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Equity Incentive Plan

12 Months Ended

Dec. 31, 2024

Equity Incentive Plan

Equity Incentive Plan

Note 10 – Equity Incentive Plan

In May 2024, the Company’s stockholders approved the Agree Realty Corporation 2024 Omnibus Incentive Plan (the “2024 Plan”), which replaced the Agree Realty Corporation 2020 Omnibus Incentive Plan. The 2024 Plan provides for the award to employees, directors and consultants of the Company of options, restricted stock, restricted stock units, stock appreciation rights, performance awards (which may take the form of performance units or performance shares) and other awards to acquire up to an aggregate of 2,000,000 shares of the Company’s common stock. As of December 31, 2024, 2,000,000 shares of common stock were available for issuance under the 2024 Plan.

Restricted Stock - Employees

Restricted shares have been granted to employees which vest based on continued service to the Company.

The holder of a restricted share award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a stockholder of the Company, including the right to vote the shares and the right to receive dividends on the shares. Restricted share awards granted prior to 2023 vest over a five-year period while awards granted in 2023 and 2024 vest over a three-year period.

The Company estimates the fair value of restricted share grants at the date of grant and amortizes those amounts into expense on a straight-line basis over the appropriate vesting period. The Company used 0% for the forfeiture rate for determining the fair value of restricted stock. The Company recognized expense related to restricted share grants of $5.8 million, $4.6 million and $3.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024, there was $9.0 million of total unrecognized compensation costs related to the outstanding restricted shares, which is expected to be recognized over a weighted average period of 1.8 years. The intrinsic value of restricted shares vested was $2.3 million, $2.7 million and $1.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Restricted share activity is summarized as follows:


		Shares		Weighted Average
		Outstanding		Grant Date
		(in thousands)		Fair Value
Unvested restricted stock at December 31, 2021		175		$	64.90

Restricted stock granted		81		$	63.10
Restricted stock vested		(63)		$	60.84
Restricted stock forfeited		(10)		$	65.12
Unvested restricted stock at December 31, 2022		183		$	65.46

Restricted stock granted		82		$	73.15
Restricted stock vested		(56)		$	63.95
Restricted stock forfeited		(15)		$	69.12
Unvested restricted stock at December 31, 2023		194		$	68.85

Restricted stock granted		101		$	57.51
Restricted stock vested		(68)		$	69.33
Restricted stock forfeited		(9)		$	63.63
Unvested restricted stock at December 31, 2024		218		$	63.65

Performance Units and Shares

Performance shares were granted to certain executive officers prior to 2019, while performance units were granted beginning in 2019. Performance units and shares are subject to a three-year performance period, following the conclusion of which shares awarded are to be determined by the Company’s total shareholder return (“TSR”) compared to the constituents of the MSCI US REIT Index and a defined peer group. Fifty percent of the award is based upon the TSR percentile rank versus the constituents in the MSCI US REIT Index for the three-year performance period; and fifty percent of the award is based upon TSR percentile rank versus a specified net lease peer group for the three-year performance period. For performance units and shares granted prior to 2023, vesting of the performance units following their issuance will occur ratably over a three-year period, with the initial vesting occurring immediately following the conclusion of the performance period such that all units vest within five years of the original award date. Performance units granted in 2023 and 2024 vest following the conclusion of the performance period such that all units will vest three years from the original award date.

The grant date fair value of these awards is determined using a Monte Carlo simulation pricing model. For the performance units and shares granted prior to 2023, compensation expense is amortized on an attribution method over a five-year period. For performance units granted in 2023 and 2024, compensation expense is amortized on a straight-line basis over a three-year period. Compensation expense related to performance units and shares is determined at the grant date and is not adjusted throughout the measurement or vesting periods.

The Monte Carlo simulation pricing model for issued grants utilizes the following assumptions: (i) expected term (equal to the remaining performance measurement period at the grant date); (ii) volatility (based on historical volatility); and (iii) risk-free rate (interpolated based on 2-and 3- year rates). The Company used 0% for the forfeiture rate for determining the fair value of performance units and shares.

The following assumptions were used when determining the grant date fair value:


			2024			2023			2022
Expected term (years)			2.9			2.9			2.9
Volatility			20.0	%		23.6	%		33.5	%
Risk-free rate			4.5	%		4.4	%		1.8	%

The Company recognized expense related to performance units for which the three-year performance period had not yet been completed of $3.1 million, $2.2 million and $1.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was $5.3 million of total unrecognized compensation costs related to performance units for which the three-year performance period has not yet been completed, which is expected to be recognized over a weighted average period of 1.8 years.

The Company recognized expense related to performance units and shares for which the three-year performance period was completed, however the shares have not yet vested, of $0.5 million, $0.5 million and $0.4 million for the years ending December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was $0.2 million of total unrecognized compensation costs related to performance units and shares for which the three-year performance period has been completed, however the shares have not yet vested, which is expected to be recognized over a weighted average period of 0.9 years.

Performance unit and share activity is summarized as follows:


		Target Number		Weighted Average
		of Awards		Grant Date
		(in thousands)		Fair Value
Performance units and shares at December 31, 2021 - three-year performance period to be completed		78		$	72.13

Performance units granted		34		$	68.59
Performance shares - three-year performance period completed		(27)		$	66.96
Performance units at December 31, 2022 - three-year performance period to be completed		85		$	72.27

Performance units granted		47		$	80.34
Performance units - three-year performance period completed		(21)		$	90.17
Performance units at December 31, 2023 - three-year performance period to be completed		111		$	72.14

Performance units granted		77		$	59.16
Performance units - three-year performance period completed		(31)		$	63.42
Performance units at December 31, 2024 - three-year performance period to be completed		157		$	67.50


	Shares		Weighted Average
	Outstanding		Grant Date
	(in thousands)		Fair Value
Performance shares - three-year performance period completed but not yet vested at December 31, 2021	27		$	55.29

Shares earned at completion of three-year performance period ⁽¹⁾	28		$	66.96
Shares vested	(23)		$	59.91
Performance shares and units - three-year performance period completed but not yet vested at December 31, 2022	32		$	61.91

Shares earned at completion of three-year performance period ⁽²⁾	33		$	90.17
Shares vested	(34)		$	69.73
Performance units and shares - three-year performance period completed but not yet vested at December 31, 2023	31		$	83.40

Shares earned at completion of three-year performance period ⁽³⁾	23		$	63.42
Shares vested	(28)		$	75.18
Performance units and shares - three-year performance period completed but not yet vested at December 31, 2024	26		$	74.58

(1) Performance units granted in 2019 for which the three-year performance period was completed in 2022 were earned at the 106% performance level

(2) Performance units granted in 2020 for which the three-year performance period was completed in 2023 were earned at the 150% performance level

(3) Performance units granted in 2021 for which the three-year performance period was completed in 2024 were earned at the 76% performance level

Restricted Stock - Directors

Beginning in 2022, the Company granted restricted shares to non-employee directors which vest over the calendar year, commensurate with the board members’ annual services to the Company.

During the year ended December 31, 2024, 23,389 restricted shares were granted to independent members of the Company’s board of directors at a weighted average grant date fair value of $57.51 per share. During the year ended December 31, 2023, 14,535 restricted shares were granted to independent members of the Company’s board of directors at a weighted average grant date fair value of $73.27 per share.

The holder of a restricted share award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a stockholder of the Company, including the right to vote the shares and the right to receive dividends on the shares.

The Company estimates the fair value of board members’ restricted share grants at the date of grant and amortizes those amounts into expense on a straight-line basis over the one-year vesting period. The Company recognized expense relating to restricted share grants to the board members of $1.3 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.

The Company used 0% for the forfeiture rate for determining the fair value of this restricted stock.