Colonial Properties Trust 2012 Annual Incentive Plan

 

On January 24, 2012, the Executive Compensation Committee of the Board of Trustees of Colonial Properties Trust (the "Company") adopted an annual incentive plan for 2012 and set the specific performance goals and business criteria for the award of 2012 incentive payments to each of the Company's executive officers. Such incentives are expected to be paid in the first quarter of 2013. The intent of the performance goals and business criteria of this plan is to align the interests of the Company's executive management team with the interests of the Company's shareholders. The performance goals and business criteria for 2012 are based on the following:

 

 

For purposes of the 2012 annual incentive plan, “total return” is equal to the share price of the Company (or the companies in the index of comparable REITs, as the case may be) plus any dividends reinvested in the Company (or the companies in the index of comparable REITs, as the case may be) calculated based on reinvestment on the ex-dividend pay date.

 

The Company's absolute performance measure must be positive for the plan year for any payout to occur; however, (1) if the absolute performance measure is negative but the Company's total return is at least at the “median” level of performance when compared to the one-year “total return” relative performance measure, the Compensation Committee has discretion to pay up to 20% of the payout calculated based on the relative performance measures' results, and (2) if the absolute performance measure is positive and the Company's total return is at least at the “median” level of performance when compared to the one-year “total return” relative performance measure, the Compensation Committee has the discretion to increase the award amount up to 20% of the payout calculated based on the relative performance measures' results. In addition to this specific discretionary authority, the Compensation Committee retains discretion to adjust any payment that is otherwise under the terms of the 2012 annual incentive plan.

 

The first 75% of each annual incentive award will automatically be payable to the applicable participant in time-vesting restricted common share awards that will vest in three equal annual installments beginning on the first anniversary of the grant date. In addition, 50% of all shares received by a participant with respect to the first 75% of each annual incentive award (after the payment of taxes, including, if applicable by the forfeiture of shares) must be held by the participant for five years or until separation from the Company, including retirement, whichever occurs first.

 

With respect to the remaining 25% of his or her approved 2012 annual incentive award, each participant will receive such portion of his or her award in cash unless he or she elects to receive any or all of such remaining 25% in restricted common shares. Each participant who elects to receive between 25% and 50% of such remaining amount in restricted common shares will receive shares having a market value on the grant date equal to 125% of the amount elected to be received in restricted common shares (i.e., an additional 25% in restricted common shares), and each participant who elects to receive more than 50% of such remaining 25% in restricted common shares will receive shares having a market value on the grant date equal to 140% of the elected amount (i.e., an additional 40% in restricted common shares). These restricted common share awards are subject to a three-year vesting period - 50% will vest on the first anniversary of the grant date and 25% will vest on each of the second and third anniversaries of the grant date. In the event, however, that the Compensation Committee grants a discretionary annual incentive award to a participant and the absolute performance measure was negative, then the entire remaining 25% of the participant's annual incentive award will be payable by the Company solely in restricted common shares that will vest 100% on the third anniversary of the grant date.

 

The amounts actually payable to the participants are determined based upon whether Company performance meets the “threshold,” “median,” “target” or “maximum” level for the relative performance measures. For each relative performance measure, the “threshold” level is the 25^th percentile, the “median” level is the 50^th percentile, the “target” level is the 75^th percentile and the “maximum” level is the 90^th percentile. The relative performance measures are weighted equally, i.e., 33.33% of any payout is based on the one-year relative performance measure; 33.33% of any payout is based on the two-year relative performance measure, and 33.33% of any payout is based on the three-year relative performance measure. For the

2012 annual incentive plan, the performance payout thresholds were set as follows:

 

 

Since the Company is a multifamily-focused REIT, the Compensation Committee adopted a peer group comprised solely of multifamily REITs for purposes of calculating the relative performance measures under the 2012 annual incentive plan. The following peer group was selected by the Compensation Committee for calculating the relative performance measures:

For 2012, the Compensation Committee determined that long-term incentive compensation for the participants would continue to be provided through a combination of share options and restricted common share awards. Amounts awarded are expected to equal 100% of each participant's actual annual incentive award for the year (if any) in an equal split between option shares (which will vest 100% on the third anniversary of the grant date) and restricted common shares (which will vest in five equal annual installments beginning on the first anniversary of the grant date and will be subject to a five-year holding period (or until separation from the Company, including retirement, whichever occurs first)). All shares issued under the 2012 annual incentive plan and options or restricted common shares issued as long-term incentive awards are expected to be issued under the Company's 2008 Omnibus Incentive Plan, as amended.