Share-Based Compensation

Stockholder Approved Equity Compensation Plans

As of March 31, 2013, we maintained one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan as amended (the "2006 Plan"). As of March 31, 2013, 142,532 shares were available for grant under the 2006 Plan. The number of shares that remains available for grant is calculated using the weighted share counting provisions set forth in the 2006 Plan, which are based on the type of awards that are granted. The maximum number of shares available for grant subject to full value awards (which generally include equity awards other than options and stock appreciation rights) was 48,812 shares as of March 31, 2013.

Summary of Market-Measure Based RSUs

On March 30, 2012, the Executive Compensation Committee of the Company's Board of Directors granted 103,239 restricted stock units ("RSUs") to the Company's Chief Executive Officer. The RSUs granted vest in seven equal annual installments for each calendar year during 2012 through 2018 based on the achievement of certain absolute or relative total shareholder return goals measured annually or, if neither of the shareholder return hurdles are achieved for an applicable year during the performance period, those RSUs will remain eligible to vest in a subsequent year (ending in 2018) based on the achievement of a cumulative total shareholder return goal, as well as (in each case) continued employment through the applicable vesting date.

As of March 31, 2013, we had 88,491 unvested market-measure based RSUs outstanding.

Summary of Time-Based RSUs

A summary of our time-based RSU activity from January 1, 2013 through March 31, 2013 is presented below:



	Nonvested RSUs				Vested RSUs		Total RSUs
	Amount		Weighted-Average Grant Date Fair Value Per Share		Vested RSUs		Total RSUs
Outstanding at January 1, 2013	279,102		$	41.30	769,761		1,048,863
Granted	157,232		48.88		—		157,232
Vested	(64,778	)	37.89		64,778		—
Settled ⁽¹⁾					(8,559	)	(8,559	)
Issuance of dividend equivalents ⁽²⁾					6,864		6,864
Canceled ⁽¹⁾⁽³⁾					(3,800	)	(3,800	)
Outstanding as of March 31, 2013	371,556		$	45.11	829,044		1,200,600

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(1)	Represents vested RSUs that are settled in cash or shares of the Company's common stock.


(2)	RSUs issued as dividend equivalents are vested upon issuance.


(3)	We accept the return of RSUs, at the current quoted closing share price of the Company's common stock, to satisfy minimum statutory tax-withholding requirements related to either the issuance, vesting or settlement of RSUs in accordance with the terms of the 2006 Plan.

A summary of our time-based RSU activity for the three months ended March 31, 2013 and 2012 is presented below:



	RSUs Granted			RSUs Vested
Three Months Ended March 31,	Non-Vested RSUs Issued	Weighted-Average Grant Date Fair Value Per Share		Vested RSUs		Total Vest-Date Fair Value ⁽¹⁾ (in thousands)
2013	157,232	$	48.88	(64,778	)	$	3,161
2012	196,033	44.29		(48,864	)	1,961

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(1)	Total fair value of RSUs vested was calculated based on the quoted closing share price of the Company's common stock on the NYSE on the day of vesting.

On April 4, 2013, the terms of 61,327 time-based RSUs granted to certain officers of the Company in January 2013 were modified to include performance-based vesting requirements based on certain total shareholder return and FFO per share targets. The Company's closing stock price on the date of modification was $53.05. The compensation expense related to the modified RSUs will be recognized using the accelerated attribution expense method through the remainder of the five-year requisite service period.

Summary of Nonvested Shares

A summary of our nonvested shares activity from January 1, 2013 through March 31, 2013 is presented below:



Nonvested Shares	Shares		Weighted-Average Grant Date Fair Value Per Share
Outstanding at January 1, 2013	95,241		$	40.42
Granted	—		—
Vested ⁽¹⁾	(47,291	)	39.12
Outstanding as of March 31, 2013	47,950		$	41.71

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(1)	The total shares vested include 20,880 shares that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the restricted shares that have vested. We accept the return of shares at the current quoted closing share price of the Company's common stock to satisfy tax obligations.

A summary of our nonvested and vested share activity for the three months ended March 31, 2013 and 2012 is presented below:



	Shares Granted			Shares Vested
Three Months Ended March 31,	Non-Vested Shares Issued	Weighted-Average Grant Date Fair Value Per Share		Vested Shares		Total Fair Value at Vest Date⁽¹⁾ (in thousands)
2013	—	$	—	(47,291	)	$	2,290
2012	59,938	41.71		(33,104	)	1,274

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(1)	Total fair value of shares vested was calculated based on the quoted closing share price of the Company's common stock on the NYSE on the date of vesting.

Summary of Stock Options

A summary of our stock option activity from January 1, 2013 through March 31, 2013 is presented below:



	Number of Options		Exercise Price	Remaining Contractual Term (years)
Outstanding at January 1, 2013	1,540,000		$42.61
Granted	—		—
Exercised	—		—
Forfeited	(12,000	)	42.61
Outstanding at March 31, 2013 ⁽¹⁾⁽²⁾	1,528,000		$42.61	8.9

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(1)	As of March 31, 2013, 308,000 of the outstanding stock options were exercisable.


(2)	The total intrinsic value of options outstanding at March 31, 2013 was $15.0 million.

Share-based Compensation Cost Recorded During the Period

The total compensation cost for all share-based compensation programs was $2.4 million and $1.5 million for the three months ended March 31, 2013 and 2012, respectively. Of the total share-based compensation cost, $0.2 million and $0.2 million was capitalized as part of real estate assets for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, there was approximately $31.2 million of total unrecognized compensation cost related to nonvested incentive awards granted under share-based compensation arrangements that is expected to be recognized over a weighted-average period of 2.6 years. The remaining compensation cost related to these nonvested incentive awards had been recognized in periods prior to March 31, 2013.