ESSEX PROPERTY TRUST, INC. ESSEX PORTFOLIO L.P. 2015 LONG-TERM INCENTIVE PLAN AWARD AGREEMENT

No. of LTIP Units: [_________] (the “Award LTIP Units”)

A.The Grantee is an employee of Essex Property Trust, Inc., a Maryland corporation (the “Company”), which is the general partner of Essex Portfolio, L.P., a California limited partnership through which the Company conducts substantially all of its operations (the “Partnership”).

B.The Partnership has adopted the 2015 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) to provide the Company’s employees with incentive compensation.  The Long-Term Incentive Plan was adopted effective as of December 9, 2014 by the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”). This award agreement (this “Award Agreement”) evidences an award to the Grantee under the Long-Term Incentive Plan (the “Award”), which is subject to the terms and conditions set forth herein.

C.The Grantee was selected by the Committee to receive the Award.  The Committee, effective as of the Grant Date set forth above, caused the Partnership to issue to the Grantee the number of LTIP Units (as defined in Appendix A) set forth above.

D.Capitalized terms used herein shall have the respective meanings ascribed to them in Appendix A hereto. Unless the context requires otherwise, capitalized terms used, but not otherwise defined herein or in Appendix A, shall have the respective meanings ascribed to them in the 2013 Plan.

1.Grant of Award LTIP Units.

a.The Company hereby grants [____] LTIP Units to the Grantee as of the Grant Date, which will be subject to forfeiture based on (i) the performance metrics set forth in Section 2 and (ii) the vesting and continuous service requirements of the Grantee to the Company as provided in Section 3.

b.The Grantee shall be admitted as a partner of the Partnership with beneficial ownership of the Award LTIP Units as of the Grant Date by (i) signing and delivering to the Partnership a copy of this Award Agreement and (ii) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A). Thereupon, the Grantee shall have all the rights of a Limited Partner of the Partnership with respect to the Award LTIP Units granted pursuant hereto, as set forth in the Partnership Agreement, subject, however, to the restrictions and conditions specified herein. The Award LTIP Units constitute and shall be treated for all purposes as the property of the Grantee, subject to the terms of this Award Agreement and the Partnership Agreement.

2.    Performance Criteria and Attainment Levels. The number of Award LTIP Units that will be earned pursuant to this Award will be based on the Company’s Absolute TSR and Multifamily REIT Relative TSR during the Performance Period, as set forth below.

(a)With respect to one-half of the Award LTIP Units, the number of Award LTIP Units that are earned will be based on the Company’s Absolute TSR during the Performance Period in accordance with the following table:

For Absolute TSR between 2% and 4%, the number of Award LTIP Units earned will be based on linear interpolation between the number of Award LTIP Units that would have been earned if Absolute TSR was 2% and the number that would have been earned if Absolute TSR was 4%, as set forth above.

(b)With respect to the remaining one-half of the Award LTIP Units, the number of such Award LTIP Units that are earned will be based on the Company’s Multifamily REIT Relative TSR during the Performance Period in accordance with the following table:

For Multifamily REIT Relative TSR between -100 and +100 basis points, the percentage earned will be based on linear interpolation between the number of Award LTIP Units that would have been earned if Multifamily REIT Relative TSR was -100 basis points and the number that would have been earned if Multifamily REIT Relative TSR was +100 basis points, as set forth above.

(c)    The Committee, as promptly as practicable following the conclusion of the Performance Period, shall determine the actual number of the Award LTIP Units that are earned in accordance with this Section 2. On the Determination Date, all Award LTIP Units that are not earned shall automatically and immediately be forfeited by the Grantee.

3.    Vesting.

(a)    Any Award LTIP Units earned pursuant to this Award shall be subject to time-based vesting, with 20% of the earned Award LTIP Units vesting on each of the first five anniversaries of the Grant Date, subject to the Grantee’s continued employment with the Company (or a Company Affiliate) through such vesting date. Except as provided in Section 3(b) below, if at any time the Grantee shall cease to be an employee of the Company for any reason (other than in circumstances where the Grantee immediately thereafter remains or becomes an employee of a Company Affiliate), then all Award LTIP Units that remain unvested at such time shall automatically and immediately be forfeited by the Grantee.

(b)    In the event of the termination of the Grantee’s employment by the Company (or a Company Affiliate) in circumstances where such termination constitutes a Terminating Event, then:

(i)    if such termination occurs after the Determination Date, all unvested Award LTIP Units earned pursuant to Section 2 hereof shall vest immediately and automatically as of the date of such termination; and

(ii)    if such termination occurs prior to the Determination Date, then the Award LTIP Units will not be forfeited upon termination and any Award LTIP Units earned following such termination will be fully vested as of the Determination Date.

4.    Distributions.

(b)    The holder of the Award LTIP Units shall be entitled to receive distributions with respect to such Award LTIP Units to the extent provided for in the Partnership Agreement. The LTIP Unit Sharing Percentage for purposes of applying the relevant provisions of the Partnership Agreement shall be (i) 10% with respect to each Award LTIP Unit at any time on or prior to the Valuation Date and (ii) 100% with respect to each Award LTIP Unit at any time following the Valuation Date.

(b)    Notwithstanding anything to the contrary contained in the Partnership Agreement, the Partnership will hold in escrow until the Determination Date 90% of any distributions on the Award LTIP Units with a record date occurring after the Valuation Date and prior to the Determination Date. Upon the Determination Date, the Partnership will release to the holder of the Award LTIP Units the portion of such distribution, if any, that such holder would have been entitled to receive assuming that any forfeiture of Award LTIP Units occurring pursuant to Section 2(c) had occurred prior to the Valuation Date and the remainder of such distribution will be forfeited to the Partnership.

(c)    Except as specifically set forth above, all distributions paid with respect to the Award LTIP Units, both before and after the Determination Date, shall be fully vested and non-forfeitable when paid, whether or not the Award LTIP Units have been earned based on performance or have become vested based on continued employment as provided in Section 3 hereof.

5.    Changes in Capital Structure. If (i) the Company shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or stock of the Company or other transaction similar thereto, (ii) any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, significant repurchases of stock, or other similar change in the capital stock of the Company, (iii) any cash dividend or other distribution to holders of shares of Stock or Common Units shall be declared and paid other than in the ordinary course, or (iv) any other extraordinary corporate event shall occur that in each case in the good faith judgment of the Committee necessitates action by way of equitable or proportionate adjustment in the terms of this Award Agreement or the Award LTIP Units to avoid distortion in the value of this Award, then the Committee shall make equitable or proportionate adjustment and take such other action as it deems necessary to maintain the Grantee’s rights hereunder so that they are substantially proportionate to the rights existing under this Award and the terms of the Award LTIP Units prior to such event, including, without limitation: (A) interpretations of or modifications to any defined term in this Award Agreement; (B) adjustments in any calculations provided for in this Award Agreement, and (C) substitution of other awards under the 2013 Plan or otherwise. All adjustments made by the Committee shall be final, binding and conclusive.

6.    Representations, Warranties and Agreements of the Grantee.

(a)    Except as otherwise agreed to by the Company and the Partnership, none of the Award LTIP Units granted hereunder nor any of the Common Units into which such Award LTIP Units may be converted (the “Award Common Units”) shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law (each such action a “Transfer”) and the Rights (as defined in the Partnership Agreement) may not be exercised with respect to the Award Common Units, provided that, at any time after the date that (a) the Award LTIP Units vest and (b) is two (2) years after the Grant Date, (i) the Award LTIP Units or Award Common Units may be Transferred to Family Members by gift or domestic relations order, provided that the transferee agrees in writing with the Company and the Partnership to be bound by all the terms and conditions of this Award Agreement and that subsequent transfers shall be prohibited except those in accordance with this Section 7 and (ii) the Rights may be exercised with respect to Award Common Units, and Award Common Units may be Transferred pursuant to the exercise of the Rights, in accordance with and to the extent otherwise permitted by the terms of the Partnership Agreement; provided that, except as set forth in Section 7(b) below, shares of Stock received upon exchange of Award Common Units may not be Transferred before the date that is ten (10) years after the Grant Date.  Additionally, all Transfers of the Award LTIP Units or Award Common Units must be in compliance with all applicable securities laws (including, without limitation, the Securities Act) and the applicable terms and conditions of the Partnership Agreement.  In connection with any Transfer of the Award LTIP Units or Award Common Units, the Partnership may require the Grantee to provide an opinion of counsel, satisfactory to the Partnership, that such Transfer is in compliance with all federal and state securities laws (including, without limitation, the Securities Act).  Any attempted Transfer of the Award LTIP Units or Award Common Units not in accordance with the terms and conditions of this Section 7 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any of the Award LTIP Units or Award Common Units as a result of any such Transfer, shall otherwise refuse to recognize any such Transfer and shall not in any way give effect to any such Transfer of any of the Award LTIP Units or Award Common Units.  This Award Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

(b)    In the event that the Grantee experiences a Hardship Event, as determined in the sole discretion of the Company, the Grantee is eligible to elect (each such election, a “Hardship Election”), upon submission of evidence demonstrating the Hardship Event and documentation evidencing such election and the required forfeitures set forth below in form and substance satisfactory to the Company, in its sole discretion, to have the ten-year restriction on Transfer (but not the other restrictions on Transfer) set forth in Section 7(a) above lifted with respect to any or all shares received upon exchange of Award Common Units, as specified by the Grantee; provided that upon making such election, and as a condition thereto, the Grantee must forfeit a number of Award Common Units, shares of Stock received in exchange for Award Common Units or earned and vested Award LTIP Units equal to 20% of the number of shares of Stock with respect to which the Hardship Election is made. A Hardship Election may be made by the Grantee only once during every 24-month period.

9.    Number of Copies.

10.    Governing Law.

This Award shall be administered by the Committee, which in the administration of this Award shall have all the powers and authority it has in the administration of the 2013 Plan as set forth in the 2013 Plan.

12.    Communication.

Dated: [_________]

“2013 Plan” means the Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, as amended, modified or supplemented from time to time.

“Absolute TSR” means, with respect to the Performance Period, the average, compounded, annual (or annualized) return (expressed as a percentage) that would have been realized by a shareholder who (A) bought one share of Stock at the Baseline Value on the Grant Date, (B) reinvested each dividend and other distribution declared during the Performance Period with respect to such share (and any other shares, or fractions thereof, previously received upon reinvestment of dividends or other distributions or on account of stock dividends), without deduction for any taxes with respect to such dividends or other distributions or any charges in connection with such reinvestment, in additional shares of Stock at a price per share equal to (i) the Fair Market Value on the trading day immediately preceding the ex-dividend date for such dividend or other distribution less (ii) the amount of such dividend or other distribution, and (C) sold such shares on the Valuation Date at the Common Stock Price as of such date, without deduction for any taxes with respect to any gain on such sale or any charges in connection with such sale. As set forth in, and pursuant to, Section 5 of this Award Agreement, appropriate adjustments to the Absolute TSR shall be made to take into account all stock dividends, stock splits, reverse stock splits and the other events set forth in Section 5 that occur during the Performance Period. For the avoidance of doubt, the intent of the Committee is that Absolute TSR over the Performance Period be calculated using a methodology analogous in all material respects to those used for the calculation of the Multifamily REIT Index Return, such that the determination of the Multifamily REIT Index Return reflects a fair comparison of the Absolute TSR to the Multifamily REIT Index Return for the purposes of determining Multifamily REIT Relative TSR and the Committee may compute Absolute TSR in a manner different from that set forth above to the extent deemed to be appropriate by the Committee in order to ensure comparability with the Multifamily REIT Index Return.

“Baseline Value” means $[__], representing the Fair Market Value of one share of Stock on the Grant Date.

“Cause” shall mean, and shall be limited to, the occurrence of any one or more of the following events:

(i)    a willful act of dishonesty by the Grantee with respect to any matter involving the Company or any Company Affiliates;  

 

(ii)     conviction of the Grantee of a crime involving moral turpitude; or

 

(iii)     the deliberate or willful failure by the Grantee (other than by reason of the Grantee’s physical or mental illness, incapacity or disability) to substantially perform the Grantee’s duties with the Company and the Company Affiliates and the continuation of such failure for a period of 30 days after delivery by the Company or a Company Affiliate to the Grantee of written notice specifying the scope and nature of such failure and its intention to terminate the Grantee for Cause.

For purposes of clauses (i) and (iii) above, no act, or failure to act, on the Grantee’s part shall be deemed “willful” unless done, or omitted to be done, by the Grantee without reasonable belief that the Grantee’s act, or failure to act, was in the best interest of the Company and/or the Company Affiliates.

 

 

 (iii)     the consummation of any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, “beneficially own” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50 percent or more of the voting shares of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any).

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person (as defined in the foregoing clause (i)) to 30 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if such person shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 30 percent or more of the combined voting power of all then outstanding Voting Securities, then a “Change in Control” shall be deemed to have occurred for purposes of the foregoing clause (i).

“Determination Date” means the date on which the number of Award LTIP Units earned pursuant to this Award is determined by the Compensation Committee pursuant to Section 2(c).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Executive Severance Plan” means the Essex Property Trust, Inc. Executive Severance Plan, as Amended and Restated, effective March 12, 2013, as amended, modified or supplemented from time to time.

“Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships of the Grantee, any person sharing the Grantee’s household (other than a tenant of the Grantee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent of the voting interests.

“Fair Market Value” means (a) if shares of Stock are then listed on a national stock exchange, the closing sales price per share on the principal national stock exchange on which shares of Stock are listed on such date (or, if such date is not a trading date on which there was a sale of such shares on such exchange, the last preceding date on which there was a sale of Stock on such exchange), (b) if shares of Stock are not then listed on a national stock exchange but are then traded on an over-the-counter market, the average of the closing bid and asked prices for shares of Stock in the principal over-the-counter market on which shares of Stock are traded on such date (or, if such date is not a trading date on which there was a sale of shares of Stock on such market, for the last preceding date on which there was a sale of shares of Stock in such market), or (c) if shares of Stock are not then listed on a national stock exchange or traded on an over-the-counter market, such value as the Committee in its discretion may in good faith determine; provided that, where shares of Stock are so listed or traded, the Committee may make such discretionary determinations where shares of Stock have not been traded for 10 trading days.

“Good Reason” means, for purposes of determining whether a Terminating Event occurred in connection with a Change in Control, the occurrence of any of the following events:

(i)    a substantial adverse change in the nature or scope of the Grantee’s responsibilities, authorities, title, powers, functions, or duties from the responsibilities, authorities, powers, functions, or duties exercised by the Grantee immediately prior to the Change in Control; or

(ii)    a reduction in the Grantee’s annual base salary as in effect on the date hereof or as the same may be increased from time to time; or

(iii)    a reduction in the Grantee’s annual bonus opportunity to an annual bonus opportunity that is less than the highest bonus opportunity during the three fiscal years preceding the date of the Change in Control; or

(iv)    a reduction in the long-term incentive, savings and retirement program opportunities and health and welfare benefits to a level that is less favorable than the most favorable of such benefits and opportunities as are in effect on the date hereof or as the same may be increased from time to time; or

(v)    a reduction in the fringe benefits programs and policies and vacation accrual rate to a level that is less favorable than the most favorable of such benefits and accrual rates as are in effect on the date hereof or as the same may be increased from time to time; or

(vi)    the relocation of the offices of the Company or Company Affiliate at which the Grantee is principally employed immediately prior to the date of the Change in Control to a location more than 30 miles from such offices, or the requirement by the Company or a Company Affiliate for the Grantee to be based anywhere other than the offices of the Company or Company Affiliate at such location, except for required travel on the business of the Company and the Company Affiliates to an extent substantially consistent with the Grantee’s business travel obligations immediately prior to the Change in Control; or

(vii)    the failure by the Company or a Company Affiliate to pay to the Grantee any portion of Grantee’s compensation or to pay to the Grantee any portion of an installment of deferred compensation under any deferred compensation program of the Company or a Company Affiliate within 15 days of the date such compensation is due without prior written consent of the Grantee; or

(viii)    the failure by the Company and the Company Affiliates to obtain an effective agreement from any successor to assume and agree to perform the obligation of the Company and the Company Affiliates under the Executive Severance Plan; or

(ix)    any material breach by the Company under the Executive Severance Plan or by any successor of the Company.

Notwithstanding the foregoing to the contrary, none of the circumstances described above will constitute Good Reason unless the Grantee has provided written notice to the Company that such circumstances exist within ninety (90) days of the Grantee’s learning of such circumstances and the Company has failed to cure such circumstances within thirty (30) days following its receipt of such notice; and provided further, that the Grantee did not previously consent in writing to the action leading to his or her claim of resignation for Good Reason.

“Hardship Event” shall mean:

(i)    any of the following events (resulting in liabilities in excess of $25,000) that the Grantee may experience during the Grantee’s employment with the Company:

a.    Purchase of a primary residence; and/or improvements on the Grantee’s existing residence; and/or repair of major damage;

b.    Payments necessary to prevent foreclosure or eviction from the Grantee’s home or to satisfy delinquent mortgage payments;

c.    Tuition and educational fees and expenses for the Grantee or a dependent, provided the tuition is due within 24 months of the Hardship Event;

d.    Total disability;

e.    Payments necessary for medical expenses not covered by insurance;

f.    Court order to pay any amounts to the Grantee’s divorced spouse, a child, or a dependent for alimony or child support that is due within 24 months of the Hardship Event;

g.    Involuntary separation from service with the Company; and

(ii)    the date on which the sum of the Grantee’s age in years plus the number of years the Grantee has been continuously employed by the Company (or a Company Affiliate) equals or exceeds 68.

“LTIP Units” has the meaning set forth in the Partnership Agreement.

“Multifamily REIT Index” means the SNL US REIT Multifamily Index, or, in the event such index is discontinued or its methodology significantly changed during the Performance Period, a comparable index selected by the Committee in good faith.

“Multifamily REIT Index Return” means, with respect to the Performance Period, the average, compounded, annual (or annualized) return (expressed as a percentage) of the Multifamily REIT Index over the Performance Period calculated by comparing (A) the value of the Multifamily REIT Index on the Grant Date to (B) the average daily value of the Multifamily REIT Index, as applicable, over the twenty (20) consecutive trading days ending on, and including, the Valuation Date (or, if such date is not a trading day, the most recent trading day immediately preceding such date). For the avoidance of doubt, the intent of the Committee is that the Multifamily REIT Index Return over the Performance Period be calculated in a manner designed to produce a fair comparison between Absolute TSR and the Multifamily REIT Index Return for the purpose of determining Multifamily REIT Relative TSR.

“Multifamily REIT Relative TSR” means the difference (expressed in basis points), be it positive or negative, obtained by subtracting the Multifamily REIT Index Return during the Performance Period from Absolute TSR during the Performance Period.

“Partnership Agreement” means the Third Amended and Restated Limited Partnership Agreement of the Partnership, dated as of December 10, 2013 as amended from time to time.

“Performance Period” means the one-year period beginning December 10, 2014 and ending on the Valuation Date.

“Qualified Termination” of the Grantee means (i) termination by the Company and/or a Company Affiliate of the employment of the Grantee with the Company (if the Grantee is then employed by the Company) and all Company Affiliates then employing the Grantee for any reason other than for Cause or the death or disability (as determined under the then existing long-term disability coverage of the Company or such Company Affiliate) of the Grantee or (ii) termination by the Grantee of the Grantee’s employment with the Company (if the Grantee is then employed by the Company) and all other Company Affiliates then employing the Grantee for Good Reason; provided, for avoidance of doubt, that no such termination shall constitute a Qualified Termination if the Grantee remains or becomes an employee of the Company or a Company Affiliate immediately following such termination.

“Stock” means a share of the Company’s common stock, par value $0.001 per share.

“Valuation Date” means the earlier of (A) December 9, 2015, or (B) the date upon which a Change in Control shall occur.

The undersigned hereby elects pursuant to §83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

7.    Gross income inclusion: The amount to include in gross income is $0.

Dated:    [_________].

______________, the Taxpayer

Dated:    [_________].

______________, the Taxpayer

Dated:    [_________].

______________, the Taxpayer

The LTIP Units are subject to time-based and performance-based vesting. Under the performance-based hurdles, a percentage of the LTIP Units will be earned based on Essex Property Trust, Inc.’s (the “Company’s”) total return to shareholders for the period from December 10, 2014 to December 9, 2015 (or earlier in certain circumstances). Under the time-based vesting hurdles, 20% of the LTIP Units earned will vest on each of the first five anniversaries of December 9, 2014, provided that the Taxpayer remains an employee of the Company (or subsidiary or parent entity) through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s status as an employee under specified circumstances. Unvested LTIP Units are subject to forfeiture in the event of failure to vest based on the passage of time or the determination of the performance-based percentage.

Name: [________________________]

Dated:    [_________]

No. of LTIP Units: [_________] (the “Award LTIP Units”)

E.The Grantee is an employee of Essex Property Trust, Inc., a Maryland corporation (the “Company”), which is the general partner of Essex Portfolio, L.P., a California limited partnership through which the Company conducts substantially all of its operations (the “Partnership”).

F.The Partnership has adopted the 2015 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) to provide the Company’s employees with incentive compensation.  The Long-Term Incentive Plan was adopted effective as of December 9, 2014 by the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”). This award agreement (this “Award Agreement”) evidences an award to the Grantee under the Long-Term Incentive Plan (the “Award”), which is subject to the terms and conditions set forth herein.

G.The Grantee was selected by the Committee to receive the Award.  The Committee, effective as of the Grant Date set forth above, caused the Partnership to issue to the Grantee the number of LTIP Units (as defined in Appendix A) set forth above.

H.Capitalized terms used herein shall have the respective meanings ascribed to them in Appendix A hereto. Unless the context requires otherwise, capitalized terms used, but not otherwise defined herein or in Appendix A, shall have the respective meanings ascribed to them in the 2013 Plan.

13.    Grant of Award LTIP Units.

c.The Company hereby grants [____] LTIP Units to the Grantee as of the Grant Date, which will be subject to forfeiture based on the performance metrics set forth in Section 2.

d.The Grantee shall be admitted as a partner of the Partnership with beneficial ownership of the Award LTIP Units as of the Grant Date by (i) signing and delivering to the Partnership a copy of this Award Agreement and (ii) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A). Thereupon, the Grantee shall have all the rights of a Limited Partner of the Partnership with respect to the Award LTIP Units granted pursuant hereto, as set forth in the Partnership Agreement, subject, however, to the restrictions and conditions specified herein. The Award LTIP Units constitute and shall be treated for all purposes as the property of the Grantee, subject to the terms of this Award Agreement and the Partnership Agreement.

14.    Performance Criteria and Attainment Levels. The number of Award LTIP Units that will be earned pursuant to this Award will be based on the Company’s Absolute TSR and Multifamily REIT Relative TSR during the Performance Period, as set forth below.

(c)With respect to one-half of the Award LTIP Units, the number of Award LTIP Units that are earned will be based on the Company’s Absolute TSR during the Performance Period in accordance with the following table:

For Absolute TSR between 2% and 4%, the number of Award LTIP Units earned will be based on linear interpolation between the number of Award LTIP Units that would have been earned if Absolute TSR was 2% and the number that would have been earned if Absolute TSR was 4%, as set forth above.

(d)With respect to the remaining one-half of the Award LTIP Units, the number of such Award LTIP Units that are earned will be based on the Company’s Multifamily REIT Relative TSR during the Performance Period in accordance with the following table:

For Multifamily REIT Relative TSR between -100 and +100 basis points, the percentage earned will be based on linear interpolation between the number of Award LTIP Units that would have been earned if Multifamily REIT Relative TSR was -100 basis points and the number that would have been earned if Multifamily REIT Relative TSR was +100 basis points, as set forth above.

(c)    The Committee, as promptly as practicable following the conclusion of the Performance Period, shall determine the actual number of the Award LTIP Units that are earned in accordance with this Section 2. On the Determination Date, all Award LTIP Units that are not earned shall automatically and immediately be forfeited by the Grantee.

15.    Vesting. Award LTIP Units are fully vested on the Grant Date, subject only to forfeiture pursuant to the terms of Section 2(c) above to the extent such Award LTIP Units are not earned on the Determination Date.”

16.    Distributions.

(a)    The holder of the Award LTIP Units shall be entitled to receive distributions with respect to such Award LTIP Units to the extent provided for in the Partnership Agreement. The LTIP Unit Sharing Percentage for purposes of applying the relevant provisions of the Partnership Agreement shall be (i) 10% with respect to each Award LTIP Unit at any time on or prior to the Valuation Date and (ii) 100% with respect to each Award LTIP Unit at any time following the Valuation Date.

(b)    Notwithstanding anything to the contrary contained in the Partnership Agreement, the Partnership will hold in escrow until the Determination Date 90% of any distributions on the Award LTIP Units with a record date occurring after the Valuation Date and prior to the Determination Date. Upon the Determination Date, the Partnership will release to the holder of the Award LTIP Units the portion of such distribution, if any, that such holder would have been entitled to receive assuming that any forfeiture of Award LTIP Units occurring pursuant to Section 2(c) had occurred prior to the Valuation Date and the remainder of such distribution will be forfeited to the Partnership.

(c)    Except as specifically set forth above, all distributions paid with respect to the Award LTIP Units, both before and after the Determination Date, shall be fully vested and non-forfeitable when paid, whether or not the Award LTIP Units have been earned based on performance.

17.    Changes in Capital Structure. If (i) the Company shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or stock of the Company or other transaction similar thereto, (ii) any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, significant repurchases of stock, or other similar change in the capital stock of the Company, (iii) any cash dividend or other distribution to holders of shares of Stock or Common Units shall be declared and paid other than in the ordinary course, or (iv) any other extraordinary corporate event shall occur that in each case in the good faith judgment of the Committee necessitates action by way of equitable or proportionate adjustment in the terms of this Award Agreement or the Award LTIP Units to avoid distortion in the value of this Award, then the Committee shall make equitable or proportionate adjustment and take such other action as it deems necessary to maintain the Grantee’s rights hereunder so that they are substantially proportionate to the rights existing under this Award and the terms of the Award LTIP Units prior to such event, including, without limitation: (A) interpretations of or modifications to any defined term in this Award Agreement; (B) adjustments in any calculations provided for in this Award Agreement, and (C) substitution of other awards under the 2013 Plan or otherwise. All adjustments made by the Committee shall be final, binding and conclusive.

18.    Representations, Warranties and Agreements of the Grantee.

(a)    Except as otherwise agreed to by the Company and the Partnership, none of the Award LTIP Units granted hereunder nor any of the Common Units into which such Award LTIP Units may be converted (the “Award Common Units”) shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law (each such action a “Transfer”) and the Rights (as defined in the Partnership Agreement) may not be exercised with respect to the Award Common Units, provided that, at any time after the date that (a) the Award LTIP Units vest and (b) is two (2) years after the Grant Date, (i) the Award LTIP Units or Award Common Units may be Transferred to Family Members by gift or domestic relations order, provided that the transferee agrees in writing with the Company and the Partnership to be bound by all the terms and conditions of this Award Agreement and that subsequent transfers shall be prohibited except those in accordance with this Section 7 and (ii) the Rights may be exercised with respect to Award Common Units, and Award Common Units may be Transferred pursuant to the exercise of the Rights, in accordance with and to the extent otherwise permitted by the terms of the Partnership Agreement; provided that, except as set forth in Section 7(b) below, shares of Stock received upon exchange of Award Common Units may not be Transferred before the date that is ten (10) years after the Grant Date.  Additionally, all Transfers of the Award LTIP Units or Award Common Units must be in compliance with all applicable securities laws (including, without limitation, the Securities Act) and the applicable terms and conditions of the Partnership Agreement.  In connection with any Transfer of the Award LTIP Units or Award Common Units, the Partnership may require the Grantee to provide an opinion of counsel, satisfactory to the Partnership, that such Transfer is in compliance with all federal and state securities laws (including, without limitation, the Securities Act).  Any attempted Transfer of the Award LTIP Units or Award Common Units not in accordance with the terms and conditions of this Section 7 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any of the Award LTIP Units or Award Common Units as a result of any such Transfer, shall otherwise refuse to recognize any such Transfer and shall not in any way give effect to any such Transfer of any of the Award LTIP Units or Award Common Units.  This Award Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

(b)    In the event that the Grantee experiences a Hardship Event, as determined in the sole discretion of the Company, the Grantee is eligible to elect (each such election, a “Hardship Election”), upon submission of evidence demonstrating the Hardship Event and documentation evidencing such election and the required forfeitures set forth below in form and substance satisfactory to the Company, in its sole discretion, to have the ten-year restriction on Transfer (but not the other restrictions on Transfer) set forth in Section 7(a) above lifted with respect to any or all shares received upon exchange of Award Common Units, as specified by the Grantee; provided that upon making such election, and as a condition thereto, the Grantee must forfeit a number of Award Common Units, shares of Stock received in exchange for Award Common Units or earned and vested Award LTIP Units equal to 25% of the number of shares of Stock with respect to which the Hardship Election is made. A Hardship Election may be made by the Grantee only once during every 24-month period.

21.    Number of Copies.

22.    Governing Law.

This Award shall be administered by the Committee, which in the administration of this Award shall have all the powers and authority it has in the administration of the 2013 Plan as set forth in the 2013 Plan.

24.    Communication.

Dated: [_________]

“2013 Plan” means the Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, as amended, modified or supplemented from time to time.

“Absolute TSR” means, with respect to the Performance Period, the average, compounded, annual (or annualized) return (expressed as a percentage) that would have been realized by a shareholder who (A) bought one share of Stock at the Baseline Value on the Grant Date, (B) reinvested each dividend and other distribution declared during the Performance Period with respect to such share (and any other shares, or fractions thereof, previously received upon reinvestment of dividends or other distributions or on account of stock dividends), without deduction for any taxes with respect to such dividends or other distributions or any charges in connection with such reinvestment, in additional shares of Stock at a price per share equal to (i) the Fair Market Value on the trading day immediately preceding the ex-dividend date for such dividend or other distribution less (ii) the amount of such dividend or other distribution, and (C) sold such shares on the Valuation Date at the Common Stock Price as of such date, without deduction for any taxes with respect to any gain on such sale or any charges in connection with such sale. As set forth in, and pursuant to, Section 5 of this Award Agreement, appropriate adjustments to the Absolute TSR shall be made to take into account all stock dividends, stock splits, reverse stock splits and the other events set forth in Section 5 that occur during the Performance Period. For the avoidance of doubt, the intent of the Committee is that Absolute TSR over the Performance Period be calculated using a methodology analogous in all material respects to those used for the calculation of the Multifamily REIT Index Return, such that the determination of the Multifamily REIT Index Return reflects a fair comparison of the Absolute TSR to the Multifamily REIT Index Return for the purposes of determining Multifamily REIT Relative TSR and the Committee may compute Absolute TSR in a manner different from that set forth above to the extent deemed to be appropriate by the Committee in order to ensure comparability with the Multifamily REIT Index Return.

“Baseline Value” means $[__], representing the Fair Market Value of one share of Stock on the Grant Date.

 

 

 (iii)     the consummation of any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, “beneficially own” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50 percent or more of the voting shares of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any).

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person (as defined in the foregoing clause (i)) to 30 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if such person shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 30 percent or more of the combined voting power of all then outstanding Voting Securities, then a “Change in Control” shall be deemed to have occurred for purposes of the foregoing clause (i).

“Determination Date” means the date on which the number of Award LTIP Units earned pursuant to this Award is determined by the Compensation Committee pursuant to Section 2(c).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships of the Grantee, any person sharing the Grantee’s household (other than a tenant of the Grantee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent of the voting interests.

“Fair Market Value” means (a) if shares of Stock are then listed on a national stock exchange, the closing sales price per share on the principal national stock exchange on which shares of Stock are listed on such date (or, if such date is not a trading date on which there was a sale of such shares on such exchange, the last preceding date on which there was a sale of Stock on such exchange), (b) if shares of Stock are not then listed on a national stock exchange but are then traded on an over-the-counter market, the average of the closing bid and asked prices for shares of Stock in the principal over-the-counter market on which shares of Stock are traded on such date (or, if such date is not a trading date on which there was a sale of shares of Stock on such market, for the last preceding date on which there was a sale of shares of Stock in such market), or (c) if shares of Stock are not then listed on a national stock exchange or traded on an over-the-counter market, such value as the Committee in its discretion may in good faith determine; provided that, where shares of Stock are so listed or traded, the Committee may make such discretionary determinations where shares of Stock have not been traded for 10 trading days.

“Hardship Event” shall mean:

(i)    any of the following events (resulting in liabilities in excess of $25,000) that the Grantee may experience during the Grantee’s employment with the Company:

a.    Purchase of a primary residence; and/or improvements on the Grantee’s existing residence; and/or repair of major damage;

b.    Payments necessary to prevent foreclosure or eviction from the Grantee’s home or to satisfy delinquent mortgage payments;

c.    Tuition and educational fees and expenses for the Grantee or a dependent, provided the tuition is due within 24 months of the Hardship Event;

d.    Total disability;

e.    Payments necessary for medical expenses not covered by insurance;

f.    Court order to pay any amounts to the Grantee’s divorced spouse, a child, or a dependent for alimony or child support that is due within 24 months of the Hardship Event;

g.    Involuntary separation from service with the Company; and

(ii)    the date on which the sum of the Grantee’s age in years plus the number of years the Grantee has been continuously employed by the Company (or a Company Affiliate) equals or exceeds 68.

“LTIP Units” has the meaning set forth in the Partnership Agreement.

“Multifamily REIT Index” means the SNL US REIT Multifamily Index, or, in the event such index is discontinued or its methodology significantly changed during the Performance Period, a comparable index selected by the Committee in good faith.

“Multifamily REIT Index Return” means, with respect to the Performance Period, the average, compounded, annual (or annualized) return (expressed as a percentage) of the Multifamily REIT Index over the Performance Period calculated by comparing (A) the value of the Multifamily REIT Index on the Grant Date to (B) the average daily value of the Multifamily REIT Index, as applicable, over the twenty (20) consecutive trading days ending on, and including, the Valuation Date (or, if such date is not a trading day, the most recent trading day immediately preceding such date). For the avoidance of doubt, the intent of the Committee is that the Multifamily REIT Index Return over the Performance Period be calculated in a manner designed to produce a fair comparison between Absolute TSR and the Multifamily REIT Index Return for the purpose of determining Multifamily REIT Relative TSR.

“Multifamily REIT Relative TSR” means the difference (expressed in basis points), be it positive or negative, obtained by subtracting the Multifamily REIT Index Return during the Performance Period from Absolute TSR during the Performance Period.

“Partnership Agreement” means the Third Amended and Restated Limited Partnership Agreement of the Partnership, dated as of December 10, 2013 as amended from time to time.

“Performance Period” means the one-year period beginning December 10, 2014 and ending on the Valuation Date.

“Stock” means a share of the Company’s common stock, par value $0.001 per share.

“Valuation Date” means the earlier of (A) December 9, 2015, or (B) the date upon which a Change in Control shall occur.

The undersigned hereby elects pursuant to §83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

7.    Gross income inclusion: The amount to include in gross income is $0.

Dated:    [_________].

______________, the Taxpayer

Dated:    [_________].

______________, the Taxpayer

Dated:    [_________].

______________, the Taxpayer

The LTIP Units are subject performance-based vesting. Under the performance-based hurdles, a percentage of the LTIP Units will be earned based on Essex Property Trust, Inc.’s (the “Company’s”) total return to shareholders for the period from December 10, 2014 to December 9, 2015 (or earlier in certain circumstances). Unvested LTIP Units are subject to forfeiture based on the determination of the performance-based percentage.

Name: [________________________]

Dated:    [_________]