KILROY
REALTY CORPORATION STOCK AWARD
DEFERRAL
PROGRAM
PREAMBLE
Kilroy
Realty Corporation (the “
Company
”) hereby establishes
this Stock Award Deferral Program on December 26, 2007 (the “
Effective Date
”) as part of
and subject to the terms of the Company’s 2006 Incentive Award Plan, as may be
amended from time to time (the “
Plan
”), which is hereby
incorporated herein by reference. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in the
Plan. The purpose of this Program is to promote the success and
enhance the value of the Company by linking the personal interests of Directors
and eligible Employees to those of Company stockholders by providing such
individuals with an incentive for outstanding performance to generate superior
returns to Company stockholders and, further, to provide flexibility to the
Company in its ability to motivate, attract and retain the services of Directors
and Employees upon whose judgment, interest and special effort the successful
conduct of the Company’s operation is largely dependent.
ARTICLE
I
DEFINITIONS
Section
1.01
“
Account
”
means an account created
by the Company pursuant to Article IV of this Program.
Section
1.02
“
Beneficiary
”
means the person or persons, including a trustee, personal representative or
other fiduciary last designated in writing by a Participant in accordance with
procedures established by the Committee to receive the benefits specified
hereunder in the event of the Participant’s death. No Beneficiary
designation shall become effective until it is filed with the Company. If there
is no Beneficiary designation in effect for a Participant, or if there is no
surviving designated Beneficiary, then the benefits specified hereunder shall
be
distributed in accordance with the applicable laws of descent and
distribution.
Section
1.03
“
Company
”
shall have the meaning provided in the Preamble.
Section
1.04
“
Company
Account Plan
” means any “account balance” nonqualified deferred
compensation plan (within the meaning of Section 409A) maintained by the Company
or any entity constituting a single employer with the Company within the meaning
of Code Section 414(b) or (c).
Section
1.05
“
Director
”
means a member of the
Board.
Section
1.06
“
Distribution
Date
” shall have the meaning provided in Section 5.01 below.
Section
1.07
“
Effective
Date
” shall have the meaning provided in the Preamble.
Section
1.08
“
Election
”
means an election under this Program (i) to receive
Restricted Stock Units
in lieu
of a Stock Award, or (ii) to re-defer the delivery of shares under such
Restricted Stock
Units
.
Section
1.09
“
Election
Form
” means a form prescribed by the Committee (which may be in paper or
electronic format) pursuant to which Eligible Service Providers may make Initial
Deferral Elections and Re-Deferral Elections under the Program.
Section
1.10
“
Eligible
Service Provider
” means (i) each Director, (ii) each Employee serving at
the level of Vice President or higher, and (iii) each other Employee who is
designated as an Eligible Service Provider in writing by the
Committee.
Section
1.11
“
ERISA
”
means the Employee Retirement Income Security Act, as amended.
Section
1.12
“
Fixed-Date
Distribution
” means a distribution of the shares subject to Restricted
Stock Units on a date specified by the Participant in an applicable Election
Form in accordance with Section 2.02 below.
Section
1.13
“
Initial
Deferral Election
” shall have the meaning provided in Section 2.01
below.
Section
1.14
“
Participant
”
means, for purposes of this Program, any Eligible Service Provider who elects
to
participate in the Program in accordance with the terms of the
Program.
Section
1.15
“
Performance-Based
Compensation
” shall mean “performance-based compensation” within the
meaning of Section 409A.
Section
1.16
“
Plan
”
shall
have
the meaning provided in the Preamble.
Section
1.17
“
Program
”
means this Kilroy Realty
Corporation Stock Award Deferral Program.
Section
1.18
“
Re-Deferral
Election
” shall have the
meaning provided in Section 2.04 below.
Section
1.19
“
Section
409A
” means Section 409A of the Internal Revenue Code of 1986, as
amended, together with other interpretive guidance issued thereunder, including
without limitation, any such regulations or other guidance that may be issued
after the Effective Date.
Section
1.20
“
Separation
from Service
”
means a “separation from service” from the Company within the meaning of Section
409A.
Section
1.21
“
Specified
Employee
” shall mean any Participant who is, or was at any time during
the twelve-month period ending on the Company’s “specified employee
identification date,” a “specified employee” of the Company (each within the
meaning of Section 409A).
Section
1.22
“
Specified
Employee Payment Date
” shall have the meaning provided in Section 5.03
below.
Section
1.23
“
Stock
Award
”
means an
award of Restricted Stock under the Plan.
Section
1.24
“
Trust
”
shall mean a “rabbi trust” satisfying the model trust conditions described in
Treas. Rev. Proc. 92-64 and any subsequent Internal Revenue Service guidance
affecting the validity of such ruling.
Section
1.25
“
Unforeseeable
Emergency
” shall mean an “unforeseeable emergency” within the meaning of
Section 409A.
Section
1.26
“
Year
”
means a calendar
year.
ELECTIONS
TO DEFER
Section
2.01
Initial
Deferral Elections
. In lieu of any Stock Award, an Eligible
Service Provider may elect to receive an equivalent number of
Restricted Stock Units
by making
an election in accordance with this Section 2.01 and Section 2.02
below. An Election with respect to a Stock Award for services
performed in any given Year must be made on or before December 31 of the Year
immediately preceding the Year in which such services are performed;
provided, however,
that an
Election with respect to a Stock Award that constitutes Performance-Based
Compensation
may
,
to the extent permitted by Section
409A,
be made
on or
before the last date that is six months prior to the end of the applicable
performance period. Notwithstanding the foregoing, any individual who
first becomes an Eligible Service Provider during any Year and who was not,
prior to becoming an Eligible Service Provider, eligible to participate in
any
other Company Account Plan, may elect, no later than thirty days following
the
date such individual first becomes an Eligible Service Provider, to receive
an
equivalent number of
Restricted
Stock Units
in lieu
of the shares of Stock subject to any Stock Award for services performed by
the
Eligible Service Provider during the portion of such Year that follows such
Election (any deferral made in accordance with this Section 2.01, an “
Initial Deferral
Election
”).
Section
2.02
Initial
Election Procedure
. Eligible Service Providers may effectuate
Initial Deferral Elections by timely completing and submitting to the Committee
(or its designee) an
Election
Form
specifying, at a minimum: (i) the Year and/or Stock Award to which
the Initial Deferral Election pertains, as applicable; and (ii) if the
Participant elects to receive a Fixed-Date Distribution, the specified date
on
which the Fixed-Date Distribution shall be made, which shall be no earlier
than
two years after the start of the Year in which the underlying Stock Award is
earned.
Section
2.03
Subsequent-Year
Stock Awards
. Each Election Form specifying an Initial
Deferral Election shall apply only to Stock Awards earned in the Year
next-following the submission of such Election Form or, in the case of
Performance-Based Compensation, earned during the relevant performance
period. Any Participant who wishes to defer Stock Awards earned in a
Year subsequent to such next-following Year must submit an Election Form to
the
Committee (or its designee) specifying such additional Initial Deferral Election
during the Year immediately preceding that in which such subsequent Stock Awards
will be earned.
Section
2.04
Re-Deferral
Elections
. The Committee may, in its sole discretion and to
the extent compliant with applicable laws (including without limitation, Section
409A), permit Participants to re-defer some or all of the shares subject to
Stock Awards previously deferred as Restricted Stock Units under this Program
(a
“
Re-Deferral
Election
”). If so permitted, a Participant may effectuate a
Re-Deferral Election by completing and submitting to the Committee (or its
designee), no more frequently than once per Year with respect to each Deferral
Election, a new Election Form in accordance with any rules or policies issued
by
the Committee with regard to Re-Deferral Elections,
provided
,
however,
that (i) a
Re-Deferral Election may only be made prior to such time as a Participant ceases
to be an Eligible Service Provider; (ii) any such Re-Deferral Election must
be
made at least one year prior to the first date on which any shares subject
to
the Re-Deferral Election would otherwise be delivered to the Participant, absent
such Re-Deferral Election; (iii) such Re-Deferral Election shall not take effect
until at least 12 months after the date on which the Re-Deferral Election is
made; and (iv) delivery of the shares with respect to which such Re-Deferral
Election is made must be deferred for an additional period of not less than
five
years from the date such shares would otherwise have been delivered to the
Participant. Election Forms specifying Re-Deferral Elections which
comply with the foregoing may cover one or more existing Elections, as specified
in the applicable Election Form.
Section
2.05
Deferrals
Irrevocable
. Any Election that has not been revoked in a
writing submitted to the Committee (or its designee) on or prior to the last
day
on which such Election could validly be made under the terms of this Program
shall be irrevocable with respect to the shares of Stock deferred or re-deferred
under such Election as of the first day on which such Election could no longer
validly be made under the terms of this Program. If an Eligible
Service Provider or a Participant fails to make a timely Election for any
reason, then such individual shall not be permitted to defer or re-defer any
Stock Awards during the period to which such Election would have applied if
validly made.
DIVIDEND
EQUIVALENTS; VESTING
Section
3.01
Dividend
Equivalents
. Each Restricted Stock Unit awarded under this
Program shall carry with it a right to receive Dividend Equivalents in respect
of the share of Stock underlying such Restricted Stock Unit, which shall entitle
the Participant to whom such Dividend Equivalents are granted to have such
Participant’s Account credited in accordance with Section 4.02 below upon the
Company’s payment of dividends. To the extent that additional
Restricted Stock Units are credited to a Participant’s Account in respect of
such Participant’s Dividend Equivalents, such Restricted Stock Units shall also
carry corresponding Dividend Equivalents. Each Dividend Equivalent
shall remain outstanding from the date of grant of such Dividend Equivalent
through the earlier to occur of (i) the Participant’s forfeiture for any reason
of the Restricted Stock Unit to which such Dividend Equivalent corresponds,
or
(ii) the delivery to the Participant of the shares of Stock underlying the
Restricted Stock Unit to which such Dividend Equivalent
corresponds.
Section
3.02
Vesting
of Restricted Stock Units
. Unless determined otherwise by the
Committee and except as provided in Section 3.03 below, Restricted Stock Units
granted under this Program (other than Restricted Stock Units attributable
to
Dividend Equivalents) shall be subject to the same vesting conditions as would
have applied to the shares underlying the Stock Awards in lieu of which such
Restricted Stock Units are issued, as determined by the Committee and specified
in an applicable Restricted Stock Unit grant agreement. Any
Restricted Stock Units credited to a Participant’s Account that do not vest
prior to or in connection with the Participant’s termination of employment or
directorship (taking into consideration any vesting that may occur in connection
with such termination) shall be forfeited upon such termination.
Section
3.03
Vesting
of Dividend Equivalents
. Notwithstanding the foregoing, any Restricted
Stock Units credited to a Participant’s Account in respect of Dividend
Equivalents shall be fully vested on the date that such amounts are credited
to
such Account.
ARTICLE
IV
ACCOUNTS
Section
4.01
Accounts
. The
Company shall establish and maintain hypothetical bookkeeping accounts for
Participants for purposes of tracking the number of Restricted Stock Units
awarded under this Program, together with any additional Restricted Stock Units
credited to such accounts in respect of Dividend Equivalents, in accordance
with
Section 4.02 below. The Company may, in its sole discretion, create
one or more subaccounts under any such bookkeeping account to reflect Restricted
Stock Units whose underlying shares of Stock may be subject to different
distribution schedules or otherwise as necessary or convenient to the
administration of this Program (such hypothetical accounts, together with any
subaccounts thereunder, the “
Accounts
”). Except
as expressly provided in Section 4.03 below (with regard to a Trust), neither
this Program nor any of the Accounts established hereunder shall hold any shares
of Stock or give any Participant or Beneficiary any right, interest or claim
in
any particular assets of the Company or any Trust, other than that of a general,
unsecured creditor.
Section
4.02
Crediting
of Accounts
. Participants’ Accounts shall be credited as
follows:
a)
|
Restricted
Stock
Units
. On the date that any Stock Award to which an
Initial Deferral Election hereunder
pertains would be
granted
(absent an applicable Election)
, the Company shall credit the
Account of the deferring Participant with a number of Restricted
Stock
Units equal to the number of shares of Stock deferred under such
Stock
Award;
|
b)
|
Cash
Dividends
. On the date that the Company pays any cash
dividend in respect of outstanding shares of Stock, the Company shall
credit each Participant’s Account with a number of full and fractional
Restricted Stock Units equal to the quotient of (i) the number of
Restricted Stock Units credited to such Account but not yet distributed,
multiplied by the per share dollar amount of such dividend, divided
by
(ii) the Fair Market Value of a share of Stock on the date such dividend
is paid (credited proportionately over any subaccounts, if
applicable);
|
c)
|
Stock
Dividends
. On the date that the Company pays any Stock
dividend in respect of outstanding shares of Stock, the Company shall
credit each Account with a number of shares of full and fractional
Restricted Stock Units equal to the product of (i) the number of
Restricted Stock Units credited to such Account but not yet distributed,
multiplied by (ii) the number of shares of Stock distributed with
respect
to such dividend per share of Stock;
and
|
d)
|
Other
Distributions
. On the date that the Company pays any
other type of distribution in respect of outstanding shares of Stock,
the
Company shall credit each Participant’s Account in an equitable manner
based on the number of Restricted Stock Units held in such Account,
as
determined in the sole discretion of the
Committee.
|
Section
4.03
Trust
. The
Company may, in its sole discretion, establish a Trust for purposes of
allocating funds to satisfy obligations arising under this
Program. The rights of Participants and Beneficiaries (if any) with
respect to any assets so held in Trust (if any) shall be governed by the terms
and conditions of the document(s) creating such Trust.
DISTRIBUTION
Section
5.01
Distribution
of Shares
. Subject to Sections 5.02 and 5.03 below, shares of
Stock underlying Restricted Stock Units issued under this Program (including
any
Restricted Stock Units issued in respect of rights to Dividend Equivalents)
shall, to the extent vested as of any such date, be distributed in a single
distribution upon the earliest to occur of: (i) the Participant’s Separation
from Service; (ii) the occurrence of a “change of control event” (within the
meaning of Section 409A), (iii) to the extent so elected by the Participant,
the
applicable Fixed-Date Distribution date (as may be adjusted in respect of any
Re-Deferral Election); and (iv) the occurrence of the Participant’s death or
disability (within the meaning of Section 409A) (any such date, a “
Distribution
Date
”). To the extent that any fractional Restricted Stock
Units become distributable on a Distribution Date, such fractional Restricted
Stock Units shall be distributed in cash. To the extent that any
outstanding Restricted Stock Units remain unvested as of an applicable
Distribution Date (after taking into consideration any vesting which may occur
in connection with the occurrence of such Distribution Date), then such
Restricted Stock Units shall, to the extent not forfeited in connection with
such distribution, be distributed as Restricted Stock, and the vesting schedule
that applied to such Restricted Stock Units immediately prior to such
distribution shall continue to apply to such Restricted Stock.
Section
5.02
Unforeseeable
Emergency
. If a Participant experiences an Unforeseeable
Emergency, the Committee may, in its sole discretion, permit an early
distribution of that portion of such Participant’s Account reasonably necessary
to satisfy the emergency need giving rise to the Unforeseeable
Emergency, including any taxes or penalties reasonably anticipated to
result from such distribution and taking into consideration any funds that
may
become available as a result of the termination of such Participant’s existing
Election(s) in connection with such distribution. If the
Participant’s Account is comprised of one or more subaccounts, the Committee
shall determine, in its sole discretion, from which subaccount such amounts
shall be distributed. If a Participant takes a distribution pursuant
to this Section 5.02, any existing Elections by such Participant shall
immediately terminate with regard to Stock Awards not yet earned at the time
of
such distribution and the Participant shall only be eligible to make future
Elections under this Program as determined by the Committee, in its sole
discretion and in accordance with Section 409A.
Section
5.03
Specified
Employees
.
Notwithstanding
anything
in this Program or any Election Form to the contrary, with respect to any
Participant who is a Specified Employee at the time of such Participant’s
Separation from Service, as determined in the sole discretion of the Committee,
the distribution of such Participant’s Account (and all subaccounts) upon such
Separation from Service shall, to the extent that such distribution upon a
Separation from Service would be a prohibited distribution under Section
409A(a)(2)(b)(i) of the Code, be delayed until the date which is six months
and
one day after the date on which such Separation from Service occurs (such
delayed payment date, the “
Specified Employee Payment
Date
”),
provided
,
however
, that to the extent
that all or any portion of such Participant’s Account would have been
distributed during the six-month period following such Separation from Service
without regard to such Separation from Service, such amounts shall continue
be
distributed in accordance with such schedule without regard to this Section
5.02, and any remaining balance in such Participant’s Account shall be
distributed on the Specified Employee Payment Date.
ARTICLE
VI
ADMINISTRATION
Section
6.01
Administration
.
This
Program shall be administered by the Committee in accordance with the provisions
of Article 12 of the Plan. Without limiting the generality of the
foregoing, the Committee may delegate the administration of ministerial duties
to one or more individuals or sub-committees
and, in the event of such delegation,
references to "Committee" herein shall be deemed to refer to the individuals
or
subcommittees to whom such delegation has been
made
. References to the Committee throughout this Program
shall be understood to refer to the appropriate administrative body as provided
under this Section 6.01
.
Section
6.02
Powers
and Duties of the Committee
. Without limiting the generality
of Article 12 of the Plan, the Committee, on behalf of Participants and their
Beneficiaries, shall administer this Program in accordance with its terms,
and
shall have all powers necessary to accomplish its purposes, including, but
not
by way of limitation, the following:
a)
|
To
construe and interpret the terms and provisions of this Program and
to
make all factual determinations relevant to this
Program;
|
b)
|
To
direct and instruct the trustee of any Trust (if the Company establishes
a
Trust), to the extent the Company is authorized or required to do
so under
this Program; and
|
c)
|
To
take all actions set forth in this Program
document.
|
Section
6.03
Construction
and Interpretation
.
The Committee
shall
have full discretion to construe and interpret the terms and provisions of
this
Program, which construction and interpretation shall be final and binding on
all
parties, including but not limited to the Company and all Participants and
Beneficiaries.
BENEFICIARIES
Section
7.01
Beneficiaries
.
Each Participant shall have the right to designate one or more Beneficiaries
to
succeed to such Participant’s right to receive distributions hereunder in the
event of such Participant’s death.
ARTICLE
VIII
MISCELLANEOUS
Section
8.01
Adjustments
. Without
limiting the generality of any provision of this Program, Article 11 of the
Plan
(pertaining to adjustments upon changes in capital structure and corporate
transactions) is hereby expressly incorporated by reference into this
Program.
Section
8.02
Unsecured
General Creditors
.
Participants
and
their Beneficiaries, heirs, successors, and assigns shall have no legal or
equitable rights, claims, or interest in any specific property or assets of
the
Company or any Trust. Any and all of the Company’s assets and any
Trust’s assets shall be, and remain, the general unpledged, unrestricted assets
of the Company, which shall be subject to the claims of the Company’s general
creditors. The Company’s obligations under this Program shall be
merely that of an unfunded and unsecured promise of the Company to pay shares
of
Stock in the future, and the rights of the Participants and Beneficiaries shall
be no greater than those of unsecured general creditors. It is the intention
of
the Company that this Program (and any Trust established in connection herewith)
be unfunded for purposes of the Code and for purposes of Title I of
ERISA.
Section
8.03
Section
409A
. To the extent applicable, this Program, the Plan, all
Election Forms and all other instruments evidencing amounts subject to this
Program shall be interpreted in accordance with Section
409A. Notwithstanding any provision of this Program, the Plan, any
Election Form or any other instrument evidencing amounts subject to this Program
to the contrary, if the Committee determines that any amounts subject to this
Program may be or become subject to taxes under Section 409A, the Committee
may
adopt such amendments to this Program, the Plan, any Election Form(s) and any
other instruments relating to this Program or the Plan, and/or adopt other
policies and procedures (including amendments, policies and procedures with
retroactive effect), or take any other actions as the Committee determines
are
necessary or appropriate to (i) exempt such amounts from Section 409A, or (ii)
comply with the requirements of Section 409A, in any case, to preserve the
intended tax treatment of the such amounts.
Section
8.04
Restriction
Against Assignment
.
Except as otherwise
provided herein or by law, no right or interest of any Participant or
Beneficiary under this Program shall be assignable or transferable, in whole
or
in part, either directly or by operation of law or otherwise, including without
limitation by execution, levy, garnishment, attachment, pledge or in any manner;
no attempted assignment or transfer thereof shall be effective; and no right
or
interest of any Participant or Beneficiary under this Program shall be liable
for, or subject to, any obligation or liability of such Participant. When a
payment is due under this Program to a Participant or Beneficiary who is unable
to care for his or her affairs, payment may be made directly to his or her
legal
guardian or personal representative.
Section
8.05
Withholding
.
The
Company shall have
the authority and the right to deduct, withhold or require a Participant or
Beneficiary to remit to the Company an amount sufficient to satisfy federal,
state, local and foreign taxes (including without limitation any income and
employment tax obligations) required by law to be withheld with respect to
amounts payable under this Program.
Section
8.06
Program
Subject to the Plan
.
This Program
is established under and controlled by the
Plan. The Program and all Restricted Stock Units and Dividend
Equivalents awarded hereunder shall be subject to the terms and conditions
of
the Plan.
Section
8.07
Expenses
. The
expenses of administering this Program shall be borne by the
Company.
Section
8.08
No
Rights
as Stockholder
. Except as expressly provided herein with respect to
dividends, the right to receive Stock at a later date under this Program shall
not entitle any person to rights of a stockholder with respect to such Stock
unless and until such shares of Stock have been issued to such
Participant.
Section
8.09
Amendment,
Suspension or Termination
.
The Board may
amend, suspend or terminate this Program in whole or in part, at any time,
except that no amendment, suspension or termination shall have any retroactive
effect to reduce any amounts allocated to a Participant’s Account.
Section
8.10
Additional
Authority
.
The Board may,
in its
sole discretion, with respect to this Program and all matters arising hereunder,
take any action permitted under Treas. Reg. 1.409A-3(j) or any successor
provision thereto, as such provisions may be amended from time to time,
including without limitation, terminate or liquidate the Program, whether or
not
in connection with a Change in Control.
Section
8.11
Release
.
Any
payment
to a Participant or Beneficiary in accordance with the provisions of this
Program shall, to the extent thereof, be in full satisfaction of all claims
arising under, or with respect to, this Program against the Committee and the
Company. The Company may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute and release in a form prescribed by the
Company.
Section
8.12
Captions
. The
captions contained in this Program are for convenience only and shall have
no
bearing on the meaning, construction or interpretation of the Program’s
provisions.
Section
8.13
Validity
.
The invalidity or
unenforceability of any provision of this Program shall not affect the validity
or enforceability of any other provision of this Program, which shall remain
in
full force and effect.
**
IN
WITNESS WHEREOF
, Kilroy
Realty Corporation has caused this Program to be executed on this 26th day
of
December, 2007.
KILROY
REALTY CORPORATION
By:
____________________________
Name:
Title:
By:
____________________________
Name:
Title:
EXHIBIT
A
[ELECTION
FORM]