Exhibit 10.18

 

FORM OF 2005

EQUITY RESIDENTIAL

PERFORMANCE BASED UNIT AWARD GRANT AGREEMENT

 

 

ARTICLE 1

 

ESTABLISHMENT

 

1.1.          Pursuant to the terms of this Grant Agreement(1) (“Grant”),
effective as of January 1, 2005 (“Grant Date”), the undersigned Participant,
intending to be legally bound, hereby accepts a Performance Unit Award (“Award”)
of                  Units (as defined below) from Equity Residential (“Trust”)
in accordance with the terms of the Trust’s 2002 Share Incentive Plan (the
“Plan”). Notwithstanding the foregoing, the actual number of Units provided
under the Award shall be determined under Article 3. The purpose of the Award is
to promote the overall financial objectives of the Trust and its shareholders by
linking the financial interests of the Participant to the achievement of
long-term growth in shareholder equity in the Trust and by enabling the Trust to
retain the services of those individuals who are instrumental in achieving this
growth.

 

ARTICLE 2

 

SHARES SUBJECT TO GRANT

 

2.1.          Description of Units.  For purposes of this Grant, a “Unit” shall
consist of the measurement of the number of common shares of beneficial interest
(“Shares”) that will be issued by the Trust to the Participant upon the
satisfaction of the criteria in this Grant.  Except as otherwise specifically
provided herein, the Participant shall have no property or ownership interest
with respect to a Unit and, accordingly, a Unit may not be assigned or
transferred to any person other than to the estate of a Participant upon his or
her death.

 

2.2.          Restrictions on Shares.  Shares issued in conjunction with this
Award shall be subject to the terms and conditions specified herein and to such
other terms, conditions and restrictions as may be required under the terms of
the Plan and applicable law.  The Trust shall not be required to issue or
deliver any certificates for Shares or Units, cash or other property prior to
the satisfaction of the performance criteria associated with the Award and any
applicable income tax withholding obligation. The Trust may cause any
certificate for any Shares to be delivered to be properly marked with a legend
or other notation reflecting the limitations on transfer of such Shares as
provided in this Grant, applicable securities law or as the Committee may
otherwise require. The Committee may require the Participant to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the Shares in

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(1)                                  For purposes of this Grant, any capitalized
terms which are undefined in this Grant shall have the meaning given to such
term under the provisions of the Equity Residential 2002 Share Incentive Plan,
of which this Grant shall be considered a part.

 

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compliance with applicable law or otherwise. Fractional Shares shall not be
delivered, but shall be rounded to the next highest whole number of Shares with
appropriate payment for such fractional Shares as shall reasonably be determined
by the Committee.

 

2.3.          Shareholder Rights.  No person shall have any rights of a
shareholder as to Shares or Units subject to a Award until, after proper
conversion of the Units relating to the Award or other action required, such
Shares shall have been recorded on the Trust’s official shareholder records as
having been issued or transferred. Upon conversion of the Units relating to the
Award (or any portion thereof) and the satisfaction of the requirements for
issuance of the Shares to the Participant, the Trust will have ten (10) days in
which to issue the Shares, and the Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such Shares are recorded as issued or transferred in the
Trust’s official shareholder records, except as provided herein or any
subsequent written agreement.

 

ARTICLE 3

 

AWARDS

 

3.1.          Value of Units Granted Under the Award.  The Units granted under
the Award shall have no initial value.

 

3.2.          Adjustment of Number of Units Granted Under Award.  Except as
specifically indicated below, if the Participant is not employed by the Trust or
a Subsidiary of the Trust during the entire period from the Grant Date to the
third annual anniversary thereof (the “Third Anniversary”), the Participant’s
total number of Units will be zero.  Otherwise, the total number of Units
actually issued under the Award will be determined as of the Third Anniversary
in accordance with the following:

 

 

If the Trust’s Average Annual Return exceeds the Average T-Note Rate by:

 

less than .99%

 

1-1.99%

 

2%

 

3%

 

4%

 

5%

 

6%

 

7% or greater

Then, Participant will receive a number of Units equal to the number of Units
initially granted under Article 1.1 times the following percentage:

 

0%

 

50%

 

100%

 

115%

 

135%

 

165%

 

190%

 

225%

 

Any fractional or partial Units will be rounded to the next highest whole
number.  The percentages set forth above serve as measurement guidelines. 
Accordingly, if the Trust’s Average Annual Return exceeds the Average T-Note
Rate by an amount which falls between any of the percentages sets forth in this
Section 3.2 in excess of 2%, the Participant’s award will be determined by
extrapolation by multiplying the Award on a pro-rata basis by a percentage which
directly corresponds to the Trust’s actual Average Annual Return based upon the
guidelines set forth above.

 

 

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For example, if the Trust’s Average Annual Return exceeds the Average T-Note
Rate by 2.5% for the three-year period, the Participant’s initial number of
Units will be multiplied by 107.5%.

 

3.3.          Definitions. The “Average Annual Return” will be expressed as an
annual percentage (i.e., the average of the 2005, 2006 and 2007 calendar years)
utilizing the sum of the following two numbers:  (i) the average of the Common
Share dividends paid or declared during each calendar year as a percentage of
the closing price of a Share as of January 3, 2005 -  the first business day in
January, 2005 (i.e. $35.45); and (ii) the average percentage change in Funds
from Operation as announced by the Trust (“FFO”) calculated for each calendar
year per Share over the prior calendar year.  In the event of a change in the
Trust’s calculation of FFO, the Trust shall calculate the percentage change in
FFO on a consistent basis most favorable to the Participant.  The “Average
T-Note Rate” will be expressed as an annual percentage (i.e., the average of the
2005, 2006 and 2007 calendar years) utilizing the 10-year Treasury Note interest
rate as of the first business day in January of each calendar year.

 

                3.4.          Conversion of Awards. On the Third Anniversary,
the final number of Units granted pursuant to this Award (if any) will be
converted into Shares that are subject to the restrictions set forth in Section
4.3 (“Restricted Shares”).  The number of Units which convert shall equal the
number of Restricted Shares to be received by the Participant upon conversion.

 

                3.5.          Conversion of Units Upon Death, Disability,
Retirement or Change in Control.  Notwithstanding the foregoing, in the event of
the Participant’s termination of employment with the Trust or any Subsidiary
prior to the Valuation Date due to Death, Disability or retirement at or after
age 62, the greater of:  (i) the number of Units initially granted under the
Award or (ii) the number of Units a Participant would receive pursuant to
Section 3.2 calculated as of said date; shall become fully convertible into
fully vested, non-restricted Shares.  Furthermore, in the event of a Change in
Control prior to the Valuation Date, 225% of the Units initially granted under
the Award shall become fully convertible into fully vested non-restricted Shares
as of said Date.

 

ARTICLE 4

 

RESTRICTED SHARES

 

                4.1.          General. Upon the Third Anniversary, the Trust
shall issue Shares to the Participant in an amount equal to the number of Units
determined under Section 3.2, provided the Participant remains employed by the
Trust or a Subsidiary of the Trust on such date. Fifty percent of the Shares
shall vest immediately upon the Third Anniversary and 50% of the Shares shall be
issued as Restricted Shares.  Thereafter, 50% of the total number of Restricted
Shares shall vest upon each subsequent anniversary of the Grant Date provided
the Participant remains employed by the Trust or a Subsidiary of the Trust on
such date (the “Restriction Period”).

 

                4.2.          Awards and Certificates. Upon conversion of the
Units granted under Section 3.2, the Participant shall be issued a certificate
for the number of his or her Restricted Shares.  Such certificate shall be
registered in the name of the Participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Shares. The Committee may require that the certificates evidencing
Restricted Shares be held in custody by the

 

 

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Trust until the restrictions thereon shall have lapsed and that, as a condition
of any award of Restricted Shares, the Participant shall have delivered a stock
power, endorsed in blank, relating to the Shares covered by such Award.

 

                4.3.          Terms and Conditions. Restricted Shares shall be
subject to the following terms and conditions:

 

                                                                (a)          
Limitations on Transferability. Subject to the provisions of the Plan and
Section 4.3(b), during the vesting period described in Section 4.1, the
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber any unvested interest in the Restricted Shares.

 

                                                                (b)          
Rights. Except as provided in Section 4.3(a), the Participant shall have, with
respect to the Restricted Shares, all of the rights of a shareholder of the
Trust holding the class of Shares that is the subject of the Restricted Shares,
including, but not limited to, the right to vote the Shares, the right to
receive any dividends on the Shares or tender the Shares pursuant to a tender
offer extended to all shareholders of the Trust.

 

                                                                (c)          
Acceleration. Based on service, performance by the Participant or by the Trust,
including any division or department for which the Participant is employed, or
such other factors or criteria as the Committee may determine, the Committee
may, in its sole discretion, provide for the lapse of restrictions in
installments and may accelerate the vesting of all or any part of any Award and
waive the restrictions for all or any part of such Award.

 

                                                                (d)          
Forfeiture.  The restrictions shall lapse and the Participant shall be fully
vested in the Restricted Shares if during the Restricted Period:  (i) a Change
in Control of the Company occurs; or (ii) in the event of the Participant’s
termination of employment with the Trust or any Subsidiary due to Death,
Disability, or retirement at or after age 62. Upon a Participant’s termination
of employment for any other reason during the Restriction Period (excluding a
termination of employment following a Change in Control), all Restricted Shares
shall be forfeited by the Participant, except the Committee shall have the sole
discretion to waive in whole or in part any or all remaining restrictions with
respect to any or all of the Participant’s Restricted Shares.

 

                                                                (e)          
Delivery. If and when the Restriction Period expires without a prior forfeiture
of the Restricted Shares subject to such Restriction Period, unlegended
certificates (except for legends relating to applicable securities laws) for
such Shares shall be delivered to the Participant.

 

ARTICLE 5

 

MISCELLANEOUS

 

                5.1.          Amendments and Termination. This Grant may be
amended, altered or discontinued upon subsequent written agreement executed by
the Committee and the Participant.  However, no amendment, alteration or
discontinuation shall be made which would (a) impair the rights of a

 

 

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Participant under this Grant without the Participant’s consent, except such an
amendment made to cause the Plan to qualify for the exemption provided by Rule
16b-3 of the Act or (b) disqualify the Plan from the exemption provided by Rule
16b-3. In addition, no such amendment shall be made without the approval of the
Trust’s shareholders to the extent such approval is required by law or
agreement.

 

                5.2.          General Provisions.

 

                                                                (a)          
Withholding. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award, the Participant shall pay to the Trust (or
other entity identified by the Committee), or make arrangements satisfactory to
the Trust or other entity identified by the Committee regarding the payment of,
any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Trust or an
Affiliate to obtain a current deduction.  Unless otherwise determined by the
Committee, withholding obligations may be settled with Shares, including Shares
that are part of the Award that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the Act are
satisfied. The obligations of the Trust under the Plan shall be conditional on
such payment or arrangements, and the Trust or any Subsidiary of the Trust
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the Participant.

 

                                                                (b)          
Designation of Representative. Pursuant to a form provided by the Committee, a
Participant shall designate a beneficiary (“Beneficiary”) to whom any amounts
payable in the event of the Participant’s death are to be paid.

 

                                                                (c)          
Controlling Law. This Grant shall be governed by and construed in accordance
with the laws of the State of Maryland (other than its law respecting choice of
law) to the extent not governed by Federal law. The Grant shall be construed to
comply with all applicable law and to avoid liability to the Trust or the
Participant, including, without limitation, liability under Section 16(b) of the
Act.

 

                                                                (d)          
Fail Safe. If the Participant is subject to Section 16 of the Act, transactions
under this Grant will comply with all applicable conditions of Rule 16b-3 or
Rule 16a-l(c)(3), as applicable. To the extent any provision of the Grant or
action by the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee. Moreover, in
the event this Grant does not include a provision required by Rule 16b-3 or Rule
16a-­1 (c)(3) to be stated herein, such provision (other than one relating to
eligibility requirements or the price and amount of Awards) shall be deemed to
be incorporated by reference into this Grant with respect to the Participant.

 

                5.3.          No Rights with Respect to Continuance of
Employment.  Nothing contained herein shall be deemed to alter the relationship
between the Trust or a Subsidiary of the Trust and the Participant, or the
contractual relationship between a Participant and the Trust or a Subsidiary of
the Trust (written or otherwise) regarding such relationship. Nothing contained
herein shall be

 

 

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construed to constitute a contract of employment between the Trust or a
Subsidiary of the Trust and the Participant. The Trust or a Subsidiary of the
Trust and the Participant continues to have the right to terminate the
employment or service relationship at any time for any reason, except as
provided in a written contract. The Trust or a Subsidiary of the Trust shall
have no obligation to retain the Participant in its employ or service as a
result of this Grant.  There shall be no inference as to the length of
employment or service hereby, and the Trust or a Subsidiary of the Trust
reserves the same rights to terminate the Participant’s employment or service as
existed prior to the individual’s becoming a Participant in the Plan.

 

                5.4.          Delay. If at the time the Participant incurs a
termination of employment (other than due to Cause) or if at the time of a
Change in Control, the Participant is subject to “short-­swing” liability under
Section 16(b) of the Act, any time period provided for under the Plan or the
Grant to the extent necessary to avoid the imposition of liability shall be
suspended and delayed during the period the Participant would be subject to such
liability, but not more than six (6) months and one (1) day.  The Trust shall
have the right to suspend or delay any time period described in the Plan or this
Grant if the Committee shall determine that the action may constitute a
violation of any law or result in liability under any law to the Trust, a
Subsidiary of the Trust or a shareholder of the Trust until such time as the
action required or permitted shall not constitute a violation of law or result
in liability to the Trust, a Subsidiary of the Trust or a shareholder of the
Trust. The Committee shall have the discretion to suspend the application of the
provisions of the Plan required solely to comply with Rule 16b-3 if the
Committee shall determine that Rule 16b-3 does not apply to this Grant.

 

                5.5.          Headings.  The headings contained in this Grant
are for reference purposes only and shall not affect the meaning or
interpretation of this Grant.

 

                5.6.          Severability.  If any provision of this Grant
shall for any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and this Grant
shall be construed as if such invalid or unenforceable provision were omitted.

 

                5.7.          Successors and Assigns. This Grant shall inure to
the benefit of and be binding upon each successor and assign of the Trust. All
obligations imposed upon a Participant, and all rights granted to the Trust
hereunder, shall be binding upon the Participant’s heirs, legal representatives
and successors.

 

 

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                5.8.          Entire Grant. The Plan and this Grant constitute
the entire agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between the Plan and the Grant,
the terms and conditions of this Plan shall control unless specific contrary
reference has been made in this Grant.

 

                Executed on this          day of March, 2005.

 

 

EQUITY RESIDENTIAL

 

 

 

 

By:

 

 

 

 

John Powers

 

 

Senior Vice President

 

 

 

 

 

 

 

 

 

 

 

 

Accepted this                day of March, 2005.

 

 

 

 

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