EXHIBIT 3.8
KILROY REALTY CORPORATION
ARTICLES SUPPLEMENTARY
780,000 SHARES OF
9 1/4% SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK
Kilroy Realty Corporation, a Maryland corporation (the "Company"),
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
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Directors of the Company by Article IV of the Articles of Amendment and
Restatement of the Company filed with the Department on January 21, 1997, which
comprises, together with the Articles Supplementary (the "Series A Articles
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Supplementary") filed by the Company on February 6, 1998 and April 20, 1998
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establishing a class of preferred stock of the Company, par value $0.01
Preferred Stock (the "Preferred Stock"), designated as the "8.073% Series A
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Cumulative Redeemable Preferred Stock" (the "Series A Preferred Stock"), the
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Articles Supplementary (the "Series B Articles Supplementary") filed by the
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Company on October 15, 1998, establishing a class of Preferred Stock designated
as the Series B Junior Participating Preferred Stock (the "Series B Preferred
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Stock"), the Articles Supplementary (the "Series C Articles Supplementary")
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filed by the Company on November 25, 1998, establishing a class of Preferred
Stock designated as the "9 3/8% Series C Cumulative Redeemable Preferred Stock"
(the "Series C Preferred Stock") and these Articles Supplementary, the charter
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(collectively, the "Charter") and Section 2-105 of the Maryland General
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Corporation Law (the "MGCL"), the Board of Directors of the Company (the "Board
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of Directors"), by resolutions duly adopted on October 8, 1999, has classified
up to 1,000,000 shares of the authorized but unissued Preferred Stock as a
separate class of Preferred Stock, authorized the issuance of a maximum of
1,000,000 shares of such class of Preferred Stock, set certain of 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, and pursuant to the powers contained in the Bylaws of the
Company and the MGCL, appointed a committee (the "Committee") of the Board of
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Directors and delegated to the Committee, to the fullest extent permitted by the
MGCL and the Charter and Bylaws of the Company, all powers of the Board of
Directors with respect to designating, and setting all other preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption of, such class of Preferred Stock, and determining the number of
shares of such class of Preferred Stock (not in excess of the aforesaid maximum
number) to be issued and the consideration and other terms and conditions upon
which such shares of such class of Preferred Stock are to be issued.
Second: Pursuant to the authority conferred upon the Committee as
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aforesaid, the Committee has unanimously adopted resolutions designating the
aforesaid class of Preferred Stock as the "9 1/4% Series D Cumulative Redeemable
Preferred Stock," setting the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, terms and
conditions of redemption and other terms and conditions of such 9
1/4% Series D Cumulative Redeemable Preferred Stock (to the extent not set by
the Board of Directors in the resolutions referred to in Article First of these
Articles Supplementary) and authorizing the issuance of up to 780,000 shares of
9 1/4% Series D Cumulative Redeemable Preferred Stock.
Third: The class of Preferred Stock of the Company created by the
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resolutions duly adopted by the Board of Directors of the Company and by the
Committee and referred to in Articles First and Second of these Articles
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Supplementary shall have the following designation, number of shares,
preferences, conversion and other rights, voting powers, restrictions and
limitation as to dividends and other distributions, qualifications, terms and
conditions of redemption and other terms and conditions:
Section 1. Designation and Number. A series of Preferred Stock,
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designated the "9 1/4% Series D Cumulative Redeemable Preferred Stock" (the
"Series D Preferred Stock") is hereby established. The number of shares of
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Series D Preferred Stock shall be 780,000.
Section 2. Rank. The Series D Preferred Stock will, with respect to
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distributions and rights upon voluntary or involuntary liquidation, winding-up
or dissolution of the Company, rank senior to all classes or series of Common
Stock (as defined in the Charter), the Series B Preferred Stock and to all
classes or series of equity securities of the Company now or hereafter
authorized, issued or outstanding, other than the Series A Preferred Stock,
Series C Preferred Stock and any class or series of equity securities of the
Company expressly designated as ranking on a parity with or senior to the Series
D Preferred Stock as to distributions or rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Company. For purposes of these
Articles Supplementary, the term "Parity Preferred Stock" shall be used to refer
to the Series A Preferred Stock, the Series C Preferred Stock and any class or
series of equity securities of the Company now or hereafter authorized, issued
or outstanding expressly designated by the Company to rank on a parity with
Series D Preferred Stock with respect to distributions or rights upon voluntary
or involuntary liquidation, winding-up or dissolution of the Company, or both,
as the context may require. The term "equity securities" does not include debt
securities, which will rank senior to the Series D Preferred Stock prior to
conversion.
Section 3. Distributions.
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(a) Payment of Distributions. Subject to the rights of holders
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of Parity Preferred Stock as to the payment of distributions and holders of
equity securities ranking senior to the Series D Preferred Stock as to
payment of distributions, holders of Series D Preferred Stock will be
entitled to receive, when, as and if declared by the Company, out of funds
legally available for the payment of distributions, cumulative preferential
cash distributions at the rate per annum of 9 1/4% of the $50 liquidation
preference per share of Series D Preferred Stock. All distributions shall
be cumulative, shall accrue from the original date of issuance and shall be
payable (i) quarterly (such quarterly periods for purposes of payment and
accrual will be the quarterly periods ending on the dates specified in this
sentence and not calendar quarters) in arrears, on February 15, May 15,
August 15 and November 15 of each year, commencing on the first of such
dates to occur after the original date of issuance and, (ii) in the event
of a redemption, on the redemption
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date (each a "Preferred Stock Distribution Payment Date"). The amount of
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the distribution payable for any period will be computed based on the ratio
of a 360-day year of twelve 30-day months and for any period shorter than a
full quarterly period for which distributions are computed, the amount of
the distribution payable will be computed on the basis of the actual number
of days elapsed in such a period to ninety (90) days. If any date on which
distributions are to be made on the Series D Preferred Stock is not a
Business Day (as defined herein), then payment of the distribution to be
made on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date. Distributions on the Series D Preferred Stock will be made to
the holders of record of the Series D Preferred Stock on the relevant
record dates, which, unless otherwise provided by the Company with respect
to any distribution, will be fifteen (15) Business Days prior to the
relevant Preferred Stock Distribution Payment Date (each a "Distribution
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Record Date"). Notwithstanding any provision to the contrary contained
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herein, each outstanding share of Series D Preferred Stock shall be
entitled to receive, and shall receive a dividend with respect to any
Distribution Record Date equal to the dividend paid with respect to each
other share of Series D Preferred Stock which is outstanding on such date.
In addition, notwithstanding anything to the contrary set forth herein,
each share of Series D Preferred Stock shall also continue to accrue all
accrued and unpaid distributions up to the Exchange Date on any Series D
Preference Unit (as defined in the Fourth Amended and Restated Agreement of
Limited Partnership of Kilroy Realty, L.P., dated as of November 24, 1998,
as (i) amended by that certain First Amendment to Fourth Amended and
Restated Agreement of Limited Partnership of Kilroy Realty, L.P., dated as
of the date hereof, and (ii) supplemented by First Supplement dated January
6, 1999; Second Supplement dated February 22, 1999; Third Supplement dated
March 9, 1999; Fourth Supplement dated March 31, 1999; and Fifth Supplement
dated March 26, 1999, as amended and supplemented, the "Partnership
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Agreement"), as amended through the date hereof) validly exchanged into
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such share of Series D Preferred Stock in accordance with the provisions of
such Partnership Agreement.
The term "Business Day" shall mean each day, other than a Saturday or
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a Sunday, which is not a day on which banking institutions in New York, New York
are authorized or required by law, regulation or executive order to close.
(b) Limitations on Distributions. No distributions on the
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Series D Preferred Stock shall be declared or paid or set apart for payment
by the Company at such time as the terms and provisions of any agreement of
the Company, including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for payment or
provides that such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment shall be restricted or
prohibited by law.
(c) Distributions Cumulative. Notwithstanding the foregoing,
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distributions on the Series D Preferred Stock will accrue whether or not
declared, whether
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or not the terms and provisions set forth in Section 3(b) hereof at any
time prohibit the current payment of distributions, whether or not the
Company has earnings, whether or not there are funds legally available for
the payment of such distributions and whether or not such distributions are
authorized or declared. Accrued but unpaid distributions on the Series D
Preferred Stock will accumulate as of the Preferred Stock Distribution
Payment Date on which they first become payable. Accumulated and unpaid
distributions will not bear interest.
(d) Priority as to Distributions.
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(i) So long as any Series D Preferred Stock is
outstanding, no distribution of cash or other property shall be
authorized, declared, paid or set apart for payment on or with respect
to any class or series of Common Stock or any class or series of other
stock of the Company ranking junior as to the payment of distributions
to the Series A Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock (such Common Stock or other junior stock,
including, without limitation, the Series B Preferred Stock,
collectively, "Junior Stock"), nor shall any cash or other property be
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set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series D Preferred Stock, any
Parity Preferred Stock as to payment of distributions or any Junior
Stock, unless, in each case, all distributions accumulated on all
Series D Preferred Stock and all classes and series of outstanding
Parity Preferred Stock as to payment of distributions have been paid
in full. Without limiting Section 6(c) hereof, the foregoing sentence
will not prohibit (i) distributions payable solely in Junior Stock,
(ii) the conversion of Junior Stock or Parity Preferred Stock into
Junior Stock, and (iii) purchase by the Company of such Series D
Preferred Stock, Parity Preferred Stock as to payment of distributions
or Junior Stock pursuant to the Charter to the extent required to
preserve the Company's status as a real estate investment trust.
(ii) So long as distributions have not been paid in full
(or a sum sufficient for such full payment is not irrevocably
deposited in trust for immediate payment) upon the Series D Preferred
Stock, all distributions authorized and declared on the Series D
Preferred Stock and all classes or series of outstanding Parity
Preferred Stock (including Series A Preferred Stock and Series C
Preferred Stock) as to payment of distributions shall be authorized
and declared so that the amount of distributions authorized and
declared per share of Series D Preferred Stock and such other classes
or series of Parity Preferred Stock (including Series A Preferred
Stock and Series C Preferred Stock) shall in all cases bear to each
other the same ratio that accrued distributions per share on the
Series D Preferred Stock and such other classes or series of Parity
Preferred Stock (including Series A Preferred Stock and Series C
Preferred Stock) as to payment of distributions (which shall not
include any accumulation in respect of unpaid distributions for prior
distribution periods if such class or series of Parity Preferred Stock
does not have cumulative distribution rights) bear to each other.
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(e) No Further Rights. Holders of Series D Preferred Stock
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shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions
described herein.
(f) Capital Gain Dividend. If, for any taxable year, the
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Company elects to designate as a "capital gain dividend" (as defined in
Section 857 of the Internal Revenue Code of 1986, as amended); any portion
(the "Capital Gains Amount") of the dividends paid or made available for
the year to holders of any class or series of stock of the Company, the
portion of the Capital Gains Amount that shall be allocable to holders of
the Series D Preferred Stock shall be the amount that the total dividends
(as determined for federal income tax purposes) paid or made available to
the holders of the Series D Preferred Stock for the year bears to the
aggregate amount of dividends (as determined for federal income tax
purposes) paid or made available to the holders of all classes of series of
stock of the Company for such year.)
Section 4. Liquidation Preference.
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(a) Payment of Liquidating Distributions. Subject to the rights
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of holders of Parity Preferred Stock with respect to rights upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
Company and subject to equity securities ranking senior to the Series D
Preferred Stock with respect to rights upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of
Series D Preferred Stock shall be entitled to receive out of the assets of
the Company legally available for distribution or the proceeds thereof,
after payment or provision for debts and other liabilities of the Company,
but before any payment or distributions of the assets shall be made to
holders of Common Stock or any other class or series of stock of the
Company that ranks junior to the Series D Preferred Stock as to rights upon
liquidation, dissolution or winding-up of the Company, an amount equal to
the sum of (i) a liquidation preference of $50 per share of Series D
Preferred Stock, and (ii) an amount equal to any accumulated and unpaid
distributions thereon, whether or not declared, to the date of payment. In
the event that, upon such voluntary or involuntary liquidation, dissolution
or winding-up, there are insufficient assets to permit full payment of
liquidating distributions to the holders of Series D Preferred Stock and
any Parity Preferred Stock as to rights upon liquidation, dissolution or
winding-up of the Company, all payments of liquidating distributions on the
Series D Preferred Stock and such Parity Preferred Stock shall be made so
that the payments on the Series D Preferred Stock and such Parity Preferred
Stock shall in all cases bear to each other the same ratio that the
respective rights of the Series D Preferred Stock and such other Parity
Preferred Stock (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such Parity
Preferred Stock does not have cumulative distribution rights) upon
liquidation, dissolution or winding-up of the Company bear to each other.
(b) Notice. Written notice of any such voluntary or involuntary
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liquidation, dissolution or winding-up of the Company, stating the payment
date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i)
fax and (ii) by first class mail, postage pre-paid, not less than thirty
(30) and not more than sixty (60) days prior to the payment date stated
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therein, to each record holder of the Series D Preferred Stock at the
respective addresses of such holders as the same shall appear on the share
transfer records of the Company.
(c) No Further Rights. After payment of the full amount of the
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liquidating distributions to which they are entitled, the holders of Series
D Preferred Stock will have no right or claim to any of the remaining
assets of the Company.
(d) Consolidation, Merger or Certain Other Transactions. The
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voluntary sale, conveyance, lease, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of
the property or assets of the Company to, or the consolidation or merger or
other business combination of the Company with or into any corporation,
trust or other entity (or of any corporation, trust or other entity with or
into the Company) shall not be deemed to constitute a liquidation,
dissolution or winding-up of the Company.
(e) Permissible Distributions. In determining whether a
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distribution (other than upon voluntary or involuntary liquidation) by
dividend, redemption or other acquisition of shares of stock of the Company
or otherwise is permitted under the MGCL, no effect shall be given to
amounts that would be needed, if the Company were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon
dissolution of holders of shares of stock of the Company whose preferential
rights upon dissolution are superior to those receiving the distribution.
Section 5. Optional Redemption.
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(a) Right of Optional Redemption. Subject to Section 7, the
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Series D Preferred Stock may not be redeemed prior to December 9, 2004. On
or after such date, the Company shall have the right to redeem the Series D
Preferred Stock, in whole or in part, at any time or from time to time,
upon not less than thirty (30) nor more than sixty (60) days written
notice, at a redemption price, payable in cash, equal to $50 per share of
Series D Preferred Stock plus accumulated and unpaid distributions, whether
or not declared, to the date of redemption. If fewer than all of the
outstanding shares of Series D Preferred Stock are to be redeemed, the
shares of Series D Preferred Stock to be redeemed shall be selected pro
rata (as nearly as practicable without creating fractional units).
(b) Limitation on Redemption.
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(i) The redemption price of the Series D Preferred Stock
(other than the portion thereof consisting of accumulated but unpaid
distributions) will be payable solely out of the sale proceeds of
capital stock of the Company and from no other source. For purposes of
the preceding sentence, "capital stock" means any equity securities
(including Common Stock and Preferred Stock), shares, participation or
other ownership interests (however designated) and any rights (other
than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing.
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(ii) Subject to Section 7 hereof, the Company may not redeem
fewer than all of the outstanding shares of Series D Preferred Stock
unless all accumulated and unpaid distributions have been paid on all
outstanding Series D Preferred Stock for all quarterly distribution
periods terminating on or prior to the date of redemption.
(c) Procedures for Redemption.
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(i) Notice of redemption will be (i) faxed, and (ii) mailed
by the Company, postage prepaid, not less than thirty (30) nor more
than sixty (60) days prior to the redemption date, addressed to the
respective holders of record of the Series D Preferred Stock to be
redeemed at their respective addresses as they appear on the transfer
records of the Company. No failure to give or defect in such notice
shall affect the validity of the proceedings for the redemption of any
Series D Preferred Stock except as to the holder to whom such notice
was defective or not given. In addition to any information required by
law or by the applicable rules of any exchange upon which the Series D
Preferred Stock may be listed or admitted to trading, each such notice
shall state: (i) the redemption date, (ii) the redemption price, (iii)
the number of shares of Series D Preferred Stock to be redeemed, (iv)
the place or places where such shares of Series D Preferred Stock are
to be surrendered for payment of the redemption price, (v) that
distributions on the Series D Preferred Stock to be redeemed will
cease to accumulate on such redemption date and (vi) that payment of
the redemption price and any accumulated and unpaid distributions will
be made upon presentation and surrender of such Series D Preferred
Stock. If fewer than all of the shares of Series D Preferred Stock
held by any holder are to be redeemed, the notice mailed to such
holder shall also specify the number of shares of Series D Preferred
Stock held by such holder to be redeemed.
(ii) If the Company gives a notice of redemption in respect
of Series D Preferred Stock (which notice will be irrevocable) then,
by 12:00 noon, New York City time, on the redemption date, the Company
will deposit irrevocably in trust for the benefit of the Series D
Preferred Stock being redeemed funds sufficient to pay the applicable
redemption price, plus any accumulated and unpaid distributions, if
any, on such shares to the date fixed for redemption, without
interest, and will give irrevocable instructions and authority to pay
such redemption price and any accumulated and unpaid distributions,
whether or not declared, if any, on such shares to the holders of the
Series D Preferred Stock upon surrender of the Series D Preferred
Stock by such holders at the place designated in the notice of
redemption. If fewer than all Series D Preferred Stock evidenced by
any certificate is being redeemed, a new certificate shall be issued
upon surrender of the certificate evidencing all Series D Preferred
Stock, evidencing the unredeemed Series D Preferred Stock without cost
to the holder thereof. On and after the date of redemption,
distributions will cease to accumulate on the Series D Preferred Stock
or portions thereof called for redemption, unless the Company defaults
in the payment thereof. If any date fixed for redemption of Series D
Preferred Stock is not a Business Day, then
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payment of the redemption price payable on such date
will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if
such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date fixed for redemption. If payment
of the redemption price or any accumulated or unpaid distributions in
respect of the Series D Preferred Stock is improperly withheld or refused
and not paid by the Company, distributions on such Series D Preferred Stock
will continue to accumulate from the original redemption date to the date
of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the applicable
redemption price and any accumulated and unpaid distributions.
(d) Status of Redeemed Stock. Any Series D Preferred Stock that
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shall at any time have been redeemed shall after such redemption, have the
status of authorized but unissued Preferred Stock, without designation as to
class or series until such shares are once more designated as part of a
particular class or series by the Board of Directors.
Section 6. Voting Rights.
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(a) General. Holders of the Series D Preferred Stock will not
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have any voting rights, except as set forth below.
(b) Right to Elect Directors.
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(i) If at any time full distributions shall not have been
timely made on any Series D Preferred Stock with respect to any six (6)
prior quarterly distribution periods, whether or not consecutive, (a
"Preferred Distribution Default"), the holders of such Series D Preferred
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Stock, voting together as a single class with the holders of each class or
series of Parity Preferred Stock which is on parity with the Series D
Preferred Stock both as to payment of distributions and as to rights upon
voluntary or involuntary liquidation, dissolution or winding-up of the
Company upon which like voting rights have been conferred and are
exercisable, including the Series A Preferred Stock and the Series C
Preferred Stock ("Parity Securities"), will have the right to elect two
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additional directors to serve on the Company's Board of Directors (the
"Preferred Stock Directors") at a special meeting called in accordance with
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Section 6(b)(ii) below or at the next annual meeting of stockholders, and
at each subsequent annual meeting of stockholders or special meeting held
in place thereof, until all such distributions in arrears and distributions
for the current quarterly period on the Series D Preferred Stock and each
such class or series of Parity Preferred Stock, including the Series A
Preferred Stock and the Series C Preferred Stock, have been paid in full.
A distribution in respect of Series D Preferred Stock shall
be considered timely made if made within two (2) Business Days after
the applicable
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Preferred Stock Distribution Payment if at the time of such late payment
date there shall not be any prior quarterly distribution periods in respect
of which full distributions were not timely made at the applicable
Preferred Stock Distribution Date.
(ii) At any time when such voting rights shall have vested,
a proper officer of the Company shall call or cause to be called, upon
written request of holders of record of at least 10% of the outstanding
shares of Series D Preferred Stock, a special meeting of the holders of
Series D Preferred Stock and all the series of Parity Securities by mailing
or causing to be mailed to such holders a notice of such special meeting to
be held not less than ten and not more than forty-five (45) days after the
date such notice is given. The record date for determining holders of the
Parity Securities entitled to notice of and to vote at such special meeting
will be the close of business on the third Business Day preceding the day
on which such notice is mailed. At any such special meeting, all of the
holders of the Parity Securities, by plurality vote, voting together as a
single class without regard to series will be entitled to elect two
directors on the basis of one vote per $50 of liquidation preference to
which such Parity Securities are entitled by their terms (excluding amounts
in respect of accumulated and unpaid dividends) and not cumulatively. The
holder or holders of one-third of the Parity Securities then outstanding,
present in person or by proxy, will constitute a quorum for the election of
the Preferred Stock Directors except as otherwise provided by law. Notice
of all meetings at which holders of the Series D Preferred Stock shall be
entitled to vote will be given to such holders at their addresses as they
appear in the transfer records. At any such meeting or adjournment thereof
in the absence of a quorum, subject to the provisions of any applicable
law, a majority of the holders of the Parity Securities present in person
or by proxy shall have the power to adjourn the meeting for the election of
the Preferred Stock Directors, without notice other than an announcement at
the meeting, until a quorum is present. If a Preferred Distribution Default
shall terminate after the notice of a special meeting has been given but
before such special meeting has been held, the Company shall, as soon as
practicable after such termination, mail or cause to be mailed notice of
such termination to holders of the Series D Preferred Stock that would have
been entitled to vote at such special meeting.
(iii) If and when all accumulated distributions and the
distribution for the current distribution period on the Series D Preferred
Stock shall have been paid in full or a sum sufficient for such payment is
irrevocably deposited in trust for payment, the holders of the Series D
Preferred Stock shall be divested of the voting rights set forth in Section
6(b) herein (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all distributions in arrears and the
distributions for the current distribution period have been paid in full or
set aside for payment in full on all other classes or series of Securities,
the term and office of each Preferred Stock Director so elected shall
terminate. Any Preferred Stock Director may be removed at any time with or
without cause by the vote of, and shall not be removed otherwise than by
the vote
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of, the holders of record of a majority of the outstanding Series D
Preferred Stock when they have the voting rights set forth in Section 6(b)
(voting separately as a single class with all other classes or series of
Parity Securities). So long as a Preferred Distribution Default shall
continue, any vacancy in the office of a Preferred Stock Director may be
filled by written consent of the Preferred Stock Director remaining in
office, or if none remains in office, by a vote of the holders of record of
a majority of the outstanding Series D Preferred Stock when they have the
voting rights set forth in Section 6(b) (voting separately as a single
class with all other classes or series of Parity Securities). The Preferred
Stock Directors shall each be entitled to one vote per director on any
matter.
(c) Certain Voting Rights. So long as any Series D Preferred
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Stock remains outstanding, the Company shall not, without the affirmative vote
of the holders of at least two-thirds of the Series D Preferred Stock
outstanding at the time (i) designate or create, or increase the authorized or
issued amount of, any class or series of shares ranking prior to the Series D
Preferred Stock with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any authorized shares of
the Company into any such shares, or create, authorize or issue any obligations
or security convertible into or evidencing the right to purchase any such
shares, (ii) designate or create, or increase the authorized or issued amount
of, any Parity Preferred Stock or reclassify any authorized shares of the
Company into any such shares, 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 such Parity Preferred Stock is issued to an affiliate of
the Company, or (iii) either (A) consolidate, merge into or with, or convey,
transfer or lease its assets substantially as an entirety, to any corporation or
other entity, or (B) amend, alter or repeal the provisions of the Company's
Charter (including these Articles Supplementary) or Bylaws, whether by merger,
consolidation or otherwise, in each case in such a way that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series D Preferred Stock or the holders thereof; provided, however,
that with respect to the occurrence of any event set forth in (iii) above, so
long as (a) the Company is the surviving entity and the Series D Preferred Stock
remains outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a corporation, business trust or other like
entity organized under the laws of any state and substitutes for the Series D
Preferred Stock other preferred stock having substantially the same terms and
same rights as the Series D Preferred Stock, including with respect to
distributions, voting rights and rights upon liquidation, dissolution or
winding-up, then the occurrence of any such event shall not be deemed to
materially and adversely affect the rights, privileges or voting powers of the
holders of the Series D Preferred Stock and provided further that any increase
in the amount of authorized Preferred Stock or the creation or issuance of any
other class or series of Preferred Stock, or any increase in an amount of
authorized shares of each class or series, in each case ranking either (a)
junior to the Series D Preferred Stock with respect to payment of distributions
and the distribution of assets upon liquidation, dissolution or winding-up, or
(b) on a parity with the Series D Preferred Stock with respect to payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding-up to the extent such Preferred Stock is not issued to an affiliate
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of the Company, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
Section 7. Restrictions on Ownership and Transfer to Preserve Tax
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Benefit.
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(a) Definitions. For the purposes of this Section 7 of these
----------
Articles Supplementary, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Series D Preferred
--------------------
Stock by a Person who is or would be treated as an owner of such Series D
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) of the
--------------------------
outstanding shares of capital stock of the Company.
"Charitable Beneficiary" shall mean one or more beneficiaries of a
----------------------
Trust, as determined pursuant to Section 7(c)(vi) of these Articles
Supplementary, each of which shall be an organization described in Sections
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. All
----
section references to the Code shall include any successor provisions thereof as
may be adopted from time to time.
"Constructive Ownership" shall mean ownership of Series D Preferred
----------------------
Stock by a Person who is or would be treated as an owner of such Series D
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) of the
----------------------------
outstanding shares of capital stock the Company.
"IRS" means the United States Internal Revenue Service.
---
"Market Price" shall mean the last reported sales price reported on
------------
the New York Stock Exchange of the Series D Preferred Stock on the trading day
immediately preceding the relevant date, or if the Series D Preferred Stock is
not then traded on the New York Stock Exchange, the last reported sales price of
the Series D Preferred Stock on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over which the
Series D Preferred Stock may be traded, or if the Series D Preferred Stock is
not then traded over any exchange or quotation system, the market price of the
Series D Preferred Stock on the relevant date as determined in good faith by the
Board of Directors of the Company.
"Operating Partnership" shall mean Kilroy Realty, L.P., a Delaware
---------------------
limited partnership.
11
"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
Series D Preferred Stock provided that the ownership of such shares of Series D
Preferred Stock by such underwriter would not result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, or otherwise
result in the Company failing to qualify as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to any
-------------------------------
purported Transfer (or other event) which results in a transfer to a Trust, as
provided in Section 7(b)(ii) of these Articles Supplementary, the Purported
Record Transferee, unless the Purported Record Transferee would have acquired or
owned shares of Series D Preferred Stock for another Person who is the
beneficial transferee or owner of such shares, in which case the Purported
Beneficial Transferee shall be such Person.
"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 7(b)(ii) of these Articles Supplementary, the record holder
of the Series D Preferred Stock if such Transfer had been valid under Section
7(b)(i) 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, comparable 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 Series D Preferred Stock, (including (i) the granting of
any option or entering into any agreement for the sale, transfer or other
disposition of Series D Preferred Stock or (ii) the sale, transfer, assignment
or other disposition of any securities (or rights convertible into or
exchangeable for Series D 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
Series D 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 7(c) of
-----
these Articles Supplementary.
"Trustee" shall mean any Person unaffiliated with the Company, or a
-------
Purported Beneficial Transferee, or a Purported Record Transferee, that is
appointed by the Company to serve as trustee of a Trust.
12
(b) Restriction on Ownership and Transfers.
--------------------------------------
(i) Prior to the Restriction Termination Date:
(1) except as provided in Section 7(i) of these Articles Supplementary, no
Person shall Beneficially Own Series D Preferred Stock which, taking into
account any other capital stock of the Company Beneficially Owned by such
Person, would cause such ownership to exceed the Beneficial Ownership Limit;
(2) except as provided in Section 7(i) of these Articles Supplementary, no
Person shall Constructively Own Series D Preferred Stock which, taking into
account any other capital stock of the Company Constructively Owned by such
Person, would cause such ownership to exceed the Constructive Ownership Limit;
(3) no Person shall Beneficially or Constructively Own Series D Preferred
Stock which, taking into account any other capital stock of the Company
Beneficially or Constructively Owned by such Person, would result in the Company
being "closely held" within the meaning of Section 856(h) of the Code, or
otherwise failing to qualify as a REIT (including but not limited to Beneficial
or 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 or comparable provisions of state law).
(ii) 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 or
Constructively Owning Series D Preferred Stock in violation of Section
7(b)(i) of these Articles Supplementary, (1) then that number of shares of
Series D Preferred Stock that otherwise would cause such Person to violate
Section 7(b)(i) 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 7(c), effective as of
the close of business on the business day prior to the date of such
Transfer or other event, and such Purported Beneficial Transferee 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 or Constructively Owning Series D Preferred Stock in violation
of Section 7(b)(i) of these Articles Supplementary, then the Transfer of
that number of shares of Series D Preferred Stock that otherwise would
cause any Person to violate Section 7(b)(i) shall be void ab initio, and
the Purported Beneficial Transferee shall have no rights in such shares.
(iii) Subject to Section 7(n) of this Article Third and
notwithstanding any other provisions contained herein, prior to the Restriction
13
Termination Date, any Transfer of Series D 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 Series D Preferred Stock.
It is expressly intended that the restrictions on ownership and
Transfer described in this Section 7(b) shall apply to the exchange rights
provided in Section 19.9 of the Partnership Agreement. Notwithstanding any of
the provisions of the Partnership Agreement to the contrary, a partner of the
Operating Partnership shall not be entitled to effect an exchange of an interest
in the Operating Partnership for Series D Preferred Stock if the actual or
beneficial or Beneficial or Constructive Ownership of Series D Preferred Stock
would be prohibited under the provisions of this Section 7.
(c) Transfers of Series D Preferred Stock in Trust.
----------------------------------------------
(i) Upon any purported Transfer or other event described in
Section 7(b)(ii) of these Articles Supplementary, such Series D
Preferred Stock 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 7(b)(ii). 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 7(c)(vi) of these Articles
Supplementary.
(ii) Series D Preferred Stock held by the Trustee shall be
issued and outstanding Series D Preferred Stock of the Company. The
Purported Beneficial Transferee or Purported Record Transferee shall
have no rights in the shares of the Series D 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 Series D Preferred Stock held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
dividends with respect to Series D 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 Series D Preferred Stock have
been transferred to the Trustee shall be paid 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 Series D Preferred
Stock. Any dividends or distributions so paid over to the Trustee shall
be held in trust for the Charitable Beneficiary.
14
The Purported Record Transferee and Purported Beneficial Transferee
shall have no voting rights with respect to the Series D Preferred Stock held in
the Trust and, subject to Maryland law, effective as of the date the Series D
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 Series D Preferred
Stock prior to the discovery by the Company that the Series D 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 Series D 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.
(iv) Within 20 days of receiving notice from the Company
that shares of Series D Preferred Stock have been transferred to the
Trust, the Trustee of the Trust shall sell the shares of Series D
Preferred Stock held in the Trust to a Person, designated by the
Trustee, whose ownership of the shares of Series D Preferred Stock
will not violate the ownership limitations set forth in Section
7(b)(i). Upon such sale, the interest of the Charitable Beneficiary in
the shares of Series D 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 7(c)(iv). The Purported Record Transferee shall receive
the lesser of (1) the price paid by the Purported Record Transferee
for the shares of Series D Preferred Stock in the transaction that
resulted in such transfer to the Trust (or, if the event which
resulted in the transfer to the Trust did not involve a purchase of
such shares of Series D Preferred Stock at Market Price, the Market
Price of such shares of Series D Preferred Stock on the day of the
event which resulted in the transfer of such shares of Series D
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 Series D 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 Series D Preferred Stock have been transferred to
the Trustee, such shares of Series D Preferred Stock are sold by a
Purported Record Transferee then (i) such shares of Series D Preferred
Stock shall be deemed to have been sold on behalf of the Trust and
(ii) to the extent that the Purported Record Transferee received an
amount for such shares of Series D Preferred Stock that exceeds the
amount that such Purported Record Transferee was entitled to receive
pursuant to this Section 7(c)(iv), such excess shall be paid to the
Trustee upon demand.
15
(v) Series D 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 for the shares of Series D Preferred Stock in
the transaction that resulted in such transfer to the Trust (or, if the
event which resulted in the transfer to the Trust did not involve a
purchase of such shares of Series D Preferred Stock at Market Price, the
Market Price of such shares of Series D Preferred Stock on the day of the
event which resulted in the transfer of such shares of Series D 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 Series D
Preferred Stock held in the Trust pursuant to Section 7(c)(iv). Upon such a
sale to the Company, the interest of the Charitable Beneficiary in the
shares of Series D 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 Series D Preferred Stock shall thereupon be paid to
the Charitable Beneficiary.
(vi) 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 the Series D Preferred
Stock held in the Trust would not violate the restrictions set forth in
Section 7(b)(i) in the hands of such Charitable Beneficiary.
(d) Remedies For Breach. If the Board of Directors or a committee
-------------------
thereof or other designees if permitted by the MGCL shall at any time determine
in good faith that a Transfer or other event has taken place in violation of
Section 7(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 Series D Preferred Stock of the
Company in violation of Section 7(b) of these Articles Supplementary, the Board
of Directors or a committee thereof or other designees if permitted by 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 Series D 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 7(b)(i) of these Articles Supplementary, shall
automatically result in the transfer to a Trust as described in Section 7(b)(ii)
and any Transfer in violation of Section 7(b)(iii) 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 Series D Preferred Stock in violation of Section
7(b) of these Articles Supplementary, or any Person who is a Purported
Beneficial Transferee such that an automatic transfer to a Trust results under
Section 7(b)(ii) of these Articles Supplementary, shall immediately give written
notice to the Company of such event and
16
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 Series D Preferred Stock and each Person
(including the shareholder of record) who is holding Series D 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 7(n) 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 7 of these Articles Supplementary,
including any definition contained in Section 7(a), the Board of Directors shall
have the power to determine the application of the provisions of this Section 7
with respect to any situation based on the facts known to it (subject, however,
to the provisions of Section 7(n) of these Articles Supplementary). In the event
Section 7 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 7. Absent a
decision to the contrary by the Board of Directors (which the Board of Directors
may make in its sole and absolute discretion), if a Person would have (but for
the remedies set forth in Section 7(b)) acquired Beneficial or Constructive
Ownership of Series D Preferred Stock in violation of Section 7(b)(i), such
remedies (as applicable) shall apply first to the shares of Series D Preferred
Stock which, but for such remedies, would have been actually owned by such
Person, and second to shares of Series D 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 Series D Preferred Stock based upon the relative number of the shares
of Series D Preferred Stock held by each such Person.
(i) Exceptions.
----------
(i) Subject to Section 7(b)(i)(C), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Series D Preferred Stock in violation of
Section 7(b)(i)(A) if the Board of Directors obtains such representations
and undertakings from such Person as are reasonably necessary in the
opinion of the Board of Directors to ascertain that no individual's
Beneficial Ownership of such shares of Series D Preferred Stock will
violate Section 7(b)(i)(A) or that any such violation will not
17
cause the Company to fail to qualify as a REIT under the Code, and agrees
that any violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Section 7(b) of these
Articles Supplementary) or attempted violation will result in such Series D
Preferred Stock being transferred to a Trust in accordance with Section
7(b)(ii) of the Articles Supplementary.
(ii) Subject to Section 7(b)(i)(C), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Series D Preferred Stock in violation of Section
7(b)(i)(B), if the Company obtains such representations and undertakings
from such Person as are reasonably necessary in the opinion of the Board of
Directors to ascertain that such Person does not and 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 that any
violation or attempted violation will result in such Series D Preferred
Stock being transferred to a Trust in accordance with Section 7(b)(ii) of
these Articles Supplementary. Notwithstanding the foregoing, the inability
of a Person to make the certification described in this Section 7(i)(ii)
shall not prevent the Board of Directors, in its sole discretion, from
exempting such Person from the limitation on a Person Constructively Owning
Series D Preferred Stock in violation of Section 7(b)(i)(B) 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) of the
Company in any taxable year, after taking into account the effect of this
sentence with respect to all other capital stock of the Company to which
this sentence applies.
(iii) Prior to granting any exception pursuant to Section
7(i)(i) or (ii) of these Articles Supplementary, the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of
counsel, in either case in form and substance satisfactory to the Board of
Directors in its sole discretion, as it may deem necessary or advisable in
order to determine or ensure the Company's status as a REIT.
(j) Legends. Each certificate for Series D Preferred Stock shall
-------
bear substantially the following legends in addition to any legends required to
comply with federal and state securities laws:
Class of Stock
"THE COMPANY IS AUTHORIZED TO ISSUE CAPITAL 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
18
CLASS OF THE PREFERRED STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF
PREFERRED STOCK. THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER
MAKING A WRITTEN REQUEST THEREFOR, A COPY OF THE COMPANY'S CHARTER AND A WRITTEN
STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR 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 SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS
TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. 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 D PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP
AND TRANSFER FOR THE PURPOSE OF THE COMPANY'S MAINTENANCE OF ITS STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY
PROVIDED IN THE ARTICLES SUPPLEMENTARY FOR THE SERIES D PREFERRED STOCK, (i) NO
PERSON MAY BENEFICIALLY OWN SHARES OF THE COMPANY'S SERIES D PREFERRED STOCK
WHICH, TAKING INTO ACCOUNT ANY OTHER CAPITAL STOCK OF THE COMPANY BENEFICIALLY
OWNED BY SUCH PERSON, WOULD CAUSE SUCH OWNERSHIP TO EXCEED THE BENEFICIAL
OWNERSHIP LIMIT OF 7.0%; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE
COMPANY'S SERIES D PREFERRED STOCK WHICH, TAKING INTO ACCOUNT ANY OTHER CAPITAL
STOCK OF THE COMPANY CONSTRUCTIVELY OWNED BY SUCH PERSON, WOULD CAUSE SUCH
OWNERSHIP TO EXCEED THE CONSTRUCTIVE OWNERSHIP LIMIT OF 9.8%; (iii) NO PERSON
MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES D PREFERRED STOCK THAT, TAKING
INTO ACCOUNT ANY OTHER CAPITAL STOCK OF THE COMPANY BENEFICIALLY OR
CONSTRUCTIVELY OWNED BY SUCH PERSON, 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 SERIES D 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 SERIES D PREFERRED STOCK WHICH
CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES D
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
SERIES D
19
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 WHICH ARE DEFINED IN THE ARTICLES
SUPPLEMENTARY FOR THE SERIES D PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED
TO THEM IN SUCH ARTICLES SUPPLEMENTARY, AS THE SAME MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP,
WILL BE FURNISHED TO EACH HOLDER OF SERIES D PREFERRED STOCK ON REQUEST AND
WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL OFFICE."
(k) Exchange of Series D Preferred Units. So long as the Company
------------------------------------
remains the general partner of the Operating Partnership, the Board of
Directors of the Company is hereby expressly vested with authority (subject
to the restrictions on ownership, transfer and redemption of Series D
Preferred Stock set forth in this Section 7) to issue, and shall issue to
the extent provided in the Partnership Agreement, Series D Preferred Stock
in exchange for Series D Preferred Units (as defined in the Partnership
Agreement) (the "Series D Preferred Units").
------------------------
(l) Reservation of Shares. Pursuant to the obligations of the
---------------------
Company under the Partnership Agreement to issue Series D Preferred Stock
in exchange for Series D Preferred Units, the Board of Directors is hereby
required to reserve and authorize for issuance a number of authorized but
unissued shares of Series D Preferred Stock not less than the number of
Series D Preferred Units issued to permit the Company to issue Series D
Preferred Stock in exchange for Series D Preferred Units that may be
exchanged for or converted into Series D Preferred Stock as provided in the
Partnership Agreement.
(m) Severability. If any provision of this Section 7 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.
(n) NYSE. Nothing in this Section 7 shall preclude the settlement
----
of any transaction entered into through the facilities of the NYSE. The
shares of Series D Preferred Stock that are the subject of such transaction
shall continue to be subject to the provisions of this Section 7 after such
settlement.
(o) Applicability of Section 7. The provisions set forth in this
--------------------------
Section 7 shall apply to the Series D Preferred Stock notwithstanding any
contrary provisions of the Series D Preferred Stock provided for elsewhere
in these Articles Supplementary.
20
Section 8. No Conversion Rights. The holders of the Series D
--------------------
Preferred Stock shall not have any rights to convert such shares into shares of
any other class or series of stock or into any other securities of, or interest
in, the Company.
Section 9. No Sinking Fund. No sinking fund shall be established
---------------
for the retirement or redemption of Series D Preferred Stock.
Section 10. No Preemptive Rights. No holder of the Series D
--------------------
Preferred Stock of the Company shall, as such holder, have any preemptive rights
to purchase or subscribe for additional shares of stock of the Company or any
other security of the Company which it may issue or sell.
Fourth: The Series D Preferred Stock have been classified and
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designated by the Board under the authority contained in the Charter.
Fifth: These Articles Supplementary have been approved by the
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Board in the manner and by the vote required by law.
Sixth: These Articles Supplementary shall be effective at the
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time the State Department of Assessment and Taxation of Maryland accepts these
Articles Supplementary for the record.
Seventh: The undersigned Senior Vice President of the Company
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acknowledges these Articles Supplementary to be the corporate act of the Company
and, as to all matters or facts required to be verified under oath, the
undersigned Senior Vice President acknowledges that 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 for
perjury.
(SPACE LEFT INTENTIONALLY BLANK)
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In witness whereof, the Company has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
Senior Vice President and attested to by its Secretary on this 9 th day of
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December, 1999.
KILROY REALTY CORPORATION
By: /S/ Tyler H. Rose
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Tyler H. Rose
Senior Vice President
[SEAL]
ATTEST:
/S/ Richard E. Moran Jr.
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Richard E. Moran Jr.
Secretary
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