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ESSEX PROPERTY TRUST, INC. 8-K Report, Material Agreement (Mar 18, 2013)

Filed March 18, 2013For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) filed an 8-K on March 18, 2013, to disclose amendments to its Executive Severance Plan, effective March 12, 2013. The primary objective of these amendments was to align the plan with investor-friendly practices by removing certain provisions that could be seen as overly protective of executives. Specifically, the 'gross-up' provision for excise taxes related to change-in-control payments and 'single-trigger' vesting acceleration for stock options were eliminated. However, to secure executive consent for these changes, the company introduced enhanced severance protection. This includes an extended 'double-trigger' severance period (two months prior to 24 months after a change in control) and accelerated vesting of equity awards under specific conditions (non-assumption or involuntary termination post-change in control). These adjustments aim to balance executive compensation with shareholder interests while maintaining a competitive compensation structure.

Key Highlights

  • 1Essex Property Trust amended its Executive Severance Plan, effective March 12, 2013.
  • 2Key changes include the elimination of excise tax gross-up provisions for change-in-control payments.
  • 3The plan also removed 'single-trigger' vesting acceleration for stock options upon a change in control.
  • 4To incentivize executive acceptance, the severance period was extended to a 'double-trigger' arrangement (2 months before to 24 months after a change in control).
  • 5Equity awards will accelerate vesting if not assumed or substituted during a change in control, or if an executive experiences involuntary termination post-change in control.
  • 6Outplacement services are now provided for terminated participants.
  • 7The amended plan limits coverage to current participants and future selected key employees.

Frequently Asked Questions

The main reason for the amendments is to remove provisions that are generally viewed as less favorable to shareholders, such as excise tax gross-ups and single-trigger vesting acceleration, in alignment with evolving corporate governance best practices.

The 'double-trigger' requires both a 'change in control' event AND an 'involuntary termination' (or termination for 'Good Reason') by the executive within a specified window (two months prior to 24 months after the change in control) to trigger severance payments and benefits.

Under the amended plan, stock options will not automatically vest upon a change in control ('single-trigger'). Vesting acceleration will occur only if the equity awards are not assumed or substituted by the acquiring entity, or if the participant experiences an involuntary termination during the extended severance period following a change in control.

The amended plan's coverage is limited to existing participants and future eligible key employees who may be selected by the Compensation Committee. Participants who do not consent to the amended plan will remain under the terms of the prior plan.