CHANGE IN CONTROL AND TERMINATION AGREEMENT
THIS CHANGE IN CONTROL AND
TERMINATION AGREEMENT (the “Agreement”), to be effective as of the ____
day of ______, ____, is made and entered into by and between MID_AMERICA APARTMENT COMMUNITIES,
INC., a Tennessee corporation (the “Company”) and ______________________
(the “Employee”).
RECITALS:
WHEREAS, the Company
acknowledges that Employee’s contributions to the past and future growth and
success of the Company have been and will continue to be
substantial. As a publicly held corporation, the Company recognizes
that there exists a possibility of a Change in Control (as defined herein) of
the Company. The Company also recognizes that the possibility of such
a Change in Control may contribute to uncertainty on the part of management and
may result in the departure or distraction of senior management from their
operating responsibilities.
WHEREAS, outstanding
management of the Company is always essential to advancing the best interests of
the Company’s shareholders. In the event of a threat or occurrence of
a bid to acquire or change control of the Company or to effect a business
combination, it is particularly important that the Company’s businesses be
continued with a minimum of disruption. The Company believes that the
objective of securing and retaining outstanding management will be achieved if
the Company’s key management employees are given assurances of employment
security so they will not be distracted by personal uncertainties and risks
created by such circumstances.
NOW, THEREFORE, in
consideration of the mutual covenants and obligations herein and the
compensation the Company agrees herein to pay to the Employee, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Employee agree as follows:
1. Definitions. For
purposes of this Agreement, the following terms shall have the following
definitions:
“1994 Plan” means the
Company’s Amended and Restated 1994 Restricted Stock and Stock Option
Plan.
“1999 Plan” means the
Company’s 1999 Equity Compensation Plan.
“2004 Plan” means the
Company’s 2004 Stock Plan
“Additional Amount” means the
amount the Company shall pay to the Employee in order to indemnify the Employee
against all claims, losses, damages, penalties, expenses, interest, and Excise
Taxes (including additional taxes on such Additional Amount) incurred by
Employee as a result of Employee receiving Change of Control Benefits as further
described in Section
3(e) of this Agreement.
“Arbitrators” means the
arbitrators selected to conduct any arbitration proceeding in connection with
any disputes arising out of or relating to this Agreement.
“Award Plans” means the 1994
Plan, the 1999 Plan, the 2004 Plan and any other stock option, incentive
compensation, profit participation, bonus or extra compensation plan that is
adopted by the Company and in which the Company’s employees of the same level as
Employee are entitled to participate.
“Benefit Plans” means each and
every health, life, medical, dental, disability, insurance and welfare plan
maintained by the Company for the benefit of Employee or the employees of the
Company generally, provided that Employee is eligible to participate in such
plan under the eligibility provisions thereof that are generally applicable to
participants therein.
“Board” means the Board of
Directors of the Company.
“Change of Control” means any
of the following events which occur during the Term of this
Agreement:
(i) any
“person”, as that term is used in Section 13(d) and Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes, is
discovered to be, or files a report on Schedule 13D or 14D-1 (or any successor
schedule, form or report) disclosing that such person is a beneficial owner (as
defined in Rule 13d-3 under the Exchange Act or any successor rule or
regulation), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company’s then outstanding
securities entitled to vote generally in the election of directors, regardless
of whether or not the Board shall have approved the acquisition of such
securities by the acquiring person;
(ii) individuals
who, as of the effective date of this Agreement, constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
of the Board of Directors of the Company, unless any such change is approved by
the vote of at least 80% of the members of the Board of Directors of the Company
in office immediately prior to such cessation;
(iii) the
Company is merged, consolidated or reorganized into or with another corporation
or other legal person, or securities of the Company are exchanged for securities
of another corporation or other legal person, and immediately after such merger,
consolidation, reorganization or exchange less than 80% of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such
transaction;
(iv) the
Company in any transaction or series of related transactions, sells all or
substantially all of its assets to any other corporation or other legal person
and less than a majority of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such sale or sales
are held, directly or indirectly, in the aggregate by the holders of the
securities entitled to vote generally in the election of directors of the
Company immediately prior to such sale:
(v) the
Company and its affiliates shall sell or transfer (in a single transaction or
series of related transactions) to a non-affiliate business operations or assets
that generated at least two-thirds of the consolidated revenues (determined on
the basis of the Company’s four most recently completed fiscal quarters for
which reports have been filed under the Exchange Act) of the Company and its
subsidiaries immediately prior thereto;
(vi) the
Company files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to Form 8-K (or
any successor, form or report or item therein) that a change in control of the
Company has occurred;
(vii) the
shareholders for the Company approve any plan or proposal for the liquidation or
dissolution of the Company; or
(viii) any other
transaction or series of related transactions occur that have substantially the
effect of the transactions specified in any of the preceding clauses in this
sentence.
“Change of Control Benefits”
means the Termination Payment and all other payments, benefits or compensation
(except for the Additional Amount) which the Employee receives or has the right
to receive from the Company or any of its affiliates solely as a result of
Employee’s Change of Control Termination.
“Change of Control
Termination” means (i) a Termination Without Cause of the Employee’s
employment by the Company, in anticipation of, on, or within three (3) years
after a Change of Control, or (ii) the Employee’s resignation for Good Reason on
or within three (3) years after a Change of Control.
“Code” means the Internal
Revenue Code of 1986, as amended.
“Company” means Mid-America
Apartment Communities, Inc., a Tennessee corporation, and any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
“Company Shares” means the
shares of the common stock of the Company or any securities of a successor
company which shall have replaced such common stock.
“Compensation Committee” means
the compensation committee of the Board.
“Excess Parachute Payments”
has the meaning set forth in section 280G of the Code.
“Excise Tax” means a tax on
Excess Parachute Payments imposed pursuant to Code section 4999.
“Employee” means the person
identified in the preamble paragraph of this Agreement.
“Fair Market Value” means, on
any given date, the closing sale price of the common stock of the Company on the
New York Stock Exchange on such date, or, if the New York Stock Exchange shall
be closed on such date, the next preceding date on which the New York Stock
Exchange shall have been open.
“Good
Reason” means
that the Employee terminated his employment because, within the six (6) month
period preceding the Employee’s termination, one or more of the following
conditions arose and the Employee notified the Company of such condition within
90 days of its occurrence and the Company did not remedy such condition within
30 days:
(i) a
material diminution in the Employee’s Base Salary as in effect on the date
hereof or as the same may be increased from time to time;
(ii) a
material diminution in the Employee’s authority, duties, or
responsibilities;
(iii) the
relocation of the Company’s principal executive offices to a location outside a
thirty-mile radius of Memphis, Tennessee or the Company’s requiring the Employee
to be based at any place other than a location within a thirty-mile radius of
Memphis, Tennessee, except for reasonably required travel on the Company’s
business; or
(iv) any other
action or inaction that constitutes a material breach by the Company of this
Agreement.
“Multi-Family Residential Business”
means the business of acquiring, developing, constructing, owning or
operating multi-family residential apartment communities.
“Multi-Family Residential
Property” means any real estate upon which the Multi-Family Residential
Business is being conducted.
“Option(s)” means any options
issued pursuant to the 1994 Plan, 1999 Plan, 2004 Plan or any other stock option
plan adopted by the Company, any option granted with respect to partnership
Units, or any option granted under the plan of any successor company that
replaces or assumes the Company’s or the Partnership’s Options.
“Partnership” means
Mid-America Apartments, L.P., a Tennessee limited partnership.
“Partnership Unit(s)” means
limited partnership interests of the Partnership. The holder has the
option of requiring the Company to redeem such interests. The Company
may elect to effectuate such redemption by either paying cash or exchanging
Company Shares for such interests.
“Term” has the meaning
assigned to it in Section
2 of the Agreement.
“Termination Date” means the
date employment of Employee is terminated.
“Termination Notice” means a
written notice of termination of employment by Employee or the
Company.
“Termination Payment” has the
meaning set forth in Section
3(b)(i) of this Agreement.
“Termination With Cause” means
the termination of the Employee’s employment by act of the Board for any of the
following reasons:
(i) the
Employee’s conviction for a felony;
(ii) the
Employee’s theft, embezzlement, misappropriation of or intentional infliction of
material damage to the Company’s property or business opportunity;
(iii) the
Employee’s intentional breach of the noncompetition provisions contained in
Section
4 of this Agreement; or
(iv) the
Employee’s ongoing willful neglect of or failure to perform his duties hereunder
or his ongoing willful failure or refusal to follow any reasonable, unambiguous
duly adopted written direction of the Board or any duly constituted committee
thereof, if such willful neglect or failure is materially damaging or materially
detrimental to the business and operations of the Company; provided that
Employee shall have received written notice of such failure and shall have
continued to engage in such failure after 30 days following receipt of such
notice from the board, which notice specifically identifies the manner in which
the Board believes that Employee has engaged in such failure.
For
purposes of this subsection, no act, or failure to act, shall be deemed
“willful” unless done, or omitted to be done, by Employee not in good faith, and
without reasonable belief that such action or omission was in the best interest
of the Company. Employee shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Employee a copy of
a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Employee and an
opportunity for Employee, together with his counsel, to be heard before the
Board), finding that, in good faith opinion of the Board, Employee was guilty of
misconduct as set forth above, and of continuing such misconduct after notice
from the Board.
“Termination Without Cause”
means the termination of the Employee’s employment by the Company for any
reason other than Termination With Cause, or termination by the Company due to
Employee’s death or Permanent Disability.
“Uniform Arbitration Act”
means the Uniform Arbitration Act, Tennessee Code Annotated §
29-5-391 et
seq., as
amended.
“Voluntary Termination” means
the Employee’s voluntary termination of his employment hereunder for any reason
other than Good Reason. If the Employee gives a Termination Notice of
Voluntary Termination and, prior to the Termination Date, the Employee
voluntarily refuses or fails to provide substantially the same level of services
previously provided by the Employee to the Company for a period greater than two
consecutive weeks, the Voluntary Termination shall be deemed to be effective as
of the date on which the Employee so ceases to carry out his
duties. Voluntary refusal to perform services shall not include
taking accrued and unused vacation, the Employee’s failure to perform services
on account of his illness or the illness of a member of his immediate family,
provided such illness is adequately substantiated at the reasonable request of
the Company, or any other absence from service with the written consent of the
Board.
2. Term;
Termination. The term of this Agreement shall be one year and
shall commence on the date hereof and shall be extended automatically, for so
long as the Employee remains employed by the Company hereunder, the first day of
each month beginning January 1, 2005 for an additional one-month period (such
period, as it may be extended from time to time, being herein referred to as the
“Term”), unless terminated by Employee as a Voluntary Termination or otherwise
terminated earlier in accordance with the terms of this Agreement, to the effect
that on the first day of each month, the remaining term of this Agreement and
the Employee’s employment hereunder shall be one year.
3. Change of
Control.
(a) Termination in Connection with a
Change of Control. Notwithstanding any other provision in this
Agreement or any other agreement pre-dating this Agreement between the Company
and Employee, in the event of a Change of Control Termination, the Company
shall, on the termination Date in respect of such Change of Control Termination,
pay the Employee, in addition to any Base Salary earned but not paid through the
Termination Date and any amounts due pursuant to Award plans and Benefit Plans
including, without limitation, the pro rata amount of Employee’s anticipated
bonus for the fiscal year in which Employee’s employment is so terminated, the
compensation and benefits set forth in Section
3(b).
(b) Compensation and
Benefits.
(i) A
Termination payment shall be paid which is equal to the sum of _____ times the
Employee’s annual base salary in effect on the Termination Date plus _____ times
the average annual cash bonus paid to the Employee for the two immediately
preceding fiscal years, under this Agreement or otherwise (“Termination
Payment”). Notwithstanding Section
3(a), the Termination Payment shall be calculated and paid immediately
prior to the closing of the transactions constituting a Change of Control if the
Employee receives notice prior to the Change of Control that his employment will
be terminated on or after the Change of Control.
(ii) Employee
shall be permitted to participate in, and have all rights and benefits provided
by, all Benefit Plans which Employee was eligible to participate in immediately
prior to the Termination Date (to the extent such participation is possible
under the laws then pertaining to such Benefit Plans), for a minimum of two
years following the Termination Date.
(iii) In
lieu of Company Shares or Partnership Units issuable upon exercise of any
outstanding and unexercised Options granted to Employee, Employee may, at
Employee’s option, receive an amount in cash equal to the product of (i) the
excess of the higher of the Fair Market Value of the Company Shares on the
Termination Date, or the highest per share price the Company Shares actually
paid in connection with any Change of Control of the Company, over the per share
exercise price of each Option held by Employee, times (ii) the number of the
Company Shares or Partnership Units covered by each such Option. In
the event Employee does not elect to receive a cash payment for any outstanding
and unexercised Options granted to Employee, Employee shall have the right to
exercise such Options in accordance with the terms and conditions provided in
the applicable stock option plans.
(iv) The
Company shall also pay to Employee all legal fees and expenses incurred by
Employee as a result of a termination described in Section
3(a) of this Agreement (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided
hereunder).
(c) Certain
Transactions. Notwithstanding the provisions of subparagraphs
(i) or (vi) in the definition of change of control, unless otherwise determined
in a specific case by majority vote of the Board, a Change of Control shall not
be deemed to have occurred for purposes of this Agreement solely because (i) an
entity in which the Company directly or indirectly beneficially owns 50% or more
of the voting securities or (ii) any Company-sponsored employee stock ownership
plan, or any other employee benefit plan of the Company, either files or becomes
obligated to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule A (or any successor schedule, form or
report or item thereon) under the Exchange Act, disclosing beneficial ownership
by it of shares of stock of the Company, or because the Company reports that a
Change of Control of the Company has or may have occurred or will or may occur
in the future by reason of such beneficial ownership.
(d) Escrow
Arrangement. If within thirty (30) days after the effective
date of a Change of Control Employee’s employment has not been terminated, the
Company shall deposit with an escrow agent, pursuant to an escrow agreement
between the Company and such escrow agent, a sum of money, or other property
permitted by such escrow agreement, which is substantially sufficient in the
opinion of the Company’s management to fund the amounts due to Employee set
forth in Section
3(b) of this Agreement. The escrow agreement shall provide
that such agreement may not be terminated until the earlier of (i) Employee’s
employment has terminated and all amounts due to Employee as set forth in this
Agreement have been paid to Employee or (ii) three (3) years after the effective
date of the Change of Control.
(e) Tax Matters. If
the Excise Tax on Excess Parachute Payments will be imposed on the Employee
under Code section 4999 as a result of the Employee’s receipt of the Change of
Control Benefits, the Company shall indemnify the Employee and hold him harmless
against all claims, losses, damages, penalties, expenses, interest, and Excise
Taxes. To effect this indemnification, the Company shall pay to the
Employee the Additional Amount which is sufficient to indemnify and hold the
Employee harmless from the application of Code sections 280G and 4999, including
the amount of (i) the Excise Tax that will be imposed on the Employee under
section 4999 of the Code with respect to the Change of Control Benefits; (ii)
the additional (A) Excise Tax under section 4999 of the Code, (B) hospital
insurance tax under section 3111(b) of the Code and (C) federal, state and local
income taxes for which the Employee is or will be liable on account of the
payment of the amount described in subitem (i); and (iii) the further excise,
hospital insurance and income taxes for which the Employee is or will be liable
on account of the payment of the amount described in subitem (ii) and this
subitem (iii) and any other indemnification payment under this Section
3(e). The Additional Amount shall be calculated and paid to
the Employee at the time that the Termination payment is paid to the
Employee. In calculating the Additional Amount, the highest marginal
rates of federal and applicable state and local income taxes applicable to
individuals and in effect for the year in which the Change of Control occurs
shall be used. Nothing in this paragraph shall give the Employee the
right to receive indemnification from the Company for federal, state or local
income taxes or hospital insurance taxes payable solely as a result of the
Employee’s receipt of (a) the Change in Control Benefits, or (b) any additional
payment, benefit or compensation other than the Additional Amount. As
specified in items (ii) and (iii), above, all income, hospital insurance and
additional Excise Taxes resulting from additional compensation in the form of
the Excise Tax payment specified in item (i), above, shall be paid to the
Employee.
The provisions of this Section
3(e) are illustrated by the following example:
Assume that the termination Payment and
all other Change of Control Benefits result in a total federal, state and local
income tax and hospital insurance tax liability of $180,000; and an Excise Tax
liability under Code section 4999 of $70,000. Under such
circumstances, the Employee is solely responsible for the $180,000 income and
hospital insurance tax liability; and the Company must pay to the Employee
$70,000, plus an amount necessary to indemnify the Employee for all federal,
state and local income taxes, hospital insurance taxes, and Excise Taxes that
will result from the $70,000 payment to the Employee and from all further
indemnification to the Employee of taxes attributable to the initial $70,000
payment.
4. Noncompetition. During
the Term, the Employee shall not, other than through the Company or affiliates
of the Company, own any interest in any Multi-Family Residential Property (other
than Multi-Family Residential Property in which the Company or the Partnership
has an ownership interest), as partner, shareholder or otherwise, or engage in
the Multi-Family Residential Business, directly or indirectly, for his own
account or for the account of others, either as an officer, director,
shareholder, owner, partner, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity. For a period of one year after a
Change in Control Termination, Employee shall not own any interest in any
Multi-Family Residential Property as partner, shareholder or otherwise, or
directly or indirectly, for his own account or for the account of others, either
as an officer, director, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity, engage in the Multi-Family Residential
Business within 5 miles of any Multi-Family Residential Property owned by the
Company or the Partnership at the time of termination of
employment.
The Employee agrees that damages at law
for violation of the restrictive covenant contained herein would not be an
adequate or proper remedy to the Company, and that should the Employee violate
or threaten to violate any of the provisions of such covenant, the Company, its
successors or assigns, shall be entitled to obtain a temporary or permanent
injunction, as appropriate, against the Employee in any court having
jurisdiction over the person and the subject matter, prohibiting any further
violation of any such covenants. The injunctive relief provided
herein shall be in addition to any award of damages, compensatory, exemplary or
otherwise, payable by reason of such violation.
Furthermore, the Employee acknowledges
that this Agreement had been negotiated at arms’ length by the parties, neither
being under any compulsion to enter into this Agreement, and that the foregoing
restrictive covenant does not in any respect inhibit his ability to earn a
livelihood in his chosen profession without violating the restrictive covenant
contained herein. The Company by these presents has attempted to
limit the Employee’s right to compete only to the extent necessary to protect
the Company from unfair competition. The Company recognizes, however,
that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
5. Employment
Status. The parties acknowledge that the Employee is an “at
will” employee of the Company and has not contractual right to continued
employment or compensation in the event of termination of Employee’s employment
for any reason or no reason at all, other than as set forth in this
Agreement. The parties acknowledge and agree that Employee is not an
independent contractor. Any payments made to Employee by the Company
pursuant to this Agreement shall be treated for federal and state payroll tax
purposes as payments made to a Company employee, irrespective of whether such
payments are made subsequent to the Termination Date.
6. Notices. All
notices or deliveries authorized or required pursuant to this Agreement shall be
deemed to have been given when in writing and personally delivered or when
deposited in the U.S. mail, certified, return receipt requested, postage
prepaid, addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:
To the
Company: 0000
Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Corporate
Secretary
To the
Employee: Employee
Name
Employee Address
7. Entire
Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided, however, that any amendment or
termination of the covenant of noncompetition in Section
4 must be approved by a majority of the Directors of the Company other
than the Employee, if the Employee is then a director of the
Company. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties hereto.
8. Arbitration. Any
controversy concerning or claim arising out of or relating to this Agreement
shall be settled by final and binding arbitration in Memphis, Shelby County,
Tennessee at a location specified by the party seeking such
arbitration.
(a) The
Arbitrators. Any arbitration proceeding shall be conducted by
three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and
expert competence in the matters being arbitrated. The part desiring
to submit any matter relating to this Agreement to arbitration shall do so by
written notice to the other party, which notice shall set forth the items to be
arbitrated, such party’s choice of Arbitrator, and such party’s substantive
position in the arbitration. The party receiving such notice shall,
within fifteen (15) days after receipt of such notice, appoint an Arbitrator and
notify the other party of its appointment and of its substantive
position. The Arbitrators appointed by the parties to the Arbitration
shall select an additional Arbitrator meeting the aforedescribed
criteria. The Arbitrators shall be required to render a decision in
accordance with the procedures set forth in Subparagraph (b) below within thirty
(30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the
arbitration.
(b) Arbitration
Procedures. Arbitration shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of such Act are
modified by this Agreement or the subsequent mutual agreement of the
parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this provision applies in any
court having jurisdiction over such action in Shelby County, Tennessee, and the
parties agree that jurisdiction and venue in Shelby County, Tennessee are
appropriate and approved by such parties.
9. Applicable
Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
10. Assignment. The
Employee acknowledges that his services are unique and
personal. Accordingly, the Employee may not assign his rights or
delegate his duties or obligations under this Agreement, except with respect to
certain rights to receive payments as described in Section
7.
11. Headings. Headings
in this Agreement are for convenience only and shall not be used to interpret or
construe is provisions.
12. Successors;
Binding Agreement. The Company will require any successor to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Employee to compensation
from the Company in the same amount and on the same terms as Employee would be
entitled to hereunder if Employee terminates his employment for Good
Reason. The Company’s rights and obligations under this Agreement
shall inure to the benefit of and shall be binding upon the Company’s successors
and assigns.
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IN WITNESS WHEREOF, the parties have
executed this Agreement effective as of the date first above
written.
MID-AMERICA APARTMENT COMMUNITIES,
INC.
By:
____________________________________________
Simon
X. X. Xxxxxxxxx
Chief
Financial Officer
Employee:
________________________________________________
Employee Name
