Form of 2025 Long-Term Incentive Plan Award Agreement
Exhibit 10.1
EQUITY RESIDENTIAL
2025 LONG-TERM INCENTIVE PLAN AWARD AGREEMENT
This 2025 Long-Term Incentive Plan Award Agreement (the “Award Agreement”) is made as of January 1, 2025 between Equity Residential (the “Company”) and _______________ (the “Grantee”).
RECITALS
NOW, THEREFORE, the Company and the Grantee agree as follows:
The following “Performance Metrics” will determine the actual number of Restricted Shares and/or Restricted Units the Grantee may earn pursuant to the Award at the end of the Performance Period:
Company TSR Performance relative to Apartment Index Weighted Average TSR | Percentage of 35% Earned |
more than 400 basis points below average | 0% |
400 basis points below average (“threshold”) | 50% |
Equal to the average (“target”) | 100% |
400 basis points or more above average (“maximum”) | 200% |
Company TSR Performance relative to Equity Index Weighted Average TSR | Percentage of 20% Earned |
more than 500 basis points below average | 0% |
500 basis points below average (“threshold”) | 50% |
Equal to the average (“target”) | 100% |
500 basis points or more above average (“maximum”) | 200% |
Net Debt to Normalized EBITDAre relative to Company’s target Net Debt to Normalized EBITDAre expectations | Percentage of 22.5% Earned |
More than 6.00x | 0% |
6.00x (“threshold”) | 50% |
5.50x to 4.00x (“target”) | 100% |
3.00x (“maximum”) | 200% |
The achievement of this metric shall be determined on a quarterly basis and the average of the twelve quarters of each quarterly computation in the Company’s quarterly earnings releases shall be used in the final determination of the Award.
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No later than March 31 of each calendar year, the Compensation Committee shall establish the threshold, target and maximum NFFO performance level metrics for such calendar year. In no event will target be less than the midpoint of the Company’s range of NFFO expectations for the year, provided that the Compensation Committee may specify a range above and below the midpoint to be paid at target and except as provided in Section 2(e). The achievement of this metric shall be determined on an annual basis and the average of the three years shall be used in the final determination of the Award.
To the extent the Company is using a NFFO performance metric with threshold (50%) and maximum (200%) limits in its Annual Incentive Plan Corporate Goals for any calendar year, it shall use the same threshold and maximum metrics in the NFFO metric hereunder.
The following is an example of a sample NFFO performance metric:
NFFO relative to Company’s target NFFO expectations | Percentage of 22.5% Earned |
Less than threshold | 0% |
$XXXX (“threshold”) | 50% |
$XXXX (“target”) | 100% |
$XXXX (“maximum”) | 200% |
TSR relative to Apartment Index Weighted Average TSR (35% of Award) | TSR relative to Equity Index Weighted Average TSR (20% of Award) | Net Debt to Normalized EBITDAre (22.5% of Award) | NFFO relative to annual target (22.5% of Award) |
Result = Equal to the average Equal to the average = 100% of target Pct of 35% earned = 100% 35% x 100% = 35% | Result = 108 basis points above the average 108 basis points = 127% of target Pct of 20% earned = 127% 20% x 127% = 25.4% | Result = 5.50x 5.50x = 100% of target Pct of 22.5% earned = 100% 22.5% x 100% = 22.5% | Result = target (100%) Pct of 22.5% earned = 100% 22.5% x 100% = 22.5% |
Final Calculation of Award = 35% + 25.4% + 22.5% + 22.5% = 105.4% of Target |
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The TSR of each of the member companies comprising the Apartment Index and Equity Index over the Performance Period shall be calculated using the methodologies analogous in all material respects to those used for the calculation of the Company’s TSR as described in Section 2(a) to provide a fair comparison of TSRs, and as is the case with the Company (see Section 2(e)), the Compensation Committee shall make equitable adjustments to the TSR of such member companies to take into account any extraordinary, unusual or non-recurring corporate events as described in Section 14 of the 2019 Share Plan affecting such member companies, such as spin-offs, stock splits, reverse splits, special dividends, recapitalizations, reclassifications and similar events. The Compensation Committee has discretion in how the required adjustments are determined as long as they are done equitably.
The Company’s TSR will be compared to the Apartment Index using a same store approach (all constituents must be included in the index for all three years), while the comparison to the Equity Index will not use this same store approach. In comparison to the Apartment Index, the Equity Index is much larger and weighted through daily rebalancing so no further adjustments are necessary for changes in the constituents who comprise the index.
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Accordingly, for purposes of the Apartment Index, companies that are not public throughout the entire Performance Period will be excluded from the TSR calculations. In addition, a member company of the Apartment Index will be excluded from the TSR calculations if on the last day of the Performance Period such company is under a definitive agreement to be acquired or merged out of existence during the next 12 months. Also, any such member company of the Apartment Index that files for bankruptcy during the Performance Period shall have a minus 100% value assigned to its TSR for purposes of the TSR calculations.
The market capitalization of the companies in the Apartment Index shall be weighted
based on the market capitalization weighting method used by FTSE one time at the beginning of the Performance Period (using the average of the last 20 trading days prior to the beginning of the Performance Period) to determine each company’s weighted share of the final results. For example, if there are five companies in the index as of the beginning of the Performance Period with the identical market capitalization, each company’s share of the final results shall be 20%. If one of the companies is excluded from the TSR calculations, as provided above, then each of the remaining company’s weighted share shall be 25%.
Furthermore, the Compensation Committee shall make equitable adjustments to the Award granted hereunder and/or the Performance Metrics contained herein to take into account any other significant or unforeseen events which occur (as an example only, such as a purchase or sale of a significant number of assets which would justify a change in the NFFO Performance Metric), so that the total value of the Award shall not be changed by such events.
The Compensation Committee has discretion in how the required adjustments are determined as long as they are done equitably.
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If a Change in Control occurs at any time prior to the end of the Performance Period, the Award shall be valued as though the Performance Period had ended on the date of the Change in Control, and for purposes of calculating TSR, the Ending Share Price for the Company and the relevant index companies shall be the closing price of each company’s common shares on the date of the Change in Control (as opposed to a trailing average), which together with the Net Debt to Normalized EBITDAre and NFFO Performance Metrics (as appropriately prorated) shall determine the actual number of Restricted Shares issued and/or Restricted Units retained by the Grantee, which shall be a percentage (from zero to 200%) of the target Award. While the valuation of the Award shall be fixed as set forth above in the event of a Change in Control, vesting of the Award upon a Change in Control is governed by the terms of the 2019 Share Plan. Dividend equivalent payments and distributions payable pursuant to Section 5 hereof would be paid at the time of vesting of the Award based on the actual number of Restricted Shares issued and/or Restricted Units retained. In the event of any conflict between the terms of this Section 3 and the terms set forth in the 2019 Share Plan and any “change in control” agreement between the Company and the Grantee entered into prior to or as of the date hereof, the terms of this Section 3 shall control; provided, however, that any Restricted Shares issued, Restricted Units retained, and other payments made pursuant to this Section 3 are expressly subject to “modified cutback” language contained in any “change in control” agreement between the Company and the Grantee.
(i) Qualified Termination under the 2019 Share Plan. If a “Qualified Termination” of employment occurs during the first year of the Performance Period, the Grantee’s Award shall be prorated in the proportion that the number of days employed during such year bears to 365 (or 366 if such year is a leap year), as the award represents payment for services to be provided during the first year of the Performance Period. For example, if the Grantee had a Qualified Termination of employment on October 1, 2025, Grantee’s prorated portion would be 9/12 of the Award, and 3/12 of the Award would be forfeited. The number of resulting Restricted Shares and/or Restricted Units (based on the pro-rated Award) will continue to be determined at the end of the Performance Period. All dividend equivalent payments and Partial Distributions described in Section 5 shall be based on the pro-rated Award from and after the date of the Qualified Termination. “Qualified Termination” is defined as a termination of employment due to:
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(a) Death,
(b) Disability,
(c) Retirement at or after age 62, provided that (i) the Grantee’s service at the Company commenced prior to January 1, 2009 and (ii) the Grantee was at least 59 years old as of February 1, 2019, or
(d) Retirement in accordance with the Rule of 70.
Vesting is immediate for a Qualified Termination due to (i) the events described above in Section 4(b)(i)(a)-(b) and (ii) the event described above in Section 4(b)(i)(c), provided the Grantee signs a release in a form that is reasonably satisfactory to the Company releasing the Company from customary claims. For a Qualified Termination due to the event described above in Section 4(b)(i)(d), vesting continues after retirement, provided the Grantee signs a release in a form that is reasonably satisfactory to the Company releasing the Company from customary claims and also containing non-competition and employee non-solicitation provisions and complies with such non-competition and employee non-solicitation provisions.
(ii) Qualifying Termination under the Severance Plan. If the Grantee terminates his or her employment with “Good Reason” or if the Company terminates the Grantee without “Cause” (as such terms are defined in the Company’s Executive Severance Plan (the “Severance Plan”) and each, a “Qualifying Severance Plan Termination”) during the Performance Period, the Grantee’s Award shall be prorated in the proportion that the number of days employed during the Performance Period bears to the full 36 months in the Performance Period. For example, if the Grantee had a Qualifying Severance Plan Termination of employment on September 30, 2025, Grantee’s prorated portion would be 25% of the Award (9/36 months). The Award shall be valued as though the Performance Period had ended on the date of the Qualifying Severance Plan Termination (or, if the date of Qualifying Severance Plan Termination occurs on a date within a trading lockout imposed by the Company, as of market close on the fifth trading day after the expiration of the lockout), and for purposes of calculating TSR, the Ending Share Price for the Company and the relevant index companies shall be the closing price of each company’s common shares on the date of the Qualifying Severance Plan Termination (as opposed to a trailing average). With respect to the Net Debt to Normalized EBITDAre and NFFO Performance Metrics, the valuation will be appropriately measured based on a combination of (A) the Company’s actual performance through the most recently completed fiscal quarter for which the Company has calculated or is in the process of calculating results and (B) the Company’s most recent internal reforecast for the remainder of the fiscal year. Following the Company’s valuation, the resulting amount will be vested and paid in cash in equal monthly installments over the remaining applicable severance payment period set forth in the Severance Plan. Dividend equivalent payments and distributions payable pursuant to Section 5 hereof would be determined as of the date of the Qualifying Severance Plan Termination based on the prorated Award and paid in a lump sum following the Company’s calculation.
(iii) If a Grantee’s employment terminates prior to vesting of the Award for any reason other than pursuant to a Qualified Termination, Qualifying
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Severance Plan Termination or Change in Control, any unvested Awards shall be forfeited, unless the Compensation Committee determines otherwise. For the avoidance of doubt, if a Grantee incurs a Qualifying Severance Plan Termination after the end of the Performance Period but prior to vesting of the Award, the Award will be valued and vested in the normal course as provided in Sections 1 and 4(a) hereof.
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Any notice to be given under the terms of this Award Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Grantee shall be addressed to the address as set forth in the Company’s records. Either party may hereafter designate a different address for notices to be given to it or him or her.
Titles and captions are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement. Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the 2019 Share Plan or as the context otherwise reasonably indicates. The Compensation Committee shall have the exclusive discretion and authority to conclusively construe and interpret this Award Agreement and the LTI Plan, and to decide any and all questions of fact, interpretation, definition, computation or administration. The determinations of the Compensation Committee shall be binding on all parties.
This Award Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Award Agreement.
The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Award Agreement regardless of the law that might be applied under principles of conflicts of laws.
This Award Agreement may be executed in multiple counterparts, and on separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereupon delivered by electronic means (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) shall be deemed for all purposes as constituting good and valid execution and delivery of this Award Agreement by such party.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be executed as of the aforesaid date.
EQUITY RESIDENTIAL
By:
The foregoing Award Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.
GRANTEE
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SCHEDULE A
Name of Grantee |
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Target number of Restricted Units | _______
200% of this target number, or _______ Restricted Units, will be issued to the Grantee, subject to the Compensation Committee’s determination of the Company’s performance results for the Performance Period and the determination of the resulting number of retained Restricted Units.
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Target number of Restricted Shares | ________
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Performance Period | January 1, 2025 to December 31, 2027
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