8-KMaterial Agreements

EQUITY RESIDENTIAL 8-K Report, Material Agreement (Feb 9, 2005)

Filed February 9, 2005For Securities:EQR

Summary

Equity Residential (EQR) filed an 8-K on February 9, 2005, reporting on key executive compensation matters. The most significant event is the extension of the compensation agreement for Chairman Samuel Zell by two years, maintaining his existing terms. Mr. Zell is entitled to a $3.25 million annual long-term incentive grant, allocated between company options and restricted shares, contingent upon his continued service as Chairman. This filing also details the approval of performance unit awards to executive officers under the 2002 Share Incentive Plan, with targets set for specific officers including CEO Bruce W. Duncan. These performance units are tied to the company's Average Annual Return, which considers both dividend yield and Funds From Operations (FFO) per share growth, compared against the 10-year Treasury Note Rate. The number of common shares ultimately received by executives can range from 0% to 225% of their target units, depending on the company's performance over the three-year period. The awarded shares will have a staggered vesting schedule over five years, with accelerated vesting upon certain events like death, retirement, disability, or a change in control. These disclosures are important for investors to understand executive incentives and potential dilution.

Key Highlights

  • 1Extension of Samuel Zell's Chairman compensation agreement for two years on existing terms.
  • 2Samuel Zell to receive annual long-term incentive grants valued at $3.25 million in 2005 and 2006.
  • 3Grants to Mr. Zell are a mix of company options (25%) and restricted shares (75%) for services rendered in 2004 and 2005.
  • 4Approval of performance unit awards for executive officers under the 2002 Share Incentive Plan.
  • 5Executive awards are tied to the company's Average Annual Return (dividends + FFO growth) relative to the 10-year Treasury Note Rate.
  • 6Potential payout for executives ranges from 0% to 225% of target performance units.
  • 7Performance shares will have a staggered vesting schedule over five years, with accelerated vesting provisions.

Frequently Asked Questions

This 8-K filing primarily reports on material definitive agreements and executive compensation matters, specifically detailing an amendment to Samuel Zell's compensation agreement and the approval of performance unit awards for executive officers.

Samuel Zell's compensation agreement has been extended for two years. He will receive an annual long-term incentive grant valued at $3.25 million in 2005 and 2006. This grant is a mix of company options and restricted shares, contingent on his continued service as Chairman, and allocated 25% to options and 75% to restricted shares for the grant related to 2004 services.

Executive performance unit awards are tied to Equity Residential's Average Annual Return, which is calculated based on the average of common share dividends and the average percentage increase in Funds From Operations (FFO) per share. The actual number of shares received depends on how this Average Annual Return compares to the average 10-year Treasury Note interest rate over the performance period, with payouts ranging from 0% to 225% of the target units.

The shares issued in exchange for performance units will vest on a staggered basis: 50% on the third anniversary of the award, 25% on the fourth, and the remaining 25% on the fifth. Vesting can be accelerated upon the executive's death, retirement at or after age 62, disability, or a change in control of the company.