemption for
each such class or series of capital stock.
Material provisions of Maryland General Corporation Law affecting the
rights of holders of common stock. Under the Maryland General Corporation Law,
our stockholders are generally not liable for our debts or obligations. If we
liquidate, we will first pay all debts and other liabilities, including debts
and liabilities arising out of our status as general partner of Kilroy Realty,
L.P., and any preferential distributions on any outstanding shares of preferred
stock. Each holder of common stock then will share ratably in our remaining
assets. All shares of common stock have equal distribution, liquidation and
voting rights, and have no preference or exchange rights, subject to the
ownership limits in our charter or as permitted by our board of directors.
Under the Maryland General Corporation Law, subject to certain
exceptions, we require approval by our stockholders by the affirmative vote of
at least two-thirds of the votes entitled to vote before we can:
. dissolve;
. amend our charter;
. merge;
. sell all or substantially all of our assets;
. engage in a share exchange; or
. engage in similar transactions outside the ordinary course of
business.
Because the term "substantially all of the Company's assets" is not
defined in the Maryland General Corporation Law it is subject to Maryland common
law and to judicial interpretation and review in the context of the unique facts
and circumstances of any particular transaction. Although the Maryland General
Corporation Law allows our charter to establish a lesser percentage of
affirmative votes by our stockholders for approval of those actions, our charter
does not include such provision.
Rights to purchase Series B Preferred Stock. Each share of our common
stock includes a right to purchase from us, once the rights become exercisable,
one one-hundredth (1/100th) of a share of our Series B Preferred Stock, at a
purchase price of $71.00 per share,
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subject to certain anti-dilution adjustments. Once exercisable, the rights may
be exercised until we redeem them, until they are exchanged or terminated, or
until they expire on October 2, 2008.
Until the earlier to occur of:
. ten 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 Chairman of our board of
directors, John B. Kilroy, Jr., our President and Chief Executive
Officer, and Kilroy Industries, and their respective affiliates,
more than 21%) of the shares of our common stock (an "Acquiring
Person") or
. ten business days (or such later date as may be determined by
action of our 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 for shares of our common stock,
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 Chairman of our board of directors, John B.
Kilroy, Jr., our President and Chief Executive Officer, and Kilroy
Industries, and their respective affiliates, more than 21%) of the
shares of our common stock,
the rights will be evidenced by any common stock certificates outstanding on
October 15, 1998. We refer to the earlier of these dates as the distribution
date. The rights will be transferred with and only with shares of our common
stock until the distribution date or earlier redemption or expiration of the
rights. Our board of directors may not postpone the exercisability and
transferability of the rights. As soon as practicable after such time, separate
right certificates will be issued to holders of record of shares of common stock
as of the close of business on the distribution date. Subject to the termination
of the right of redemption, the rights will become exercisable and transferable.
Right certificates initially will represent the right to purchase one share of
common stock for each share of our common stock currently outstanding.
If a person or group becomes an Acquiring Person, or if we were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person and shares of common stock 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, will then have the right to
receive upon exercise that number of shares of common stock having a market
value of two times the then current purchase price of one right. The rights that
are or were acquired or beneficially owned by the Acquiring Person will then be
void. We will adjust the number of rights associated with each share of our
common stock as necessary if we distribute shares of common stock as dividends,
or declare a split or reverse split in the number of shares of common stock. If
after a person has become an Acquiring Person, we are acquired in a merger or
other business combination transaction or more than 50% of our assets or earning
power are sold, we will provide that each holder of a right will receive, upon
the exercise of a right at the then current purchase price, the 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.
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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 the Acquiring Person of 50% or more of our then
outstanding common stock, we may exchange the rights (other than rights owned by
an Acquiring Person which have become void), in whole or in part, for shares of
common stock having an aggregate value equal to the difference between the value
of the common stock issuable upon exercise of the rights and the purchase price
payable upon such exercise.
Our board of directors may redeem the rights in whole, but not in part,
at a redemption price of $.01 per right at any time prior to the time a person
becomes an Acquiring Person. The board of directors in its sole discretion may
establish when the redemption of the rights may be made effective, on what basis
and under conditions. Immediately upon any redemption of the rights, the right
to exercise the rights will terminate and the holders of rights may then only
receive the redemption price.
We may adjust from time to time the purchase price payable, and the
number of one one-hundredths of a share of Series B Preferred Stock or other
securities or property issuable, upon exercise of the rights to prevent
dilution:
. in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Series B Preferred Stock ,
. upon the grant to holders of the shares of Series B Preferred Stock
of certain rights or warrants to subscribe to or purchase shares of
Series B Preferred Stock or convertible securities at less than the
current market price of the Series B Preferred Stock, or
. upon the distribution to holders of shares of Series B Preferred
Stock of evidences of indebtedness, cash, securities or assets or
of subscription rights or warrants, other than those referred to
above.
The distributions referred to above exclude regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend paid or, in case regular periodic cash dividends have not
been paid, at a rate not in excess of 50% of our average net income per share
for the four quarters ended immediately prior to the payment of such dividend,
or dividends payable in shares of Series B Preferred Stock which will be subject
to the adjustment described above.
Until a right is exercised, the holder of the right will have no rights
as a stockholder 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 us and the rights agent may be amended by our board of directors for so
long as the rights are redeemable. After the rights are no longer redeemable, we
may amend or supplement the Rights Agreement in any manner that does not
adversely affect the interests of the holders of the rights.
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Our preferred stock ranks senior to our common stock.
We describe below the material terms and conditions of our preferred
stock which affects the rights of holders of our common stock. Our charter
authorizes us to issue 30,000,000 shares of preferred stock, par value $.01 per
share. Of the 30,000,000 authorized shares of preferred stock, we have
classified and designated 1,700,000 shares as Series A Preferred Stock, 400,000
as Series B Preferred Stock and 700,000 shares as Series C Preferred Stock. No
shares of preferred stock were issued and outstanding as of December 31, 1998.
We may classify, designate and issue additional shares of preferred
stock, in one or more classes, as authorized by our board of directors without
the prior consent of our stockholders. The board of directors may afford the
holders of preferred stock preferences, powers and rights-voting or otherwise-
senior to the rights of holders of shares of common stock. Our board of
directors can authorize the issuance of preferred stock with terms and
conditions that could have the effect of delaying or preventing a change of
control transaction that might involve a premium price for holders of shares of
common stock or otherwise be in their best interest. All shares of preferred
stock which are issued and become outstanding will be fully paid and
nonassessable. Before we may issue any shares of preferred stock of any class,
the Maryland General Corporation Law and our charter require our board of
directors to determine the following:
. the designation;
. the number of shares;
. the terms;
. preferences;
. conversion and other rights;
. voting powers;
. restrictions;
. limitations as to distributions;
. qualifications; and
. terms or conditions of redemption.
8.075% Series A Cumulative Redeemable Preferred Stock and 9 3/8% Series C
Cumulative Redeemable Preferred Stock.
General. Of our 30,000,000 authorized shares of preferred stock, we
designated 1,700,000 shares as Series A Preferred Stock and 700,000 shares as
Series C Preferred Stock. Shares of Series A Preferred Stock are issuable on a
one-for-one basis upon redemption or exchange of Kilroy Realty, L.P.'s Series A
Preferred Units. Shares of Series C Preferred Stock
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are issuable on a one-for-one basis upon redemption or exchange of Kilroy
Realty, L.P.'s Series C Preferred Units.
Dividends. Each share of Series A Preferred Stock and Series C Preferred
Stock will be entitled to receive cumulative preferential dividends from the
date of issue payable on or before the 15th of February, May, August and
November of each year, in cash, in preference to any payment made on any other
classes or series of capital stock or our other equity securities ranking junior
to the Series A Preferred Stock and Series C Preferred Stock. Shares of Series A
Preferred Stock will be entitled to dividends at a rate of 8.075% per annum and
shares of Series C Preferred Stock will be entitled to dividends at a rate of 9
3/8% per annum. Cumulative preferential dividends include any accrued but unpaid
distributions in respect of Series A Preferred Units and Series C Preferred
Units at the time they are exchanged for shares of Series A Preferred Stock or
Series C Preferred Stock, as applicable.
Ranking. The Series A Preferred Stock and Series C Preferred Stock will
rank:
. on parity with each other and with all other classes or series of
preferred stock designated as ranking on a parity with the Series A
Preferred Stock and Series C Preferred Stock with respect to
distributions and rights upon voluntary or involuntary liquidation,
dissolution, or winding-up,
. senior to the Series B Preferred Stock and all other classes or
series of preferred stock designated as ranking junior to the
Series A Preferred Stock and Series C Preferred Stock and
. junior to all other classes or series of preferred stock designated
as ranking senior to Series A Preferred Stock and Series C
Preferred Stock.
Redemption. At our option, we may redeem the Series A Preferred Stock, on
and after February 6, 2003, and the Series C Preferred stock on and after
November 24, 2003, in each case in whole or in part from time to time, upon not
less than thirty (30) or more than sixty (60) days' written notice, at a
redemption price payable in cash equal to $50.00 per share, plus any accrued but
unpaid dividends to the date of redemption. We may redeem shares of Series A
Preferred Stock and Series C Preferred Stock prior to these dates to the extent
necessary to maintain our qualification as a REIT. We are required to pay the
redemption price of the Series A Preferred Stock and Series C Preferred Stock,
excluding the portion consisting of accumulated but unpaid dividends, solely out
of proceeds from issuances of our capital stock.
Limited voting rights. If we do not pay dividends on any shares of Series
A Preferred Stock or on any shares of Series C Preferred Stock for six or more
quarterly periods, including any periods we did not make distributions in
respect of Series A Preferred Units and Series C Preferred Units prior to their
exchange into shares of Series A Preferred Stock and Series C Preferred Stock,
as applicable, whether or not consecutive, the holders of such shares of
preferred stock will vote as a single class with all other shares of capital
stock ranking on parity with the Series A Preferred Stock and Series C Preferred
Stock which have similar vested voting rights for the election of two additional
directors. The directors will be elected by a plurality of the votes cast in the
election for a one-year term and until their successors are duly elected and
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qualify or until the director's right to hold such office terminates, whichever
occurs earlier, subject to the director's earlier death, disqualification,
resignation or removal. The election will take place at:
. special meetings called by the holders of at least 10% of the
outstanding shares of Series A Preferred Stock, Series C Preferred
Stock or the holders of shares of any other class or series of
stock on parity with the Series A Preferred Stock and the Series C
Preferred Stock with respect to which dividends are also accrued
and unpaid if such request is received more than 90 days before the
date fixed for our next annual or special meeting of stockholders
or,
. if the request for a special meeting is received by us less than 90
days before the date fixed for our next annual or special meeting
of stockholders, at our annual or special meeting of stockholders,
and
. at each subsequent annual meeting until all dividends accumulated
on the Series A Preferred Stock and the Series C Preferred Stock
for all past dividend periods and the dividend for the then current
dividend period, including accrued but unpaid distributions in
respect of Series A Preferred Units and Series C Preferred Units at
the time they are exchanged for shares of Series A Preferred Stock
or Series C Preferred Stock, as applicable, have been fully paid or
declared and a sum sufficient for the payment of such dividends is
irrevocably set aside in trust for payment in full.
When all such dividends have been paid in full, the holders of Series A
Preferred Stock and Series C Preferred Stock will be divested of their voting
rights and the term of any member of our board of directors elected by the
holders of Series A Preferred Stock, Series C Preferred Stock and holders of any
other shares of stock on parity with the Series A Preferred Stock and the Series
C Preferred Stock will terminate.
In addition, if any shares of Series A Preferred Stock or Series C
Preferred Stock are outstanding, without the consent of two-thirds of the
holders of such series of preferred stock then outstanding, as applicable, we
may not:
. authorize or create or increase the authorized or issued amount of
any shares of capital stock ranking senior to the Series A
Preferred Stock and the Series C Preferred Stock, or
. reclassify any of our authorized shares of capital stock into any
shares ranking senior to the Series A Preferred Stock and the
Series C Preferred Stock, or
. designate or create, or increase the authorized or issued amount
of, or reclassify any of our authorized shares of capital stock
into any stock on parity with the Series A Preferred Stock and the
Series C Preferred Stock, or create, authorize or issue any
obligations or security convertible into or evidencing the right to
purchase any such shares, but only to the extent the shares on
parity with the
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Series A Preferred Stock and the Series C Preferred Stock are issued
to one or our affiliates, or
. either
. consolidate, merge into or with, or convey, transfer or lease
our assets substantially as an entirety, to any corporation or
other entity, or
. amend, alter or repeal the provisions of our charter, whether
by merger, consolidation or otherwise, in each case that would
materially and adversely affect the powers, special rights,
preferences, privileges or voting power of the Series A
Preferred Stock and Series C Preferred Stock or the holders of
Series A Preferred Stock and Series C Preferred Stock.
The Series A Preferred Stock and Series C Preferred Stock will have no
voting rights other than as discussed above.
Liquidation preference. Each share of Series A Preferred Stock and Series
C Preferred Stock is entitled to a liquidation preference of $50.00 per share,
plus any accrued but unpaid dividends, in preference to any other class or
series of our capital stock, other than any class or series of our equity
securities expressly designated as ranking on a parity with or senior to the
Series A Preferred Stock and Series C Preferred Stock.
Series B Junior Participating Preferred Stock.
General. Of our 30,000,000 authorized shares of preferred stock, we
designated 400,000 shares as Series B Junior Participating Preferred Stock. The
Series B Preferred Stock is issuable upon exercise of the rights to purchase
shares of Series B Preferred Stock, as described above in the section entitled
"--Common stock--Rights to purchase Series B Preferred Stock."
Ranking. The Series B Preferred Stock, if and when issued, will rank:
. junior to our Series A Preferred Stock and Series C Preferred
Stock, if and when issued, and all other classes or series of
preferred stock designated as ranking senior to the Series B
Preferred Stock with respect to distributions and rights upon
liquidation, dissolution, or winding-up,
. senior to all classes or series of preferred stock designated as
ranking junior to the Series B Preferred Stock and
. on a parity with all other classes or series of stock designated as
ranking on a parity with the Series B Preferred Stock.
Dividends. Each share of Series B Preferred Stock will be entitled, when,
as and if declared, to the greater of:
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. a minimum preferential cumulative quarterly dividend payment of
$1.00 per share and
. an aggregate dividend of 100 times the dividend, if any, declared
per share of common stock, other than a dividend payable in shares
of common stock, since the last quarterly dividend payment date.
We will adjust as necessary the right to dividends per share of the
Series B Preferred Stock if we increase or decrease the number of shares of
common stock by declaring or paying a dividend on the common stock payable in
shares of common stock, or subdividing, combining or consolidating the
outstanding shares of common stock. Dividends on Series B Preferred Stock, when
and if declared, will be paid on the first day of March, June, September and
December. Accrued and unpaid dividends shall not bear interest. Dividends paid
on shares of Series B Preferred Stock in an amount less than the total amount of
the dividends accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such outstanding shares of Series B Preferred
Stock.
Until dividends or distributions payable on the Series B Preferred Stock,
whether or not declared, have been paid in full, we may not:
. declare or pay dividends, or make any other distributions,
including upon liquidation, dissolution or winding up, on any
shares of capital stock ranking:
. junior to the Series B Preferred Stock;
. on parity with the Series B Preferred Stock, except dividends
paid ratably on the Series 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;
. redeem or purchase or otherwise acquire for consideration:
. shares of any capital stock ranking junior, either as to
dividends or upon liquidation, dissolution or winding up, to
the Series B Preferred Stock, except as provided in our charter
to protect our REIT status or if we acquire shares of such
junior stock in exchange for shares of any of our capital stock
ranking junior both as to dividends and upon dissolution,
liquidation or winding up, to the Series B Preferred Stock; or
. any shares of Series B Preferred Stock, or any shares of
capital stock ranking on parity with the Series B Preferred
Stock, except as provided in our charter to protect our REIT
status or in accordance with a written or published purchase
offer to all holders of such shares such terms our board of
directors shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
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We will not permit any of our subsidiaries to purchase or otherwise
acquire for consideration any shares of our capital stock unless we could
purchase or otherwise acquire the shares at that time and in the manner set
forth above.
Liquidation preference. If we liquidate, dissolve or wind-up our
business, the holders of shares of Series B Preferred Stock will be entitled,
pro rata with any shares of preferred stock ranking on parity with the Series B
Preferred Stock, to an aggregate preferential liquidation payment of 100 times
the payment made per share of common stock. In no event may such liquidation
payment be less than $100 per share plus any accrued and unpaid dividends. We
will adjust as necessary the liquidation preference per share of the Class B
Preferred Stock if we increase or decrease the number of shares of common stock
by declaring or paying a dividend on the common stock payable in shares of
common stock, or subdividing, combining or consolidating the outstanding shares
of common stock.
Voting rights. Each holder of a share of Series B Preferred Stock is
entitled to 100 votes on all matters submitted to our stockholders having
general voting rights. We will adjust as necessary the votes per share of the
Series B Preferred Stock if we increase or decrease the number of shares of
common stock by declaring or paying a dividend on the common stock payable in
shares of common stock, or subdividing, combining or consolidating the
outstanding shares of common stock.
Subject to any of our provisions or as required by law, we do not require
the consent of holders of Series B Preferred Stock for taking any corporate
action, unless they are entitled to vote with holders of common stock.
Generally, any holder of Series B Preferred Stock, common stock or any other
shares of stock that have general voting powers will vote together as one class
on all matters submitted to those stockholders having general voting rights.
Business combinations. If we enter into any consolidation, merger,
combination or other transaction, shares of our common stock may be exchanged
for or changed into other stock or securities, cash and/or any other property.
In that case, each share of Series B Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property, payable
in kind, as the case may be, into or for which each share of common stock is
changed or exchanged. We will adjust as necessary the amount of per share
consideration to be received by holders of Series B Preferred Stock upon any
such transaction if we increase or decrease the number of shares of common stock
by declaring or paying a dividend on the common stock payable in shares of
common stock, or subdividing, combining or consolidating the outstanding shares
of common stock.
Redemption. We may not redeem the Series B Preferred Stock at any time.
Restrictions on ownership and transfer of capital stock which affect the rights
of holders of common stock.
Internal Revenue Code requirements. To maintain our tax status as a REIT,
five or fewer individuals (as defined in the Code to include certain entities)
may not own, actually or constructively, more than 50% in value of our issued
and outstanding capital stock at any time
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during the last half of a taxable year. Attribution rules in the Code determine
if any individual or entity constructively owns our capital stock under this
requirement. In addition, 100 or more persons must beneficially own our capital
stock during at least 335 days of a taxable year or during a proportionate part
of a short taxable year. Also, rent from Related Party Tenants (as defined below
under "Federal Income Tax Considerations--Income Tests") is not qualifying
income for purposes of the gross income tests of the Code. To help ensure we
meet these tests, our charter restricts the acquisition and ownership of shares
of our capital stock.
Transfer Restrictions in our charter. Subject to exceptions specified in
our charter, no holder may own, either actually or constructively under the
applicable attribution rules of the Code:
. more than 7%, by number of shares or value, whichever is more
restrictive, of the outstanding shares of our common stock;
. if and when such stock is issued, more than 7%, by number of shares
or value, whichever is more restrictive, of our Series B Preferred
Stock; and
. if and when such stock is issued, shares of our Series A and/or
Series C Preferred Stock, which, taking into account all other
shares of our capital stock actually or constructively held, would
cause a holder to own more than 7% by value of our outstanding
shares of capital stock.
In addition, because rent from Related Party Tenants is not qualifying rent for
purposes of the gross income tests under the Code, our charter provides that no
holder may own, either actually or constructively by virtue of the attribution
provisions of the Code (which differ from the attribution provisions described
in the preceding sentence):
. more than 9.8%, by number of shares or value, whichever is more
restrictive, of the outstanding shares of our common stock;
. if and when such stock is issued, more than 9.8% by number of
shares or value, whichever is more restrictive, of our Series B
Preferred Stock; and
. if and when such stock is issued, shares of our Series A and/or
Series C Preferred Stock, which, taking into account all other
shares of our capital stock actually or constructively held, would
cause a holder to own more than 9.8% by value of our outstanding
shares of capital stock.
We refer to the limits described in this paragraph, together, as the "Ownership
Limits."
The constructive ownership rules set forth in the Code are complex, and
may cause shares of our capital stock owned actually or constructively by a
group of related individuals and/or entities to be constructively owned by one
individual or entity. As a result, the acquisition of shares of our capital
stock in an amount that does not exceed the Ownership Limits, or the acquisition
of an interest in an entity that actually or constructively owns our capital
stock, could, nevertheless cause that individual or entity, or another
individual or entity, to own constructively
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shares in excess of the Ownership Limits and thus violate the Ownership Limits
described above or otherwise permitted by our board of directors. In addition,
if and when such shares are issued, a violation of the Ownership Limits relating
to the Series A Preferred Stock or the Series C Preferred Stock could occur as a
result of a fluctuation in the relative value of such stock and our common
stock, even absent a transfer or other change in actual or constructive
ownership.
Our board of directors may, but in no event will be required to, waive
the Ownership Limits with respect to a particular stockholder if it determines
that such ownership will not jeopardize our status as a REIT and our board of
directors otherwise decides such action would be in our best interest. As a
condition of such waiver, our board of directors may require opinions of counsel
satisfactory to it and/or undertakings or representations from the applicant
with respect to preserving our REIT status. Our board of directors has waived
the ownership limit applicable to our common stock for John B. Kilroy, Sr. and
John B. Kilroy, Jr., as well as members of their families and entities which are
deemed to own Messrs. Kilroy's common stock, allowing them to own up to 19.6% of
our common stock. However, we conditioned this waiver upon the receipt of
undertakings and representations from Messrs. Kilroy which we believed were
reasonably necessary in order for us to conclude that the waiver would not cause
us to fail to qualify and maintain our status as a REIT.
In addition to the foregoing Ownership Limits, no holder may own, either
actually or constructively under the applicable attribution rules of the Code,
any shares of any class of our capital stock if:
. more than 50% in value of our outstanding capital stock would be
owned, either actually or constructively under the applicable
attribution rules of the Code, by five or fewer individuals, as
defined in the Code to include certain entities,
. our capital stock would be beneficially owned by less than 100
persons, determined without reference to any rules of attribution,
or
. we would fail to qualify as a REIT.
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of our shares of capital stock that will or may violate
any of the foregoing restrictions on transferability and ownership is required
to give notice immediately to us and provide us with such other information as
we may request in order to determine the effect of such transfer on our status
as a REIT. The foregoing restrictions on transferability and ownership will not
apply if our board of directors determines that it is no longer in our best
interest to attempt to qualify, or to continue to qualify, as a REIT.
Effect of violation of transfer restrictions. If any attempted transfer
of our capital stock or any other event would result in any person violating the
Ownership Limits described above, unless otherwise permitted by our board of
directors, then any such purported transfer will be void and of no force or
effect with respect to the attempted transferee as to that number of shares in
excess of the applicable Ownership Limit and such transferee shall acquire no
right or interest in the excess shares. In the case of any event other than a
purported transfer, the person
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or entity holding record title to any such excess shares shall cease to own any
right or interest in the excess shares.
Any excess shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by us. The automatic transfer will be effective
as of the close of business on the business day prior to the date of the
violative transfer. Within 20 days of receiving notice from us of the transfer
of shares to the trust, the trustee of the trust will be required to sell the
excess shares to a person or entity who could own such shares without violating
the Ownership Limits or as otherwise permitted by our board of directors, and
distribute to the prohibited transferee or owner, as applicable, an amount equal
to the lesser of the price paid by the prohibited transferee or owner for the
excess shares or the sales proceeds received by the trust for the excess shares.
In the case of any excess shares resulting from any event other than a transfer,
or from a transfer for no consideration, such as a gift, the trustee will be
required to sell the excess shares to a qualified person or entity and
distribute to the prohibited transferee or owner, as applicable, an amount equal
to the lesser of the market price of the excess shares as of the date of such
event or the sales proceeds received by the trust for the excess shares. In
either case, any proceeds in excess of the amount distributable to the
prohibited transferee or owner, as applicable, will be distributed to the
charitable organization selected by us as beneficiary of the trust.
The trustee of the trust shall be designated by us and be unaffiliated
with us and any prohibited transferee or owner. Prior to a sale of any excess
shares by the trust, the trustee will be entitled to receive, in trust for such
beneficiary, all dividends and other distributions paid by us with respect to
the excess shares, and also will be entitled to exercise all voting rights with
respect to the excess shares.
Subject to Maryland law, effective as of the date that such shares have
been transferred to the trust, the trustee shall have the authority, at the
trustee's sole discretion, (i) to rescind as void any vote cast by a prohibited
transferee or owner, as applicable, prior to our discovery that our shares have
been transferred to the trust and (ii) to recast such vote in accordance with
the desires of the trustee acting for the benefit of the beneficiary of the
trust. However, if we have already taken irreversible corporate action, then the
trustee shall not have the authority to rescind and recast such vote. Any
dividend or other distribution paid to the prohibited transferee or owner, prior
to our discovery that such shares had been automatically transferred to a trust
as described above, will be required to be repaid to the trustee upon demand for
distribution to the beneficiary of the trust. In the event that the transfer to
the trust as described above is not automatically effective, for any reason, to
prevent violation of the applicable ownership limit or as otherwise permitted by
the Board of Directors, then our charter provides that the transfer of the
excess shares will be void.
If shares of capital stock which would cause us to be beneficially owned
by fewer than 100 persons are transferred to any person, the transfer shall be
null and void in its entirety, and the intended transferee will acquire no
rights to the stock.
If our board of directors shall at any time determine in good faith that
a person intends to acquire or own, has attempted to acquire or own, or may
acquire or own our capital stock in violation of the limits described above, it
shall take actions to refuse to give effect to or to
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prevent the ownership or acquisition. These actions include but are not limited
to authorizing us to repurchase stock, refusing to give effect to such ownership
or acquisition on our books, or instituting proceedings to enjoin such ownership
or acquisition.
All certificates representing shares of our capital stock bear a legend
referring to the restrictions described above.
All persons who own at least a specified percentage of the outstanding
shares of our stock must file with us a completed questionnaire annually
containing information about their ownership of the shares, as set forth in the
Treasury Regulations. Under current Treasury Regulations, the percentage will be
set between 0.5% and 5.0%, depending on the number of record holders of shares.
In addition, each stockholder may be required to disclose to us in writing
information about the actual and constructive ownership of shares as our board
of directors deems necessary to comply with the provisions of the Code
applicable to a REIT or to comply with the requirements of any taxing authority
or governmental agency.
These ownership limitations could discourage a takeover or other
transaction in which holders of some, or a majority, of our shares of capital
stock might receive a premium for their shares over the then prevailing market
price or which stockholders might believe to be otherwise in their best
interest.
Transfer agent and registrar for shares of capital stock. ChaseMellon
Shareholder Services, LLC is the transfer agent and registrar for our shares of
preferred stock and common stock.
Material provisions of the partnership agreement of Kilroy Realty, L.P. which
affect the rights of holders of common stock.
We describe below the material terms and conditions of the partnership
agreement of Kilroy Realty, L.P. which affect the rights of holders of common
stock. For more detail you should refer to the partnership agreement itself,
which we previously filed with the SEC and which we incorporate by reference as
an exhibit to this registration statement.
Restrictions of the transferability of partnership interests of Kilroy
Realty, L.P. which may have the effect of delaying, deferring or preventing a
change of control of Kilroy Realty Corporation. Except under certain
circumstances, we may not voluntarily withdraw from Kilroy Realty, L.P., or
transfer or assign our interest in it, without the consent of the holders of at
least 60% of the common partnership interests including our interests. The
limited partners may not transfer, assign, sell, encumber or otherwise dispose
of their interest in Kilroy Realty, L.P., other than to family members or
accredited investors. Such family members and accredited investors must agree to
assume the transferor's obligations under the partnership agreements. Such a
transfer is subject to our right of first refusal to purchase the limited
partner's units for our benefit.
In addition, without our consent, limited partners may not transfer their
units:
. to any person who lacks the legal capacity to own the units;
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. in violation of applicable law;
. where the transfer is for only a portion of the rights represented
by the units such as the partner's capital account or right to
distributions;
. if we believe the transfer would cause the termination of Kilroy
Realty, L.P. or would cause it to no longer be classified as a
partnership for federal or state income tax purposes;
. if the transfer would cause Kilroy Realty, L.P. to become a
party-in-interest within the meaning of ERISA or would cause its
assets to constitute assets of an employee benefit plan under
applicable regulations;
. if the transfer would require registration under applicable federal
securities laws;
. if the transfer could cause Kilroy Realty, L.P. to become a
"publicly traded partnership" under applicable Treasury
Regulations;
. if the transfer could cause Kilroy Realty, L.P. to be regulated
under the Investment Company Act of 1940 or the Employee Retirement
Income Security Act of 1974; and
. if the transfer would adversely affect our ability to maintain our
qualification as a REIT.
We may not engage in any "termination transaction" without the approval
of at least 60% of the common units in Kilroy Realty L.P., including our general
partner interest in Kilroy Realty L.P. Examples of termination transactions
include:
. a merger;
. a consolidation or other combination with or into another entity;
. a sale of all or substantially all of our assets; or
. a reclassification, recapitalization or change of our outstanding
equity interests.
In connection with a termination transaction, all common limited partners
must either receive, or have the right to elect to receive, for each common unit
an amount of cash, securities or other property equal to the product of:
. the number of shares of common stock into which each common unit is
then exchangeable; and
. the greatest amount of cash, securities or other property paid to
the holder of one share of common stock in consideration for one
share of common stock pursuant to the termination transaction.
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If, in connection with a termination transaction, a purchase, tender or
exchange offer is made to holders of our common stock, and the common
stockholders accept such purchase, tender or exchange offer, each holder of
common units must either receive, or must have the right to elect to receive,
the greatest amount of cash, securities or other property which that holder
would have received if immediately prior to the purchase, tender or exchange
offer it had exercised its right to redemption, received shares of common stock
in exchange for its common units, and accepted the purchase, tender or exchange
offer.
We also may merge or otherwise combine our assets with another entity
with the approval of at least 60% of the common units if:
. substantially all of the assets directly or indirectly owned by the
surviving entity are held directly or indirectly by Kilroy Realty,
L.P. as the surviving partnership or another limited partnership or
limited liability company is the surviving partnership of a merger,
consolidation or combination of assets with Kilroy Realty, L.P.;
. the common limited partners own a percentage interest of the
surviving partnership based on the relative fair market value of
the net assets of Kilroy Realty, L.P. and the other net assets of
the surviving partnership immediately prior to the consummation of
such transaction;
. the rights, preferences and privileges of the common limited
partners in the surviving partnership are at least as favorable as
those in effect immediately prior to the consummation of the
transaction and as those applicable to any other limited partners
or non-managing members of the surviving partnership; and
. the common limited partners may exchange their interests in the
surviving partnership for either:
. the consideration available to the common limited partner
pursuant to the preceding paragraph, or
. if the ultimate controlling person of the surviving
partnership has publicly traded common equity securities,
shares of those common equity securities, at an exchange ratio
based on the relative fair market value of those securities
and our common stock.
The board of directors will reasonably determine relative fair market
values and rights, preferences and privileges of the limited partners as of the
time of the termination transaction. These values may not be less favorable to
the limited partners than the relative values reflected in the terms of the
termination transaction.
We must use commercially reasonable efforts to structure transactions
like those described above to avoid causing the common limited partners to
recognize gain for federal income tax purposes by virtue of the occurrence of or
their participation in such transaction. In addition, Kilroy Realty, L.P. must
use commercially reasonable efforts to cooperate with the
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common limited partners to minimize any taxes payable in connection with any
repayment, refinancing, replacement or restructuring of indebtedness, or any
sale, exchange or other disposition of its assets.
Material terms of Kilroy Realty, L.P.'s 8.075% Series A Cumulative Redeemable
Preferred Units and 9 3/8% Series C Cumulative Redeemable Preferred Units which
affect the rights of holders of our common stock.
We describe below the material terms and conditions of the Series A
Preferred Units and the Series C Preferred Units of Kilroy Realty, L.P. which
affect the rights of holders of our common stock.
General. Kilroy Realty, L.P. has designated classes of preferred limited
partnership units as the 8.075% Series A Cumulative Redeemable Preferred Units
and the 9 3/8% Series C Cumulative Redeemable Preferred Units representing
preferred limited partnership interests. As of December 31, 1998, 1,500,000
Series A Preferred Units and 700,000 Series C Preferred Units are issued and
outstanding.
Distributions. Each Series A Preferred Unit and Series C Preferred Unit
is entitled to receive cumulative preferential distributions payable on or
before the 15th of February, May, August and November of each year. Series A
Preferred Units will be entitled to distributions at a rate of 8.075% per annum
and Series C Preferred Units will be entitled to distributions at a rate of 9
3/8% per annum. The cumulative preferential distributions will be paid in
preference to any payment made on any other class or series of partnership
interest of Kilroy Realty, L.P., other than any other class or series of
partnership interest expressly designated as ranking on parity with or senior to
the Series A Preferred Units and the Series C Preferred Units.
Ranking. The Series A Preferred Units and the Series C Preferred Units
will rank:
. on parity with each other and with all other classes or series of
preferred partnership units designated as ranking on a parity with
the Series A Preferred Units and the Series C Preferred Units with
respect to distributions and rights upon liquidation, dissolution,
or winding-up,
. senior to the Series B Preferred Units and to all classes or series
of preferred partnership units designated as ranking junior to the
Series A Preferred Units and the Series C Preferred Units, and
. junior to all other classes or series of preferred partnership
units designated as ranking senior to the Series A Preferred Units
and the Series C Preferred Units.
Limited approval rights. For as long as any Series A Preferred Units and
the Series C Preferred Units remain outstanding, Kilroy Realty, L.P. will not,
without the affirmative vote of the holders of at least two-thirds of the units
of such class, as applicable:
. authorize, create or increase the authorized or issued amount of
any class or series of partnership interests ranking senior to
the Series A Preferred Units and the
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Series C Preferred Units or reclassify any partnership interests of
Kilroy Realty, L.P. into any class or series of partnership
interest ranking senior to the Series A Preferred Units and the
Series C Preferred Units, or create, authorize or issue any
obligations or security convertible into or evidencing the right to
purchase any class or series of partnership interests ranking
senior to the Series A Preferred Units and the Series C Preferred
Units,
. authorize or create, or increase the authorized or issued amount of
any preferred partnership units on parity with the Series A
Preferred Units and the Series C Preferred Units or reclassify any
partnership interest into any preferred partnership units on parity
with the Series A Preferred Units and the Series C Preferred Units
or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any preferred
partnership units on parity with the Series A Preferred Units and
the Series C Preferred Units, but only to the extent such preferred
partnership units on parity with the Series A Preferred Units and
the Series C Preferred Units are issued to an affiliate of Kilroy
Realty, L.P., other than to us to the extent the issuance of such
interests was to allow us to issue corresponding preferred stock to
persons who are not affiliates of Kilroy Realty, L.P., or
. either consolidate, merge into or with, or convey, transfer or lease
its assets substantially as an entirety to, any corporation or
other entity or amend, alter or repeal the provisions of the
partnership agreement, whether by merger, consolidation or
otherwise, in each case in a manner that would materially and
adversely affect the powers, special rights, preferences,
privileges or voting power of the Series A Preferred Units and the
Series C Preferred Units or the holders of Series A Preferred Units
and the Series C Preferred Units.
Redemption and exchange. We may redeem the Series A Preferred Units on
and after February 6, 2003, and we may redeem the Series C Preferred Units on
and after November 24, 2003, in each case out of proceeds from issuances of our
capital stock at a redemption price equal to $50.00 per unit, plus accrued and
unpaid distributions to the date of redemption. The Series A Preferred Units may
be exchanged on and after February 6, 2003, and the Series C Preferred Units may
be exchanged on and after November 24, 2003, in each case, in whole but not in
part, into shares of our Series A Preferred Stock or Series C Preferred Stock,
as applicable at the option of 51% of the holders of the applicable series of
units. In addition, the Series A Preferred Units and the Series C Preferred
Units may be exchanged, in whole but not in part, into shares of Series A
Preferred Stock or Series C Preferred Stock, as applicable at any time at the
option of 51% of the holders if:
. distributions on the Series A Preferred Units or Series C Preferred
Units, as applicable, have not been made for six prior quarterly
distribution periods, whether or not consecutive or
. Kilroy Realty, L.P. is or is likely to become a "publicly traded
partnership" for federal income tax purposes.
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In addition, the Series A Preferred Units may be exchanged, on or after
February 6, 2001 and prior to February 6, 2008, and the Series C Preferred Units
may be exchanged on or after November 24, 2001 and prior to November 24, 2008,
in each case in whole but not in part at the option of the holders of 51% of the
applicable series if the Series A Preferred Units or the Series C Preferred
Units, as applicable, would not be considered "stock and securities" for federal
income tax purposes.
The Series A Preferred Units and the Series C Preferred Units also are
exchangeable, in whole but not in part, if Kilroy Realty, L.P. believes, or the
initial holder believes, based upon the opinion of counsel, that the character
of Kilroy Realty, L.P.'s assets and income would not allow it to qualify as a
REIT if it were a corporation. We may, in lieu of exchanging the Series A
Preferred Units for shares of Series A Preferred Stock, or the Series C
Preferred Units for shares of Series C Preferred Stock, elect to redeem all or a
portion of the Series A Preferred Units or the Series C Preferred Units for cash
in an amount equal to $50.00 per unit plus accrued and unpaid distributions. The
right of the holders of Series A Preferred Units and Series C Preferred Units to
exchange their units for shares of Series A Preferred Stock or Series C
Preferred Stock, as applicable, will in each case be subject to the ownership
limitations in our charter in order for us to maintain our qualification as a
REIT for federal income tax purposes.
Liquidation preference. The distribution and income allocation provisions
of the partnership agreement have the effect of providing each Series A
Preferred Unit and Series C Preferred Unit with a liquidation preference to each
holder equal to their capital contributions, plus any accrued but unpaid
distributions, in preference to any other class or series of partnership
interest.
Material terms of Kilroy Realty, L.P.'s Series B Junior Participating Preferred
Units which affect the rights of holders of our common stock.
We describe below the material terms and conditions of the Series B
Preferred Units of Kilroy Realty, L.P. which affect the rights of the holders of
our common stock.
General. Under the terms of the partnership agreement, if we issue any
shares of Series B Preferred Stock, we must contribute the proceeds to Kilroy
Realty, L.P. In exchange for the contribution of these proceeds, Kilroy Realty,
L.P. will issue to us Series B Preferred Units equal to the number of shares of
Series B Preferred Stock that we issued. As of December 31, 1998, no Series B
Preferred Units have been issued.
Distributions. Each Series B Preferred Unit is entitled to receive
preferential cumulative distributions payable on or before the first day of
March, June, September and December, of each year at a rate in an amount per
unit equal to the greater of:
. $1.00, and
. an aggregate distribution of 100 times the distribution, if any,
declared per unit on the common units since the last quarterly
distribution payment date.
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The preferential distributions will be paid in preference to any payment
made on any other class or series of partnership interest of Kilroy Realty,
L.P., other than the Series A Preferred Units, the Series C Preferred Units and
any other class or series of partnership interest expressly designated as
ranking on parity with or senior to the Series B Preferred Units.
Ranking. The Series B Preferred Units will rank:
. on parity with all classes or series of preferred partnership units
designated as ranking on a parity with the Series B Preferred Units
with respect to distributions and rights upon liquidation,
dissolution, or winding-up,
. senior to all classes or series of preferred partnership units
designated as ranking junior to the Series B Preferred Units, and
. junior to the Series A Preferred Units, the Series C Preferred
Units and all other classes or series of preferred partnership
units designated as ranking senior to the Series B Preferred Units.
Approval rights. The Series B Preferred Units have no approval rights.
Redemption and exchange. Kilroy Realty, L.P. may not redeem the Series B
Units at any time and the Series B Preferred Units are not exchangeable into any
of our securities or any other security of Kilroy Realty, L.P.
Liquidation preference. The distribution and income allocation provisions
of the partnership agreement have the effect of providing each Series B
Preferred Unit with a liquidation preference to us equal to our capital
contributions, plus any accrued but unpaid distributions, in preference to any
other class or series of partnership interest ranking junior to the Series B
Preferred Units.
Material terms of Kilroy Realty, L.P.'s Common limited partnership units which
affect the rights of holders of our common stock.
We describe below the material terms and conditions of the common units
of Kilroy Realty, L.P. which affect the rights of holders of our common stock.
General. The partnership agreement provides that, subject to the
distribution preferences of the Series A Preferred Units, Series B Preferred
Units and the Series C Preferred Units, common units are entitled to receive
quarterly distributions of available cash on a pro rata basis in accordance with
their respective percentage interests.
Redemption/Exchange rights. Common limited partners have the right to
require Kilroy Realty, L.P. to redeem part or all of their common units for cash
based upon the fair market value of an equivalent number of shares of common
stock at the time of such redemption. Alternatively, we may elect to acquire
those units in exchange for shares of our common stock. Our acquisition will be
on a one-for-one basis, subject to adjustment in the event of stock splits,
stock dividends, issuance of certain rights, certain extraordinary distributions
and similar events. However, even if we elect not to acquire tendered units in
exchange for shares of common stock,
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holders of common units that are corporations or limited liability companies may
require that we issue common stock in exchange for their common units, subject
to applicable ownership limits or any other limit as provided in our charter or
as otherwise determined by our board of directors, as applicable. We presently
anticipate that we will elect to issue shares of common stock in exchange for
common units in connection with each redemption request, rather than having
Kilroy Realty, L.P. redeem the common units for cash. With each redemption or
exchange, we increase our percentage ownership interest in Kilroy Realty, L.P.
Common limited partners may exercise this redemption right from time to time, in
whole or in part, except when, as a consequence of shares of common stock being
issued, any person's actual or constructive stock ownership would exceed the
Ownership Limits, or any other limit as provided in our charter or as otherwise
determined by our board of directors as described under the section entitled
"Restrictions on the ownership and transfer of shares of our capital stock."
Common limited partner approval rights. The partnership agreement
provides that if the common limited partners own at least 5% of the outstanding
common units, including those common units held by us, we will not, on behalf of
Kilroy Realty, L.P. and without the prior consent of the holders of more than
50% of the common units representing limited partner interests and excluding
common units held by us, take any of the following actions:
. dissolve Kilroy Realty, L.P., or
. prior to January 31, 2004, sell the office property located at 2260
E. Imperial Highway, at Kilroy Airport Center-El Segundo,
unless the dissolution or sale is incident to a merger or a sale of
substantially all of our assets.
In addition, we may not sell in a taxable transaction 11 of our
properties prior to October 31, 2002 without the consent of the limited partners
that contributed the properties to Kilroy Realty, L.P., except in connection the
sale or transfer of all or substantially all of our assets or those of Kilroy
Realty, L.P.
Material provisions of Maryland law and of our charter and bylaws which may
delay, defer or prevent a change of control.
Classified board of directors. Our charter divides our board of directors
into three classes. Each class of director serves a staggered three-year term.
As the term of each class expires, stockholders elect directors in that class
for a term of three years and until their successors are duly elected and
qualified. The directors in the other two classes continue in office, serving
the remaining portion of their respective three-year term. We believe that
classification of our board of directors helps to assure the continuity and
stability of our business strategies and policies.
The classified board of directors makes removing incumbent directors more
time consuming and difficult and discourages a third party from making a tender
offer for our capital stock or otherwise attempting to obtain control of us,
even if it might benefit us and our stockholders. The classified board increases
the likelihood that incumbent directors will retain their positions by requiring
at least two annual meetings of stockholders, rather than one, to elect
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a new majority of the board of directors. Holders of shares of common stock have
no right to cumulative voting for the election of directors. Consequently, at
each annual meeting of our stockholders, the holders of a majority of the shares
of common stock entitled to vote will be able to elect all of the successors of
the class of directors whose term expires at that meeting.
Removal of directors. Our charter provides that our stockholders may
remove a director only for "cause" and only by the affirmative vote of at least
two-thirds of the shares entitled to vote in the election of directors. The
Maryland General Corporation Law does not define the term "cause." As a result,
removal for "cause" is subject to Maryland common law and to judicial
interpretation and review in the context of the unique facts and circumstances
of any particular situation.
Business combinations statute. Under Maryland law, certain "business
combinations" between a Maryland corporation and an interested stockholder or an
affiliate of an interested stockholder are prohibited for five years after the
most recent date on which the interested stockholder becomes an interested
stockholder. A business combination includes a merger, consolidation, share
exchange, or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities. An interested stockholder is defined in
the Maryland General Corporation Law as:
. any person who beneficially owns, directly or indirectly, ten
percent or more of the voting power of the corporation's shares; or
. an affiliate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial
owner of ten percent or more of the voting power of the then
outstanding voting stock of the corporation.
At the conclusion of the five-year prohibition, any business combination
between the Maryland corporation and an interested stockholder generally must be
recommended by the board of directors of the corporation and approved by the
affirmative vote of at least:
. 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation; and
. two-thirds of the votes entitled to be cast by holders of voting
stock of the corporation other than shares held by the interested
stockholder with whom or with whose affiliate the business
combination is to be effected.
These super-majority vote requirements do not apply if the corporation's
common stockholders receive a minimum price, as defined under Maryland law, for
their shares in the form of cash or other consideration in the same form as
previously paid by the interested stockholder for its shares. None of these
provisions of the Maryland law will apply, however, to business combinations
that are approved or exempted by the board of directors of the corporation prior
to the time that the interested stockholder becomes an interested stockholder.
Our board of directors determined by resolution that we will not be
governed by the "business combinations" provisions of the Maryland General
Corporation Law (3-601 through 3-
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604). The resolution provides that we cannot later determine to be governed by
the business combination provisions of the Maryland General Corporation Law
without the approval of holders of a majority of the shares of our common stock.
As a result of our decision to opt out of the business combinations provisions
of the Maryland General Corporation Law, an interested stockholder would be able
to effect a "business combination" without complying with the requirements in
the business combination provision of the Maryland General Corporation Law. Our
decision not to be governed by these provisions may make it easier for
stockholders who become interested stockholders to consummate a business
combination involving us. We cannot assure you that any such business
combination will be consummated or, if consummated, will result in a purchase of
shares of common stock from any stockholder at a premium.
Control share acquisitions. The Maryland General Corporation Law provides
that "control shares" of a company acquired in a "control share acquisition"
have no voting rights except to the extent approved by a vote of two-thirds of
the votes entitled to be cast on the matter, excluding shares owned by the
acquiror or by officers or directors who are employees of the company. "Control
shares" are voting shares of stock which, if aggregated with all other voting
shares of stock previously acquired by the acquiror, or over which the acquiror
is able to directly or indirectly exercise voting power (except solely by
revocable proxy), would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting power:
. one-fifth or more but less than one-third;
. one-third or more but less than a majority; or
. a majority of all voting power.
"Control shares" do not include shares of stock the acquiring person is
entitled to vote having obtained prior stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions and expenses, may compel the board of
directors to call a special meeting of stockholders to consider voting rights
for the shares. The meeting must be held within 50 days of demand. If no request
for a meeting is made, we may present the question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which voting
rights previously have been approved) for fair value. Fair value is determined
without regard to the absence of voting rights for control shares, as of the
date of the last control share acquisition or of any meeting of stockholders at
which the voting rights of control shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of these appraisal rights may not be less than the
highest price per share
24
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paid in the control share acquisition. Certain limitations and restrictions
otherwise applicable to the exercise of dissenters' rights do not apply in the
context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the company is a party to the
transaction, or to acquisitions approved or exempted by it charter or bylaws. We
have elected in our bylaws not to be governed by the "control share acquisition"
statute of the Maryland General Corporation Law (sections 3-701 through 3-709).
If we want to be governed by these provisions at a future date, our bylaws
require the affirmative vote of a majority of all votes entitled to be cast by
the holders of the issued and outstanding shares of common stock. Because we
decided to opt out of these provisions, stockholders who acquire a substantial
block of common stock do not need approval of the other stockholders before
exercising full voting rights with respect to their shares on all matters. This
may make it easier for any such control share stockholder to effect a business
combination with us. However, we cannot assure you that any such business
combination will be consummated or, if consummated, will result in a purchase of
shares of common stock from any stockholder at a premium.
Amendment of our charter and bylaws. Our charter may generally be amended
only if any such amendment is declared advisable by our board of directors and
approved by our stockholders by the affirmative vote of at least two-thirds of
the shares of our capital stock outstanding and entitled to vote on the
amendment. Our bylaws may be amended by the affirmative vote of a majority of
the board of directors or of a majority of the issued and outstanding shares of
our capital stock entitled to vote. However, the following bylaw provisions may
be amended only by the approval of a majority of the shares of capital stock
entitled to vote:
. provisions opting out of the control share acquisition statute;
. provisions requiring approval by the independent directors for
selection of operators of our properties or of transactions
involving John B. Kilroy, Sr. and John B. Kilroy, Jr. and their
affiliates; and
. provisions governing amendment of our bylaws.
Advance notice of director nominations and new business. Our bylaws
provide that with respect to an annual meeting of stockholders, nominations of
persons for election to our board of directors and the proposal of other
business to be considered by stockholders at the meeting may be made only:
. pursuant to our notice of the meeting;
. by or at the direction of our board of directors; or
. by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice procedures set forth in our
bylaws.
Our bylaws also provide that with respect to special meetings of
stockholders, only the business specified in the notice of meeting may be
brought before the meeting.
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The advance notice provisions of our bylaws could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of common stock might receive a premium for their shares
over the then prevailing market price or which holders of our common stock
believe is in their best interests.
26
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Item 2. Exhibits
--------
3.1 Articles of Amendment and Restatement of the Registrant (1)
3.2 Amended and Restated Bylaws of the Registrant (1)
3.3 Form of Certificate for Common Stock of the Registrant (1)
3.4 Articles Supplementary of the Registrant designating 8.075%
Series A Cumulative Redeemable Preferred Stock (2)
3.5 Articles Supplementary of the Registrant designating 8.075%
Series A Cumulative Redeemable Preferred Stock (3)
3.6 Articles Supplementary of the Registrant designating its Series
B Junior Participating Preferred Stock
3.7 Certificate of Correction to Articles Supplementary designating
its Series B Junior Participating Preferred Stock
3.8 Articles Supplementary of the Registrant designating its 9 3/8%
Series C Cumulative Redeemable Preferred Stock (4)
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(5)
10.1 Fourth Amended and Restated Agreement of Limited Partnership of
Kilroy Realty, L.P. (4)
____________
(1) Previously filed as an exhibit to the Registration Statement on
Form S-11 (No. 333-15553) as declared effective on January 28,
1997 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Current Report
on Form 8-K dated February 6, 1998 and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1-12675) dated April 20, 1998 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1-12675) dated November 24, 1998 and incorporated herein by
reference.
27
<PAGE>
(5) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1-12675) dated October 2, 1998 and incorporated herein by
reference.
28
<PAGE>
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: March 3, 1999 By /s/ Tyler H. Rose
-----------------------
Tyler H. Rose
Senior Vice President and Treasurer
S-1
<PAGE>
EXHIBIT INDEX
Exhibit
-------
3.1 Articles of Amendment and Restatement of the Registrant (1)
3.2 Amended and Restated Bylaws of the Registrant (1)
3.3 Form of Certificate for Common Stock of the Registrant (1)
3.4 Articles Supplementary of the Registrant designating 8.075%
Series A Cumulative Redeemable Preferred Stock (2)
3.5 Articles Supplementary of the Registrant designating 8.075%
Series A Cumulative Redeemable Preferred Stock (3)
3.6 Articles Supplementary of the Registrant designating its Series
B Junior Participating Preferred Stock
3.7 Certificate of Correction to Articles Supplementary designating
its Series B Junior Participating Preferred Stock
3.8 Articles Supplementary of the Registrant designating its 9 3/8%
Series C Cumulative Redeemable Preferred Stock (4)
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(5)
10.1 Fourth Amended and Restated Agreement of Limited Partnership of
Kilroy Realty, L.P. (4)
____________
(1) Previously filed as an exhibit to the Registration Statement on
Form S-11 (No. 333-15553) as declared effective on January 28,
1997 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Current Report
on Form 8-K dated February 6, 1998 and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1 -12675) dated April 20, 1998 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1-12675) dated November 24, 1998 and incorporated herein by
reference.
1
<PAGE>
(5) Previously filed as an exhibit to the Current Report on Form 8-K
(No. 1-12675) dated October 2, 1998 and incorporated herein by
reference.
2
<PAGE>
EXHIBIT 3.6
ARTICLES SUPPLEMENTARY
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", set 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 of such class of Preferred Stock, as set forth in
Article Second of these Articles Supplementary, and authorized 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 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.
1
<PAGE>
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 above in 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 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
2
<PAGE>
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 or 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 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;
3
<PAGE>
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 could, under the provisions set forth above in 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 B
Liquidation Preference") equal to $1,000 per share, plus an amount equal to
accrued and unpaid
4
<PAGE>
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 B 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 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
5
<PAGE>
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.
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.
6
<PAGE>
"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 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.
7
<PAGE>
"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 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.
8
<PAGE>
(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 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.
9
<PAGE>
(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 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
10
<PAGE>
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 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.
11
<PAGE>
(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 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
12
<PAGE>
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 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
13
<PAGE>
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
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
14
<PAGE>
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 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
15
<PAGE>
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.
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 Executive Vice President and Chief Operating
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.
(Signature Page Follows.)
16
<PAGE>
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: /s/ Jeffrey C. Hawken
---------------------------------
Jeffrey C. Hawken
Executive Vice President
and Chief Operating Officer
[SEAL]
ATTEST:
/s/ Tyler H. Rose
- ------------------------------
Tyler H. Rose
Assistant Secretary
17
<PAGE>
Exhibit 3.7
KILROY REALTY CORPORATION
CERTIFICATE OF CORRECTION
-------------------------
Kilroy Realty Corporation, a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
(the "Department") that:
FIRST: On October 15, 1998, the Corporation filed with the
-----
Department, Articles Supplementary (the "Articles Supplementary") classifying
400,000 shares of the Corporation's authorized but unissued preferred stock as
"Class B Junior Participating Preferred Stock". The Corporation is the only
party to the Articles Supplementary.
SECOND: The Articles Supplementary contained certain typographical
------
errors, errors of transcription or other errors and the Corporation desires to
correct such errors by filing this Certificate of Correction.
THIRD: The first such error appears in the Articles Supplementary, as
-----
originally filed, in the first paragraph of Section 2 of Article SECOND, which
reads:
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,
<PAGE>
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 that
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.
FOURTH: The first paragraph of Section 2 of Article SECOND of the
------
Articles Supplementary, as corrected, now reads as follows:
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
2
<PAGE>
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, 100 times the aggregate per share amount of all cash dividends, and
100 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 that
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.
FIFTH: The remaining paragraphs of Section 2 of Article SECOND
-----
contain no errors and remain unchanged.
SIXTH: The second such error appears in the Articles Supplementary,
-----
as originally filed, in the first paragraph of Section 6 of Article SECOND which
reads:
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
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<PAGE>
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 B 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.
SEVENTH: The first paragraph of Section 6 of Article SECOND of the
-------
Articles Supplementary, as corrected, now reads as follows:
Upon any liquidation, dissolution or winding up of the Company,
voluntary or otherwise, no distribution
4
<PAGE>
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 B Liquidation Preference") equal to $100 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 100 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.
EIGHTH: The remaining paragraphs of Section 6 of Article SECOND contain no
------
errors and remain unchanged.
5
<PAGE>
NINTH: The third such error appears in the Articles Supplementary, as
-----
originally filed, in Section 7 of Article SECOND, which reads:
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.
TENTH: Section 7 of Article SECOND of the Articles Supplementary, as
-----
corrected, now reads as follows:
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 100 times the aggregate
6
<PAGE>
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.
ELEVENTH: The undersigned Executive Vice President of the Corporation
- --------
acknowledges this Certificate of Correction to be the corporate act of the
Corporation and, as to all matters or facts required to be verified under oath,
the undersigned Executive Vice President acknowledges to the best of his
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.
7
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be executed under seal in its name and on its behalf by its
Executive Vice President and attested to by its Assistant Secretary on this
3rd day of March, 1999.
KILROY REALTY CORPORATION
By /s/ Jeffrey C. Hawken
-----------------------------
Jeffrey C. Hawken
Executive Vice President and
Chief Operating Officer
ATTEST:
/s/ Tyler H. Rose
__________________________
Tyler H. Rose
Assistant Secretary
8
