A compensatory award granted to an employee or other service provider of a company. On exercise of a SAR, the recipient is entitled to receive an amount equal to the appreciation in the value of the underlying company shares from the date the SAR is granted until the SAR is exercised.

SARs may be settled in cash or shares. However, it is more common for SARs to be settled in cash.

A SAR is similar to a stock option except that the recipient is not required to pay an exercise price to exercise the SAR. Rather, the recipient receives the excess of the fair market value of the SAR at the time of exercise over the exercise price (usually the fair market value of the underlying shares on the grant date).

As is the case with stock options, a recipient's ability to exercise a SAR is typically subject to the satisfaction of vesting requirements.

For further information on SARs, see Practice Notes, Equity Compensation Awards: Overview: Stock Appreciation Rights and Overview of the Taxation of Equity Compensation Awards: Stock Appreciation Rights. For a model SAR agreement that can be used with an equity plan to grant SARs to an employee, see Standard Document, Stock Appreciation Rights Agreement (Employee).