**Exhibit 10.12**

 

**GABLESRESIDENTIAL TRUST**

SeniorExecutive Severance Agreement

           AGREEMENT madeas of this 24th day of January, 2002 (the "Effective Date") by and amongGables Residential Trust, a Maryland business trust with its principal place ofbusiness in Atlanta, Georgia (the "Company"), and Douglas G. Chesnut, SeniorVice President of Investments (the "Executive").

1.                   Purpose.  The Board of Trustees of the Company (the "Board")recognizes that, as is the case with many publicly held corporations, thepossibility of a Change in Control (as defined in Section 2 hereof) exists andthat such possibility, and the uncertainty and questions which it may raise, mayinfluence the Executive's decision to accept the offered position with theCompany.  Therefore, the Board hasagreed to enter into an agreement that reinforces its commitment to theExecutive in the face of potentially disturbing circumstances arising from thepossibility of a Change in Control.  Nothingin this Agreement shall be construed as creating an express or implied contractof employment and, except as otherwise agreed in writing between the Executiveand the Company, the Executive shall not have any right to be retained in theemploy of the Company.

2.                   Changein Control. For purposes of this Agreement, a "Change in Control" shall mean theoccurrence of any one of the following events:

(a)     any "person," as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended (the "Act") (other than theCompany, any of its Subsidiaries (as defined below), or any trustee, fiduciaryor other person or entity holding securities under any employee benefit plan ortrust of the Company or any of its Subsidiaries), together with all"affiliates" and "associates" (as such terms are defined in Rule 12b-2under the Act) of such person, shall become the "beneficial owner" (as suchterm is defined in Rule 13d-3 under the Act), directly or indirectly, ofsecurities of the Company representing 40% or more of either (i) the combinedvoting power of the Company's then outstanding securities having the right tovote in an election of the Board ("Voting Securities") or (ii) the thenoutstanding common shares of beneficial interest, par value $.01 per share, ofthe Company ("Shares") (in either such case other than as a result of anacquisition of securities directly from the Company); or(b)    individuals who, as of the date hereof, constitute the Board (the"Incumbent Members") cease for any reason to constitute at least a majorityof the Board, provided, however, that any individual becoming a trustee of theCompany subsequent to the date hereof (excluding, for this purpose, (A) any suchindividual whose initial assumption of office is in connection with an actual orthreatened solicitation of proxies or consents by or on behalf of a person otherthan the Board, including by reason of agreement intended to avoid or settle anysuch actual or threatened contest or solicitation, and (B) any individual whoseinitial assumption of office is in connection with a merger or consolidation,involving an unrelated entity), whose election or nomination for election by theCompany's shareholders was approved by a vote of at least a majority of thepersons then comprising Incumbent Members shall for purposes of this Agreementbe considered an Incumbent Member; or (c)     the consummation of a consolidation or merger of the Company where theshareholders of the Company, immediately prior to the consolidation or merger,would not, immediately after the consolidation or merger, "beneficially own"(as such term is defined in Rule 13d-3 under the Act), directly or indirectly,shares representing in the aggregate 50% or more of the voting shares of thecorporation issuing cash or securities in the consolidation or merger (or of itsultimate parent corporation, if any) (the "Resulting Corporation"); or(d)    the shareholders of the Company shall approve (A) any sale, lease,exchange or other transfer to an unrelated party (in one transaction or a seriesof transactions contemplated or arranged by any party as a single plan) of allor substantially all of the assets of the Company or (B) any plan or proposalfor the liquidation or dissolution of the Company.

Notwithstandingthe foregoing, a "Change in Control" shall not be deemed to have occurredfor purposes of the foregoing clause (a) solely as the result of an acquisitionof securities by the Company which, by reducing the number of Shares or otherVoting Securities outstanding, increases (x) the proportionate number of Sharesbeneficially owned by any person to 40% or more of the Shares then outstandingor (y) the proportionate voting power represented by the Voting Securitiesbeneficially owned by any person to 40% or more of the combined voting power ofall then outstanding Voting Securities;   provided,however, that ifsuch person referred to in clause (x) or (y) of this sentence shall thereafterbecome the beneficial owner of any additional Shares or Voting Securities (otherthan pursuant to a stock split, stock dividend, or similar transaction or as aresult of an acquisition of securities directly from the Company) andimmediately thereafter beneficially owns 40% or more of the combined votingpower of all the outstanding Voting Securities or 40% or more of the Shares thenoutstanding, then a "Change in Control" shall be deemed to have occurred forpurposes of the foregoing clause (a).

             Notwithstanding the foregoing, a "Change in Control" shall not bedeemed to have occurred for purposes of the foregoing clause [c] if after theconsummation of a consolidation or merger of the Company where the shareholdersof the Company, immediately prior to the consolidation or merger, would,immediately after the consolidation or merger, "beneficially own" (as suchterm is defined in Rule 13d-3 under the Act), directly or indirectly, sharesrepresenting in the aggregate less than 50% or more of the voting shares of theResulting Corporation, the Incumbent Members constitute at least 50% of theboard of directors or board of trustees of the Resulting Corporation and theChairman and Chief Executive Officer of the Company prior to the consolidationor merger remains the Chief Executive Officer of the Resulting Companyimmediately after consolidation or merger.

             As used in this definition of "Change in Control," the term"Subsidiary" means Gables Realty Limited Partnership, Gables ResidentialServices, Inc., Gables Central Construction, Inc., and Gables East Construction,Inc., and any corporation or other entity (other than the Company) in anyunbroken chain of corporations or other entities, beginning with the Company ifeach of the corporations or entities (other than the last corporation or entityin the unbroken chain) owns stock or other interest possessing 50% or more ofthe economic interest or the total combined voting power of all classes of stockor other interest in one of the other corporations or entities in the chain.

3.                   TerminatingEvent. A "Terminating Event" shall mean any of the events provided in thisSection 3 occurring within 24 months following a Change in Control:(a)   termination by the Company of the employment of the Executive with theCompany and its Subsidiaries for any reason other than for Cause or the death ofthe Executive.  "Cause" shallmean, and shall be limited to, the occurrence of any one or more of thefollowing events: 

      (i) a willful act of dishonesty bythe Executive in connection with the performance of his material dutiesinvolving the Company or any of its Subsidiaries; or(ii)  conviction of the Executive ofa crime involving moral turpitude or conviction of a felony and such conviction has a material adverse affect on the interests of the Company; or(iii) the deliberate or willful failureby the Executive (other than by reason of the Executive's physical or mentalillness, incapacity or disability) to substantially perform the Executive's duties withthe Company and the continuation of such failure for a period of 30 days after delivery by the Company to the Executiveof written notice specifying the scope and nature of such failure and its intention to terminate the Executive for Cause. 

ATerminating Event shall not be deemed to have occurred pursuant to this Section3(a) solely as a result of the Executive being an employee of any direct orindirect successor to the business or assets of the Company, rather thancontinuing as an employee of the Company following a Change in Control. For purposes of clauses (i) and (iii) of this Section 3(a), no act, orfailure to act, on the Executive's part shall be deemed "willful" unlessdone, or omitted to be done, by the Executive without reasonable belief that theExecutive's act, or failure to act, was in the best interest of the Company;or 

(b)  termination by the Executive of the Executive's employment with theCompany and its Subsidiaries for Good Reason. "Good Reason" shall mean the occurrence of any of the followingevents: 

(i) a substantial adverse change in the nature or scope of the Executive'sresponsibilities, authorities, powers, functions, or duties from the responsibilities, authorities, powers,functions, or duties exercised by the Executive immediately prior to the Change inControl; or

(ii) a reduction in the Executive's annual base salary as in effect on thedate hereof or as the same may be increased from time to time except for across-the-board salary reductionssimilarly affecting all or substantially all management employees; or

(iii) therelocation of the Company's offices at which the Executive is principallyemployed immediately prior to the date of a Change in Control to a location more than 30 miles fromsuch offices, or the requirement by the Company for the Executive to be based anywhere other than the Company'soffices at such location, except for required travel on the Company's business to an extentsubstantially consistent with the Executive's business travel obligations immediately prior to the Change in Control; or(iv)   the failure by the Company to pay to the Executive any portion of hiscompensation or to pay to the Executive any portion of an installment of deferred compensation under any deferredcompensation program of the Company within 15 days of the date such compensation is due without prior writtenconsent of the Executive; or(v)    the failure by the Company to obtain an effective agreement from anysuccessor to assume and agree to perform this Agreement.

4.                    Special Termination Payments  In the event a Terminating Event occurs within the period (asdefined in 4(a), 4(b) and 4(c) below), subject to the signing by Executive of arelease of employment-related claims reasonably acceptable to the Company (orits successor), the Company shall pay to the Executive,

(a)     During the period of  zero(0)to one (1) year following the effective date, an amount equal to one hundred(100) percent of the sum of Executive's most recent total annual compensation.

(b)    During the period of one (1) to two (2) years following the effectivedate an amount equal to sixty-six (66) percent of the sum of Executive's mostrecent total annual compensation

(c)During the period of two (2) to three (3) years following the effective date anamount equal to thirty-three (33) percent of the sum of Executive's mostrecent total annual compensation.   

5.                   Term. This Agreement shall take effect on the Effective Date set forth aboveand shall terminate upon the earliest of (a) the termination by the Company ofthe employment of the Executive for Cause; (b) the resignation or voluntarytermination of the Executive for any reason prior to a Change in Control; (c)the resignation of the Executive after a Change in Control for any reason otherthan the occurrence of any of the events enumerated in Section 3(b)(i)-(v) ofthis Agreement; or (d) three (3) years from the Effective Date. 

6.                   Withholding.  All payments made by theCompany under this Agreement shall be net of any tax or other amounts requiredto be withheld by the Company under applicable law. 

7.                   No Mitigation; Disputes; Etc.

(a)     No Mitigation.  The Company agrees that,if the Executive's employment by the Company is terminated during the term ofthis Agreement, the Executive is not required to seek other employment or toattempt in any way to reduce any amounts payable to the Executive by the Companypursuant to Section 4 hereof.  Further,the amount of any payment provided for in this Agreement shall not be reduced byany compensation earned by the Executive as the result of employment by anotheremployer, by retirement benefits, or otherwise. 

(b)    Mediation of Disputes.  Theparties shall endeavor in good faith to settle within 90 days any controversy orclaim arising out of a relating to this Agreement or the breach thereof throughmediation with JAMS, Endispute or similar organizations. If the controversy or claim is not resolved within 90 days, the partiesshall be free to pursue other legal remedies in law or equity. 

8.                   Assignment; Prior Agreements.  Neitherthe Company nor the Executive may make any assignment of this Agreement or anyinterest herein, by operation of law or otherwise, without the prior writtenconsent of the other party, and without such consent any attempted transfershall be null and void and of no effect.  ThisAgreement shall inure to the benefit of and be binding upon the Company and theExecutive, their respective successors, executors, administrators, heirs andpermitted assigns.  In the event ofthe Executive's death after a Terminating Event but prior to the completion bythe Company of all payments due him under Section 4 of this Agreement, theCompany shall continue such payments to the Executive's beneficiary designatedin writing to the Company prior to his death (or to his estate, if the Executivefails to make such designation). 

9.                Enforceability.  If any portion orprovision of this Agreement shall to any extent be declared illegal orunenforceable by a court of competent jurisdiction, then the remainder of thisAgreement, or the application of such portion or provision in circumstancesother than those as to which it is so declared illegal or unenforceable, shallnot be affected thereby, and each portion and provision of this Agreement shallbe valid and enforceable to the fullest extent permitted by law. 

10.                Waiver. No Waiver of any provision hereof shall be effective unless made inwriting and signed by the waiving party.  Thefailure of any party to require the performance of any term or obligation ofthis Agreement, or the waiver by any party of any breach of this Agreement,shall not prevent any subsequent enforcement of such term or obligation or bedeemed a waiver of any subsequent breach.  

11.                Notices.  Any notices, requests,demands, and other communications provided for by this Agreement shall besufficient if in writing and delivered in person or sent by registered orcertified mail, postage prepaid, to the Executive at the last address theExecutive has filed in writing with the Company, or to the Company at its mainoffice, attention of the Board of Trustees. 

12.                Effect on Other Plans.  Nothingin this Agreement shall be construed to limit the rights of the Executive underthe Company's benefit plans, programs or policies.

13.                Amendment.  This Agreement may beamended or modified only by a written instrument signed by the Executive and bya duly authorized representative of the Company. 

14.                Governing Law.  This is a Marylandcontract and shall be construed under and be governed in all respects by thelaws of the State of Maryland.
15.                Obligations of Successors.  Inaddition to any obligations imposed by law upon any successor to the Company,the Company will use their best efforts to require any successor (whether director indirect, by purchase, merger, consolidation or otherwise) to all orsubstantially all of the business or assets of the Company to expressly assumeand agree to perform this Agreement in the same manner and to the same extentthat the Company would be required to perform if no such succession had takenplace. 

IN WITNESS WHEREOF, this Agreement has beenexecuted as a sealed instrument by the Company by its duly authorized officerand by the Executive, as of the date first above written.

 

GABLES RESIDENTIAL TRUSTBy: /s/ Chris D. WheelerChris D. WheelerChairman and Chief Executive Officer                                                               By:  /s/ Douglas G. ChesnutDouglas G. Chesnut