EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") effective as of December __,
1999, by and between Mid-America Apartment Communities, Inc., a Tennessee
corporation (the "Company"), and Xxxxxx X. Xxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the Chief
Executive Officer of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties 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.
"ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including additional
taxes on such Additional Amount) incurred by Executive as a result of Executive
receiving Change of Control Benefits as further described in SECTION 9(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" has the meaning set forth in SECTION 4(B)of this Agreement.
"BASE SALARY" means the annual salary to be paid to Executive as set forth
in SECTION 4(A) of this Agreement.
"BENEFIT PLANS" has the meaning set forth in SECTION 4(C) of this
Agreement.
"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 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;
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(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 of 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 Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (except for
the Additional Amount) which the Executive receives or has the right to receive
from the Company or any of its affiliates as a result of Executive's
termination.
"CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause of
the Executive's employment by the Company, in anticipation of, on, or within
three (3) years after a Change of Control, (ii) the Executive's resignation for
Good Reason on or within three (3) years after a Change of Control, or (iii)
Executive's giving of a Termination Notice of Voluntary Termination during the
thirty days immediately following the Change of Control or during the thirty
days immediately following the one year anniversary of the 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 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.
"EXECUTIVE" means the person identified in the preamble paragraph of this
Agreement.
"FAIR MARKET VALUE" means, on any give 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
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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 any of the following:
(i) a change in the Executive's status, position or responsibilities
(including reporting responsibilities) which, in the Executive's
reasonable judgment and without Executive's consent, represents a
reduction in or demotion of the Executive's status, position or
responsibilities as in effect immediately prior to a Change of Control;
the assignment to the Executive of any duties or responsibilities which,
in the Executive's reasonable judgment, are inconsistent with such status,
position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect the Executive to any of such positions,
except in connection with a Termination with Cause, as a result of the
Executive's death or Permanent Disability or by Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on the date
hereof or as the same may be increased from time to time or modifying,
suspending, discontinuing, or terminating any Award Plan or Benefit Plan
in a manner which treats Executive differently than other similarly
situated employees or singles out or discriminates against Executive;
(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 Executive 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;
(iv) the failure by the Company to continue to provide the Executive with
compensation and benefits provided for under this Agreement or benefits
substantially similar to those provided to the Executive under any of the
employee benefit plans in which the Executive is or becomes a participant,
or the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Change of Control;
(v) any material breach by the Company of any provision of this Agreement;
(vi) any purported termination of Executive's employment by the Company
which is not effected pursuant to the procedures set forth in SECTION 3;
or
(vii) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company to
assume and agree to perform this Agreement.
"MULTI-FAMILY RESIDENTIAL BUSINESS" means the business of acquiring,
developing, constructing, owning or operating multi-family residential apartment
communities.
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"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
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.
"PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the services described in SECTION
2 of the Agreement that continues for a period of six (6) consecutive months.
"TERM" has the meaning assigned to it in SECTION 3 of this Agreement.
"TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be (i) in the case of Executive's Permanent Disability, 30 days
after a Termination Notice is given and Executive does not return to the
full-time performance of his duties within such 30 day period or (ii) in all
other instances, the date specified as the Termination Date in the Termination
Notice, which date shall not be less than thirty nor more than sixty days from
the date the Termination Notice is given.
"TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
"TERMINATION PAYMENT" has the meaning set forth in SECTION 9(B)(I) of this
Agreement.
"TERMINATION WITH CAUSE" means the termination of the Executive's
employment by act of the Board for any of the following reasons:
(i) the Executive's conviction for a felony;
(ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property or
business opportunity;
(iii) the Executive's intentional breach of the noncompetition provisions
contained in SECTION 10 of this Agreement; or
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(iv) the Executive'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 that is not inconsistent with the
description of the Executive's duties set forth in SECTION 2, if such
willful neglect or failure is materially damaging or materially
detrimental to the business and operations of the Company; provided that
Executive 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 Executive 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 Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company. Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to Executive 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 Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive 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 Executive's
employment by the Company for any reason other than Termination With Cause, or
termination by the Company due to Executive's death or Permanent Disability.
"UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 ET SEQ., as amended.
"VOLUNTARY TERMINATION" means the Executive's voluntary termination of his
employment hereunder for any reason other than Good Reason. If the Executive
gives a Termination Notice of Voluntary Termination and, prior to the
Termination Date, the Executive voluntarily refuses or fails to provide
substantially all the services described in SECTION 2 hereof for a period
greater than two consecutive weeks, the Voluntary Termination shall be deemed to
be effective as of the date on which the Executive so ceases to carry out his
duties. Voluntary refusal to perform services shall not include taking vacation
otherwise permitted in accordance with SECTION 4 hereof, the Executive'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. EMPLOYMENT; SERVICES. The Company shall employ the Executive, and the
Executive agrees to be so employed, in the capacity of Chief Executive Officer
of the Company to serve for the Term hereof, subject to earlier termination as
hereinafter provided. The Executive shall devote such amount of his time and
attention to the Company's affairs as are necessary to perform his duties to the
Company in his capacity as Chief Executive Officer. The Executive shall have
authority and
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responsibility with respect to the day-to-day management of the Company,
consistent with direction from the Company's Board.
3. TERM; TERMINATION.
(a) The term of the Executive's employment hereunder shall be one
year and shall commence on the date hereof and shall be extended automatically,
for so long as the Executive remains employed by the Company hereunder, the
first day of each month beginning January 1, 2000 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 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 Executive's employment hereunder shall
be one year.
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay the
Executive for his services a Base Salary of $276,750.00, to be paid in
accordance with customary Company policies, such Base Salary being subject to
any increases approved by the Compensation Committee or the Board, as the case
may be.
(b) AWARD PLANS. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, or Options, and shall be eligible to
participate the 1994 Plan, 1999 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 executive officers generally
participate (collectively, "AWARD PLANS").
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(c) BENEFIT PLANS. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life, medical, dental, disability, insurance and welfare plan maintained
by the Company including, without limitation, the benefits contemplated by
SECTION 5 of this Agreement, that are maintained from time to time by the
Company for the benefit of Executive, the executives of the Company generally or
for the Company's employees generally, provided that Executive is eligible to
participate in such plan under the eligibility provisions thereof that are
generally applicable to the participants thereof (collectively, "BENEFIT
PLANS").
(d) VACATION. The Executive shall be entitled each calendar year to
vacation time, during which time his compensation shall be paid in full. The
time allotted for such vacation shall be three (3) weeks.
(e) CONTINUATION OF WELFARE BENEFITS. If Executive's employment is
terminated due to Executive's Permanent Disability, Termination Without Cause,
or termination for Good Reason, and if Executive is no longer eligible to
participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
one (1) year after the Termination Date. If Executive's employment is terminated
due to a Change of Control Termination, and if Executive is no longer eligible
to participate in one or more of the Benefit Plans because of such termination,
Executive shall be entitled to, and the Company shall provide to Executive at
the Company's sole expense, benefits substantially equivalent to those Benefit
Plans to which Executive was entitled immediately prior to such termination for
two (2) years after the Termination Date.
(f) OVERALL QUALIFICATION. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. EXPENSES. The Company recognizes that the Executive will have to incur
certain out-of-pocket expenses, including but not limited to travel expenses,
related to his services and the Company's business and the Company agrees to
reimburse the Executive for all reasonable expenses necessarily incurred by him
in the performance of his duties upon presentation of a voucher or documentation
indicating the amount and business purposes of any such expenses, including, but
not limited to, expenses incurred in connection with the operation of
Executive's aircraft in the course of conducting the Company's business;
provided that Executive complies with the Company's policies and procedures
regarding business expenses.
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6. VOLUNTARY TERMINATION; TERMINATION WITH CAUSE. Except as otherwise
provided in SECTION 9 of this Agreement, if (i) the Executive shall cease being
an employee of the Company on account of a Voluntary Termination or (ii) there
shall be a Termination With Cause, the Executive shall not be entitled to any
compensation after the Termination Date of such Voluntary Termination or
Termination With Cause (except Base Salary and vacation accrued but unpaid on
the Termination Date of such event). In the event of a Voluntary Termination or
Termination With Cause, the Executive shall continue to be subject to the
noncompetition covenant contained in SECTION 10 hereof for the remainder of the
Term.
7. DEATH OR DISABILITY. In the event of the Executive's death or Permanent
Disability, the Company may elect to terminate Executive's employment with the
Company. Upon termination of Executive by the Company due to Executive's death
or Permanent Disability, the Company shall continue to pay the Executive or his
heirs, devisees, executors, legatees or personal representatives, as
appropriate, the semi-monthly payments of the Base Salary then in effect for one
year from the Termination Date. The Company shall also pay any amounts due
pursuant to the terms of any Benefit Plans and Award Plans in which Executive
was a participant, including, without limitation, the pro rata amount of any
bonus to be paid to Executive for the fiscal year in which Executive was
terminated. In addition, Executive shall be permitted to participate in, and
have all rights and benefits provided by, all Benefit Plans which Executive 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 one (1) year following the Termination Date.
8. TERMINATION WITHOUT CAUSE. RESIGNATION FOR GOOD REASON. The Company may
terminate Executive for any reason, or no reason at all, at any time and
Executive may terminate this Agreement at any time for Good Reason, provided
that, upon termination of this Agreement by the Executive for Good Reason or in
the event of a Termination Without Cause, except as otherwise provided in
SECTION 9 of this Agreement, the Company shall provide the compensation and
benefits set forth in this SECTION 8. Executive may terminate this Agreement for
Good Reason notwithstanding any incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) BASE SALARY, BENEFIT AND AWARD PLANS. The Company shall continue
to pay the Executive the semi-monthly payments of the Base Salary then in effect
for one year after the Termination Date. The Company shall also pay on the
Termination Date any amounts due pursuant to the terms of any Benefit Plans and
Award Plans in which Executive was a participant, including, without limitation,
the pro rata amount of any bonus to be paid to Executive for the fiscal year in
which Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive 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 one year following the
Termination Date.
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(b) STOCK OPTIONS. All Options granted to Executive shall become
fully vested at the Termination Date. In lieu of Company Shares issuable upon
exercise of any outstanding and unexercised Options granted to Executive,
Executive may, at Executive's option, receive an amount in cash equal to the
product of (i) the Fair Market Value of Company Shares on the Termination Date
over the per share exercise price of each Option held by Executive, times (ii)
the number of Company Shares covered by each such Option. In the event Executive
does not elect to receive a cash payment for any outstanding and unexercised
Options granted to Executive, Executive shall have the right to exercise such
Options in accordance with the terms and conditions provided in the applicable
stock option plans as if Executive had continued his employment with the
Company, notwithstanding Executive's termination.
(c) LEGAL FEES. The Company shall also pay to Executive all legal
fees and expenses incurred by Executive as a result of a Termination Without
Cause or Executive's resignation for Good Reason (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).
9. CHANGE OF CONTROL.
(a) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL.
Notwithstanding any other provision in this Agreement, in the event of a Change
of Control Termination, the Company shall, on the Termination Date, pay the
Executive, 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 Executive's anticipated
bonus for the fiscal year in which Executive is terminated, the compensation and
benefits set forth in SECTION 9(B).
(b) COMPENSATION AND BENEFITS.
(i) A Termination Payment shall be paid which is equal to the sum of
two and 99/100 (2.99) times the Executive's annual base salary in effect on the
Termination Date plus two and 99/100 (2.99) times the average annual cash bonus
paid to the Executive for the two immediately preceding fiscal years, under this
Agreement or otherwise (but not including compensation under the Company's
Shareholder Value Plan) ("Termination Payment"). Notwithstanding SECTION 9(A),
the Termination Payment shall be calculated and paid immediately prior to the
closing of the transactions constituting a Change of Control if the Executive
receives notice prior to the Change of Control that his employment will be
terminated on or after the Change of Control.
(ii) Executive shall be permitted to participate in, and have all
rights and benefits provided by, all Benefit Plans which Executive 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.
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(iii) In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
excess of the higher of the Fair Market Value of Company Shares on the
Termination Date, or the highest per share price for 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 Executive, times (ii) the number of
Company Shares covered by each such Option. In the event Executive does not
elect to receive a cash payment for any outstanding and unexercised Options
granted to Executive, Executive 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 Executive all legal fees and
expenses incurred by Executive as a result of a termination described in SECTION
9(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-l, Form 8-K
or Schedule 14A (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 Executive'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
Executive set forth in SECTION 9(B) of this Agreement. The escrow agreement
shall provide that such agreement may not be terminated until the earlier of (i)
Executive's employment has terminated and all amounts due to Executive as set
forth in this Agreement have been paid to Executive 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 Executive under Code section 4999 as a result of the
Executive's receipt of the Change of Control Benefits, the Company shall
indemnify the Executive and hold him harmless against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes. To effect this
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indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on the Executive 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
Executive 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 Executive 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 9(E). The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the Executive. 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 Executive 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 Executive'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 Executive.
The provisions of this SECTION 9(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 Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
10. NONCOMPETITION. During the Term, the Executive 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
two (2) years after a Change of Control Termination, Executive 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.
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The Executive 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 Executive 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 Executive 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 Executive acknowledges that this Agreement has 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 Executive'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.
11. EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is
an employee of the Company, not an independent contractor. Any payments made to
Executive 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 whether such payments are made subsequent to the Termination Date.
12. 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: Chief Financial Officer
To the Executive: Xxxxxx X. Xxxxx
000 X. Xxxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
13. 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 10 must be approved
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by a majority of the Directors of the Company other than the Executive, if the
Executive 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.
14. 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 party 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.
15. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Tennessee.
16. ASSIGNMENT. The Executive acknowledges that his services are unique
and personal. Accordingly, the Executive 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.
17. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
18. 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
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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 beach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled to hereunder if Executive 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: ____________________________
Name: __________________________
Title: _________________________
EXECUTIVE:
________________________________
Xxxxxx X. Xxxxx
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