Exhibit 10.3

 

April 2005 Amendment

to

Senior Executive Severance Agreement

 

WHEREAS, Gables Residential Trust (the “Company”) and David Fitch (the
“Executive”) are parties to a Senior Executive Severance Agreement dated as of
August 8, 2002 (the “Severance Agreement”);

 

WHEREAS, pursuant to Section 14 of the Severance Agreement, the Company and the
Executive each desire to amend the Severance Agreement;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Severance Agreement is hereby amended
effective as of the date of execution, as follows:

 

1.                                       Section 3 is amended by deleting
subsections (a) and (b) thereof in their entirety and replacing such subsections
with the following:

 

“(a) termination by the Company of the employment of the Executive with the
Company and its Subsidiaries for any reason other than the death of the
Executive.  A Terminating Event shall not be deemed to have occurred pursuant to
this Section 3(a) solely as a result of the Executive being an employee of any
direct or indirect successor to the business or assets of the Company, rather
than continuing as an employee of the Company following a Change in Control; or

 

(b) termination by the Executive of the Executive’s employment with the Company
and its Subsidiaries for any reason other than the death of the Executive.”

 

2.                                       Section 4 is amended by deleting
clauses (ii) and (iii) of subsection (a) thereof in their entirety and replacing
them with the following:

 

“(ii) the (A) average of cash bonuses earned as a percentage of Executive’s
maximum cash bonus potential for the three most recently completed fiscal years
multiplied by (B) the Executive’s maximum cash bonus potential expressed as a
percentage of annual base salary and multiplied by (C) the Executive’s most
recent annual base salary (or the Executive’s annual base salary immediately
prior to the Change in Control, if higher) and (iii) the value of 50% of the
maximum restricted equity award (determined using the fair market value of the
shares immediately prior to the Change in Control, without regard to any
restrictions thereon) for the fiscal year of the Company in which the Change in
Control occurs.”

 

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3.                                       Section 4 is further amended by adding
a new subsection (c) to immediately follow subsection (b) thereof as follows:

 

“(c) Gross Up Payment.

 

(i)  In the event it shall be determined that any compensation, payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the “Severance Payments”), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Severance Payments, any Federal, state, and
local income tax, employment tax and Excise Tax upon the payment provided by
this subsection, and any interest and/or penalties assessed with respect to such
Excise Tax, shall be equal to the Severance Payments.  Notwithstanding the
foregoing provisions of this Subparagraph 4(c)(i), if it shall be determined
that the Executive is entitled to a Gross Up Payment, but the amount that equals
95% of the Severance Payments that would be treated as “parachute payments”
under Section 280G of the Code does not exceed the Threshold Amount, then no
Gross Up Payment shall be made to the Executive, but rather, (A) if the
Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total
of the Federal, state, and local income and employment taxes payable by
Executive on the amount of the Severance Payments which are in excess of the
Threshold Amount, are greater than or equal to the Threshold Amount, the
Executive shall be entitled to 100% of the benefits payable under this
Agreement; or (B) if the Threshold Amount is less than (x) the Severance
Payments, but greater than (y) the Severance Payments reduced by the sum of
(1) the Excise Tax and (2) the total of the Federal, state, and local income and
employment taxes on the amount of the Severance Payments which are in excess of
the Threshold Amount, then the benefits payable under this Agreement shall be
reduced (but not below zero) to the extent necessary so that the maximum
Severance Payments shall not exceed the Threshold Amount.  To the extent that
there is more than one method of reducing the payments to bring them within the
Threshold Amount, the Executive shall determine which method shall be followed;
provided that if the Executive fails to make such determination within 15 days
after the Company has sent the Executive written notice of the need for such
reduction, the Company may determine the amount of such reduction in its sole
discretion.  For the purposes of this Subparagraph, “Threshold Amount” shall
mean three times the Executive’s “base amount” within the meaning of
Section 280G(b)(3) of the Code and the regulations promulgated thereunder less
one dollar ($1.00).

 

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(ii) Subject to the provisions of Subparagraph (iii) below, all determinations
required to be made under this clause (ii), including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a
nationally recognized accounting firm selected by the Company (the “Accounting
Firm”), which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the Company or
the Executive.  For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation applicable to individuals for the
calendar year in which the Gross-Up Payment is to be made, and state and local
income taxes at the highest marginal rates of individual taxation in the state
and locality of Executive’s residence on the date of the Terminating Event, net
of the maximum reduction in Federal income taxes which could be obtained from
deduction of such state and local taxes.  The initial Gross-Up Payment, if any,
as determined pursuant to this clause (ii), shall be paid to the Executive
within five days of the receipt of the Accounting Firm’s determination.  Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive.  As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an “Underpayment”).  In the event that the
Company exhausts its remedies pursuant to Subparagraph (iii) below and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred, consistent with the calculations required to be made hereunder, and
any such Underpayment, and any interest and penalties imposed on the
Underpayment and required to be paid by the Executive in connection with the
proceedings described in Subparagraph (iii) below, shall be promptly paid by the
Company to or for the benefit of the Executive.

 

(iii) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-up Payment.  Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid.  The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
he gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due).  If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to

 

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contest such claim, provided that the Company has set aside adequate reserves to
cover the Underpayment and any interest and penalties thereon that may accrue,
the Executive shall: (A) give the Company any information reasonably requested
by the Company relating to such claim, (B) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by the Company, (C) cooperate with
the Company in good faith in order to effectively contest such claim, and
(D) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses.  Without limitation on the foregoing provisions
of this Subparagraph (iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis (to the extent not prohibited
by applicable law) and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.

 

(iv)  If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Subparagraph (iii) above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company’s complying with the requirements of

 

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Subparagraph (iii) above) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto).  If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Subparagraph (iii) above, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.”

 

4.                                       Section 5 is amended by deleting such
Section in its entirety and replacing it with the following:

 

“5.  Term.  This Agreement shall take effect on the date first set forth above
and shall terminate upon the earliest of (a) the resignation or voluntary
termination of the Executive for any reason prior to a Change in Control; or
(b) 24 months plus one day following a Change in Control.”

 

5.                                       Except as amended herein, the Severance
Agreement is hereby confirmed in all respects.

 

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IN WITNESS WHEREOF, this Amendment has been executed as a sealed instrument by
the Company by its duly authorized officer and by the Executive as of the 19th
day of April, 2005.

 

 

GABLES RESIDENTIAL TRUST

 

 

 

 

 

By:

/s/ Chris D. Wheeler

 

 

 

Name:

Chris D. Wheeler

 

 

Title:

Executive Chairman

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

/s/ David Fitch

 

 

David Fitch

 

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