8-KLeadership ChangesMaterial AgreementsExhibits & Filings

ESSEX PROPERTY TRUST, INC. 8-K Report, Material Agreement (Dec 30, 2009)

Filed December 30, 2009For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) has filed an 8-K detailing an amendment to its Partnership Agreement concerning incentive units issued to executive officers and employees. The key change, the 'First Amendment,' allows the Compensation Committee greater flexibility in setting conversion dates and ratios for Series Z and Series Z-1 Incentive Units (Z Units) into common partnership units. These common units are ultimately exchangeable for ESS common stock. Significantly, the amendment introduces provisions for early conversion of Z Units into common units, with a conversion date set for December 31, 2009. This early conversion is tied to the conversion ratio as of January 1, 2009, and importantly, any ESS shares received from this early conversion will be subject to restrictions on sale and transfer. This move provides some liquidity to employees while retaining potential future upside based on performance objectives for their remaining incentive units.

Key Highlights

  • 1Amendment to Partnership Agreement concerning incentive units (Z Units) for executives and employees.
  • 2Compensation Committee granted flexibility to set conversion dates and ratios for Z Units.
  • 3Introduction of early conversion option for Z Units into common partnership units.
  • 4Early conversion for eligible Z Units set for December 31, 2009.
  • 5Common units received from early conversion are exchangeable for ESS common stock.
  • 6ESS shares received from early conversion will be subject to sale and transfer restrictions.
  • 7Holders electing early conversion remain eligible for future conversion ratio increases on remaining units, subject to performance conditions.

Frequently Asked Questions

The First Amendment provides the Compensation Committee with more control over the terms of incentive units (Z Units) granted to executives and employees. It allows them to adjust conversion dates, conversion ratios, and impose restrictions on the sale of resulting common stock, while also enabling early conversion options for holders.

Z Units are Series Z and Series Z-1 Incentive Units issued to employees as part of their compensation. They are designed to convert into common units of Essex Portfolio, L.P. under certain conditions. These common units are then exchangeable on a one-for-one basis for shares of Essex Property Trust's common stock.

Early conversion allows holders to convert a portion of their Z Units into common units (and subsequently into Essex shares) sooner than originally scheduled, with the conversion date set for December 31, 2009. This provides some immediate access to value, but the shares received will have restrictions on when they can be sold or transferred, and the conversion ratio for remaining units will be adjusted.

Yes, employees who elect early conversion are still eligible for future increases in the conversion ratio of their remaining Z Units, provided they meet the performance conditions set by the Compensation Committee. This mechanism ensures that incentive remains tied to company performance.