8-KMaterial AgreementsExhibits & Filings

ESSEX PROPERTY TRUST, INC. 8-K Report, Material Agreement (Dec 8, 2008)

Filed December 8, 2008For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) filed an 8-K on December 8, 2008, detailing amendments to its executive compensation plans to comply with Section 409A of the Internal Revenue Code. The company adopted the Essex Portfolio, L.P. 2005 Deferred Compensation Plan and amended its Executive Severance Plan. These changes are primarily technical in nature, aiming to ensure compliance and avoid adverse tax consequences for both the company and its key employees regarding deferred compensation and severance payments. For investors, the key takeaway is that these are regulatory compliance updates rather than significant strategic shifts or new financial commitments. The core provisions of the deferred compensation plan remain similar to previous arrangements, allowing eligible employees to defer a portion of their salary and bonuses. However, specific rules regarding payment timing, election changes, and distributions for "key employees" have been adjusted to meet Section 409A requirements. The severance plan also includes similar adjustments, particularly concerning payment delays and the definition of "good reason" for termination.

Key Highlights

  • 1Company adopted the Essex Portfolio, L.P. 2005 Deferred Compensation Plan and amended the Executive Severance Plan.
  • 2The primary purpose of these changes is to comply with Section 409A of the Internal Revenue Code.
  • 3The 2005 Deferred Compensation Plan allows eligible employees to defer up to 100% of base salary and cash bonuses.
  • 4Initial deferral elections must be made in the year prior to compensation earning.
  • 5Payment events for deferred compensation include separation from service, change in control, or a specified date.
  • 6Key employees' deferred compensation payments will be subject to a mandatory six-month delay if required by Section 409A.
  • 7Changes to the Severance Plan include a notice and cure period for termination for "good reason" and clarifications on legal fee payments.

Frequently Asked Questions

The main reason for the amendments is to ensure compliance with Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation plans. These changes are intended to avoid penalties and adverse tax consequences for both the company and its executives.

Based on the filing, these amendments are primarily regulatory compliance updates. The deferred compensation plan allows employees to defer compensation they would otherwise earn. While the company could make discretionary contributions, there's no indication of new, mandatory financial commitments or increased expenses beyond those already anticipated for executive compensation.

The payment events (separation from service, change in control, specified date) remain similar, but Section 409A introduces stricter rules. Notably, payments to "key employees" will be delayed for at least six months after separation from service if required for compliance. Changes to the timing or form of payment are also subject to strict limitations to prevent acceleration of payments.

No, the filing states that participants allocate their deferred compensation balances among hypothetical investment options for determining the rate of return. The company does not guarantee any specific rate of return on these deferred amounts. Participants bear the investment risk.