UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 2, 2007
KILROY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
| Maryland | 1-12675 | 95-4598246 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 12200 W. Olympic Boulevard, Suite 200, Los Angeles, California | 90064 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (310) 481-8400
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. |
On February 2, 2007, the Executive Compensation Committee (the “Committee”) of the Board of Directors of Kilroy Realty Corporation (the “Company”) approved the 2007 annual bonus program, the 2007 annual long-term incentive program, and the 2007 long-term targeted performance incentive program (comprised of the development performance program and the total annual shareholder return program) for executive management that will allow for executive management to receive bonus compensation in the event certain specified corporate performance measures are achieved. The purpose of these programs is to provide incentive to the Company’s executive officers to attain established performance measures and to increase stockholder value in a “pay for performance” structure that is aligned with the interests of the Company’s stockholders. Executive management who will participate in the programs are the Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer (collectively, the “Executive Officers”). The Committee has conceptually approved expanding the participation in these programs to include certain other members of the Company’s senior management. For the Executive Officers, the treatment of their awards under these programs upon a change in control or termination of employment (including due to death or disability) will be governed by the applicable terms contained within each Executive Officers’ employment agreements rather than the applicable terms of these programs.
2007 Annual Bonus Program and 2007 Annual Long-Term Incentive Program
The specific performance measures for the 2007 annual bonus program and the 2007 annual long-term incentive program are based upon: 2007 funds from operations targets, 2007 revenue targets, 2007 operating margin targets, and 2007 leasing targets (each, a “Performance Criterion” and, collectively, the “Performance Criteria”). The actual total award payout under these programs relative to such Performance Criteria will be determined as follows: 25% for achievement of 2007 funds from operation targets, 25% for 2007 revenue targets, 25% for 2007 operating margin targets, and 25% for 2007 leasing targets.
Under the 2007 annual bonus program and the 2007 annual long-term incentive program, the Executive Officers are eligible to earn different amounts of incentive compensation depending on the level of performance achieved for each of the Performance Criteria. The Executive Officers must exceed a minimum threshold performance level for each Performance Criterion to earn incentive compensation with respect to that individual Performance Criterion under each of these programs. Once the Executive Officers exceed the applicable minimum thresholds, they are eligible to earn additional incentive compensation upon achieving certain target and/or high levels of performance. In the event the Executive Officers exceed the applicable thresholds but do not achieve the applicable target and/or high performance levels, they are entitled to proportional awards. When calculating the total payout under these programs, the payout under each Performance Criterion is calculated independently.
2007 Annual Bonus Program
Under the 2007 annual bonus program, the Chief Executive Officer is eligible to earn up to 100% of his 2007 base salary in the event threshold performance levels are achieved for all of the Performance Criteria, 200% of his 2007 base salary in the event target performance levels are achieved for all of the Performance Criteria, and 400% of his 2007 base salary in the event high performance levels are achieved for all of the Performance Criteria. The Chief Operating Officer is eligible to earn up to 68% of his 2007 base salary in the event threshold performance levels are achieved for all of the Performance Criteria, 136% of his 2007 base salary in the
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event target performance levels are achieved for all of the Performance Criteria, and 218% of his 2007 base salary in the event high performance levels are achieved for all of the Performance Criteria. The Chief Financial Officer is eligible to earn up to 60% of his 2007 base salary in the event threshold performance levels are achieved for all of the Performance Criteria, 120% of his 2007 base salary in the event target performance levels are achieved for all of the Performance Criteria, and 192% of his 2007 base salary in the event high performance levels are achieved for all of the Performance Criteria.
It is anticipated that any amounts earned under the 2007 annual bonus program will be paid in cash during the first quarter of 2008. Payments under this program are contingent on continued employment through December 31, 2007.
2007 Annual Long-Term Incentive Program
Under the 2007 annual long-term incentive program, the Chief Executive Officer is eligible to earn up to 150% of his 2007 base salary in the event the threshold performance levels are achieved for all of the Performance Criteria and 300% of his 2007 base salary in the event the target performance levels are achieved for all of the Performance Criteria; the Chief Operating Officer is eligible to earn up to 136% of his 2007 base salary in the event the threshold performance levels are achieved for all of the Performance Criteria and 273% of his 2007 base salary in the event the target performance levels are achieved for all of the Performance Criteria; and the Chief Financial Officer is eligible to earn up to 100% of his 2007 base salary in the event the threshold performance levels are achieved for all of the Performance Criteria and 200% of his 2007 base salary in the event the target performance levels are achieved for all of the Performance Criteria.
Individual awards under the 2007 annual long-term incentive program will be made under the Kilroy Realty 2006 Incentive Award Plan (the “2006 Plan”), and it is anticipated that such awards will be paid in restricted stock or, if available, and at the employee’s option, in long-term incentive program partnership units of Kilroy Realty, L.P. (“LTIP Units”) that, subject to vesting and other conditions, may become exchangeable on a one-for-one basis for shares of the Company’s common stock or cash, at the election of the Company. The Company anticipates that the restricted stock or LTIP Units will be issued during the first quarter of 2008, subject to forfeiture in the event employment is terminated prior to the vesting of such restricted stock or LTIP Units. Each share of restricted stock or LTIP Unit, both vested and non-vested, will entitle the holder to receive dividends or distributions in an amount per restricted share or LTIP Unit equal to the dividends per share paid on the Company’s common stock or distributions in respect of Kilroy Realty, L.P.’s common limited partnership units, as applicable. Such dividends or distributions are not returnable to the Company if individual awards are forfeited prior to vesting. Individual awards under the 2007 annual long-term incentive program will vest 50% on December 31, 2008 and 50% on December 31, 2009 based on continued employment through the applicable vesting date.
2007 Long-Term Targeted Performance Incentive Program
The 2007 long-term targeted performance incentive program is comprised of two separate programs: the development performance program and the total annual shareholder return program. These programs are meant to provide multiple year performance incentives, as opposed to the annual performance incentives provided pursuant to the 2007 annual bonus program and the 2007 annual long-term incentive program.
Development Performance Program
The specific performance measures for the development performance program are based upon: development completion targets and development leasing targets (each, a “Development Performance Criterion” and, collectively, the “Development Performance Criteria”). The actual total award payout under this program relative to such Development Performance Criteria will be determined for 2007 development starts, once 2007 development starts exceed a certain pre-defined threshold, as follows: 50% for achievement of development completion targets measured based on actual building shell development costs as compared to budgeted building shell development costs on a weighted average basis for all 2007 development starts and 50% for achievement of development leasing targets measured based on an average leased percentage on a weighted average basis for all 2007 development starts and on whether leases included in the average leased percentage were executed at a market rental rate or higher at the time of lease execution on a weighted average basis. The performance period for the development completion component will end at building shell completion for the last 2007 development
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start. The performance period for the development leasing component will end two years after building shell completion for the last 2007 development start or earlier if the pre-determined development leasing targets are met. When calculating the total payout under this program, the payout under each Development Performance Criterion is calculated independently.
Under this program, the Chief Executive Officer is eligible to earn 150% of his 2007 base salary in the event the target performance levels are achieved for both of the Development Performance Criteria; the Chief Operating Officer is eligible to earn 136% of his 2007 base salary in the event the target performance levels are achieved for both of the Development Performance Criteria; and the Chief Financial Officer is eligible to earn 100% of his 2007 base salary in the event the target performance levels are achieved for both of the Development Performance Criteria. In the event the target performance levels are not achieved for either of the Development Performance Criterion, the Executive Officers will earn nothing under that particular Development Performance Criterion.
Individual awards under the development performance program will be made under the 2006 Plan and will be made in unrestricted shares of common stock of the Company or LTIP Units, as there is no additional service vesting period under this program.
Total Annual Shareholder Return Program
The specific performance measures for the total annual shareholder return program are based upon: absolute total annual shareholder return targets and relative total annual shareholder return targets for calendar year 2007 (each, a “Shareholder Return Criterion” and, collectively, the “Shareholder Return Criteria”). The actual total award payout under this program relative to such Shareholder Return Criteria will be determined as follows: 50% for achievement of absolute total annual shareholder return targets and 50% for relative total annual shareholder return targets. When calculating the total payout under this program, the payout under each Shareholder Return Criterion is calculated independently.
Under this program, the Chief Executive Officer is eligible to earn 150% of his 2007 base salary in the event the target performance levels are achieved for both of the Shareholder Return Criteria; the Chief Operating Officer is eligible to earn 136% of his 2007 base salary in the event the target performance levels are achieved for both of the Shareholder Return Criteria; and the Chief Financial Officer is eligible to earn 100% of his 2007 base salary in the event the target performance levels are achieved for both of the Shareholder Return Criteria. In the event the target performance levels are not achieved for either of the Shareholder Return Criterion, the Executive Officers will earn nothing under that particular Shareholder Return Criterion.
Individual awards under the total annual shareholder return program will be made under the 2006 Plan, and it is anticipated that such awards will be paid in restricted stock or, if available, and at the employee’s option, in LTIP Units that, subject to vesting and other conditions, may become exchangeable on a one-for-one basis for shares of the Company’s common stock or cash, at the election of the Company. The Company anticipates that the restricted stock or LTIP Units will be issued during the first quarter of 2008, subject to forfeiture in the event employment is terminated prior to the vesting of such restricted stock, or LTIP Units. Each share of restricted stock or LTIP Unit, both vested and non-vested, will entitle the holder to receive dividends or distributions in an amount per restricted share or LTIP Unit equal to the dividends per share paid on the Company’s common stock or distributions in respect of Kilroy Realty, L.P.’s common limited partnership units, as applicable. Such dividends or distributions are not returnable to the Company if individual awards are forfeited prior to vesting. Individual awards under this program will vest 50% on December 31, 2008 and 50% on December 31, 2009 based on continued employment through the applicable vesting date.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
List below the financial statements, pro forma financial information and exhibits, if any, filed as part of this report.
(d) Exhibits
| 4.1 | Form of Restricted Stock Award Agreement | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KILROY REALTY CORPORATION | ||||
|
Date: February 8, 2007 |
||||
| By: |
/s/ Heidi R. Roth |
|||
| Heidi R. Roth | ||||
| Senior Vice President and Controller | ||||
EXHIBIT INDEX
|
Exhibit
No. |
Description |
|
| 4.1* | Form of Restricted Stock Award Agreement. | |
| * | Filed herewith. |
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Exhibit 4.1
KILROY REALTY
2006 INCENTIVE AWARD PLAN
RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT
Kilroy Realty Corporation, a Maryland corporation (the “ Company ”), pursuant to the Kilroy Realty 2006 Incentive Award Plan (the “ Plan ”), hereby grants to the individual listed below (“ Participant ”), the number of shares of the Company’s common stock, par value $.01 per share, set forth below (the “ Shares ”). This Restricted Stock Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Award Agreement attached hereto as Exhibit A (the “ Restricted Stock Agreement ”) (including without limitation the Restrictions on the Shares set forth in the Restricted Stock Agreement) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Agreement.
By his or her signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and this Grant Notice. Participant has reviewed the Restricted Stock Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Restricted Stock Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Agreement. If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit B .
| KILROY REALTY CORPORATION: | PARTICIPANT: | |||||||
| By: | By: | |||||||
| Print Name: | Print Name: | |||||||
| Title: | ||||||||
| Address: | ||||||||
| KILROY REALTY, L.P.: | ||
| By: | ||
| Print Name: | ||
| Title: | ||
EXHIBIT A
TO RESTRICTED STOCK AWARD GRANT NOTICE
KILROY REALTY RESTRICTED STOCK AWARD AGREEMENT
This Restricted Stock Award Agreement (the “ Agreement ”), dated as of __________, 200__, is made and entered into by and between Kilroy Realty Corporation, a Maryland corporation (the “ Company ”), Kilroy Realty, L.P., a Maryland limited partnership (the “ Employer ”), and ____________ (the “ Participant ”). Pursuant to the Restricted Stock Award Grant Notice (the “ Grant Notice ”) to which this Agreement is attached, the Company has granted to Participant the right to purchase the number of shares of Restricted Stock under the Kilroy Realty 2006 Incentive Award Plan (as amended from time to time, the “ Plan ”) as set forth in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Definitions . All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Plan and the Grant Notice.
1.2 Incorporation of Terms of Plan . The Award is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
AWARD OF RESTRICTED STOCK
2.1 Award of Restricted Stock .
(a) Award . In consideration of the Participant’s agreement to remain in the service or employ of the Company, the Employer, the TRS or any Subsidiary (as applicable), and for other good and valuable consideration, the Company issues to the Participant the Award described in this Agreement (the “ Award ”). The number of shares of Restricted Stock (the “ Shares ”) subject to the Award is set forth in the Grant Notice.
(b) Purchase Price; Book Entry Form . The purchase price of the Shares is set forth on the Grant Notice. At the sole discretion of the Committee, the Shares will be issued in either (i) uncertificated form, with the Shares recorded in the name of the Participant in the books and records of the Company’s transfer agent with appropriate notations to the extent that the Shares remain subject to the Restrictions (as defined below); or (ii) certificate form pursuant to the terms of Sections 2.1(c) and (d).
(c) Legend . Certificates representing Shares issued pursuant to this Agreement shall, until all restrictions on transfer imposed pursuant to this Agreement lapse or shall have been removed and new certificates are issued, bear the following legend (or such other legend as shall be determined by the Committee):
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AWARD
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AGREEMENT, DATED ____________ __, 200_, BY AND BETWEEN KILROY REALTY CORPORATION, KILROY REALTY, L.P. AND THE REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE PROVISIONS OF SUCH AGREEMENT.”
(d) Escrow . The Secretary of the Company or such other escrow holder as the Committee may appoint may retain physical custody of the certificates representing the Shares until all of the restrictions on transfer imposed pursuant to this Agreement lapse or shall have been removed. In such event the Participant shall not retain physical custody of any certificates representing unvested Shares issued to the Participant.
2.2 Restrictions .
(a) Repurchase of Shares Subject to Restrictions . In the event that the Participant ceases to be an Employee, member of the Board, Consultant or TRS Director for any reason, the Company or the Employer shall have the right to repurchase from the Participant any or all Shares then subject to the Restrictions at a cash price per Share equal to the price paid by the Participant for such Shares. For purposes of this Agreement, “ Restrictions ” shall mean the restrictions on sale or other transfer set forth in Section 3.1 and the exposure to repurchase set forth in this Section 2.2(a).
(b) Vesting and Lapse of Restrictions . Subject to Sections 2.2(a) and 3.2, the Award shall vest and the Restrictions shall lapse in accordance with the vesting schedule set forth on the Grant Notice.
(c) Tax Withholding; Conditions to Issuance of Certificates . Notwithstanding any other provision of this Agreement (including without limitation Section 2.1(b)):
(i) No Shares shall be recorded in the name of the Participant in the books and records of the Company’s transfer agent and no new certificate shall be delivered to the Participant or his legal representative unless and until the Participant or his legal representative shall have paid to the Company or the Employer the full amount of all federal and state withholding or other taxes applicable to the taxable income of Participant resulting from the grant of Shares or the lapse or removal of the Restrictions.
(ii) The Company shall not be required to record any Shares in the name of the Participant in the books and records of the Company’s transfer agent, and neither the Company nor the Employer shall be required to issue or deliver any certificate or certificates for any Shares prior to the fulfillment of all of the following conditions: (A) the admission of the Shares to listing on all stock exchanges on which the Company’s common stock is then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary and advisable, (C) the obtaining of any approval or other clearance from any state or federal governmental agency that the Committee shall, in its absolute discretion, determine to be necessary or advisable and (D) the lapse of any such reasonable period of time following the date the Restrictions lapse as the Committee may from time to time establish for reasons of administrative convenience.
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ARTICLE III.
OTHER PROVISIONS
3.1 Restricted Stock Not Transferable . No Shares that are subject to the Restrictions or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 3.1 notwithstanding, with the consent of the Committee, the Shares may be transferred to certain persons or entities related to Participant, including but not limited to members of Participant’s family, charitable institutions or trusts or other entities whose beneficiaries or beneficial owners are members of Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to any such conditions and procedures the Committee may require. Notwithstanding the foregoing, in no event shall the Award be transferable by the Participant to a third party (other than the Company, the Partnership, the TRS or any Subsidiary) for consideration.
3.2 Ownership Limit and REIT Status . Notwithstanding anything contained herein, the Award shall not vest and the Restrictions shall not lapse:
(a) to the extent that such vesting or lapsing could cause the Participant to be in violation of the Ownership Limit (as defined in the Company’s Articles of Incorporation, as amended from time to time) or Subparagraph E(2) of Article IV (or any successor provision thereto) of the Company’s Articles of Incorporation, as amended from time to time; or
(b) if, in the discretion of the Committee, such vesting or lapsing could impair the Company’s status as a REIT.
3.3 Rights as Stockholder . Except as otherwise provided herein, upon the Grant Date the Participant shall have all the rights of a stockholder with respect to the Shares, subject to the Restrictions herein, including the right to vote the Shares and the right to receive any cash or stock dividends paid to or made with respect to the Shares.
3.4 Not a Contract of Employment . Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company, the Partnership, the TRS or any Subsidiary.
3.5 Governing Law . The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
3.6 Conformity to Securities Laws . The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act of 1933, as amended, and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
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3.7 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board , provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely effect the Award in any material way without the prior written consent of the Participant.
3.8 Notices . Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the Participant to his address shown in the Company records, and to the Company or the Employer at their principal executive offices.
3.9 Successors and Assigns . The Company and the Employer may assign any of their rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company or the Employer. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
| KILROY REALTY CORPORATION, | ||
| a Maryland corporation | ||
| By: | ||
| [Name] | ||
| [Title] | ||
| KILROY REALTY, L.P., | ||
| a Maryland limited partnership | ||
| By: | Kilroy Realty Corporation, a Maryland corporation | |
| Its: | General Partner | |
| By: | ||
| [Name] | ||
| [Title] | ||
| PARTICIPANT |
| [Name] |
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EXHIBIT B
TO RESTRICTED STOCK AWARD GRANT NOTICE
CONSENT OF SPOUSE
I, ____________________, spouse of _______________, have read and approve the foregoing Agreement. In consideration of issuing to my spouse the shares of the common stock of Kilroy Realty Corporation set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares of the common stock of Kilroy Realty Corporation issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.
| Dated: , | ||||
| Signature of Spouse |
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