<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for use of the
[X] Definitive proxy statement commission only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive additional materials
[_] Soliciting Material Pursuant to Rule 14a-12
KILROY REALTY CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
KILROY REALTY CORPORATION
2250 EAST IMPERIAL HIGHWAY, SUITE 1200
EL SEGUNDO, CALIFORNIA 90245
March 30, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 annual meeting of stockholders
of KILROY REALTY CORPORATION to be held on May 23, 2000, at 10:00 a.m. at The
Beverly Hilton located at 9876 Wilshire Boulevard, Beverly Hills, California
90210.
Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
Stockholders and Proxy Statement which follow. Also included is a Proxy Card
and postage paid return envelope.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend, we hope that you will complete and return your Proxy
Card in the enclosed envelope as promptly as possible.
Sincerely,
Richard E. Moran Jr.
Executive Vice President,
Chief Financial Officer and
Secretary
<PAGE>
KILROY REALTY CORPORATION
2250 EAST IMPERIAL HIGHWAY, SUITE 1200
EL SEGUNDO, CALIFORNIA 90245
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
To the Stockholders of Kilroy Realty Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Kilroy Realty Corporation, a Maryland corporation (the
"Company"), will be held at The Beverly Hilton located at 9876 Wilshire
Boulevard, Beverly Hills, California 90210 on May 23, 2000, at 10:00 a.m.,
local time, for the following purposes:
1. To elect two directors to the Company's Board of Directors to serve
until the annual meeting of stockholders in the year 2003 and until their
successors are duly elected and qualify; and
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 20, 2000 as
the record date (the "Record Date") for determining the stockholders entitled
to receive notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company,
which recommends that stockholders vote FOR the election of the nominees named
therein. Please refer to the attached Proxy Statement, which forms a part of
this Notice and is incorporated herein by reference, for further information
with respect to the business to be transacted at the Annual Meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors,
Richard E. Moran Jr.
Executive Vice President,
Chief Financial Officer and
Secretary
March 30, 2000
El Segundo, California
<PAGE>
KILROY REALTY CORPORATION
2250 EAST IMPERIAL HIGHWAY, SUITE 1200
EL SEGUNDO, CALIFORNIA 90245
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
----------------
PROXY STATEMENT
----------------
INTRODUCTION
General
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Kilroy Realty Corporation, a Maryland corporation (the
"Company"), of proxies from the holders of the Company's issued and
outstanding shares of common stock, par value $.01 per share (the "Common
Stock"), to be exercised at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on May 23, 2000 at The Beverly Hilton located at 9876
Wilshire Boulevard, Beverly Hills, California 90210 at 10:00 a.m. local time,
and at any adjournment(s) or postponement(s) thereof for the purposes set
forth in the accompanying Notice of Annual Meeting.
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following proposals (the "Proposals"):
1. The election of two directors to the Company's Board of Directors to
serve until the annual meeting of stockholders to be held in the year 2003
and until their successors are duly elected and qualify; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only the holders of record of the shares of Common Stock at the close of
business on March 20, 2000 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote on all matters. As of the Record Date, 26,163,310 shares of Common Stock
were outstanding. This Proxy Statement and enclosed form of proxy are first
being mailed to the stockholders of the Company on or about March 30, 2000.
A majority of the shares of Common Stock outstanding must be represented at
the Annual Meeting in person or by proxy to constitute a quorum for the
transaction of business at the Annual Meeting. Shares represented by proxies
that reflect abstentions or "broker non-votes" will be counted as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. In order to be elected as a director, a nominee must receive a
plurality of all the votes cast at the Annual Meeting at which a quorum is
present. For purposes of calculating votes cast in the election of the
directors, abstentions or broker non-votes will not be counted as votes cast
and will have no effect on the result of the vote on the Proposal regarding
the election of the director nominees.
The shares of Common Stock represented by all properly executed proxies
returned to the Company will be voted at the Annual Meeting as indicated or,
if no instruction is given, FOR election of the two director nominees named
herein. As to any other business that may properly come before the Annual
Meeting, all properly executed proxies will be voted by the persons named
therein in accordance with their discretion. The Company does not presently
know of any other business which may come before the Annual Meeting. However,
if any other matter
1
<PAGE>
properly comes before the Annual Meeting, or any adjournment or postponement
thereof, which may properly be acted upon, unless otherwise indicated the
proxies solicited hereby will be voted on such matter in accordance with the
discretion of the proxy holders named therein. Any person giving a proxy has
the right to revoke it at any time before it is exercised (i) by filing with
the Secretary of the Company a duly signed revocation or a proxy bearing a
later date or (ii) by electing to vote in person at the Annual Meeting. Mere
attendance at the Annual Meeting will not revoke a proxy.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited by directors, officers and employees of the Company in person or by
mail, telephone or facsimile transmission, but such persons will not be
specially compensated therefor.
The Company's executive offices are located at 2250 East Imperial Highway,
Suite 1200, El Segundo, California 90245, telephone (310) 563-5500. References
herein to the "Company" refer to Kilroy Realty Corporation and its
subsidiaries, unless the context otherwise requires.
----------------
The date of this Proxy Statement is March 30, 2000.
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the Company's articles of incorporation, as amended (the
"Charter"), the Company's bylaws, as amended (the "Bylaws"), and the
resolutions adopted by the Board of Directors (the "Board"), the Board
presently consists of seven directors with one vacancy. The Board is divided
into three classes equal in number, serving staggered three-year terms,
consisting of two members whose term will expire at the Annual Meeting, two
members whose terms will expire at the 2001 annual meeting of stockholders and
two members whose terms will expire at the 2002 annual meeting of
stockholders.
Pursuant to the Charter, at each annual meeting the successors to the class
of directors whose terms expire at such meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. Accordingly, at the Annual
Meeting, the nominees for election will be elected to hold office for a term
of three years until the annual meeting of stockholders to be held in the year
2003, and until their successors are duly elected and qualify. Except where
otherwise instructed, proxies solicited by this Proxy Statement will be voted
for the election of each of the nominees to the Board listed below. Each such
nominee has consented to be named in this Proxy Statement and to serve as a
director if elected.
The information below relating to the nominees for election as director and
to each of the other directors whose terms of office continue after the Annual
Meeting has been furnished to the Company by the respective individuals.
The Board recommends a vote FOR the election of John B. Kilroy, Jr. and Dale
F. Kinsella to serve until the annual meeting of stockholders to be held in
the year 2003 and until their respective successors are duly elected and
qualify.
Nominees for Director
The following table sets forth certain current information with respect to
the nominees for directors to the Board of the Company:
<TABLE>
<CAPTION>
Name Age Director Since Position With The Company
---- --- -------------- -------------------------
<S> <C> <C> <C>
John B. Kilroy, Jr............. 51 1996 President, Chief Executive
Officer, and Director
Dale F. Kinsella............... 51 1997 Director
</TABLE>
The following is a biographical summary of the experience of the nominees
for directors to the Board of the Company:
John B. Kilroy, Jr., has served as the Company's President, Chief Executive
Officer and Director since its incorporation in September 1996. Prior to
joining the Company, Mr. Kilroy served in the same capacity for Kilroy
Industries ("KI"), the predecessor entity to the Company, and was responsible
for the overall management of all facets of KI and its various affiliates
since 1981. Mr. Kilroy has been involved in all aspects of commercial and
industrial real estate development, construction, acquisition, sales, leasing,
financing, and entitlement since 1967 and worked for KI for over 30 years. Mr.
Kilroy became President of KI in 1981 and was elected Chief Executive Officer
in 1991. Prior to that time he held positions as Executive Vice President and
Vice President--Leasing & Marketing. He is a trustee of the El Segundo
Employers Association, and a past trustee of Viewpoint School, the Jefferson
Center For Character Education and the National Fitness Foundation. Mr. Kilroy
holds a Bachelor of Science degree in Economics from the University of
Southern California. Mr. Kilroy is the son of John B. Kilroy, Sr., the
Chairman of the Company's Board of Directors.
Dale F. Kinsella, has been a member of the Board of Directors of the Company
since its inception as a public company in January 1997. Since 1990, Mr.
Kinsella has been a partner with the Los Angeles law firm of Kinsella, Boesch,
Fujikawa & Towle LLP. Mr. Kinsella received his undergraduate degree from the
University of California, Santa Barbara and his Juris Doctor degree from the
University of California, Los Angeles.
3
<PAGE>
Vote Required
The election of each director requires the plurality of the votes cast by
the holders of the shares of Common Stock entitled to vote thereon present in
person or by proxy at the Annual Meeting. The Board Recommends a vote FOR the
election of John B. Kilroy, Jr. and Dale F. Kinsella to serve until the annual
meeting of stockholders to be held in the year 2003 and until their respective
successors are duly elected and qualify.
Directors Continuing in Office
Information concerning the other directors of the Company whose terms do not
expire at the Annual Meeting is set forth below.
<TABLE>
<CAPTION>
Name Age Position With The Company Term
---- --- ------------------------- ----
<S> <C> <C> <C>
John B. Kilroy, Sr............... 77 Chairman of the Board of Directors 2002
John R. D'Eathe.................. 64 Director 2001
William P. Dickey................ 57 Director 2001
Matthew J. Hart.................. 47 Director 2002
</TABLE>
John B. Kilroy, Sr., has served as the Company's Chairman of the Board of
Directors since its incorporation in September 1996, and served in the same
capacity for KI since 1954. In 1947, Mr. Kilroy founded the businesses that
were incorporated in 1952 as the entity known as KI, the predecessor to the
Company. Mr. Kilroy served as KI's President from 1952 until 1981, and as its
Chairman of its Board of Directors from 1954 to 1997. Mr. Kilroy is a
nationally recognized member of the real estate community, providing the
Company with strategic leadership and a broadly based network of
relationships. Mr. Kilroy is a trustee of the Independent Colleges of Southern
California, serves on the Board of Directors of Pepperdine University, and is
a past trustee of Harvey Mudd College. Mr. Kilroy is the father of John B.
Kilroy, Jr., the Company's President and Chief Executive Officer.
John R. D'Eathe, has been a member of the Board of Directors of the Company
since October 1997. Mr. D'Eathe is a 30-year veteran of real estate
development and management in Canada, Europe and the United States. Since
1980, Mr. D'Eathe has been serving as the President of Freehold Development
Canada, which is primarily focused on commercial and industrial development in
western Canada. From 1970 to 1979, Mr. D'Eathe was President and Chief
Executive Officer of Canadian Freehold Properties Ltd., a Canadian-based
development company involved in commercial projects in both Canada and the
United States. From 1965 to 1969, he served as a director and senior vice
president of Grosvenor International, a private real estate group that owns
and develops property around the world. Since 1997, Mr. D'Eathe has been the
Chairman and President of Penreal Advisors Ltd., one of Canada's largest
pension fund real estate investment and advisory firms. In addition, he has
been the Chairman of Spark Music Inc., of Vancouver since 1992, and has been a
director of John Hancock's Maritime Life Assurance Company since 1995. Mr.
D'Eathe holds an honors Bachelor of Laws degree from London University, UK and
is an associate member of The Canadian Bar Association.
William P. Dickey, has been a member of the Board of Directors of the
Company since its inception as a public company in January 1997. Mr. Dickey
has been the President of The Dermot Company, Inc., a real estate investment
and management company since 1990. From 1986 to 1990, Mr. Dickey was a
Managing Director of Real Estate for CS First Boston Corporation. Prior to
1986, Mr. Dickey was a partner at the New York law firm of Cravath, Swaine &
Moore, where he started as an associate beginning in 1974. Mr. Dickey is a
member of the board of directors of Prime Retail, Inc., a real estate
investment trust ("REIT") which invests primarily in factory outlet centers,
and Mezzanine Capital Property Investors, Inc., a REIT which invests primarily
in East Coast office/mixed use space. Mr. Dickey received his undergraduate
degree from the United States Air Force Academy, his Masters Degree from
Georgetown University and his Juris Doctor Degree from Columbia Law School.
4
<PAGE>
Matthew J. Hart, has been a member of the Board of Directors of the Company
since its inception as a public company in January 1997. Mr. Hart joined
Hilton Hotels Corporation in 1996 and presently serves as its Executive Vice
President, Chief Financial Officer and Treasurer. Prior to joining Hilton, Mr.
Hart was Senior Vice President and Treasurer of The Walt Disney Company from
1995 to 1996. From 1981 to 1995, Mr. Hart was employed by Host Marriott
Corporation (formerly known as Marriott Corporation), most recently as its
Executive Vice President and Chief Financial Officer. Before joining Marriott
Corporation, Mr. Hart had been a lending officer with Bankers Trust Company in
New York. Mr. Hart is a member of the board of directors of First Washington
Realty Trust, Inc., a REIT which invests primarily in retail properties and
Heal the Bay, a nonprofit organization. Mr. Hart received his undergraduate
degree from Vanderbilt University and a Masters of Business Administration
from Columbia University.
Board of Directors Meetings and Attendance
During the year ended December 31, 1999, the Board held five meetings
including one special telephonic meeting. All but one director attended 75% or
more of the aggregate of (i) the total number of meetings of the Board while
they were on the Board and (ii) the total number of meetings of the committees
of the Board on which such directors served. Mr. Kilroy, Sr. attended 60% of
the total meetings of the Board and their respective committees.
Board Committees
The Board of Directors of the Company has an Audit Committee, an Independent
Committee, an Executive Committee and an Executive Compensation Committee.
Audit Committee. The Audit Committee consists of two Independent Directors,
Mr. Hart, the Chairman, and Mr. D'Eathe. An "Independent Director" is a
director who is not an employee, officer or affiliate of the Company or a
subsidiary or a division thereof, or a relative of a principal executive
officer, or who is not an individual member of an organization acting as an
advisor, consultant or legal counsel, receiving compensation on a continuing
basis from the Company in addition to director's fees. The Audit Committee
makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the scope and
results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit
fees and reviews the adequacy of the Company's internal accounting controls.
The Audit Committee held three meetings during 1999.
Independent Committee. The Independent Committee consists of four
Independent Directors, Mr. Kinsella, the Chairman, and Messrs. Dickey, Hart
and D'Eathe. The Independent Committee has the authority to approve
transactions between the Company and its affiliates, including, without
limitation, John B. Kilroy, Sr. or John B. Kilroy, Jr. and their respective
affiliates. The Independent Committee held one meeting during 1999.
Executive Committee. The Executive Committee consists of Mr. Kilroy, Jr.,
the Chairman, and Messrs. Kilroy, Sr. and Kinsella. Subject to the Company's
conflict of interest policies, the Executive Committee has authority to
acquire and dispose of real property and the power to authorize, on behalf of
the full Board, the execution of certain contracts and agreements, including
those related to the borrowing of money by the Company (and, consistent with
the Agreement of Limited Partnership as amended from time to time (the
"Partnership Agreement") of Kilroy Realty, L.P. (the "Operating Partnership"),
to cause the Operating Partnership to take such actions). The Executive
Committee held no meetings during 1999.
Executive Compensation Committee. The Executive Compensation Committee
consists of two Independent Directors, Mr. Dickey, the Chairman, and Mr.
Kinsella. The function of the Executive Compensation Committee is to (i)
establish, review, modify, and adopt remuneration levels for executive
officers of the Company, and (ii) implement the Company's Stock Incentive Plan
and any other incentive programs. The Executive Compensation Committee held
one meeting during 1999.
5
<PAGE>
Compensation of Directors
In February 1999, the Board approved a recommendation by management to
modify and increase the Board's compensation structure to a level comparable
to the Company's peers. During 1999, under the new structure, the Company paid
its non-employee directors (including those who are deemed "inside" directors)
annual compensation of $20,000 for their services. In addition, each non-
employee director also received annual compensation of $2,000 for their
services as chairman of any committee of the Board and $1,000 for each Board
meeting attended by such director. Each non-employee Director was also
reimbursed for reasonable expenses incurred to attend director and committee
meetings. Officers of the Company who are directors were not paid any
directors fees.
In addition, under the Company's 1997 Stock Option and Incentive Plan (the
"Stock Incentive Plan"), upon his initial election to the Board, each
Independent Director was automatically granted options to purchase
10,000 shares of Common Stock which options vest pro rata in annual
installments over a three-year period, and on each anniversary of his election
to the Board, each Independent Director received an option to purchase
1,000 shares of Common Stock which options also vest pro rata in annual
installments over a three-year period. As a result of management's
recommendation to modify and increase the Board compensation structure in
February 1999 as discussed above, the annual grant of options to purchase
shares to each non-employee director was increased from options to purchase
1,000 shares, to options to purchase 5,000 shares. For administrative
simplicity, the new structure provides that all future option grants to Board
members will be made on a common annual date, rather than the respective
anniversary dates of each Board member's election to the Board. All stock
options were issued pursuant to the Stock Incentive Plan at an exercise price
equal to or greater than the fair market value of the Common Stock at the date
of grant.
As of December 31, 1999, Messrs. Dickey, Hart and Kinsella each held options
to purchase 10,000 shares of Common Stock at an exercise price of $23.00 per
share, all of which are currently exercisable, options to purchase 1,000
shares of Common Stock at an exercise price of $28.56 per share, of which
options to purchase 667 shares are currently exercisable, and options to
purchase 5,000 shares of Common Stock at an exercise price of $20.38 per
share, of which options to purchase 1,667 shares are currently exercisable. In
addition, as of December 31, 1999, Mr. D'Eathe held options to purchase 10,000
shares of Common Stock at an exercise price of $27.25 per share, of which
options to purchase 6,667 shares are currently exercisable, options to
purchase 1,000 shares of Common Stock at an exercise price of $20.56 per
share, of which options to purchase 333 shares are currently exercisable, and
options to purchase 5,000 shares of Common Stock at an exercise price of
$20.38 per share, of which options to purchase 1,667 shares are currently
exercisable. Further, as of December 31, 1999, Mr. Kilroy, Sr. held options to
purchase 15,000 shares of Common Stock at an exercise price of $23.00 per
share, of which options to purchase 10,000 shares are exercisable as of
December 31, 1999, and options to purchase 5,000 shares of Common Stock at an
exercise price of $20.38 per share, of which options to purchase 1,667 shares
are currently exercisable.
CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
The following table sets forth certain current information with respect to
the executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
John B. Kilroy, Sr. ... 77 Chairman of the Board
John B. Kilroy, Jr. ... 51 President, Chief Executive Officer and Director
Executive Vice President, Los Angeles
Campbell Hugh Greenup.. 46 Development
Executive Vice President and Chief Operating
Jeffrey C. Hawken...... 41 Officer
Executive Vice President, Chief Financial
Richard E. Moran Jr. .. 48 Officer and Secretary
Steven R. Scott........ 43 Senior Vice President, San Diego Development
</TABLE>
6
<PAGE>
The following is a biographical summary of the experience of the executive
and senior officers of the Company:
John B. Kilroy, Sr. has served as Chairman of the Board since its
incorporation in September 1996. Biographical information regarding Mr. Kilroy
is set forth under "Proposal 1: Election of Directors--Directors Continuing in
Office."
John B. Kilroy, Jr. has served as the President and Chief Executive Officer
of the Company since it commenced operations as a public company in January
1997. Biographical information regarding Mr. Kilroy is set forth under
"Proposal 1: Election of Directors--Nominees for Director."
Campbell Hugh Greenup is currently an Executive Vice President of the
Company and has served in that capacity since the Company commenced operations
as a public company in January 1997. Prior to that time, Mr. Greenup was
employed at KI since 1986 as Assistant General Counsel and was also President
of Kilroy Technologies Company, LLC. Mr. Greenup is a member of the American
Bar Association, the Urban Land Institute, the National Association of
Corporate Real Estate Executives and the Los Angeles County Beach Advisory
Commission. Mr. Greenup holds a Juris Doctor from Hastings College of Law and
a Bachelor of Arts degree in History from the University of California, Los
Angeles.
Jeffrey C. Hawken has served as the Executive Vice President and Chief
Operating Officer of the Company since it commenced operations as a public
company in January 1997. Prior to that time, Mr. Hawken served in the same
capacity for KI and was responsible for the management and operations of KI's
real estate portfolio. He also served on KI's acquisitions and executive
committees. Mr. Hawken joined KI in 1980, as a Senior Financial Analyst, and
has been involved in property and asset management with the Company since May
1983. Since that time, he attained the designation of Real Property
Administrator through the Building Owner's and Manager's Association ("BOMA"),
and currently serves as a director on the board of BOMA of Greater
Los Angeles. Mr. Hawken holds a Bachelor of Science degree in Business
Administration from the University of Southern California.
Richard E. Moran Jr. has served as Executive Vice President, Chief Financial
Officer and Secretary of the Company since December 1996. Prior to that time,
Mr. Moran was Executive Vice President, Chief Financial Officer and Secretary
of Irvine Apartment Communities, Inc. from 1993 to 1996. Mr. Moran was
affiliated with The Irvine Company from 1977 to 1993 where he served as
Treasurer from 1983 to 1993, was named Vice President in 1984, Senior Vice
President in 1990, and Executive Vice President, Corporate Finance in 1992.
Previously, he was a certified public accountant with Coopers & Lybrand LLP.
He is a member of the Urban Land Institute. Mr. Moran received his Master of
Business Administration degree from the Harvard University Graduate School of
Business Administration and a Bachelor of Science degree in Accounting from
Boston College.
Steven R. Scott is currently a Senior Vice President of the Company and has
served in that capacity since he joined the Company in January 1998. Prior to
that time Mr. Scott was Senior Vice President with CB Richard Ellis in San
Diego from January 1996 to December 1997, where he concentrated in corporate
services, build-to-suits and brokerage in the mid-San Diego County markets of
Sorrento Mesa, Torrey Pines, University Towne Centre and the I-15 Corridor.
Prior to CB Richard Ellis, he was affiliated with the San Diego office of
Grubb & Ellis Company for 13 years most recently as Senior Marketing
Consultant. Mr. Scott holds a Bachelor of Science degree in Business from San
Diego State University.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the salary rates and other compensation paid
for the fiscal years ended December 31, 1999 and 1998 and for the period from
the Company's inception as a public company, January 31, 1997 through December
31, 1997, to the Chief Executive Officer and each of the Company's other
executive officers (the "Named Executive Officers"). The Company has entered
into employment agreements with each of its executive officers, except for
Steven R. Scott, as described below. See "--Employment Agreements."
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- ---------------------
Securities
Restricted Underlying
Other Annual Stock Options
Name and Principal Position Year Salary Bonus Compensation Award (1) Granted(2)
--------------------------- ---- -------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John B. Kilroy, Jr. ............ 1999 $465,000 $1,029,500 (6)
Director, President and Chief 1998 $350,000 $ 510,000 250,000
Executive Officer 1997 $180,769(3) $ 200,000 250,000
Jeffrey C. Hawken............... 1999 $275,000 $ 611,700 (6)
Executive Vice President and 1998 $225,000 $ 325,000 150,000
Chief Operating Officer 1997 $158,173(3) $ 200,000 150,000
Richard E. Moran Jr. ........... 1999 $275,000 $ 545,300 (6)
Executive Vice President, Chief 1998 $225,000 $ 325,000 150,000
Financial Officer and Secretary 1997 $180,769(3) $ 200,000(5) $2,299,000 150,000
Campbell Hugh Greenup........... 1999 $207,000 $ 225,000 (6)
Executive Vice President, 1998 $200,000 $ 200,000
Los Angeles Development 1997 $149,135(3) $ 200,000 100,000
Steven R. Scott................. 1999 $182,400 $ 225,000 (6)
Senior Vice President, 1998 $167,750(4) $ 116,000 20,000
San Diego Development
</TABLE>
- --------
(1) Pursuant to Mr. Moran's employment agreement, concurrent with the
consummation of the Company's initial public offering of Common Stock (the
"IPO"), he received 100,000 restricted shares of Common Stock under the
Stock Incentive Plan with an aggregate value at January 31, 1997, the date
of issuance, of $2.3 million against the payment of $1,000 therefor. The
restricted shares of Common Stock vest in equal annual installments pro
rata over a five-year period, subject to certain acceleration provisions.
Mr. Moran is entitled to receive distributions in respect of such
restricted stock.
(2) Options to purchase an aggregate of 2,019,000 shares of Common Stock have
been granted to directors, executive officers and other employees of the
Company as of the date of this Proxy Statement. Such options vest pro rata
in annual installments over a three-year period. An additional 881,000
shares of Common Stock are reserved for issuance under the Stock Incentive
Plan, as of the date of this Proxy Statement.
(3) The salary, which was paid to the Named Executive Officer during the fiscal
year ended December 31, 1997, commenced on February 1, 1997.
(4) The salary, which was paid to the Named Executive Officer during the fiscal
year ended December 31, 1998, commenced on January 5, 1998.
(5) Mr. Moran also was paid a bonus of $200,000 upon consummation of the IPO on
January 31, 1997, which was an obligation of, and was paid by, the
principals of KI.
(6) The aggregate amount of the perquisites and other personal benefits,
securities or property for each Named Executive Officer is less than the
lesser of $50,000 or 10% of the total 1999, 1998 and 1997 salary and bonus
for such Named Executive Officer.
8
<PAGE>
Option Grants in Last Fiscal Year
The Company did not grant any options to purchase shares of Common Stock to
the Named Executive Officers during 1999.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth certain information concerning exercised and
unexercised options held by the Named Executive Officers at December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
December 31, 1999 December 31, 1999(1)
Shares Acquired Value ------------------------- --------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
John B. Kilroy, Jr. .... -- N/A 250,001 249,999 $20,834 $41,666
Jeffrey C. Hawken....... -- N/A 150,000 150,000 12,500 25,000
Richard E. Moran Jr. ... -- N/A 150,000 150,000 12,500 25,000
Campbell Hugh Greenup... -- N/A 66,667 33,333 -- --
Steven R. Scott......... -- N/A 6,667 13,333 -- --
</TABLE>
- --------
(1) Based on the closing price of $22.38 per share of Common Stock on December
31, 1999, as reported by the New York Stock Exchange.
401(k) Plan
Effective November 1, 1997, the Company established its Section 401(k)
Savings/Retirement Plan (the "401(k) Plan") to cover eligible employees of the
Company and any designated affiliate. The 401(k) Plan permits eligible
employees of the Company to defer up to 20% of their annual compensation,
subject to certain limitations imposed by the Internal Revenue Code (the
"Code"). The employees' elective deferrals are immediately vested and non-
forfeitable upon contributions to the 401(k) Plan. The Company currently makes
matching contributions to the 401(k) Plan in an amount equal to fifty-cents
for each one dollar of participant contributions up to a maximum of five
percent of the participant's annual salary up to certain limits. Participants
vest immediately in the amounts contributed by the Company. Employees of the
Company are eligible to participate in the 401(k) Plan after one year of
credited service with the Company. For the year ended December 31, 1999, the
Company's contribution to the 401(k) Plan was $138,000. The 401(k) Plan
qualifies under Section 401 of the Code so that contributions by employees to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan.
Employment Agreements
Each of John B. Kilroy, Jr., Jeffrey C. Hawken, Richard E. Moran Jr, and
Campbell Hugh Greenup have entered into an employment agreement with the
Company which became effective on January 31, 1997. Each of the employment
agreements has a one-year term and is subject to automatic one-year renewals.
Each of the employment agreements provides that the amount paid for annual
base compensation and the amount of any bonus is determined at the discretion
of the Executive Compensation Committee.
The employment agreements entitle the executives to participate in the
Company's Stock Incentive Plan and to receive certain other insurance
benefits. The employment agreements also provide that in the event of death,
the executive's estate will receive monthly payments of the executive's annual
salary, plus one-twelfth of any bonus to be received, for a period equal to
the lesser of the term remaining under the employment agreement or one year.
In addition, in the event of a termination by the Company without "cause," a
termination of employment resulting from "disability," a termination by the
executive for "good reason," or, in the case of Mr. Kilroy and Mr. Moran, a
termination pursuant to a "change of control" of the Company (as such terms
are
9
<PAGE>
defined in the respective employment agreements) the terminated executive will
be entitled to (i) severance (the "Severance Amount") and (ii) continued
receipt of certain benefits including medical insurance, life and disability
insurance and the receipt of other customary benefits established by the
Company for its executive employees for two years following the date of
termination (collectively, the "Severance Benefits"). The Severance Amount is
equal to the sum of two times the executive's average annual base compensation
and two times the highest annual bonus received during the preceding 36-month
period.
Under the employment agreements, "Disability" means a physical or mental
disability or infirmity which, in the opinion of a physician selected by the
Board, renders the executive unable to perform his duties for six consecutive
months or for shorter periods aggregating 180 business days in any 12-month
period (but only to the extent that such definition does not violate the
Americans with Disabilities Act). "Cause," as defined under the terms of the
respective employment agreements, means (i) the executive's conviction for
commission of a felony or a crime involving moral turpitude, (ii) the
executive's willful commission of any act of theft, embezzlement or
misappropriation against the Company or (iii) the executive's willful and
continued failure to substantially perform the executive's duties (other than
such failure resulting from the executive's incapacity due to physical or
mental illness), which is not remedied within a reasonable time. "Good reason"
means (i) the Company's material breach of any of its obligations under the
employment agreement (subject to certain notice and cure provisions) or (ii)
any removal of the executive from one or more of the appointed offices or any
material alteration or diminution in the executive's authority, duties or
responsibilities, without "cause" and without the executive's prior written
consent. "Change of Control" means (i) the event by which the individuals
constituting the Board as of the date of the IPO cease for any reason to
constitute at least a majority of the Company's Board; provided, however, that
if the election, or nomination for election by the Company's stockholders of
any new director was approved by a vote of at least a majority of the members
of the original Board of Directors, such new director shall be considered a
member of the original Board of Directors; (ii) an acquisition of any voting
securities of the Company by any "person" (as the term "person" is used for
purposes of Section 13(d) or Section 14(d) of the Exchange Act, immediately
after which such person has "beneficial ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20; or (iii) approval by the
stockholders of the Company of (a) a merger, consolidation, share exchange or
reorganization involving the Company, unless the stockholders of the Company,
immediately before such merger, consolidation, share exchange or
reorganization, own, directly or indirectly immediately following such merger,
consolidation, share exchange or reorganization, at least 80% of the combined
voting power of the outstanding voting securities of the corporation that is
the successor in such merger, consolidation, share exchange or reorganization
in substantially the same proportion as their ownership of the voting
securities immediately before such merger, consolidation, share exchange or
reorganization; (b) a complete liquidation or dissolution of the Company; or
(c) an agreement for the sale or other disposition of all or substantially all
of the assets of the Company.
Executive Compensation Interlocks and Insider Participation
The Executive Compensation Committee is comprised of William P. Dickey and
Dale F. Kinsella. There are no Executive Compensation Committee interlocks and
no employees of the Company participate on the Executive Compensation
Committee.
Executive Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is responsible for
developing, administering and monitoring the executive compensation plans and
programs of the Company. The names of the Compensation Committee members are
set forth below this report.
General Policies Regarding Compensation of Executive Officers
In establishing compensation for executive officers, the Committee seeks to:
(1) attract and retain individuals of superior ability and managerial talent,
(2) motivate individuals for the achievement of the Company's business
objectives and (3) align the goals of the Company's executive officers with
those of its
10
<PAGE>
shareholders. To these ends, the Company's executive compensation package
consists of a fixed base salary, variable annual cash compensation (bonus) and
stock-based long-term incentive awards. Compensation for each executive
officer is weighted towards the variable components in order to ensure that
total compensation reflects the overall success or failure by the Company and
the Executive to meet the appropriate performance measures.
Base Salary. Salary levels of executive officers are established after a
review of REITs and other real estate companies deemed comparable to the
Company. The Committee generally compares the Company's performance with that
of other REITs and real estate companies engaged in activities similar to
those engaged in by the Company.
Annual Bonus. The Company's annual bonus plan promotes the Company's pay for
performance philosophy. The amount of each executive officer's annual bonus is
based upon a combination of three performance factors: (1) overall corporate
performance, (2) departmental performance and (3) individual achievements and
performance. For 1999, Corporate goals were measured on the basis of achieving
targeted FFO and development objectives. These objectives included
contributions to FFO, total returns from and value created by completed
development and new acquisitions, and the performance of the existing property
portfolio. Department goals were measured on specific departmental strategic
and operational objectives. Individual performance measures are assessed in a
subjective manner based upon each individuals annual goals as established each
year during the Company's formal performance review process.
Long-Term Incentive Compensation. Stock-based incentives constitute the
long-term portion of the Company's executive compensation package. Stock
options and restricted stock granted at 100% of the stock's fair market value
on the grant date provide an incentive for executives to increase the
Company's stock price and, therefore, the return to the Company's
shareholders. In granting stock-based awards, the Committee takes into account
such factors as it determines to be appropriate under the circumstances,
including without limitation the extent of an executive's equity ownership in
the Company and the amounts and value of long-term compensation and stock-
based compensation received by similarly situated executives at competitor
firms. No options or restricted stock was granted to the Company's executive
officers during 1999.
Chief Executive Officer Compensation. The compensation of John B. Kilroy,
Jr. for the year ended December 31, 1999 was determined on the same general
basis as discussed above. In determining the total amount of cash compensation
paid to Mr. Kilroy, the Committee evaluated the performance of the Company for
1999 as compared to other REITs and real estate companies engaged in
activities similar to those engaged in by the Company. Specifically, the
Committee gave substantial weight to the achievement of the Company's goals
for growth in FFO, improved performance of its operating portfolio, the
successful execution of its development plans and the specific contributions
that the CEO made in strategically positioning the Company to be a leader in
its target markets. The Committee did not issue any stock options, restricted
stock or any other form of long-term incentive compensation to Mr. Kilroy for
the year ended December 31, 1999.
Limitation on Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code limits the deductibility of compensation paid to certain
executive officers of the Company. To qualify for deductibility under Section
162(m), compensation in excess of $1,000,000 per year paid to the Chief
Executive Officer and the four other most highly compensated executive
officers at the end of such fiscal year generally must be "performance-based"
compensation as determined under Section 162(m).
11
<PAGE>
The Committee generally intends to comply with the requirements for full
deductibility of executive compensation under Section 162(m). However, the
Committee will balance the costs and burdens involved in such compliance
against the value to the Company and its shareholders of the tax benefits to
be obtained by the Company thereby, and may in certain instances pay
compensation that is not fully deductible if in its determination such costs
and burdens outweigh such benefits. The Committee believes that because the
Company qualifies as a REIT under the Internal Revenue Code and is not subject
to Federal income taxes, the payment of compensation that does not satisfy the
requirements of Section 162(m) would not have a material adverse consequence
to the Company, provided the Company distributes 95% of its taxable income.
March 30, 2000 Executive Compensation Committee
William P. Dickey
Dale F. Kinsella
12
<PAGE>
PERFORMANCE GRAPH
As a part of the rules concerning executive compensation disclosure, the
Company is obligated to provide a chart comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock over a
five-year period. However, since the Company's Common Stock has been publicly
traded only since January 28, 1997, such information is provided from that date
through December 31, 1999.
The following line graph compares the change in the Company's cumulative
stockholder return on its shares of Common Stock to the cumulative total return
of the NAREIT Equity REIT Total Return Index ("NAREIT Equity Index") and the
Standard & Poor's 500 Stock Index ("S&P 500 Index") from January 31, 1997, the
closing date of the Company's initial public offering, to December 31, 1999.
The line graph starts at January 28, 1997, the date that the Company's shares
of Common Stock commenced trading on the New York Stock Exchange; however, the
beginning value of each of the NAREIT Equity Index and the S&P 500 Index is as
of January 31, 1998, as each index is calculated only on a monthly basis. The
graph assumes the investment of $100 in the Company and each of the indices on
January 28, 1997 and as required by the Commission, the reinvestment of all
distributions. The return shown on the graph is not necessarily indicative of
future performance.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Kilroy Realty Corp. NAREIT Equity Index(1) S&P 500 Index(1)
--------------------- ------------------- ---------------------- ----------------
<S> <C> <C> <C>
1/28/97 100 100 100
12/31/97 132 120 133
12/31/98 113 99 171
12/31/99 119 94 195
</TABLE>
- --------
(1) Beginning value of each of the NAREIT Equity Index and the S&P 500 Index is
as of January 31, 1997, as each index is calculated only on a monthly
basis.
13
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of December 31, 1999,
regarding the beneficial ownership of Common Stock (or Common Stock for which
common limited partnership interests in the Operating Partnership (the
"Units") are exchangeable) for (i) each person known by the Company to be the
beneficial owner of five percent or more of the Company's outstanding Common
Stock (or common stock for which the Units are exchangeable), (ii) each
director and each Named Executive Officer and (iii) the directors and such
Named Executive Officers of the Company as a group. Except as indicated below,
all of such Common Stock is owned directly, and the indicated person has sole
voting and investment power with respect to all of the shares of Common Stock
beneficially owned by such person. The Company has relied upon information
supplied by its officers, directors and certain stockholders and upon
information contained in filings with the Commission.
<TABLE>
<CAPTION>
Number of Shares Percentage of
of Common Stock Outstanding Shares
Name of Beneficial Owner(1) Beneficially Owned of Common Stock(2)
--------------------------- ------------------ ------------------
<S> <C> <C>
John B. Kilroy, Sr. .................... 1,181,672(3) 4.1%
John B. Kilroy, Jr. .................... 1,603,268(4) 5.5%
Jeffrey C. Hawken....................... 200,000(5) *
Richard E. Moran Jr. ................... 280,000(6) *
Campbell Hugh Greenup................... 100,000(7) *
Steven R. Scott......................... 6,667(8) *
John R. D'Eathe......................... 8,667(9) *
William P. Dickey....................... 14,334(10) *
Matthew J. Hart......................... 17,334(11) *
Dale F. Kinsella........................ 12,333(12) *
CRA Real Estate Securities, L.P. ....... 1,720,552(13) 6.2%
European Investors Incorporated......... 2,786,842(14) 10.0%
LaSalle Investment Management, Inc. .... 1,942,293(15) 7.0%
All directors and executive officers as
a group (10 persons)................... 3,424,276 11.9%
</TABLE>
- --------
* Represents less than 1.0% of outstanding shares of Common Stock.
(1) Unless otherwise indicated, the address for each of the persons listed is
c/o Kilroy Realty Corporation, 2250 East Imperial Highway, Suite 1200, El
Segundo, CA 90245.
(2) Assumes the exchange at the Company's option of Units held by such
beneficial owner that are redeemable within 60 days of December 31, 1999
into shares of Common Stock on a one-for-one basis and includes shares of
Common Stock subject to options held by such beneficial owner that are
exercisable within 60 days of December 31, 1999, the date as of which
information in the table is presented.
(3) Includes (i) 16,667 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of December 31, 1999 and (ii)
1,081,709 shares of Common Stock issuable upon the exchange of Units
(including Units beneficially owned by KI and Kilroy Technologies
Company, LLC, a California limited liability company ("Kilroy
Technologies"), and allocated to Mr. Kilroy as one of its
two shareholders).
(4) Includes (i) 333,333 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of December 31, 1999, and (ii)
1,076,930 shares of Common Stock issuable upon the exchange of Units
(including Units beneficially owned by KI and Kilroy Technologies, and
allocated to Mr. Kilroy as one of its two shareholders).
(5) Includes 200,000 shares of Common Stock issuable upon the exercise of
options within 60 days of December 31, 1999.
(6) Includes (i) 200,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of December 31, 1999, (ii) 20,000
shares of Common Stock held directly and (ii) 60,000 restricted shares of
Common Stock.
14
<PAGE>
(7) Includes 100,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of December 31, 1999.
(8) Includes 6,667 shares of Common Stock issuable upon the exercise of
options within 60 days of December 31, 1999.
(9) Includes 8,667 shares of Common Stock issuable upon the exercise of
options within 60 days of December 31, 1999.
(10) Includes (i) 12,333 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days as of December 31, 1999 and (ii) 2,000
shares of Common Stock beneficially owned by Mr. Dickey.
(11) Includes (i) 12,334 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days as of December 31, 1999 and (ii) 5,000
shares of Common Stock beneficially owned by Mr. Hart.
(12) Includes 12,334 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days as of December 31, 1999.
(13) Based on information provided in a Schedule 13G filed on February 14,
2000 by CRA Real Estate Securities, L.P. As of December 31, 1999 CRA Real
Estate Securities, L.P. had sole voting power with respect to 1,546,152
shares of Common Stock, sole dispositive power with respect to 1,659,552
shares of Common Stock and shared dispositive power with respect to
61,000 shares of Common Stock. The address for CRA Real Estate
Securities, L.P. is 259 N. Radnor-Chester Road, Suite 205, Radnor,
Pennsylvania 19087.
(14) Based on information provided in a Schedule 13G filed on February 11,
2000 by European Investors Incorporated ("EII") and EII Realty Securities
Incorporated ("ERS"), a wholly-owned subsidiary of EII. As of December
31, 1999 (i) EII had sole voting power with respect to 405,053 shares of
Common Stock, shared voting power with respect to 210,800 shares of
Common Stock, sole dispositive power with respect to 488,942 shares of
Common Stock and shared dispositive power with respect to 149,700 shares
of Common Stock; and (ii) ERS had sole voting power with respect to
1,919,299 shares of Common Stock and sole dispositive power with respect
to 2,148,200 shares of Common Stock. The address for EII is 667 Madison
Avenue, 16th Floor, New York, New York 10021-8041.
(15) Based on information provided in a Schedule 13G filed on February 10,
2000 by LaSalle Investment Management, Inc. ("LaSalle") and LaSalle
Investment Management (Securities), L.P. ("LaSalle Securities"), a
wholly-owned subsidiary of LaSalle. As of December 31, 1999 (i) LaSalle
had shared dispositive power with respect to 238,400 shares of Common
Stock; and (ii) LaSalle Securities had sole voting power with respect to
363,900 shares of Common Stock, shared voting power with respect to
1,283,153 shares of Common Stock, sole dispositive power with respect to
349,900 shares of Common Stock and shared dispositive power with respect
to 1,353,993 shares of Common Stock The address for LaSalle is 200 East
Randolph Drive, Chicago, Illinois 60601.
Certain Relationships and Related Transactions
Certain directors and executive officers of the Company, including John B.
Kilroy, Sr. and John B. Kilroy, Jr., the Chairman of the Board and the
President and Chief Executive Officer, respectively, (or members of their
immediate families) have direct or indirect interests in transactions and
potential transactions with the Company or the Operating Partnership. The
Operating Partnership holds an option to purchase the three-building office
complex located on North Sepulveda Boulevard in El Segundo, California (the
"Option Property") from a partnership controlled by John B. Kilroy, Sr. and
John B. Kilroy, Jr., In addition, the Operating Partnership performs
management and leasing activities at the Option Property.
15
<PAGE>
Various Services Provided by the Company to the Kilroy Group
Pursuant to management agreements, the Operating Partnership provided
management and leasing services to the Option Property which is beneficially
owned and controlled by John B. Kilroy, Sr. and John B. Kilroy, Jr. During
1999, in connection with the management and leasing services provided by the
Operating Partnership for the Option Property, Messrs. Kilroy, Sr. and Kilroy,
Jr. paid to the Operating Partnership fees in the aggregate amount of
$120,000, which the Company believes are equivalent to the fair market value
for such services provided.
Option Property
In connection with the formation of the Company, the Company entered into an
option agreement with a partnership controlled by John B. Kilroy, Sr. and John
B. Kilroy, Jr., the Chairman of the Board, and President, Chief Executive
Officer and Director, respectively, granting to the Operating Partnership an
option to acquire the three-building office complex located on North Sepulveda
Boulevard in El Segundo, California (the "Sepulveda Boulevard Office
Complex"). The option for the Sepulveda Boulevard Office Complex is
exercisable on or before January 31, 2004. The Company has not exercised its
option to purchase the Sepulveda Boulevard Office Complex as of the date of
this Proxy Statement. Pursuant to the terms of the applicable Option
Agreement, the purchase price for the Sepulveda Boulevard Office Complex is
equal to the sum of (i) the then outstanding mortgage indebtedness secured by
the respective properties, plus (ii) $1, plus (iii) the aggregate amount of
capital contributed by the beneficial owners of the property, net of actual
cash distributions distributed in respect of such beneficial owners, during
the period beginning on January 31, 1997 and ending on the date of exercise of
the option, plus (iv) an annualized return of 8.0% on the amount in excess of
$5.0 million, if any, as determined pursuant to clause (iii) preceding. The
purchase price is payable in cash or Units at the election of the seller. The
Company's option to purchase the Sepulveda Boulevard Office Complex is subject
to a right of first offer held by Hughes Space & Communications, a tenant of
the property.
Other Purchases and Transactions
During 1999, the Company acquired construction materials for its Kilroy
Airport Center, Long Beach development project from a partnership controlled
by John B. Kilroy, Sr. and John B. Kilroy, Jr. for a purchase price of
approximately $4.3 million (representing the accumulated costs of the
sellers). The acquisition of the construction materials was based upon terms
that the Company believes were comparable to terms obtainable from third-
parties based on arm's-length negotiations. The Independent Committee of the
Board of Directors unanimously approved the acquisition.
COMPLIANCE WITH FEDERAL SECURITIES LAWS
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, "Insiders"), to file with the
Commission initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and other equity securities of the Company.
Insiders are required by regulation of the Commission to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, during the year ended December 31, 1999, all Insiders
complied with all Section 16(a) filing requirements applicable to them.
16
<PAGE>
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
A stockholder desiring to have a proposal included in the Company's proxy
statement for the 2001 annual meeting of stockholders must comply with the
applicable rules and regulations of the Securities and Exchange Commission,
including that any such proposal must be received by the Company's Secretary
at the Company's principal executive offices by November 30, 2000.
The Company's bylaws require a stockholder desiring to present a proposal
for a vote at the 2001 annual meeting of stockholders to notify the Company's
Secretary in writing. The notice generally must be delivered to or mailed and
received at the Company's principal executive offices (i) not less than 50
days nor more than 75 days prior to the 2001 annual meeting or (ii) if the
Company provides less than 65 days public notice of the date of its annual
meeting, then not later than the 15th day following the earlier of the day on
which public notice of the date for the 2001 annual meeting is published or
mailed. Other specifics regarding the notice procedures, including the
required content of the notice, can be found in the Company's bylaws, a copy
of which may be obtained without charge by request to the Company's Secretary
at the Company's executive offices.
Stockholders who wish to have a proposal included in the Company's proxy
statement for the 2001 annual meeting and have the proposal properly brought
before the 2001 annual meeting for a vote must comply with both of the above
requirements. Stockholder proposals submitted to the Company's Secretary that
do not comply with these requirements may be excluded from the Company's proxy
statement and/or may not be brought before the 2001 annual meeting.
AUDITORS
Subject to its discretion to appoint alternative auditors if it deems such
action appropriate, the Board has retained Deloitte & Touche LLP as the
Company's auditors for the current fiscal year. The Board has been advised
that Deloitte & Touche LLP is independent with regard to the Company within
the meaning of the Securities Act and the applicable published rules and
regulations thereunder. Representatives of Deloitte & Touche LLP are expected
to be present at the Annual Meeting and will have the opportunity to make
statements if they desire and to respond to appropriate questions from
stockholders.
PROXY SOLICITATION EXPENSE
The cost of soliciting proxies will be borne by the Company. The Company
will also request persons, firms and corporations holding shares beneficially
owned by others to send proxy material to, and obtain proxies from, the
beneficial owners of such shares and will, upon request, pay the holders'
reasonable expenses for doing so.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information filed by the Company may be inspected without charge and copies
obtained upon payment of prescribed fees from the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the Commission's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511, or by way
of the Commission's Internet address, http://www.sec.gov.
The Company will provide without charge to each person to whom a copy of the
Proxy Statement is delivered, upon the written or oral request of any such
persons, additional copies of the Company's Form 10-K for the period ended
December 31, 1999. Requests for such copies should be addressed to: Kilroy
Realty Corporation, 2250 East Imperial Highway, Suite 1200, El Segundo,
California 90245, Attn: Secretary, telephone (310) 563-5500.
17
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matter which will be
brought before the Annual Meeting. However, if any other matter properly comes
before the Annual Meeting, or any adjournment or postponement thereof, which
may properly be acted upon, the proxies solicited hereby will be voted on such
matter in accordance with the discretion of the proxy holders named therein.
You are urged to sign, date and return the enclosed proxy in the envelope
provided. No further postage is required if the envelope is mailed within the
United States. If you subsequently decide to attend the Annual Meeting and
wish to vote your shares, you may do so. Your cooperation in giving this
matter your prompt attention will be appreciated.
March 30, 2000
By Order of the Board of Directors,
Richard E. Moran Jr.
Executive Vice President, Chief
Financial Officer and Secretary
18
<PAGE>
- -------------------------------------------------------------------------------
PROXY
KILROY REALTY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Kilroy Realty Corporation (the "Company")
acknowledges receipt of a copy of the Annual Report and the proxy statement
dated March 30, 2000 and, revoking any proxy heretofore given, hereby appoints
John B. Kilroy, Sr., John B. Kilroy, Jr., Richard E. Moran Jr. and each of
them, as proxies for the undersigned, and hereby authorizes each of them to
vote all the shares of Common Stock of the Company held of record by the
undersigned of March 20, 2000, at the Annual Meeting of Stockholders to be
held on May 23, 2000, or any adjournment of postponement thereof, and
otherwise to represent the undersigned at the meeting with all powers
possessed by the undersigned if personally present at the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR LISTED IN THE PROXY
STATEMENT.
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<PAGE>
Please mark [X]
your votes
like this
FOR
(except as
indicated to
the contrary) WITHHOLD
1. PROPOSAL 1: ELECTION OF DIRECTORS [_] [_]
Nominees: John B. Kilroy, Jr.
Dale F. Kinsella
INSTRUCTION: To withhold authority to vote for any
nominee's name on the space provided below:
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This proxy will be voted as directed or, if no contrary direction is
indicated, will be voted FOR approval of Proposal 1.
[_] Please check if you have had a change of address and print your new
address and phone number below
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
Date: ________, 2000 __________________________________________________________
(Signature)
NOTE: Please sign exactly as shown at left. If stock is jointly held, each
owner should sign. Executors, administrators, trustees, guardians, attorneys
and corporate officers should indicate their fiduciary capacity or full title
when signing.
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