REITs Executive Compensation Guide

Key Terms of Equity Plans and Award Agreements

Overview Equity plans and the award agreements governing any equity awards issued pursuant to such plans are legal documents that govern equity compensation awarded to employees and directors. Equity plans (or equity incentive plans) cover various programs that are designed to reward and incentivize key employees of a REIT. These plans typically provide for the grant of restricted stock awards, RSU awards, LTIP awards, stock options, SARs and other awards, generally excluding any cash incentive compensation. The various forms of award agreements are usually filed with the SEC in conjunction with the equity plan, each of which specifies terms relating to a particular type of award (e.g., a performance-based restricted stock award would not use the same award agreement that is used for a time-based restricted stock award).

Equity Plans Key matters that are covered in equity plans include the following:

purpose of the plan;

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■ administration of the plan (typically vested in the REIT’s compensation committee) and any eligible participants who may be covered under the plan; types of awards covered under the plan and any defined terms relating to each award; how many shares are reserved under the plan, including any limits for certain participants (e.g., limits on equity awarded to non-employee directors); treatment of forfeited awards and any share recycling provisions; ■ the various performance metrics that the REIT and the compensation committee may utilize in connection with grants of performance-based equity awards; and ■ severance-related provisions, including, but not limited to, CiC, “good reason” or “cause” definitions and treatment of awards under certain termination scenarios. ■ ■ form and timing of settlement; ■ ■

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