Document:

exv10w3

Exhibit 10.3

TERRENO REALTY CORPORATION

2010 EQUITY INCENTIVE PLAN

			
	SECTION 1.	 	GENERAL PURPOSE OF THE PLAN; DEFINITIONS

     The name of the plan is the Terreno Realty Corporation 2010 Equity Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee
Directors and other key persons (including Consultants and prospective employees) of Terreno Realty
Corporation (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a direct stake in the
Company’s welfare will assure a closer identification of their interests with those of the Company
and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company.

     The following terms shall be defined as set forth below:

     “Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

     “Administrator” means either the Board or the compensation committee of the Board or a similar
committee performing the functions of the compensation committee and which is comprised of not less
than two Non-Employee Directors who are independent.

     “Award” or “Awards,” except where referring to a particular category of grant under the Plan,
shall include Restricted Stock Awards, Unrestricted Stock Awards and Performance Share Awards.

     “Award Certificate” means a written or electronic document setting forth the terms and
provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the
terms and conditions of the Plan.

     “Board” means the Board of Directors of the Company.

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.

     “Consultant” means any natural person that provides bona fide services to the Company, and
such services are not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for the Company’s
securities.

     “Corporate Transaction” shall mean (i) the sale of all or substantially all of the assets of
the Company on a consolidated basis to an unrelated person or entity, or (ii) a merger,
reorganization, consolidation or other transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving entity) pursuant to which the holders of

 

 

the Company’s outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the resulting or successor entity (or its ultimate
parent, if applicable) immediately upon completion of such transaction.

     “Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section
162(m) of the Code.

     “Effective Date” means the date on which the Plan is approved by stockholders as set forth in
Section 16.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.

     “Fair Market Value” of the Stock on any given date means the fair market value of the Stock
determined in good faith by the Administrator; provided, however, that if the Stock is admitted to
quotation on the New York Stock Exchange or another national securities exchange, the determination
shall be made by reference to market quotations. If there are no market quotations for such date,
the determination shall be made by reference to the last date preceding such date for which there
are market quotations; provided further, however, that if the date for which Fair Market Value is
determined is the first day when trading prices for the Stock are reported on a national securities
exchange, the Fair Market Value shall be the “Price to the Public” (or equivalent) set forth on the
cover page for the final prospectus relating to the Company’s Initial Public Offering.

     “Initial Public Offering” means the consummation of the first fully underwritten, firm
commitment public offering pursuant to an effective registration statement under the Act covering
the offer and sale by the Company of its equity securities, or such other event as a result of or
following which the Stock shall be publicly held.

     “Non-Employee Director” means a member of the Board who is not also an employee of the Company
or any Subsidiary.

     “Performance-Based Award” means any Restricted Stock Award or Performance Share Award granted
to a Covered Employee that is intended to qualify as “performance-based compensation” under Section
162(m) of the Code and the regulations promulgated thereunder.

     “Performance Criteria” means the criteria that the Administrator selects for purposes of
establishing the Performance Goal or Performance Goals for an individual for a Performance Cycle.
The Performance Criteria (which shall be applicable to the organizational level specified by the
Administrator, including, but not limited to, the Company or a unit, division, group, or Subsidiary
of the Company) that will be used to establish Performance Goals are limited to the following:
total shareholder return, earnings before interest, taxes, depreciation and amortization, net
income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes
in the market price of the Stock, funds from operations or similar measure, operating income
(loss), cash flow (including, but not limited to, operating cash flow and free cash flow), return
on capital, assets, equity, or investment, earnings (loss) per share of Stock, volume and
performance of capital deployment, any of which may be measured either in

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absolute terms or as compared to any incremental increase or as compared to results of a peer
group.

     “Performance Cycle” means one or more periods of time, which may be of varying and overlapping
durations, as the Administrator may select, over which the attainment of one or more Performance
Criteria will be measured for the purpose of determining a grantee’s right to and the payment of a
Restricted Stock Award or Performance Share Award. Each such period shall not be less than 12
months.

     “Performance Goals” means, for a Performance Cycle, the specific goals established in writing
by the Administrator for a Performance Cycle based upon the Performance Criteria.

     “Performance Share Award” means an Award entitling the recipient to acquire shares of Stock
upon the attainment of specified Performance Goals.

     “Restricted Stock Award” means an Award entitling the recipient to acquire, at such purchase
price (which may be zero) as determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of grant.

     “Sale Price” means the value as determined by the Administrator of the consideration payable,
or otherwise to be received by stockholders, per share of Stock pursuant to a Corporate
Transaction.

     “Section 409A” means Section 409A of the Code and the regulations and other guidance
promulgated thereunder.

     “Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to
adjustments pursuant to Section 3.

     “Subsidiary” means any corporation or other entity (other than the Company) in which the
Company has at least a 50 percent interest, either directly or indirectly.

     “Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.

			
	SECTION 2.	 	ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE
AWARDS

     (a) Administration of Plan. The Plan shall be administered by the Administrator,
provided that the amount, timing and terms of the grants of Awards to Non-Employee Directors shall
be determined by the compensation committee or similar committee comprised solely of Non-Employee
Directors.

     (b) Powers of Administrator. The Administrator shall have the power and authority to
grant Awards consistent with the terms of the Plan, including the power and authority:

          (i) to select the individuals to whom Awards may from time to time be granted;

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          (ii) to determine the time or times of grant, and the extent, if any, of Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards, or any combination of the
foregoing, granted to any one or more grantees;

          (iii) to determine the number of shares of Stock to be covered by any Award;

          (iv) to determine and modify from time to time the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions
may differ among individual Awards and grantees, and to approve the forms of Award Certificates;

          (v) to accelerate at any time the vesting of all or any portion of any Award; and

          (vi) at any time to adopt, alter and repeal such rules, guidelines and practices for
administration of the Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.

     All decisions and interpretations of the Administrator shall be binding on all persons,
including the Company and Plan grantees.

     (c) Award Certificate. Awards under the Plan shall be evidenced by Award Certificates
that set forth the terms, conditions and limitations for each Award which may include, without
limitation, the term of an Award and the provisions applicable in the event employment or service
terminates.

     (d) Indemnification. Neither the Board nor the Administrator, nor any member of
either or any delegate thereof, shall be liable for any act, omission, interpretation, construction
or determination made in good faith in connection with the Plan, and the members of the Board and
the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’
liability insurance coverage which may be in effect from time to time and/or any indemnification
agreement between such individual and the Company.

     (e) Foreign Award Recipients. Notwithstanding any provision of the Plan to the
contrary, in order to comply with the laws in other countries in which the Company and its
Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator,
in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries
shall be covered by the Plan; (ii) determine which individuals outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to
individuals outside the United States to comply with applicable foreign laws; (iv) establish
subplans and modify terms and procedures, to the extent the Administrator determines such actions
to be necessary or advisable (and such subplans and/or modifications shall be

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attached to this Plan as appendices); provided, however, that no such subplans and/or
modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take
any action, before or after an Award is made, that the Administrator determines to be necessary or
advisable to obtain approval or comply with any local governmental regulatory exemptions or
approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder,
and no Awards shall be granted, that would violate the Exchange Act or any other applicable United
States securities law, the Code, or any other applicable United States governing statute or law.

			
	SECTION 3.	 	STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

     (a) Stock Issuable. The maximum number of shares of Stock reserved and available for
issuance under the Plan shall be 455,000 shares, subject to adjustment as provided in this Section
3. For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited,
canceled or otherwise terminated shall be added back to the shares of Stock available for issuance
under the Plan. Notwithstanding the foregoing, shares tendered or held back upon settlement of an
Award to cover the tax withholding shall not be added to the shares authorized for grant under the
Plan. In the event the Company repurchases shares of Stock on the open market, such shares shall
not be added to the shares of Stock available for issuance under the Plan. Subject to such overall
limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types
of Award. The shares available for issuance under the Plan may be authorized but unissued shares
of Stock or shares of Stock reacquired by the Company.

     (b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company’s capital stock, the outstanding shares of Stock are
increased or decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares of Stock or other
securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of
the assets of the Company, the outstanding shares of Stock are converted into or exchanged for
securities of the Company or any successor entity (or a parent or subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per
share subject to each outstanding Restricted Stock Award, and (iv) the maximum number of shares
provided in Section 8(d). The adjustment by the Administrator shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such
adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional
shares.

     (c) Mergers and Other Transactions. Except as the Administrator may otherwise specify
with respect to particular Awards in the relevant Award Certificate, in the case of and subject to
the consummation of a Corporate Transaction, the Plan and all outstanding Awards granted hereunder
shall terminate, unless provision is made in connection with the Corporate Transaction in the sole
discretion of the parties thereto for the assumption or continuation of Awards theretofore granted
by the successor entity, or the substitution of such Awards with new

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Awards of the successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares as such parties shall agree (after taking into account any acceleration
hereunder or pursuant to any Award Certificate).

     (d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees, directors or other key persons of
another corporation in connection with the merger or consolidation of the employing corporation
with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the substitute awards be
granted on such terms and conditions as the Administrator considers appropriate in the
circumstances. Any substitute Awards granted under the Plan shall not count against the share
limitation set forth in Section 3(a).

			
	SECTION 4.	 	ELIGIBILITY

     Grantees under the Plan will be such full or part-time officers and other employees,
Non-Employee Directors and key persons (including Consultants and prospective employees) of the
Company and its Subsidiaries as are selected from time to time by the Administrator in its sole
discretion.

			
	SECTION 5.	 	RESTRICTED STOCK AWARDS

     (a) Nature of Restricted Stock Awards. The Administrator shall determine the
restrictions and conditions applicable to each Restricted Stock Award at the time of grant.
Conditions may be based on continuing employment (or other service relationship) and/or achievement
of pre-established performance goals and objectives. The terms and conditions of each such Award
Certificate shall be determined by the Administrator, and such terms and conditions may differ
among individual Awards and grantees.

     (b) Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment
of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to
the voting of the Restricted Stock, subject to such conditions contained in the Restricted Stock
Award Certificate. Unless the Administrator shall otherwise determine, (i) uncertificated
Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer
agent to the effect that they are subject to forfeiture until such Restricted Stock are vested as
provided in Section 5(d) below, and (ii) certificated Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested as provided in Section 5(d) below,
and the grantee shall be required, as a condition of the grant, to deliver to the Company such
instruments of transfer as the Administrator may prescribe.

     (c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in the Restricted
Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the
Award Certificate or, subject to Section 13 below, in writing after the Award is issued, if a
grantee’s employment (or other service relationship) with the Company and its Subsidiaries
terminates for any reason, any Restricted Stock that has not vested at the time of termination
shall automatically and without any requirement of notice to such grantee from or other action by

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or on behalf of, the Company be deemed to have been reacquired by the Company at its original
purchase price (if any) from such grantee or such grantee’s legal representative simultaneously
with such termination of employment (or other service relationship), and thereafter shall cease to
represent any ownership of the Company by the grantee or rights of the grantee as a stockholder.
Following such deemed reacquisition of unvested Restricted Stock that are represented by physical
certificates, a grantee shall surrender such certificates to the Company upon request without
consideration.

     (d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify
the date or dates and/or the attainment of pre-established performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the Company’s right of
repurchase or forfeiture shall lapse. Notwithstanding the foregoing, in the event that any such
Restricted Stock granted to employees shall have a performance-based goal, the restriction period
with respect to such shares shall not be less than one year, and in the event any such Restricted
Stock granted to employees shall have a time-based restriction, the total restriction period with
respect to such shares shall not be less than three years; provided, however, that Restricted Stock
with a time-based restriction may become vested incrementally over such three-year period.
Subsequent to such date or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have lapsed shall no longer
be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the
Administrator either in the Award Certificate or, subject to Section 13 below, in writing after the
Award is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall
automatically terminate upon the grantee’s termination of employment (or other service
relationship) with the Company and its Subsidiaries and such shares shall be subject to the
provisions of Section 5(c) above.

			
	SECTION 6.	 	UNRESTRICTED STOCK AWARDS

     Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion,
grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. Unrestricted Stock Awards may be granted in respect of
past services or other valid consideration, or in lieu of cash compensation due to such grantee.

			
	SECTION 7.	 	PERFORMANCE SHARE AWARDS

     (a) Nature of Performance Share Awards. The Administrator may, in its sole
discretion, grant Performance Share Awards independent of, or in connection with, the granting of
any other Award under the Plan. The Administrator shall determine whether and to whom Performance
Share Awards shall be granted, the Performance Goals, the periods during which performance is to be
measured, which may not be less than one year, and such other limitations and conditions as the
Administrator shall determine.

     (b) Rights as a Stockholder. A grantee receiving a Performance Share Award shall have
the rights of a stockholder only as to shares actually received by the grantee under the Plan and
not with respect to shares subject to the Award but not actually received by the grantee. A
grantee shall be entitled to receive shares of Stock under a Performance Share Award only upon

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satisfaction of all conditions specified in the Performance Share Award Certificate (or in a
performance plan adopted by the Administrator).

     (c) Termination. Except as may otherwise be provided by the Administrator either in
the Award agreement or, subject to Section 13 below, in writing after the Award is issued, a
grantee’s rights in all Performance Share Awards shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

			
	SECTION 8.	 	PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

     (a) Performance-Based Awards. Any employee providing services to the Company and who
is selected by the Administrator may be granted one or more Performance-Based Awards in the form of
a Restricted Stock Award or Performance Share Awards payable upon the attainment of Performance
Goals that are established by the Administrator and relate to one or more of the Performance
Criteria, in each case on a specified date or dates or over any period or periods determined by the
Administrator. The Administrator shall define in an objective fashion the manner of calculating
the Performance Criteria it selects to use for any Performance Cycle. Depending on the Performance
Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms
of overall Company performance or the performance of a division, business unit, or an individual.
The Administrator, in its discretion, may adjust or modify the calculation of Performance Goals for
such Performance Cycle in order to prevent the dilution or enlargement of the rights of an
individual (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development, (ii) in recognition of, or in anticipation of, any other unusual
or nonrecurring events affecting the Company, or the financial statements of the Company, or (iii)
in response to, or in anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions provided however, that the Administrator may not exercise such
discretion in a manner that would increase the Performance-Based Award granted to a Covered
Employee. Each Performance-Based Award shall comply with the provisions set forth below.

     (b) Grant of Performance-Based Awards. With respect to each Performance-Based Award
granted to a Covered Employee, the Administrator shall select, within the first 90 days of a
Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the
Code) the Performance Criteria for such grant, and the Performance Goals with respect to each
Performance Criterion (including a threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-Based Award will specify the amount payable,
or the formula for determining the amount payable, upon achievement of the various applicable
performance targets. The Performance Criteria established by the Administrator may be (but need
not be) different for each Performance Cycle and different Performance Goals may be applicable to
Performance-Based Awards to different Covered Employees.

     (c) Payment of Performance-Based Awards. Following the completion of a Performance
Cycle, the Administrator shall meet to review and certify in writing whether, and to what extent,
the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate
and certify in writing the amount of the Performance-Based Awards earned for the

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Performance Cycle. The Administrator shall then determine the actual size of each Covered
Employee’s Performance-Based Award, and, in doing so, may reduce or eliminate the amount of the
Performance-Based Award for a Covered Employee if, in its sole judgment, such reduction or
elimination is appropriate.

     (d) Maximum Award Payable. The maximum Performance-Based Award payable to any one
Covered Employee under the Plan for a Performance Cycle is 250,000 shares of Stock (subject to
adjustment as provided in Section 3(b) hereof).

			
	SECTION 9.	 	TRANSFERABILITY OF AWARDS

     (a) Transferability. No Awards other than Unrestricted Stock Awards shall be sold,
assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by
the laws of descent and distribution or pursuant to a domestic relations order. No Awards other
than Unrestricted Stock Awards shall be subject, in whole or in part, to attachment, execution, or
levy of any kind, and any purported transfer in violation hereof shall be null and void.

     (b) Administrator Action. Notwithstanding Section 9(a), the Administrator, in its
discretion, may provide either in the Award Certificate regarding a given Award or by subsequent
written approval that the grantee (who is an employee or director) may transfer his or her Awards
to his or her immediate family members, to trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners, provided that the transferee
agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Award. In no event may an Award be transferred by a grantee for value.

     (c) Family Member. For purposes of Section 9(b), “family member” shall mean a
grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, any person sharing the grantee’s household
(other than a tenant of the grantee), a trust in which these persons (or the grantee) have more
than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee)
control the management of assets, and any other entity in which these persons (or the grantee) own
more than 50 percent of the voting interests.

     (d) Designation of Beneficiary. Each grantee to whom an Award has been made under the
Plan may designate a beneficiary or beneficiaries to receive any payment under any Award payable on
or after the grantee’s death. Any such designation shall be on a form provided for that purpose by
the Administrator and shall not be effective until received by the Administrator. If no
beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the grantee’s estate.

			
	SECTION 10.	 	TAX WITHHOLDING

     (a) Payment by Grantee. Each grantee shall, no later than the date as of which the
value of an Award or of any Stock or other amounts received thereunder first becomes includable in
the gross income of the grantee for Federal income tax purposes, pay to the

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Company, or make arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld by the Company with
respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee.
The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee
is subject to and conditioned on tax withholding obligations being satisfied by the grantee.

     (b) Payment in Stock. Subject to approval by the Administrator, a grantee may elect
to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part,
by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a
number of shares with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due.

			
	SECTION 11.	 	SECTION 409A AWARDS

     To the extent that any Award is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional
rules and requirements as specified by the Administrator from time to time in order to comply with
Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from
service” (within the meaning of Section 409A) to a grantee who is then considered a “specified
employee” (within the meaning of Section 409A), then no such payment shall be made prior to the
date that is the earlier of (i) six months and one day after the grantee’s separation from service,
or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment
from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A.
Further, the settlement of any such Award may not be accelerated except to the extent permitted by
Section 409A.

			
	SECTION 12.	 	TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a termination of
employment:

     (a) a transfer to the employment of the Company from a Subsidiary or from the Company to a
Subsidiary, or from one Subsidiary to another; or

     (b) an approved leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

			
	SECTION 13.	 	AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any
time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect rights under any outstanding Award
without the holder’s consent. To the extent required under the rules of any securities exchange or
market system on which the Stock is listed, to the extent determined by

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the Administrator to be required by the Code to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall
be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders.
Nothing in this Section 13 shall limit the Administrator’s authority to take any action permitted
pursuant to Section 3(b) or 3(c).

			
	SECTION 14.	 	STATUS OF PLAN

     With respect to any payments in cash, Stock or other consideration not received by a grantee,
a grantee shall have no rights greater than those of a general creditor of the Company unless the
Administrator shall otherwise expressly determine in connection with any Award or Awards. In its
sole discretion, the Administrator may authorize the creation of trusts or other arrangements to
meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent with the foregoing
sentence.

			
	SECTION 15.	 	GENERAL PROVISIONS

     (a) No Distribution. The Administrator may require each person acquiring Stock
pursuant to an Award to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.

     (b) Delivery of Stock Certificates. Stock certificates to grantees under this Plan
shall be deemed delivered for all purposes when the Company or a stock transfer agent of the
Company shall have mailed such certificates in the United States mail, addressed to the grantee, at
the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed
delivered for all purposes when the Company or a Stock transfer agent of the Company shall have
given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed
to the grantee, at the grantee’s last known address on file with the Company, notice of issuance
and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to the grant of any Award, unless and
until the Administrator has determined, with advice of counsel (to the extent the Administrator
deems such advice necessary or advisable), that the issuance and delivery of such certificates is
in compliance with all applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All
Stock certificates delivered pursuant to the Plan shall be subject to any stop-transfer orders and
other restrictions as the Administrator deems necessary or advisable to comply with federal, state
or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is
listed, quoted or traded. The Administrator may place legends on any Stock certificate to
reference restrictions applicable to the Stock. In addition to the terms and conditions provided
herein, the Administrator may require that an individual make such reasonable covenants,
agreements, and representations as the Administrator, in its discretion, deems necessary or
advisable in order to comply with any such laws, regulations, or requirements. The Administrator
shall have the right to require any individual to comply with any timing or other restrictions with
respect to the settlement of any

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Award, including a window-period limitation, as may be imposed in the discretion of the
Administrator.

     (c) Stockholder Rights. Until Stock is deemed delivered in accordance with Section
15(b), no right to vote or receive dividends or any other rights of a stockholder will exist with
respect to shares of Stock to be issued in connection with an Award, notwithstanding any other
action by the grantee with respect to an Award.

     (d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation arrangements, including
trusts, and such arrangements may be either generally applicable or applicable only in specific
cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right
to continued employment with the Company or any Subsidiary.

     (e) Trading Policy Restrictions. Awards under the Plan shall be subject to the
Company’s insider trading policies and procedures, as in effect from time to time.

     (f) Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to
prepare an accounting restatement due to the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the securities laws, then any grantee
who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any Award received by such
individual under the Plan during the 12-month period following the first public issuance or filing
with the United States Securities and Exchange Commission, as the case may be, of the financial
document embodying such financial reporting requirement.

			
	SECTION 16.	 	EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon stockholder approval in accordance with applicable state
law, the Company’s bylaws and articles of incorporation, and applicable stock exchange rules or
pursuant to written consent.

			
	SECTION 17.	 	GOVERNING LAW

     This Plan and all Awards and actions taken thereunder shall be governed by, and construed in
accordance with, the laws of the State of Maryland, applied without regard to conflict of law
principles.

DATE APPROVED BY BOARD OF DIRECTORS: January 14, 2010

DATE APPROVED BY STOCKHOLDERS: January 14, 2010

12exv10w7

Exhibit 10.7

TERRENO REALTY CORPORATION

LONG-TERM INCENTIVE PLAN

1. Purpose

     This Long-Term Incentive Plan (the “Plan”) is intended to provide an incentive for
superior work and to motivate executives and employees of Terreno Realty Corporation (the
“Company”) toward even higher achievement and business results, to tie their goals and
interests to those of the Company and its stockholders and to enable the Company to attract and
retain highly qualified executives and employees. The Plan is for the benefit of Participants (as
defined below).

2. Definitions

     For purposes of this Plan:

     (a) “Award” means a grant to a Participant hereunder.

     (b) “Award Notice” means a notice or agreement provided to a Participant that sets
forth the terms, conditions and limitations of the Participant’s participation in this Plan,
including, without limitation, the Participant’s Target Award.

     (c) “Board” means the Board of Directors of the Company.

     (d) “Closing Index Value” means, with respect to each Performance Measurement Index,
the Performance Measurement Index Value as of the last day of any Performance Measurement Period.

     (e) “Closing Stock Price” means the Stock Price as of the last day of any Performance
Measurement Period.

     (f) “Code” means Internal Revenue Code of 1986, as amended.

     (g) “Committee” means the Compensation Committee of the Board.

     (h) “Effective Date” means February 16, 2010, the date as of which this Plan was
approved by the Board.

     (i) “FTSE NAREIT Equity Industrial Index” means the FTSE NAREIT Equity Industrial
Index, or, in the event such index is discontinued or its methodology significantly changed, a
comparable index selected by the Committee in good faith.

     (j) “Initial Index Value” means, with respect to each Performance Measurement Index,
the Performance Measurement Index Value as of the first day of any Performance Measurement Period.

 

 

     (k) “Initial Stock Price” means the Stock Price as of the first day of any Performance
Measurement Period. Notwithstanding the foregoing, the Initial Stock Price for any Performance
Measurement Period commencing on the Effective Date shall be the “Price to the Public” (or
equivalent) set forth on the cover page for the final prospectus relating to the Company’s Initial
Public Offering.

     (l) “MSCI US REIT Index” means the MSCI US REIT Index (RMS), or, in the event such
index is discontinued or its methodology significantly changed, a comparable index selected by the
Committee in good faith.

     (m) “Participant” means an executive or employee of the Company selected by the
Committee to participate in the Plan.

     (n) “Performance Measurement Indexes” means the MSCI US REIT Index and the FTSE NAREIT
Equity Industrial Index.

     (o) “Performance Measurement Index Value” for each Performance Measurement Index
means, with respect to any date, the average value of such Performance Measurement Index for the
ten consecutive trading days immediately preceding such date.

     (p) “Performance Measurement Period” means, a three calendar year period commencing on
January 1, 2011 and each January 1 thereafter while this Plan is effective, and concluding on
December 31 of the second calendar year thereafter. Notwithstanding the foregoing, (x) the first
Performance Measurement Period shall commence on the Effective Date and conclude on December 31,
2011 and (y) the second Performance Measurement Period shall commence on the Effective Date and
conclude on December 31, 2012.

     (q) “Stock” means the Company’s common stock, par value $0.01 per share.

     (r) “Stock Price” means, as of a particular date, the average closing price of one
share of Stock for the ten consecutive trading days ending on, and including, such date (or, if
such date is not a trading day, the most recent trading day immediately preceding such date).

     (s) “Target Award” means a Participant’s target award for each Performance Measurement
Period, as set forth in the Participant’s Award Notice.

     (t) “Total Shareholder Return” means, with respect to a Performance Measurement
Period, the total percentage return per share achieved by the Stock assuming contemporaneous
reinvestment in the Stock of all dividends and other distributions (excluding dividends and
distributions paid in the form of additional shares of Stock) at the closing price of one share of
Stock on the date such dividend or other distribution was paid, based on the Initial Stock Price
and the Closing Stock Price for such Performance Measurement Period.

	3.	 	Administration

     (a) The Plan shall be administered by the Committee. The Committee shall have the
discretionary authority to make all determinations (including, without limitation, the
interpretation and construction of the Plan and the determination of relevant facts) regarding the

2

 

entitlement to any Award hereunder and the amount of any Award to be paid under the Plan
(including the number of shares of Stock issuable to any Participant), provided such determinations
are made in good faith and are consistent with the purpose and intent of the Plan. In particular,
but without limitation and subject to the foregoing, the Committee shall have the authority:

          (i) to select Participants under the Plan;

          (ii) to determine the Target Award and any formula or criteria for the determination of the
Target Award for each Participant;

          (iii) to determine the terms and conditions, not inconsistent with the terms of this Plan,
which shall govern Award Notices and all other written instruments evidencing an Award hereunder,
including the waiver or modification of any such conditions;

          (iv) to adopt, alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable; and

          (v) to interpret the terms and provisions of the Plan and any Award granted under the Plan
(and any Award Notices or other agreements relating thereto) and to otherwise supervise the
administration of the Plan.

     (b) Notwithstanding anything herein to the contrary, the Committee may, in its discretion,
make appropriate adjustments to any Award, any Target Award, any Initial Stock Price, any Closing
Stock Price, the target performance levels for any Performance Measurement Period or the Total
Shareholder Return for any period in connection with or as a result of any of the following events
which occur or have occurred after the Effective Date: reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other similar change in the
Company’s capital stock, if the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the Company, or
additional shares or new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Stock or other securities.

     (c) Subject to the terms hereof, all decisions made by the Committee pursuant to the Plan
shall be final, conclusive and binding on all persons, including the Company and the Participants.
No member of the Board or the Committee, nor any officer or employee of the Company acting on
behalf of the Board or the Committee shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all members of the Board
or Committee and each and any officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company in respect of any
such action, determination or interpretation.

4. Determination and Payment of Awards

     (a) Each Participant’s Award Notice shall specify such Participant’s Target Award. The Target
Award may be expressed as a dollar amount or as a percentage of a Participant’s base salary or
other compensation, a number of shares of Stock or pursuant to any other method, amount or formula
selected by the Committee for such Participant, and may apply for all or a

3

 

specified number of Performance Measurement Periods, each as determined in the sole discretion
of the Committee.

     (b) The amount of a Participant’s Award hereunder shall be determined based on Total
Shareholder Return for each Performance Measurement Period relative to the percentage appreciation
of each Performance Measurement Index for such period. The percentage appreciation of each
Performance Measurement Index shall be established by comparing the Initial Performance Measurement
Index Value to the Closing Performance Index Value. Unless otherwise specified in an Award Notice,
(i) 50 percent of the Award shall be calculated with reference to Total Shareholder Return relative
to the percentage appreciation of the MSCI US REIT Index, and (ii) the remaining 50 percent of the
Award shall be calculated with reference to Total Shareholder Return relative to the percentage
appreciation of the FTSE NAREIT Equity Industrial Index.

     (c) The actual value of a Participant’s Award hereunder shall be determined at the conclusion
of a Performance Measurement Period, as follows:

     (i) If Total Shareholder Return for the Performance Measurement Period is less than the
percentage appreciation of a Performance Measurement Index for such period, Participants
shall not receive an Award with respect to the 50 percent of the Target Award calculated
with reference to such Performance Measurement Index.

     (ii) If Total Shareholder Return for the Performance Measurement Period equals or
exceeds the percentage appreciation of a Performance Measurement Index for such period,
Participants shall receive an Award equal to 50 percent of the Target Award.

     (iii) If Total Shareholder Return for the Performance Measurement Period exceeds the
percentage appreciation of a Performance Measurement Index by 100 basis points or more,
Participants shall receive an Award equal to 150 percent of the Target Award. If Total
Shareholder Return for the Performance Measurement Period exceeds the percentage
appreciation of both Performance Measurement Indexes by 100 basis points or more,
Participants shall receive an Award equal to 300 percent of the Target Award.

     (iv) Notwithstanding the foregoing, if Total Shareholder Return for the Performance
Measurement Period is negative the value of each Participant’s Award, as determined pursuant
to Section 4(c)(ii) and (iii), above, shall be reduced by 50 percent.

     (d) The dollar value of Participant’s Awards shall be determined by the Committee as soon as
practicable following the conclusion of the relevant Performance Measurement Period. Following
determination of such amounts, the Company shall issue to each Participant a number of shares of
Stock with an aggregate Stock Price on the date of issuance equal to the dollar value of each
Participant’s Award. The shares of Stock shall be issued between January 1 and March 15 of the
calendar year that follows the conclusion of the relevant Performance Measurement Period.

4

 

5. Termination of Employment

     Unless otherwise provided in any Award Notice, if at any time prior to the end of a
Performance Measurement Period a Participant’s employment or other service relationship with the
Company terminates for any reason, such Participant shall forfeit the right to receive any payment
or Award not paid to the Participant as of the date of termination of employment or other service
relationship.

6. Miscellaneous

     (a) Amendment and Termination. The Company reserves the right to amend or terminate
the Plan at any time in its discretion without the consent of any Participants, but no such
amendment shall adversely affect the rights of the Participants with regard to outstanding Awards.
In the event the Plan is terminated, the Company shall determine the Awards payable to Participants
based on the Total Shareholder Return relative to the Performance Measurement Indexes for each
Performance Measurement Period ending on the date of Plan termination. The Awards for each
Performance Measurement Period shall be further prorated to reflect the shortened Performance
Measurement Period.

     (b) No Contract for Continuing Services. This Plan shall not be construed as creating
any contract for continued services between the Company or any of its subsidiaries and any
Participant and nothing herein contained shall give any Participant the right to be retained as an
employee or consultant of the Company or any of its subsidiaries.

     (c) No Transfers. A Participant’s rights in an interest under the Plan may not be
assigned or transferred.

     (d) Unfunded Plan. The Plan shall be unfunded and shall not create (or be construed
to create) a trust or separate fund. Likewise, the Plan shall not establish any fiduciary
relationship between the Company or any of subsidiaries or affiliates and any Participant. To the
extent that any Participant holds any rights by virtue of an award under the Plan, such right shall
be no greater than the right of an unsecured general creditor of the Company or any of its
subsidiaries.

     (e) Governing Law. The Plan and each Award Letter awarded under the Plan shall be
construed in accordance with and governed the laws of the State of California, without regard to
principles of conflict of laws of such state.

     (f) Tax Withholding. Any issuance of shares of Stock to a Participant shall be
subject to tax withholding. The minimum tax withholding obligation shall be satisfied through a
net issuance of shares. The Company shall withhold from shares of Stock to be issued to the
Participant a number of shares of Stock with an aggregate fair market value that would satisfy the
minimum withholding amount due.

     (g) Construction. Wherever appropriate, the use of the masculine gender shall be
extended to include the feminine and/or neuter or vice versa; and the singular form of words shall
be extended to include the plural; and the plural shall be restricted to mean the singular.

5

 

     (h) Headings. The Section headings and Section numbers are included solely for ease
of reference. If there is any conflict between such headings or numbers and the text of this Plan,
the text shall control.

     (i) Effect on Other Plans. Nothing in this Plan shall be construed to limit the
rights of Participants under the Company’s or its subsidiaries’ benefit plans, programs or
policies.

     (j) Effective Date. The Plan shall be effective as of the Effective Date.

6

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