Stock Appreciation Rights

A stock appreciation right (SAR) gives an employee the right to receive either cash or stock equal to the appreciation in value of the company’s shares from the date of SAR grant until the date the SAR is exercised. It differs from Restricted Stock Units because of this built-in purchase or exercise price.

 

SARs are customarily subject to a vesting as other types of equity compensation.  Once vested, they may be exercised at the election of the employee. When exercised, SARs are settled either in cash or in stock of the company. Taxes are due when the holder exercises his rights, provided that the exercise price of the SAR is not less than the fair market value of the underlying stock on the grant date and SAR does not include any additional deferral features.

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