UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 31, 2020
Preferred Apartment Communities, Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland
001-34995
27-1712193
(State or other Jurisdiction 
of Incorporation)
(Commission File Number)
(I.R.S. Employer 
Identification No.)
3284 Northside Parkway NW, Suite 150
30327
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (770) 818-4100
_____________________
(Former name or former address, if changed since last report)
___________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Title of each class
 
Trading Symbol
Name of each exchange on which registered
 
Common Stock, par value $.01 per shareAPTSNYSE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Series A Redeemable Preferred Stock, par value $0.01 per share
Warrant to Purchase Common Stock, par value $0.01 per share
Series M Redeemable Preferred Stock, par value $0.01 per share
Series A1 Redeemable Preferred Stock, par value $0.01 per share
Series M1 Redeemable Preferred Stock, par value $0.01 per share

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Executive Compensation:

        The Compensation Committee (the "Compensation Committee") of Preferred Apartment Communities, Inc.'s (the "Company") Board of Directors (the "Board") engaged FPL Associates ("FPL") to assist the Compensation Committee with establishing a new executive compensation framework for the Company following the internalization of the Company's external advisors effective January 31, 2020 (the "Executive Compensation Framework"). The new compensation program, as described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 19, 2020, was designed to generally accomplish the following:

•Retain and motivate key contributors to the Company’s profitability and growth;
•Align employee and stakeholder/investor interests;
•Provide incentive compensation that places a strong emphasis on financial performance with the flexibility to assess operational and individual performance;
•Provide a means to reward for strong performance; and
•Foster an ownership mentality among program participants.

        This new compensation structure includes: (i) a mix of base salary, short-term cash incentive compensation, and long-term equity incentive compensation; (ii) objective benchmarking; (iii) time-based and performance-based vesting; and (iv) peer comparisons where appropriate.

        On July 31, 2020, the Board, upon recommendation of the Compensation Committee, approved performance-based restricted stock units ("RSUs") as part of the Company's Long-Term Incentive Program ("LTIP") for the Company’s named executive officers, as reflected in the Company’s definitive proxy statement for its 2020 annual meeting of stockholders (other than Daniel M. DuPree, the Company’s former CEO, who has become Executive Chairman and Leonard A. Silverstein who resigned as an executive officer on March 3, 2020), along with Jeffrey D. Sherman, President - Multifamily, Parker Boone DuPree, President - Office, and Michael Aide, President - Retail, each of whom is currently expected to be included as a named executive officer in our definitive proxy statement for our 2021 annual meeting of stockholders (collectively, the "Named Executive Officers").

Performance-Based RSUs

General. Pursuant to the performance-based RSUs agreements, each executive is eligible to vest in a number of RSUs ranging from 0% to 200% of the target number of RSUs granted, based on the Company’s total shareholder return ("TSR") during the three-year performance period commencing on July 1, 2020 and ending on June 30, 2023 (the "Performance Period"), relative to the total shareholder return of the peer group during the Performance Period, subject to the executive’s continued service. These RSUs include both performance-based and time-based vesting conditions.

Performance Vesting. In the event that the Company's TSR performance during the Performance Period is achieved at the "threshold," "target" or "maximum" level as set forth below compared to the peer group, the award will become performance-vested with respect to the percentage of RSUs set forth below:

LevelRelative TSR Performance (Percentage Rank vs. Peers)Earned RSUs
(% of Target)
<Threshold
<35th Percentile
0%
Threshold
35th Percentile
50%
Target
55th Percentile
100%
Maximum
75th Percentile
200%

If the Company's relative TSR Performance falls between the levels specified above, the percentage of RSUs that will performance vest will be determined using straight-line linear interpolation between such levels. The number of RSUs that become performance-vested are referred to as "Earned RSUs."



Time Vesting. Following the completion of the Performance Period, the Earned RSUs will satisfy the award’s time vesting condition and become fully vested as follows, subject to the executive’s continued service through each applicable vesting date: (i) 50% on the date the Compensation Committee determines the Company's performance during the Performance Period, and (ii) 50% on June 30, 2024.

Change in Control. Except to the extent otherwise provided under any separate written change in control or severance plan that may be established by the Company and applicable to the participant, in the event of a change in control of the Company, all outstanding RSUs will vest as follows: the Performance Period will be deemed to end as of the date of the change in control, and the Committee will determine the level of achievement of the performance conditions over the deemed Performance Period and thus the number of Earned RSUs. The number of Earned RSUs that shall become payable to the participant shall be pro-rated to reflect the percentage of days elapsed during the shortened, deemed Performance Period. To the extent that the original Performance Period has been completed prior to the change in control, any remaining outstanding RSUs that are still subject to time-based vesting requirements as of the date of the change in control shall be immediately vested and payable unless the acquirer in the change in control maintains the RSUs in accordance with the terms of the Company’s 2019 Stock Incentive Plan that are applicable to RSUs.

Certain Terminations of Service. Except as otherwise described below, any RSUs that have not fully vested as of the date on which an executive’s service terminates for any reason will be cancelled and forfeited by the executive.

If an executive's service terminates due to death or disability prior to the completion of the Performance Period, a percentage of the RSUs will become vested based on the ratio of the number of days of employment during the Performance Period divided by the total number of days in the Performance Period. The Compensation Committee will also make a determination of the Company's TSR performance relative the peer group as of the date service terminated or as soon as practicable thereafter, as determined by the Compensation Committee. Any unvested and unearned RSUs will be forfeited.

Payment. Any RSUs that become vested will be paid to the executive in whole shares of Company common stock, par value $0.01 per share ("Common Stock") as soon as practicable following the applicable vesting date.

Dividend Equivalents. In the event that the Company declares and pays a dividend in respect of its outstanding shares of Common Stock and, on the record date for such dividend, the participant holds RSUs granted that have not been settled, the Company shall record the amount of such dividend in a bookkeeping account and pay to the participant an amount in cash equal to the cash dividends the participant would have received if the participant was the holder of record, as of such record date, of a number of shares of Common Stock equal to the number of RSUs held by the participant that have not been settled as of such record date but which become vested and performance-vested RSUs, such payment to be made on the date on which any RSUs are settled. For purposes of clarity, if the RSUs (or any portion thereof) are forfeited by the participant, then the participant shall also forfeit the dividend equivalents, if any, accrued with respect to such forfeited RSUs. No interest will accrue on the dividend equivalents between the declaration and payment of the applicable dividends and the settlement of the dividend equivalents.

The table below sets forth the name and target number of performance-based RSUs awarded to the named executive officers on July 31, 2020.

Name and PositionTarget Performance RSUs
Joel T. Murphy, President and Chief Executive Officer
159,024
John A. Isakson, Chief Financial Officer51,775
Michael J. Cronin, Executive Vice President and Chief Accounting Officer
10,355
Jeffrey D. Sherman, President - Multifamily18,491
Parker Boone DuPree, President - Office18,491
Michael Aide, President - Retail14,793



Executive Severance and Change in Control Plan:

In connection with the Board’s establishment of the Executive Compensation Framework, and in consultation with FPL, on July 31, 2020, the Board, based upon the recommendation of the Compensation Committee, approved and adopted the Preferred Apartment Communities, Inc. Executive Severance and Change in Control Plan (the "Severance Plan"). The Severance Plan provides severance benefits for qualifying terminations of employment under certain circumstances to our executive officers who are selected by the Compensation Committee to participate in the plan and who execute an individual participation agreement (a "Participation Agreement").

Under the Severance Plan, if a plan participant’s employment with us is terminated by the participant for "good reason" (as defined in the Severance Plan and the applicable Participation Agreement) or by us other than for "cause" (as defined in the Severance Plan and the applicable Participation Agreement), in each case on or within 24 months following a "change in control" (as defined in the Severance Plan) and other than as a result of the participant’s death or "disability (as defined in the Severance Plan)," the participant is entitled to receive (i) a severance payment in an amount equal to 1.50 (3.0 for the Company’s Chief Executive Officer and Chief Financial Officer), multiplied by the sum of (a) the participant’s annual base salary, plus (b) the participant’s target annual performance bonus in effect immediately prior to the change in control; (ii) continued health coverage at the active employee rate for up to 18 months (36 months for the Company’s Chief Executive Officer and Chief Financial Officer) following termination of employment, but subject to cessation once the participant becomes eligible for coverage from a new employer; (iii) a pro-rated annual bonus (based on the target) for the calendar year in which the participant’s employment termination date occurs; and (iv) accelerated vesting of outstanding equity awards, if any, that were assumed and continued by the acquirer following the change in control.

If the employment of our Chief Executive Officer or Chief Financial Officer is terminated under the conditions described above but other than in the 24 month period following a change in control, such participant is entitled to receive (i) a severance payment in an amount equal to 2.0 times the sum of (a) the participant’s annual base salary, plus (b) the participant’s target annual performance bonus in effect immediately prior to the change in control, which severance payment will be payable in substantially equal installments over a 24-month period following termination of employment, (ii) continued health coverage at the active employee rate for up to 24 months following termination of employment, but subject to cessation once the participant becomes eligible for coverage from a new employer; (iii) a pro-rated annual bonus (based on target) for the calendar year in which the participant’s employment termination date occurs ("Pro-Rata Bonus"); and (iv) accelerated vesting of any outstanding time-based equity awards and continued vesting in any outstanding performance-based equity awards (based on actual performance at the end of the performance period, but pro-rated to reflect the number of days the participant was employed with the Company during the performance period).

If a plan participant’s employment with us is terminated for death or "disability," the participant (or his or her estate, if applicable) will be entitled to receive a Pro-Rata Bonus under the Severance Plan.

Except as otherwise described above, upon a termination of any participant’s employment for any reason or upon a change in control, the treatment of the participant’s outstanding equity awards will be governed by the terms of the Company’s equity plan or plans under which they were granted and any applicable award agreements.

The Severance Plan does not provide a tax gross-up provision for federal excise taxes that may be imposed under sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the "Code"). Instead, the Severance Plan provides that if amounts payable to a participant under the Severance Plan, together with any other amounts that are payable by the Company as a result of a change in control, exceed the amount allowed under section 280G of the Code for such individual, thereby subjecting the individual to an excise tax under section 4999 of Code, then, depending on which method produces the better net after-tax benefit for the recipient, such payments shall either be: (i) reduced to the level at which no excise tax applies or (ii) paid in full, with the participant being responsible for his or her excise and other taxes.

Any payments payable under the Severance Plan are conditioned on the execution and non-revocation of a release for the benefit of the Company and its related entities and agents and are subject to the executive’s compliance with certain confidentiality, non-disparagement, non-competition and non-solicitation covenants that apply during the executive’s employment and for a specified period thereafter.

The Severance Plan may be amended or terminated by the Board (including any successor board) at any time, provided that (a) the Board must provide at least 24 months advance written notice to each affected participant to the extent the amendment or termination of the Severance Plan materially and adversely affects the rights of such participant under the plan, and (b) no participant’s right to receive payments or benefits with respect to a termination of employment occurring within the 24-month period following the change in control may be adversely affected by any amendment or


termination of the Severance Plan that occurs within the period beginning six months prior to the change in control and ending 24 months following the change in control, except for any amendment or modification that the participant consents to in writing.

The foregoing description of the Severance Plan is not complete and is qualified by reference to the full text of the Severance Plan and related form Participation Agreement(s), copies of which are filed as Exhibits 10.2 through 10.4 hereto and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.
10.1
10.2
10.3
10.4



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PREFERRED APARTMENT COMMUNITIES, INC.
(Registrant)
Date: August 6, 2020
By:
/s/ Jeffrey R. Sprain
Jeffrey R. Sprain
Executive Vice President, General Counsel and Corporate Secretary


Document
        
PREFERRED APARTMENT COMMUNITIES, INC.
2019 STOCK INCENTIVE PLAN
RESTRICTED STOCK UNIT GRANT NOTICE
(Performance Vesting)
Pursuant to the terms and conditions of the Preferred Apartment Communities, Inc. 2019 Stock Incentive Plan, as amended from time to time (the “Plan”), Preferred Apartment Communities, Inc. (the “Company”) hereby grants to the individual listed below (“you” or the “Participant”) the number of performance-based restricted stock units (the “PSUs”) set forth below. This award of PSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
Participant:_____________________
Date of Grant:_____________________
Award Type and Description:
The PSU is a Restricted Stock Unit Award granted as a Performance Restricted Stock Unit pursuant to Section 4.5 of the Plan. This Award represents the right to receive shares of Stock in an amount up to 200% of the Target PSUs (defined below), subject to the terms and conditions set forth herein and in the Agreement.
Your right to receive settlement of this Award in an amount ranging from 0% to 200% of the Target PSUs shall vest and become earned and nonforfeitable upon (i) the Committee’s certification of the level of achievement of the Performance Goal (defined below) (“Earned PSUs”), and (ii) your satisfaction of the continued employment or service requirements described below under “Service Requirements.” The portion of the Target PSUs actually earned upon satisfaction of both of the foregoing requirements is referred to herein as the “Vested PSUs.”
Target Number of PSUs:

_____________________ (the “Target PSUs”).
Performance Period:
July 1, 2020 (the “Performance Period Commencement Date”) through June 30, 2023 (the “Performance Period End Date”) (such period, the “Performance Period”).
US 7175666

Service Requirements:


Except as expressly provided in Section 3 of the Agreement, you must remain continuously employed by, or be in Continuous Service with, the Company or an Affiliate, as applicable, from the Date of Grant through: (a) the date the Committee certifies the level of achievement of the Performance Goal (the date of such certification, which is expected to occur within 5 days following the Performance Period End Date, the “Payout Determination Date”) with respect to 50% of the Award, and (b) the first anniversary of the Performance Period End Date with respect to the remaining 50% of the Award (each such date, the “Service Vesting Date” with respect to the relevant portion of the Award) to be eligible to receive payment of this Award, which is also based on the level of achievement with respect to the Performance Goal (as defined below).
Performance Goal:
Subject to the terms and conditions set forth in the Plan, the Agreement and herein, the number of Target PSUs, if any, that become Earned PSUs during the Performance Period will be determined in accordance with the following table:

*The percentage of Target PSUs that become Earned PSUs for performance between the threshold, target and maximum achievement levels shall be calculated using linear interpolation.
The “Performance Goal” for the Performance Period is based on the Company’s achievement with respect to relative total shareholder return, as described in Exhibit B attached hereto.
Settlement:
Settlement of the Vested PSUs shall be made solely in shares of Stock, which shall be delivered to you in accordance with Section 5 of the Agreement.
You shall forfeit this Award if you do not execute this Restricted Stock Unit Grant Notice (this “Grant Notice”) within a period of 5 days from the date of receipt (or such other period as the Committee shall provide). By your signature below, you acknowledge and agree to be bound by the terms and conditions of the Plan, the Agreement and this Restricted Stock Unit Grant Notice. You acknowledge that you have received a copy of the Plan and the Agreement and have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations that arise under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Signature Page Follows]

2



IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
        PREFERRED APARTMENT COMMUNITIES, INC.


        By:        
        Name:
        Title:


        PARTICIPANT


               
        Name:

Signature Page to
Restricted Stock Unit Grant Notice


EXHIBIT A
RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached, by and between Preferred Apartment Communities, Inc., a Maryland corporation (the “Company”), and ______________ (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
1.Award.  In consideration of the Participant’s past and/or continued employment with, or service to, the Company or its Affiliates and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, effective as of the Date of Grant set forth in the Grant Notice (the “Date of Grant”), the Company hereby grants to the Participant the target number of PSUs set forth in the Grant Notice on the terms and conditions set forth in the Grant Notice, this Agreement and the Plan, which is incorporated herein by reference as a part of this Agreement. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. To the extent vested, each PSU represents the right to receive one share of Stock, subject to the terms and conditions set forth in the Grant Notice, this Agreement and the Plan; provided, however, that, depending on the level of performance determined to be attained with respect to the Performance Goal, the number of shares of Stock that may be earned hereunder in respect of this Award may range from 0% to 200% of the Target PSUs. Unless and until the PSUs have become vested in the manner set forth in the Grant Notice, the Participant will have no right to receive any Stock or other payments in respect of the PSUs. Prior to settlement of this Award, the PSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.
2.Vesting of PSUs.  Except as otherwise set forth in Section 3, the PSUs shall vest and become Vested PSUs in accordance with the Participant’s satisfaction of the service-based vesting schedule set forth in the Grant Notice (the “Service Requirement”), and based on the extent to which the Company has satisfied the Performance Goal set forth in the Grant Notice, which shall be determined by the Committee in its sole discretion following the end of the Performance Period on the Payout Determination Date (and any PSUs that do not become Earned PSUs shall be automatically forfeited).  Unless and until the PSUs have vested and become Vested PSUs as described in the preceding sentence, the Participant will have no right to receive any dividends or other distribution with respect to the PSUs.
3.Effect of Termination of Employment or Service; Change in Control.
(a)Termination of Employment or Service due to Disability or Death. Notwithstanding anything in the Grant Notice, this Agreement or the Plan to the contrary, subject to Section 10, if your employment or Continuous Service relationship with the Company and any of its Subsidiaries is terminated as a result of your death or Disability prior to a Service Vesting Date, then you shall vest in a percentage of your unvested Earned PSUs that is equal to the number of days of employment served during the Performance Period, divided by the total
Exhibit A-1


number of days in the Performance Period. For purposes of determining the Performance Goal achievement level resulting in the amount of Earned PSUs for the foregoing calculation, if the date of your termination of employment or Continuous Service occurs prior to the Performance Period End Date, the Performance Period End Date shall be accelerated such that the Performance Period shall be deemed to end on the date of your termination of employment or Continuous Service Relationship, and such date shall be used as the Payout Determination Date; provided however, that if the Performance Goal achievement is not readily calculable as of the date of such termination of employment or Continuous Service, the Committee may base its determination upon such audited or unaudited financial information then available or may extend the Payout Determination Date until the date of the Company’s public release of earnings for the relevant period, in each case as the Committee deems relevant and/or appropriate. Such pro-rated number of Earned PSUs shall be settled in the payment form described in Section 5 within 60 days following the date of your termination of employment or Continuous Service due to death or Disability.
(b)Other Termination of Employment or Service. Except as otherwise provided in Section 3(a), if the Participant has not satisfied the Service Requirements, then upon the termination of the Participant’s employment or other Continuous Service relationship with the Company or an Affiliate for any reason, any unvested PSUs (and all rights arising from such PSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
(c)Change in Control.
(i)Except to the extent otherwise provided under any separate written change in control or severance plan that may be established by the Company and applicable to the Participant, the PSUs will become vested in connection with a Change in Control (as such term is defined in the Plan) only as provided under Article 6 of the Plan. More specifically, in the event of a Change in Control, to the extent this Award remains subject to future vesting based all or in part on future achievement of Performance Goals, (A) the incomplete Performance Period shall be deemed to end on the date of the Change in Control, and the Committee shall determine the extent to which the Performance Goals have been met during the deemed Performance Period, based upon such audited or unaudited financial information then available that it deems relevant, (or if the Committee determines that the degree of achievement of the Performance Goals is not determinable, based on the assumption that the applicable target levels of the Performance Goal have been attained, or if the concept of target level of Performance Goals does not apply, on such other basis as may be determined by the Committee), and (B) the Award shall be settled to the Participant within ten days following the date of the Change in Control, based on the Committee’s determination of the degree of attainment of the Performance Goals and multiplying such Earned PSUs by a percentage based on the number of days elapsed during the deemed Performance Period, divided by the total number of days in the original Performance Period. To the extent the original Performance Period under this Award has been completed prior to the occurrence of a Change in Control but the Award or portions of the Award remain outstanding on the date of the Change in Control, then the Award shall become immediately
A-2

vested and payable as of the date of the Change in Control unless the acquirer in the Change in Control maintains the Award in accordance with the terms specified in Section 6.1 of the Plan.
(ii)Nothing within this Section 3(c) is intended to modify Section 3(a) above regarding the pro-rata acceleration of your PSUs upon a termination of employment or Continuous Service due to death or Disability. The provisions of Section 3(a) shall apply to a termination of your employment or Continuous Service for death or Disability, as applicable, whether or not such a termination of employment or Continuous Service were to occur in connection with a Change in Control.
4.Dividend Equivalents. In the event that the Company declares and pays a dividend in respect of its outstanding shares of Stock and, on the record date for such dividend, the Participant holds PSUs granted pursuant to this Agreement that have not been settled, the Company shall record the amount of such dividend in a bookkeeping account and pay to the Participant an amount in cash equal to the cash dividends the Participant would have received if the Participant was the holder of record, as of such record date, of a number of shares of Stock equal to the number of PSUs held by the Participant that have not been settled as of such record date but which become Vested PSUs, such payment to be made on the date on which any Vested PSUs are settled in accordance with Section 5. For purposes of clarity, if the PSUs (or any portion thereof) are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalents, if any, accrued with respect to such forfeited PSUs. No interest will accrue on the Dividend Equivalents between the declaration and payment of the applicable dividends and the settlement of the Dividend Equivalents.
5.Settlement of PSUs.
(a)Settlement. Except as otherwise provided in Section 3 above, as soon as administratively practicable following the satisfaction of the Service Requirement, but in no event later than March 15 of the calendar year following the year in which all vesting restrictions lapse, the Company shall deliver to the Participant (or the Participant’s permitted transferee, if applicable), a number of shares of Stock equal to the Earned PSUs. In the event that any fractional PSU becomes earned hereunder, that PSU shall be rounded down at the time of settlement of such PSU. No fractional shares of Stock, nor the cash value of any fractional shares of Stock, shall be issuable or payable to the Participant pursuant to this Agreement. All shares of Stock, if any, issued hereunder shall be delivered either by delivering one or more certificates for such shares to the Participant or by entering such shares in book-entry form, as determined by the Committee in its sole discretion. The value of shares of Stock shall not bear any interest owing to the passage of time. Neither this Section 5 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.
(b)Delivery Delay. Notwithstanding any provision of this Agreement to the contrary, the issuance of shares of Stock hereunder may be postponed by the Company for such period as may be required for it to comply with any applicable federal or state securities law, or any national securities exchange listing requirements, and the Company is not obligated to issue or deliver any securities if, in the opinion of counsel for the Company, the issuance of the Shares
A-3

shall constitute a violation by the Participant or the Company of any provisions of any applicable federal or state law or of any regulations of any governmental authority or any national securities exchange.
6.Tax Withholding. To the extent that the receipt, vesting or settlement of this Award results in compensation income or wages to the Participant for federal, state, local and/or foreign tax purposes, the Company shall withhold from the cash and from the shares of Stock otherwise to be delivered to the Participant an amount necessary to satisfy the Company’s obligation to withhold the amounts the Participant owes under applicable law unless the Participant delivers to the Company at the time such withholding obligation is due (either by tendering a cash payment or by delivering previously owned and unencumbered shares of Stock) such amount as the Company may require to meet such withholding obligations. The maximum number of shares of Stock that may be so withheld shall be the number of shares of Stock that have an aggregate Fair Market Value (as such term is defined in the Plan) on the date of withholding equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to this Award, as determined by the Committee. The Participant acknowledges that there may be adverse tax consequences upon the receipt, vesting or settlement of this Award or disposition of the underlying shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board of Directors, the Committee, the Company or any of its Affiliates or any of their respective managers, directors, officers, employees or authorized representatives (including, without limitation, attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
7.Non-Transferability.  Except as otherwise set forth in the Plan or this Agreement, the Participant shall not sell, transfer, pledge, hypothecate, assign or otherwise dispose of the Award nor any interest or right therein unless and until the shares of Stock underlying the PSUs have been issued, and all restrictions applicable to such shares have lapsed. Any attempted sale, transfer, pledge, hypothecation, assignment or other disposition of the Award or any related interest in violation of the Plan or this Agreement shall be void and of no effect.
8.Legends. If a stock certificate is issued with respect to shares of Stock issued hereunder, such certificate shall bear such legend or legends as the Committee deems appropriate in order to reflect the restrictions set forth in this Agreement and to ensure compliance with the terms and provisions of this Agreement, the rules, regulations and other requirements of the Securities and Exchange Commission, any applicable laws or the requirements of any stock exchange on which the Stock is then listed. If the shares of Stock issued hereunder are held in book-entry form, then such entry will reflect that the shares are subject to the restrictions set forth in this Agreement.
9.Securities Acknowledgment. Participant recognizes that if the Participant is an “affiliate” within the meaning of Rule 144 under the Securities Act of 1933, as amended, that
A-4

any sales of the shares of Stock deliverable under this Award may be made only in compliance with Rule 144.
10.Execution of Receipts and Releases. Any issuance or transfer of shares of Stock or other property to the Participant or the Participant’s legal representative, heir, legatee or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such Person hereunder. As a condition precedent to such payment or issuance, the Company may require the Participant or the Participant’s legal representative, heir, legatee or distributee to execute (and not revoke within any time provided to do so) a release and receipt therefor in such form as it shall determine appropriate; provided, however, that any review period under such release will not modify the date of settlement with respect to Vested PSUs.
11.No Obligation to Continue Employment or Awards. This Agreement is not an agreement of employment. This Agreement does not guarantee that the Participant will continue as an employee or officer of the Company or any Affiliate during the entire, or any portion of the, term of this Agreement, including, but not limited to, any period during which the Award is outstanding, nor does it modify in any respect the right of the Company to terminate such employment or service relationship at any time. The grant of this Award is a one-time benefit that does not create any contractual or other right to receive a grant of any other awards or benefits in lieu of awards in the future. Any future awards will be granted at the sole discretion of the Company.
12.Rights as a Stockholder. The Participant shall have no rights as a stockholder of the Company with respect to any shares of Stock that may become deliverable hereunder unless and until the Participant has become the holder of record of such shares of Stock, whether the shares of Stock are represented by a certificate or through book entry or another similar method, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any Shares, except as otherwise specifically provided for in the Plan or this Agreement.
13.Entire Agreement; Amendment.
(a)This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the PSUs granted hereby; provided¸ however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, severance, change in control or other agreement or plan governing the Participant’s service relationship with the Company or any Affiliate that is in effect as of the date a determination is to be made under this Agreement. Without limiting the scope of the preceding sentence, except as provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.
(b)The Committee may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan; provided, however, that except as otherwise provided in the Plan or this Agreement, any such amendment that materially
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reduces the rights of the Participant shall be effective only if it is in writing and signed by both the Participant and an authorized officer of the Company.
14.Notices. Any notice or communication given hereunder (each, a “Notice”) shall be in writing and shall be sent by personal delivery, by courier or by regular United States mail, first class and prepaid, to the appropriate party at the address set forth below:
If to the Company, to:
Preferred Apartment Communities, Inc.
3284 Northside Parkway NW, Suite 150
Atlanta, GA 30327
Attention: General Counsel

If to the Participant, to the address of the Participant on file with the Company; or such other address or to the attention of such other person as a party shall have specified by prior Notice to the other party. Each Notice shall only be given and effective upon actual receipt (or refusal of receipt).

15.Waiver of Jury Trial. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this agreement or any course of conduct, course of dealing, verbal or written statement or action of any party hereto.
16.Adjustments. If any change is made to the outstanding Common Stock or the capital structure of the Company, if required, the shares of Stock subject to this Award shall be adjusted or terminated in any manner as contemplated by Section 7.2 of the Plan.
17.Agreement to Furnish Information. The Participant agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any applicable statute or regulation.
18.Clawback. The provisions of Section 7.10 of the Plan regarding clawbacks shall apply to this Award.
19.Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the PSUs granted pursuant to this Agreement are intended to be exempt from the applicable limitations and requirements of Code Section 409A, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance, and regulations thereto (“Section 409A”) and shall be construed and interpreted in accordance with such intent. Nevertheless, to the extent that the Committee determines that the PSUs may not be exempt from Section 409A, then (a) for purposes of any payment scheduled to be made upon a Participant’s termination of employment, the Participant shall be considered to have terminated from employment only when the Participant incurs a “separation from service” within the meaning of section 409A(a)(2)(A)(i) of the Code, and (b) if the Participant is deemed to be a “specified employee” within the meaning of Section 409A, as determined by the Committee, at a
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time when the Participant becomes eligible for settlement of the PSUs upon his “separation from service” within the meaning of Section 409A, then to the extent necessary to prevent any accelerated or additional tax under Section 409A, such settlement will be delayed until the earlier of: (i) the date that is six months following the Participant’s separation from service and (ii) the Participant’s death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the PSUs provided under this Agreement are exempt from or compliant with Section 409A, and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A.
20.Miscellanous.
(a)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns.
(b)Governing Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by, and construed in accordance with, the domestic laws of the State of Maryland, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Maryland or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Maryland.
(c)Dispute Resolution. In the event of any dispute, controversy or claim between the Company or any Affiliate and the Participant in any way concerning, arising out of or relating to the Plan or this Agreement (a “Dispute”), including without limitation any Dispute concerning, arising out of or relating to the interpretation, application or enforcement of the Plan or this Agreement, the parties hereby (i) agree and consent to the personal jurisdiction of the courts of the State of Georgia located in Fulton County and/or the Federal courts of the United States of America located in the Northern District of Georgia (collectively, the “Agreed Venue”) for resolution of any such Dispute, (ii) agree that those courts in the Agreed Venue, and only those courts, shall have exclusive jurisdiction to determine any Dispute, including, without limitation, any appeal, and (iii) agree that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Georgia. The parties also hereby irrevocably (A) submit to the jurisdiction of any competent court in the Agreed Venue (and of the appropriate appellate courts therefrom), (B) to the fullest extent permitted by law, waive any and all defenses the parties may have on the grounds of lack of jurisdiction of any such court and any other objection that such parties may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court (including without limitation any defense that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum), and (C) consent to service of process in any such suit, action or proceeding, anywhere in the world, whether within or without the jurisdiction of any such court, in any manner provided by applicable law. Without limiting the foregoing, each party agrees that service of process on such party pursuant to a notice as provided in Section 14 shall be deemed effective service of process on such party. Any action for enforcement or recognition of
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any judgment obtained in connection with a Dispute may enforced in any competent court in the Agreed Venue or in any other court of competent jurisdiction.
(d)Waivers; Performance. The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement.
(e)Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this Award and any other award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
(f)Effect of Award on Other Compensation. The value of the Participant’s Award is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
(g)Headings. Headings are for convenience only and are not deemed to be part of this Agreement.
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EXHIBIT B
PERFORMANCE GOAL FOR PSUs
        The performance goal for the PSUs shall be the relative total shareholder return (“TSR”) percentile ranking of the Company as compared to the Performance Peer Group (as defined below) during the Performance Period. The number of Earned PSUs will be determined in accordance with table set forth below under the heading “Company Performance Ranking and Payout Schedule.” On the Payout Determination Date, the Committee will review, analyze and certify the achievement of the Company’s relative TSR percentile ranking for the Performance Period as compared to the Performance Peer Group and will determine the number of Earned PSUs in accordance with the terms of this Agreement, the Grant Notice and the Plan.
Company Performance Ranking and Payout Schedule
Level
Relative TSR Performance
(Percentile Rank vs. Peers)
Earned PSUs
(% of Target)*
< Threshold
< 35th Percentile
0%
Threshold
35th Percentile
50%
Target
55th Percentile
100%
Maximum
≥ 75th Percentile
200%

*The percentage of Target PSUs that become Earned PSUs for performance between the threshold, target and maximum achievement levels shall be calculated using linear interpolation. For purposes of clarity, no portion of the PSUs will become Earned PSUs if the Company does not attain at least the threshold level of relative TSR performance. Any PSUs that do not become Earned PSUs in accordance with the Agreement, including this Exhibit B, and all rights arising from such PSUs and from being a holder thereof will terminate automatically on the Payout Determination Date without further action by the Company and will be forfeited without further notice and at no cost to the Company.

Performance Peer Group
The following companies will be deemed to be the Company’s “Performance Peer Group” for purposes of this Agreement:
Exhibit B-1


Ticker SymbolCompany Name
ACCAmerican Campus Communities, Inc.
BRGBluerock Residential Growth REIT, Inc.
CXPColumbia Property Trust, Inc.
CUZCousins Properties Incorporated
IRTIndependence Realty Trust, Inc.
IRETInvestors Real Estate Trust
JBGSJBG SMITH Properties
CLIMack-Cali Realty Corporation
PDMPiedmont Office Realty Trust, Inc.
PSBPS Business Parks,Inc.
WREWashington Real Estate Investment Trust
WRIWeingarten Realty Investors
Determination of Relative TSR Rank
The TSR for the Company and each member of the Performance Peer Group shall be equal to:
(“X” plus “Y”) divided by “Z”, where:
“X” is the difference between (i) the volume-weighted average closing price (the “VWAP”) of such entity’s common stock (or other equity securities as may be appropriate and as determined by the Compensation Committee (“Other Equity Securities”) for the 20 consecutive trading days immediately preceding the Performance Period End Date], minus (ii) the VWAP of such entity’s common stock or Other Equity Securities for the 20 consecutive trading days immediately preceding the Performance Period Commencement Date;
“Y” is the cumulative amount of dividends and distributions (whether in the form of cash or equity) paid in respect of such entity’s common stock or Other Equity
Securities during the Performance Period, assuming such dividends and distributions are reinvested in additional shares of such entity’s common stock or Other Equity Securities when paid; and
“Z” is the VWAP of such entity’s common stock or Other Equity Securities for the 20 consecutive trading days immediately preceding the Performance Period Commencement Date.
Notwithstanding the foregoing, the Committee may add or delete companies from the Performance Peer Group (and if deleting a company, the Committee may also substitute a new company in the Performance Peer Group) and provide a related adjustment in the rankings at any time during the Performance Period, wherever such deletion or adjustment is appropriate to reflect that such peer company is no longer publicly traded or is determined by the Committee to no longer be a peer of the Company (for example, due to a member no longer being publicly traded) or to reflect any other significant event.  For the sake of clarity, any such deletion or adjustment made by the Committee may be effectuated without the Participant’s consent and will
B-2

not be treated (for purposes of the Plan or this Award) as an amendment to this Award that adversely affects the rights of the Participant under this Award without his or her consent
To determine the Company’s applicable percentile ranking for the Performance Period, TSR will be calculated for the Company and each entity in the Performance Peer Group as of the Performance Period End Date. The entities in the Performance Peer Group will be arranged by their respective TSR (highest to lowest) excluding the Company. The Company’s percentile rank will be interpolated between the entity with the next highest TSR and the entity with the next lowest TSR based on the differential between the Company’s TSR and the TSR of such entities. Notwithstanding the foregoing, in the event the Company’s TSR for the Performance Period is negative, unless the Committee determines there are circumstances justifying otherwise, the percentage of Target PSUs that become Earned PSUs shall not exceed 100%, regardless of Company’s actual percentile ranking for the Performance Period.

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Document


PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN
1.Purpose and Effective Date. Preferred Apartment Communities, Inc. (the “Company”) has adopted this Executive Severance and Change in Control Plan (the “Plan”) to provide for the payment of severance and/or change in control benefits to Eligible Individuals. The effective date of the Plan is __________________________, 2020 (the “Effective Date”).
2.Definitions. For purposes of the Plan, the terms listed below will have the meanings specified herein:
(a)“Accrued Payments” means (i) any unpaid Base Salary through the Date of Termination (but calculated at the rate then in effect), which shall be paid within 30 business days of the Date of Termination, (ii) unreimbursed business expenses that are eligible for reimbursement in accordance with the applicable Company or Affiliate policies through the Date of Termination, and (iii) such employee benefits, if any, as to which an Eligible Individual may be entitled pursuant to the terms governing such benefits.
(b)“Affiliate” means (i) any Subsidiary, (ii) an entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company, or (iii) any entity in which the Company has such a significant interest that the Company determines it should be deemed an “Affiliate,” as determined in the sole discretion of the Company.
(c) “Base Salary” means the amount an Eligible Individual is entitled to receive as wages or salary on an annualized basis, calculated as of the Date of Termination or, if greater, before any reduction not consented to by the Eligible Individual.
(d)“Board” means the Board of Directors of the Company.
(e)“Cause” means the occurrence of any of the following events: (i) a willful failure by an Eligible Individual to perform his or her duties and responsibilities for the Company or an Affiliate, (ii) a willful misconduct by an Eligible Individual in performing his or her duties and responsibilities for the Company or an Affiliate, (iii) an intentional disclosure by an Eligible Individual to an unauthorized person confidential information or trade secrets of the Company or an Affiliate, (iv) an act by an Eligible Individual of fraud against, misappropriation from, or dishonesty to either the Company or an Affiliate, or any party if the Board of Directors determines such act could have an adverse impact on the Company, (v) a commission by an Eligible Individual of a felony or crime involving moral turpitude, as determined by the Board, (vi) a material violation by an Eligible Individual of any policy, code of ethics or business conduct, work rule or standard of the Company or an Affiliate, or (vii) a material breach by an Eligible Individual of any material agreement with the Company or an Affiliate.
(f)“Change in Control” means the occurrence of one of the following:


(i)Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(ii)Completion of a reorganization, merger or consolidation, in each case unless, following such reorganization, merger or consolidation, (A) more than sixty percent (60%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such reorganization, merger or consolidation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Company’s outstanding voting securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their beneficial ownership, immediately prior to such reorganization, merger or consolidation, of the Company’s outstanding voting securities, and (B) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation;
(iii)(A) Completion of liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation with respect to which following such sale or other disposition (1) more than sixty percent (60%) of the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Company’s outstanding voting securities entitled to vote generally in the election of directors immediately prior to such sale or other disposition in substantially the same proportion as their beneficial ownership, immediately prior to such sale or other disposition, of the Company’s outstanding voting securities, and (2) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board of Directors of the Company providing for such sale or other disposition of assets of the Company.
(g) “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(h)“Code” means the Internal Revenue Code of 1986, as amended, and applicable administrative guidance issued thereunder.
(i)“Committee” means the Compensation Committee of the Board.
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(j)“Date of Termination” means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that if an Eligible Individual’s employment is terminated by reason of death, the Date of Termination shall be the date of death of the Eligible Individual. For all purposes of the Plan, an Eligible Individual’s Date of Termination shall not occur prior to the date the Eligible Individual incurs a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Code.
(k)“Disability” means the Eligible Individual’s disability as determined under the long-term disability plan or policy maintained by the Company or an Affiliate that covers the Eligible Individual, or if no such plan or policy is applicable, “Disability” means the Eligible Individual has been determined to be totally disabled by the Social Security Administration.
(l)“Good Reason” means, except as otherwise provided in an Eligible Individual’s Participation Agreement, the occurrence of one of the following conditions arising on or after the date such Eligible Individual commences participation in this Plan, as determined in a manner consistent with Treasury Regulation § 1.409A-1(n)(2)(ii) and without the express written consent of the Eligible Individual: (i) a material diminution by the Company or an Affiliate in the Eligible Individual’s duties and responsibilities, or (ii) a material reduction by the Company or an Affiliate in the Eligible Individual’s annual base salary other than a general reduction in Base Salary that affects all similarly situated executives, or employees with similar business functions, in substantially the same proportions, (iii) a material reduction by the Company or an Affiliate in the Eligible Individual’s (A) annual target cash incentive opportunity and/or (B) annual target equity-based compensation grant (determined based on the grant date fair value of such award) offered under the Company’s executive compensation program applicable to senior executives of the Company, provided that a material reduction in the target compensation described in clause (A) or (B) alone that is offset by a corresponding increase in one or more other elements of compensation shall not constitute a Good Reason condition if the total target compensation eligible to be earned by the Eligible Individual for such calendar year has not been materially reduced, or (iv) the Company or an Affiliate requiring the Eligible Individual to relocate his or her principal place of employment to a new location that is more than fifty (50) miles (calculated using the most direct driving route) from its current location. In the case of an Eligible Individual’s allegation of Good Reason for any condition described by clauses (i) through (iv) above, (1) the Eligible Individual shall provide notice to the Company of the event alleged to constitute Good Reason within ten (10) days after the occurrence of such event, and (2) the Company or one of its Affiliates (as applicable) shall have the opportunity to remedy the alleged Good Reason event within thirty (30) days from receipt of notice of such allegation. If not remedied within that thirty (30)-day period, the Eligible Individual may submit a Notice of Termination, provided that the Notice of Termination must be given no later than thirty (30) days after the expiration of such 30-day cure period; otherwise, the Eligible Individual will be deemed to have accepted such event, or the Company’s or Affiliate’s remedy of such event, that may have given rise to the existence of Good Reason; provided, however, such acceptance shall be limited to the occurrence of such event and shall not waive the Eligible Individual’s right to claim Good Reason with respect to future similar events.
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(m)“Notice of Termination” means a written notice communicated by the Company (or its relevant employing Affiliate) or the Eligible Individual, as applicable, that (i) indicates the specific reason for termination of the Eligible Individual’s employment, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination, and (iii) specifies the Date of Termination.
(n)“Participation Agreement” means the form agreement presented to each Eligible Individual selected for participation in the Plan by the Committee or its delegate prior to his or her entry into this Plan, which shall evidence the employee’s designation as an Eligible Individual and the individual’s agreement to participate in this Plan and to comply with the terms, conditions, and restrictions within this Plan and within the Participation Agreement.
(o)“Partnership Agreement” means the Amended and Limited Partnership Agreement of Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership and the entity through which the Company conducts substantially all of its operations.
(p)“Performance Bonus” means the annual performance bonus payment an Eligible Individual is eligible to receive for a given calendar year pursuant to the Company’s or applicable Affiliate’s annual cash performance bonus program, as may be in effect from time to time.
(q)“Pro-Rata Bonus” means an amount equal to an Eligible Individual’s Target Performance Bonus, multiplied by a fraction, the numerator of which is the number of days during which the Eligible Individual was employed by the Company or applicable Affiliate in the calendar year of termination, and the denominator of which is 365.
(r)“Stock Incentive Plan” means the Company’s 2019 Stock Incentive Plan, as the same may be amended from time to time, or any successor plan thereto.
(s)“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A “Subsidiary” shall include any entity other than a corporation to the extent permissible under Code Section 424(f) or regulations or rulings thereunder.
(t)“Target Performance Bonus” means the target amount of an Eligible Individual’s annual Performance Bonus for the year that includes the Date of Termination; provided, however, that for purposes of Section 5(c)(ii), Target Performance Bonus means the target amount of an Eligible Individual’s annual Performance Bonus in effect immediately prior to the Change in Control, as determined by the Committee or the officers of the Company, as applicable; provided, further, that in the event that an Eligible Individual has no target amount established for his or her annual Performance Bonus for the year that includes the Date of Termination, such Eligible Individual’s “Target Performance Bonus” shall mean the Eligible Individual’s average Performance Bonus amounts for the three full calendar years preceding the
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Date of Termination (or if such Eligible Individual was not eligible to receive a Performance Bonus for at least three years preceding the Date of Termination, such lesser number of full calendar years for which a Performance Bonus was payable).
3.Administration of the Plan.
(a)Authority of the Administrator. The Plan will be administered by the Committee, or by a person or committee appointed by the Committee to administer the Plan (the “Administrator”). Subject to the express provisions of the Plan and applicable law, the Administrator will have the authority, in its sole and absolute discretion, to: (i) adopt, amend, and rescind administrative and interpretive rules and regulations related to the Plan, (ii) delegate its duties under the Plan to such agents as it may appoint from time to time, and (iii) make all other determinations, perform all other acts and exercise all other powers and authority necessary or advisable for administering the Plan, including the delegation of those ministerial acts and responsibilities as the Administrator deems appropriate. The Administrator shall have complete discretion and authority with respect to the Plan and its application except to the extent that discretion is expressly limited by the Plan. The Administrator may correct any defect, supply any omission, or reconcile any inconsistency in the Plan in any manner and to the extent it deems necessary or desirable to carry the Plan into effect, and the Administrator will be the sole and final judge of that necessity or desirability. The determinations of the Administrator on the matters referred to in this Section 3(a) will be final and conclusive.
(b)Manner of Exercise of Authority. Any action of, or determination by, the Administrator will be final, conclusive and binding on all persons, including the Company, its owners, each Eligible Individual, or other persons claiming rights from or through an Eligible Individual. The express grant of any specific power to the Administrator, and the taking of any action by the Administrator, will not be construed as limiting any power or authority of the Administrator. The Administrator may delegate to officers or managers of the Company or its Affiliates, or committees thereof, the authority, subject to such terms as the Administrator will determine, to perform such functions, including administrative functions, as the Administrator may determine. The Administrator may appoint agents to assist it in administering the Plan.
(c)Limitation of Liability. The Administrator will be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or its Affiliates, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. The Administrator and any officer or employee of the Company or its Affiliates acting at the direction or on behalf of the Administrator will not be personally liable for any action or determination taken or made in good faith with respect to the Plan and will, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination.
4.Eligibility. Each employee of the Company or one of its Affiliates who (a) is chosen by the Committee to participate in the Plan; (b) receives a Participation Agreement from the Company or applicable Affiliate; and (c) executes and returns such Participation Agreement to the Company or applicable Affiliate in accordance with the terms of the Participation Agreement is eligible (each an “Eligible Individual”) to receive the benefits described in this
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Plan. Notwithstanding anything in the Plan to the contrary, an Eligible Individual’s right to participate in this Plan shall be limited as provided in his or her Participation Agreement, which shall control in the event of any conflict between the provisions of the Plan and the terms of the Participation Agreement as applied to such Eligible Individual. Eligible Individuals shall be limited to a select group of management or highly compensated employees within the meaning of sections 201, 301, and 404 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
5.Plan Benefits.
(a)Termination Due to Death or Disability. In the event an Eligible Individual’s employment terminates by reason of his death or Disability, the Eligible Individual (or his estate) will be entitled to receive:
(i)the Accrued Payments; plus
(ii)provided that any Eligible Individual whose employment terminates by reason of his Disability satisfies the Severance Conditions described in Section 6:
(1)a Pro-Rata Bonus for the calendar year of termination, payable on the Company’s or employing Affiliate’s payroll date commensurate with or next following the 60th day following the Date of Termination; plus
(2) treatment of outstanding equity awards in accordance with the terms of the Company’s equity plan or plans under which they were granted and any applicable award agreements, which for the sake of clarity provides for the following treatment: (1) all outstanding equity-based compensation awards that do not vest based on the attainment of performance goals shall become fully vested and the restrictions thereon shall lapse, and (2) all outstanding equity-based compensation awards that vest based on the attainment of performance goals shall vest or be forfeited based on actual performance through the Date of Termination (determined by the Committee as provided in the applicable award agreement), but on a pro-rata basis determined by multiplying the payout by a fraction, the numerator of which is the number of days during which the Eligible Individual was employed by the Company or one of its Affiliates during the performance period, and the denominator of which is the full performance period; provided that, any delays in the settlement or payment of any such awards described in this Section 5(a)(ii)(B) that are set forth in the applicable award agreement and that are required under Section 409A of the Code shall remain in effect.
(b)Termination Without Cause or For Good Reason. In the event an Eligible Individual’s employment is terminated by the Company or one of its Affiliates without Cause or by the Eligible Individual for Good Reason and other than as provided under Section 5(c)(ii), the Eligible Individual will be entitled to receive:
(i)the Accrued Payments; plus
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(ii)provided such Eligible Individual satisfies the Severance Conditions described in Section 6 and provided further that such Eligible Individual’s Participation Agreement indicates that the Eligible Individual is eligible for a severance benefit under this Section 5(b)(ii):
(1)severance in an amount equal to the product of (1) the Applicable Severance Multiple specified in such Eligible Individual’s Participation Agreement (the “Applicable Severance Multiple”) and (2) the sum of (x) an amount equivalent to twelve (12) months of Base Salary and (y) the Eligible Individual’s Target Performance Bonus (such product, the “Severance Amount”), which Severance Amount shall be divided into substantially equal installments over a period of months determined by multiplying the Applicable Severance Multiple by twelve (12) (the “Severance Period”), payable in accordance with the Company’s normal payroll practices, but no less frequently than monthly, which payments in the aggregate are equal to the Severance Amount and which shall begin on the payroll date commensurate with or next following the 60th day following the Date of Termination; plus
(2)a Pro-Rata Bonus for the calendar year of termination, payable on the Company’s or employing Affiliate’s payroll date commensurate with or next following the 60th day following the Date of Termination; plus
(3)group health care coverage continuation for a number of months following the Eligible Individual’s Date of Termination determined by multiplying the Applicable Severance Multiple by twelve (12) months, provided in accordance with Section 5(d); plus
(4)notwithstanding the terms of the Stock Incentive Plan or Partnership Agreement or any applicable award agreements: (1) all outstanding equity-based compensation awards that do not vest based on the attainment of performance goals shall become fully vested and the restrictions thereon shall lapse; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A of the Code shall remain in effect, and (2) all outstanding equity-based compensation awards that vest based on the attainment of performance goals shall remain outstanding and shall vest or be forfeited based on actual performance through the end of the applicable performance period, but on a pro-rata basis determined by multiplying the payout by a fraction, the numerator of which is the number of days during which the Eligible Individual was employed by the Company or one of its Affiliates during the performance period, and the denominator of which is the full performance period.
(c)Change in Control. Upon the occurrence of a Change in Control:
(i)outstanding equity awards shall become vested in accordance with the terms of the Company’s equity plan or plans under which they were granted and any applicable
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award agreements, which for the sake of clarity provides for the following treatment: (A) all outstanding equity-based compensation awards that do not vest based on the attainment of performance goals shall become fully vested and the restrictions thereon shall lapse unless the acquirer in the Change in Control agrees to continue to maintain such awards in accordance with their terms (subject to adjustment pursuant to the terms of the Stock Incentive Plan) following the Change in Control; provided that, if the acquirer continues to maintain such awards following the Change in Control in the manner described above, then such awards shall become fully vested and all restrictions thereon shall lapse upon a termination of the Eligible Individual’s employment described in Section 5(c)(ii), and (B) all outstanding equity-based compensation awards that vest based on the attainment of performance goals shall vest or be forfeited based on actual performance through the date of the Change in Control, which shall be determined based upon the Committee’s determination of the degree of achievement of the performance goals in full or on a prorated basis, or, if the Committee determines that the degree of achievement of the performance goals in full or on a prorated basis is not determinable, based on the assumption that the applicable target levels of the performance goals have been attained, or if the concept of target level of performance goals does not apply to the awards in question, on such other basis as may be determined by the Committee; provided that, any delays in the settlement or payment of any such awards described in this Section 5(c)(i) that are set forth in the applicable award agreement and that are required under Section 409A of the Code shall remain in effect.
(ii) In the event an Eligible Individual’s employment is terminated by the Company or an Affiliate for any reason other than for Cause or an Eligible Individual terminates employment for Good Reason, in each case within twenty-four (24) months following a Change in Control, then the Eligible Individual will be entitled to receive:
(A) the Accrued Payments; plus
(B) provided such Eligible Individual satisfies the Severance Conditions described in Section 6:
(1) a Pro-Rata Bonus for the calendar year of termination, payable on the Company’s or employing Affiliate’s payroll date commensurate with or next following the 60th day following the Date of Termination; plus
(2) a lump sum payment in an amount equal to the product of the Applicable Severance Multiple and the sum of (x) an amount equivalent to twelve (12) months of Base Salary and (y) the Eligible Individual’s Target Performance Bonus, payable on the payroll date commensurate with or next following the 60th day following the Date of Termination; plus
(3) group health care coverage continuation for a period following the Eligible Individual’s Date of Termination, which period shall equal the number of months determined by multiplying the Applicable Severance
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Multiple by twelve (12) months, provided in accordance with Section 5(d); plus
(4) accelerated vesting of any equity awards maintained by the acquirer following the Change in Control pursuant to Section 5(c)(i)(A).
Notwithstanding the foregoing, if otherwise required to avoid any payment hereunder from being subject to tax under Code Section 409A, the lump sum payment form specified in Section 5(c)(ii)(B)(2) shall be paid in the same form and on the same schedule as specified for a qualifying termination without a Change in Control in Section 5(b)(ii)(A). For the sake of clarity, the foregoing sentence shall not apply to any Change in Control that also constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of its assets under Code Section 409A(a)(2)(A)(v).
(d)Group Health Care Coverage. If the Eligible Individual entitled to benefits under Section 5(b)(ii) or 5(c)(ii)(B) timely and properly elects continuation coverage under the Company’s or applicable Affiliate’s group health plans pursuant to the Consolidated Omnibus Reconciliation Act of 1985, as amended (“COBRA”), then:
(i)the Company shall reimburse, or cause to be reimbursed to, the Eligible Individual for the difference between (A) monthly amount the Eligible Individual pays to effect and continue such coverage for himself and his spouse and eligible dependents, if any, under the Company’s or applicable Affiliate’s group health plans (the “Monthly Payment Amount”) and (B) the monthly premium amount paid by similarly situated actively employed executives of the Company and its Affiliates to effectuate the same level of coverage. Each such monthly reimbursement payment (the “Monthly Reimbursement Payment”) shall be paid to the Eligible Individual on the Company’s or applicable Affiliate’s first regularly scheduled pay date in the month immediately following the month in which the Eligible Individual timely remits the Monthly Premium Payment. The Eligible Individual shall be eligible to receive Monthly Reimbursement Payments under this Section 5(d)(i) until the earlier of: (1) the date the Eligible Individual is no longer eligible to receive COBRA continuation coverage and (2) the date on which the Eligible Individual becomes eligible to receive coverage under a group health plan sponsored by another employer (and any such eligibility shall be promptly reported to the Company or applicable Affiliate by the Eligible Individual); provided, however, that the Eligible Individual acknowledges and agrees that (x) the election of COBRA continuation coverage and the payment of any premiums due with respect to such COBRA continuation coverage will remain the Eligible Individual’s sole responsibility, and the Company and its Affiliates will assume no obligation for payment of any such premiums relating to such COBRA continuation coverage, (y) in no event shall the Company or any Affiliate be required to pay a Monthly Reimbursement Payment if such payment could reasonably be expected to subject the Company or an Affiliate to sanctions imposed pursuant to Section 2716 of the Patient Protection and Affordable Care Act of 2010 and the related regulations and guidance promulgated thereunder (collectively, “PPACA”) and (z) if payment of a Monthly Reimbursement Payment cannot be provided to the
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Eligible Individual without subjecting the Company or an Affiliate to sanctions imposed pursuant to Section 2716 of PPACA, then the parties agree to reform this Section 5(d)(i) in a manner as is necessary to comply with the requirements of PPACA; and
(ii)On and after the date the Eligible Individual is no longer eligible to receive COBRA continuation coverage (the “COBRA End Date”), if the Eligible Individual is entitled to receive additional months of group health care coverage continuation under Section 5(b) or 5(c), as applicable, and has not become eligible to receive coverage under a group health plan sponsored by another employer during the period beginning on the Date of Termination and ending on the COBRA End Date, then the Company shall pay or cause to be paid to the Eligible Individual a lump sum cash payment on the Company’s or applicable Affiliate’s first regularly scheduled pay date following the COBRA End Date equal to the product of (A) the Monthly Reimbursement Payment and (B) the number of additional months set forth in Section 5(b) or 5(c) for which the Eligible Individual is entitled to receive group health care coverage continuation.
(e)Termination for Cause or Without Good Reason. In the event an Eligible Individual’s employment is terminated by the Company or an Affiliate for Cause or by the Eligible Individual for a reason other than Good Reason, death, or Disability, the Eligible Individual will be entitled to receive only the Accrued Payments, and any outstanding unvested equity awards shall be immediately forfeited in accordance with the terms of the Company’s equity plan or plans under which they were granted and any applicable award agreements.
(f)Nonduplication of Benefits. Notwithstanding anything to the contrary herein, if any Eligible Individual is entitled to severance or change-in-control benefits pursuant to a separate written agreement between the Company (or one of its Affiliates) and such Eligible Individual, the payments and benefits provided under Sections 5(a)(ii), 5(b)(ii) and 5(c) of this Plan shall not result in any duplication of benefits but shall be reduced by the payments or benefits provided under such separate written agreement; provided that no such offset may be made with respect to amounts payable that are subject to the requirements of Section 409A of the Code unless the offset would not result in a violation of the requirements of Section 409A of the Code.
6.Severance Conditions. Except as otherwise provided in Section 5(a)(ii), an Eligible Individual’s entitlement to any severance benefits under Section 5(a)(ii), Section 5(b)(ii), or Section 5(c)(ii)(B) will be subject to the following conditions (the “Severance Conditions”), in addition to any other conditions or requirements specified in this Plan:
(a)Receipt and Release. Any payment to any Eligible Individual in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Company, its Affiliates and the Administrator under the Plan, and the Administrator shall require such Eligible Individual, as a condition precedent to such payment (other than with respect to Accrued Payments), to execute a receipt and release to such effect substantially in the form attached hereto as Exhibit A. In order to be effective, such release must be executed and returned to the Company, within the time provided by the Company to do so, and remain unrevoked by you within any time provided by the Company to do so. If any Eligible Individual
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is determined by the Administrator to be incompetent, by reason of physical or mental disability, to give a valid receipt and release, the Administrator may cause the payment or payments becoming due to such person to be made to another person for his benefit without responsibility on the part of the Administrator or the Company or any Affiliate to follow the application of such funds.
(b)Participation Agreement. The Eligible Individual must have executed and delivered a Participation Agreement in accordance with Section 4 of the Plan and must comply with all terms of this Plan and the Participation Agreement.
7.Certain Excise Taxes. Notwithstanding anything to the contrary in this Plan, if an Eligible Individual is a “disqualified individual” (as defined in Section 280G(c) of the Code), and the payments and benefits provided for in this Plan, together with any other payments and benefits which such Eligible Individual has the right to receive from the Company or any of its Affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits provided for in this Plan shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by such Eligible Individual from the Company and its Affiliates will be one dollar ($1.00) less than three times such Eligible Individual’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by such Eligible Individual shall be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”) or (b) paid in full, whichever produces the better net after-tax position to such Eligible Individual (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its Affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times such Eligible Individual’s base amount, then such Eligible Individual shall be required to immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 6 shall require the Company to be responsible for, or have any liability or obligation with respect to, such Eligible Individuals’ excise tax liabilities under Section 4999 of the Code. Notwithstanding anything to the contrary in this Section 7, the Company and each Eligible Individual shall cooperate in good faith to mitigate the impact of the Excise Tax and any potential reduction to payments or benefits provided under this Plan or otherwise for such Eligible Individual.
8.Claims for Benefits.
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(a)Initial Claim. Any Eligible Individual that the Committee determines is entitled to a payment of severance benefits under the Plan is not required to file a claim for such benefit, but in the event that an Eligible Individual or his estate claims (a “claimant”) to be eligible for a payment under the Plan that has not been received, or claims any other rights under the Plan, such claimant must complete and submit such claim forms and supporting documentation as will be required by the Administrator, in its sole and absolute discretion, within 60 days of the Eligible Individual’s Date of Termination. In connection with the determination of a claim, the claimant may examine the Plan and any other pertinent documents generally available to Eligible Individuals that are specifically related to the claim. A written notice of the disposition of any such claim will be furnished to the claimant within ninety (90) days after the claim is filed with the Administrator. Such notice will refer, if appropriate, to pertinent provisions of the Plan, will set forth in writing the reasons for denial of the claim, if a claim is denied (including references to any pertinent provisions of the Plan), and, where appropriate, will describe any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary. If the claim is denied, in whole or in part, the claimant will also be notified of the Plan’s claim review procedure and the time limits applicable to such procedure, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a benefit claim denial on review.
(b)Request for Review. Within ninety (90) days after receiving written notice of the Administrator’s disposition of the claim, the claimant may file with the Administrator a written request for review of his claim. In connection with the request for review, the claimant will be entitled to be represented by counsel and will be given, upon request and free of charge, reasonable access to all pertinent documents, records, or other information relevant for the preparation of his claim. If the claimant does not file a written request for review within ninety (90) days after receiving written notice of the Administrator’s disposition of the claim, the claimant will be deemed to have accepted the Administrator’s written disposition, unless the claimant was physically or mentally incapacitated so as to be unable to request review within the ninety (90) day period.
(c)Decision on Review. After receipt by the Administrator of a written application for review of an initial claim determination, the Administrator will review the claim taking into account all comments, documents, records and other information submitted by the claimant regarding the claim without regard to whether such information was considered in the initial benefit determination. The Administrator will notify the claimant of its decision by delivery via certified or registered mail to the claimant’s last known address. A decision on review of the claim will be made by the Administrator within forty-five (45) days of receipt of the written request for review. If special circumstances require an extension of the forty-five (45) day period, the Administrator will so notify the claimant in writing prior to the end of the forty-five (45) day period, and a decision will be rendered within ninety (90) days of receipt of the request for review. Any such extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the determination on review. . The decision of the Administrator will be provided to the claimant as soon as possible but no later than five (5) days after the benefit determination is made and within the time periods described above. The decision will be in writing and will include the specific reasons for the
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decision presented in a manner calculated to be understood by the claimant and will contain references to all relevant Plan provisions on which the decision was based. Such decision will also advise the claimant that he may receive upon request, and free of charge, reasonable access to and copies of all documents, records and other information relevant to his claim and will inform the claimant of his right to file a civil action under section 502(a) of ERISA, in the case of an adverse decision regarding his appeal. The decision of the Administrator will be final and conclusive.
9.General Provisions.
(a)Taxes. The Company or applicable Affiliate is authorized to withhold from any payments made hereunder amounts of withholding and other taxes due or potentially payable in connection therewith and to take such other action as the Company may deem advisable to enable the Company, its Affiliates, and Eligible Individuals to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any payments made under this Plan.
(b)Offset. The Company may set off against (or cause one of its Affiliates to offset against), and each Eligible Individual authorizes the Company or its applicable Affiliate to deduct from, any payments due to the Eligible Individual, or to his estate, heirs, legal representatives, or successors, any amounts which may be due and owing to the Company or an Affiliate by the Eligible Individual, whether arising under this Plan or otherwise; provided that no such offset may be made with respect to amounts payable that are subject to the requirements of Section 409A of the Code unless the offset would not result in a violation of the requirements of Section 409A of the Code.
(c)Term of the Plan; Amendment and Termination.
(i)Subject to the following paragraph, the Board reserves the right to amend or terminate the Plan at any time; provided, however, that the Board must provide at least twenty-four months (24 months) advance written notice to each Eligible Individual to the extent the Plan is terminated or the amendment of the Plan materially and adversely affects the rights of such Eligible Individuals; and provided further, that no termination or amendment of the Plan shall materially and adversely affect the rights of any Eligible Individual whose Date of Termination occurred prior to the date of such Plan termination or amendment.
(ii)Notwithstanding the foregoing, in the event of a Change in Control, no Eligible Individual’s right to receive payments or benefits with respect to a termination of employment occurring in connection with or within twenty-four (24) months following the Change in Control shall be adversely affected by any amendment or termination of the Plan that occurs within the period beginning six (6) months prior to the Change in Control and ending twenty-four (24) months following the Change in Control, except for any amendment or modification to which such Eligible Individual consents in writing.
(d)Successors. The Plan shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors, permitted assigns, heirs and personal
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representatives and estates, as the case may be. Neither the Plan nor any right or obligation hereunder of any party may be assigned or delegated without the prior written consent of the other party hereto; provided, however, that the Company may assign this Plan to any of its Affiliates, and an Eligible Individual may direct payment of any benefits that will accrue upon death. An Eligible Individual shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any payments or other benefits provided under the Plan; and no benefits payable under the Plan shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or pursuant to the laws of descent and distribution. The Plan shall not confer any rights or remedies upon any person or legal entity other than the parties hereto and their respective successors and permitted assigns. Notwithstanding anything to the contrary in this Section 9(d), in the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by the Plan, the Company shall require any successor to the Company to expressly and unconditionally assume the Plan in writing and honor the obligations of the Company hereunder, in the same manner and to the same extent that the Company would be required to perform if no succession had taken place.
(e)Unfunded Obligation. All benefits due an Eligible Individual under this Plan are unfunded and unsecured and are payable out of the general funds of the Company.
(f)Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken hereunder will be construed as (i) giving an Eligible Individual the right to continue in the employ or service of the Company or an Affiliate; (ii) interfering in any way with the right of the Company or any Affiliate to terminate an Eligible Individual’s employment or service at any time; or (iii) giving an Eligible Individual any claim to be treated uniformly with other employees.
(g)Nonexclusivity of the Plan. The adoption of the Plan by the Company will not be construed as creating any limitations on the power of the Company to adopt such other incentive arrangements as it may deem desirable. Except as otherwise expressly provided herein, nothing contained in the Plan will be construed to prevent the Company from taking any action which is deemed by the Company to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any payments made under the Plan. No employee, beneficiary or other person will have any claim against the Company as a result of any such action. Any action with respect to the Plan taken by the Administrator, the Company, or any designee of the foregoing shall be conclusive upon all Eligible Individuals and beneficiaries entitled to benefits under the Plan.
(h)Severability. If any provision of the Plan is held to be illegal or invalid for any reason, the illegality or invalidity will not affect the remaining provisions of the Plan, but such provision will be fully severable and the Plan will be construed and enforced as if the illegal or invalid provision had never been included herein.
(i)Application of Section 409A. This Plan and the amounts payable pursuant to Section 5 of this Plan are intended to comply with the short-term deferral exception and/or separation pay exception to Section 409A of the Code and shall be construed and administered in
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accordance with Section 409A of the Code. To the extent that an Eligible Individual is a “specified employee” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) as of the Eligible Individual’s Date of Termination, no amount that constitutes a deferral of compensation which is payable on account of the Eligible Individual’s separation from service shall be paid to the Eligible Individual before the date (the “Delayed Payment Date”) which is first day of the seventh month after the Eligible Individual’s Date of Termination or, if earlier, the date of the Eligible Individual’s death following such Date of Termination. All such amounts that would, but for this Section 9(j), become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. No interest will be paid by the Company or any Affiliate with respect to any such delayed payments. For purposes of Section 409A of the Code, each payment or amount due under this Plan shall be considered a separate payment, and an Eligible Individual’s entitlement to a series of payments under this Plan is to be treated as an entitlement to a series of separate payments. To the extent required by Section 409A of the Code, each reimbursement or in-kind benefit provided under the Plan shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to the Eligible Individual on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) any right to reimbursements or in-kind benefits under his Plan shall not be subject to liquidation or exchange for another benefit. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Plan comply with Section 409A of the Code, and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A of the Code.
(j)Dispute Resolution and Governing Law. Subject to Section 8, any dispute, controversy, or claim arising out of or related to the Plan will be finally settled by arbitration in Atlanta, Georgia before, and in accordance with the applicable rules for the resolution of such disputes then in effect of, the American Arbitration Association, as well as any requirements imposed by state law. The arbitration award shall be final and binding on all parties. Nothing in this Section 9(j) shall prohibit the Company, any Affiliate, or an Eligible Individual from instituting litigation to enforce any arbitration award or to obtain a temporary restraining order or temporary injunctive relieve as contemplated by any provision of the Plan or an applicable Participation Agreement. All questions arising with respect to the provisions of the Plan and payments due hereunder will be determined by application of the laws of the State of Georgia without giving effect to any conflict of law provisions thereof, except to the extent Georgia law is preempted by federal law, including any applicable deference provided to ERISA plan administrators’ decisions and interpretations under federal law.
(k)Word Usage. Words used in the masculine shall apply to the feminine, where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural.
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(l)Status/Named Fiduciary. The Plan is intended to qualify for the exemptions under Title I of ERISA provided for plans that are unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Administrator shall be the named fiduciary for purposes of the Plan.
(m)ERISA Rights. As a participant in the Plan, Eligible Individuals are entitled to certain rights and protections under ERISA, which provides that all Plan participants shall be entitled to:
(i)Examine without charge, at the Administrator’s office and at other specified locations such as worksites, all Plan documents, and copies of all documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports.
(ii)Obtain copies of all Plan documents and other Plan information upon written request to the Administrator. The Administrator may make a reasonable charge for the copies.
(iii)To the extent applicable, receive a summary of the Plan’s annual financial report. The Administrator is required by law to furnish each participant with a copy of this summary annual report.
In addition to creating rights for Plan participants, ERISA imposes obligations upon the people who are responsible for the operation of employee benefit plans. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of Eligible Individuals and beneficiaries. No one, including the Company or any Affiliate, may fire an Eligible Individual or otherwise discriminate against the Eligible Individual in any way to prevent the Eligible Individual from obtaining benefits or exercising his or her rights under ERISA.
If a claim for a benefit under this Plan is denied in whole or in part, an Eligible Individual has the right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
Under ERISA, there are steps an Eligible Individual can take to enforce the above rights. For instance, if an Eligible Individual requests materials from the Administrator and does not receive them within 30 days, the Eligible Individual may file suit in a federal court. In such a case, the court may require the Administrator to provide the materials and pay the Eligible Individual up to $110 a day until the Eligible Individual receives the materials, unless the materials were not sent because of reasons beyond the control of the Administrator. If an Eligible Individual’s claim for benefits is denied or ignored, in whole or in part, the Eligible Individual may file suit in a state or federal court. If an Eligible Individual is discriminated against for asserting his or her rights, the Eligible Individual may seek assistance from the U.S. Department of Labor, or file suit in a federal court. The court will decide who should pay court costs and legal fees. If the Eligible Individual is successful, the court may order the person sued by the Eligible Individual to pay the costs and fees. If the Eligible Individual loses, the court may order the Eligible
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Individual to pay the costs and fees (for example, if it finds that the Eligible Individual’s claim is frivolous).
If an Eligible Individual has any questions about this Plan, the Eligible Individual should contact the Administrator. If an Eligible Individual has any questions about this statement or about his or her rights under ERISA, or if an Eligible Individual needs assistance in obtaining documents from the Administrator, he or she should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in the telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington D.C. 20210. An Eligible Individual may also obtain certain publications about his or her rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.
(n)Additional Information.
Plan Name:
Preferred Apartment Communities, Inc.
Executive Severance and Change in Control Plan
Fiscal Year of Plan:January 1 through December 31
Type of Plan:Top Hat Pension Plan
Plan No.:[002]
Plan Sponsor:
Preferred Apartment Communities, Inc.
3284 Northside Parkway, Suite 150
Atlanta, Georgia 30327
Phone: (770) 818-4100
Employer I.D. Number: [__________________]
Plan Administrator:
Preferred Apartment Communities, Inc.
3284 Northside Parkway, Suite 150
Atlanta, Georgia 30327
Phone: (770) 818-4100
Agent for Service
of Legal Process:
General Counsel of the Company. Process shall be served at the address specified above.


[Signature Page Follows]
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EXECUTED this __ day of ________, 2020.

PREFERRED APARTMENT COMMUNITIES, INC.


By:  
Name:  
Title:  




18



EXHIBIT A
SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS
This SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS (this “Agreement”) is entered into by and between Preferred Apartment Communities, Inc. (the “Company”) and [EMPLOYEE NAME] (“Employee”). All capitalized terms not defined herein shall have the meaning given to them in the Preferred Apartment Communities, Inc. Executive Severance And Change In Control Plan (the “Severance Plan”)
WHEREAS, Employee is a former employee of the Company and, as of [DATE] (the “Separation Date”), Employee was no longer employed by the Company;
WHEREAS, Employee and the Company wish for Employee to receive severance benefits as set forth in the Severance Plan, conditioned upon Employee’s entry into[, and non-revocation of,]1 this Agreement in the time provided to do so; and
WHEREAS, the parties wish to resolve any and all claims that Employee has or may have against the Company or any of the other Company Parties, including any claims that Employee may have arising out of Employee’s employment or the end of such employment.
NOW, THEREFORE, in consideration of the promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Employee and the Company, the parties hereby agree as follows:
1.Separation from Employment. Employee and the Company acknowledge and agree that Employee’s employment with the Company ended as of Separation Date and, as of the Separation Date, Employee was no longer employed by the Company or any other Company Party (as defined below).
2.Separation Payment. Provided that Employee executes this Agreement and returns it to the Company, care of [NAME] at [ADDRESS] (email: [E-MAIL ADDRESS]), so that it is received by [NAME] no later than the close of business on [DATE]2 [and does not revoke Employee’s acceptance of this Agreement pursuant to Section 6(d) below,]3 then the Company shall provide Employee with [the payments and benefits due to Employee under Section 5 of the Severance Plan]4 (the “Severance Benefits”), which Severance Benefits shall be provided in accordance with the terms set forth in the Severance Plan.
3.Receipt of Leaves and Compensation. Employee expressly acknowledges and agrees that Employee is not entitled to the Severance Benefits but for Employee’s entry into this
1 Revocation language only included if Employee is over 40 years old.
2 Date to be at least 21 days after date Employee receives agreement if Employee is over 40 years old.
3 Revocation language only included if Employee is over 40 years old.
4 Amounts to be specified.
Exhibit A-1


Agreement and satisfaction of the terms herein. Employee further acknowledges and agrees that Employee has received all leaves (paid and unpaid) which Employee has been entitled to receive from each Company Party and that (with the exception of any amounts referenced in Section 2 above and, if still unpaid as of the date Employee signs this Agreement, Employee’s base salary for the pay period in which the Separation Date occurred) Employee has been paid all wages, bonuses, compensation and other sums that Employee is owed or has been owed by each Company Party, including all payments arising out of all incentive plans and any other bonus or contractual arrangement. For the avoidance of doubt, Employee expressly acknowledges and agrees that, other than the Severance Benefits, Employee is not eligible for any further or future severance pay or benefits from the Company or any other Company Party (including any pay or benefits arising from any severance plan or other agreement with any Company Party).
4.Complete Release of Claims.
a.Employee hereby forever releases and discharges the Company and each of its parents, subsidiaries, predecessors, successors, assigns and affiliated entities, along with each of the foregoing entities’ respective past, present, and future owners, affiliates, subsidiaries, stockholders, partners, officers, directors, members, managers, employees, agents, attorneys, successors, administrators, fiduciaries, insurers and benefit plans and the trustees and fiduciaries of such plans, in their personal and representative capacities (collectively, the “Company Parties”), from, and Employee hereby waives, any and all claims, demands, liabilities and causes of action of any kind that Employee has or could have, whether known or unknown, whether statutory or common law, including any claim for salary, benefits, payments, expenses, costs, damages, penalties, compensation, remuneration, contractual entitlements, and all claims or causes of action relating to [his] [her] employment relationship with any Company Party, the termination of such employment relationship, or any other acts or omissions related to any matter occurring or existing on or prior to the date that Employee executed this Agreement, including (i) claims arising under or for any alleged violation of: (A) the Age Discrimination in Employment Act of 1967 [(including as amended by the Older Worker Benefit Protection Act)]5; (B) Title VII of the Civil Rights Act of 1964; (C) the Civil Rights Act of 1991; (D) Sections 1981 through 1988 of Title 42 of the United States Code; (E) the Employee Retirement Income Security Act of 1974 (“ERISA”); (F) the Immigration Reform Control Act; (G) the Americans with Disabilities Act of 1990; (H) the National Labor Relations Act; (I) the Occupational Safety and Health Act; (J) the Family and Medical Leave Act of 1993; (K) the Texas Labor Code (including the Texas Payday Law, the Texas Anti-Retaliation Act, Chapter 21 of the Texas Labor Code, and the Texas Whistleblower Act); (L) any other local, state or federal anti-discrimination or anti-retaliation law; (M) any other local, state or federal law, regulation or ordinance; (ii) claims arising or for any alleged violation of any public policy, contract, tort, or common law claim, or claim for defamation, emotional distress, fraud or misrepresentation of any kind, promissory estoppel, breach of any implied duty of good faith and fair dealing, breach of implied or express contract, breach of fiduciary duty or wrongful discharge; (iii) any allegation for costs, fees, or other expenses including attorneys’ fees incu
5 Only included if Employee is over 40 years old.
Exhibit A-2

rred in the matters referenced herein; (iv) any claim, whether direct or derivative, arising from, or relating to, Employee’s status as a holder of any shares or interests in any Company Party; and (v) any and all claims Employee may have arising as the result of any alleged breach of any contract, incentive compensation plan or agreement, restricted unit agreement, or equity-based compensation plan or agreement with any Company Party (collectively, the “Released Claims”). This Agreement is not intended to indicate that any such claims exist or that, if they do exist, they are meritorious. Rather, Employee is simply agreeing that, in exchange for the consideration received by his through this Agreement, any and all potential claims of this nature that Employee may have against the Company Parties, regardless of whether they actually exist, are expressly settled, compromised and waived. THIS RELEASE INCLUDES MATTERS ATTRIBUTABLE TO THE SOLE OR PARTIAL NEGLIGENCE (WHETHER GROSS OR SIMPLE) OR OTHER FAULT, INCLUDING STRICT LIABILITY, OF ANY OF THE COMPANY PARTIES.
b.Notwithstanding this release of liability, nothing in this Agreement prevents Employee from filing any non-legally waivable claim, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission (“EEOC”) or other governmental agency, or participating in (or cooperating with) any investigation or proceeding conducted by the EEOC or other governmental agency; however, Employee understands and agrees that he is waiving any and all rights to recover any monetary or personal relief or recovery from a Company Party as a result of such EEOC or governmental agency proceeding or subsequent legal actions. Nothing herein waives Employee’s right to receive an award for information provided to a governmental agency. Further, in no event shall the Released Claims include (i) any claim which arises after the date this Agreement is executed by Employee, (ii) any claim to enforce Employee’s rights under this Agreement; or (iii) any claim to vested benefits under an employee benefit plan that is subject to ERISA.
5.Employee’s Representations. Employee represents, warrants and agrees that, as of the time that Employee executes this Agreement, Employee has not brought or joined any claims, appeals, complaints, charges or lawsuits against any Company Party in any court or before any government agency or arbitrator with respect to a matter, claim or incident that occurred or arose out of one or more occurrences that took place on or prior to the time that Employee signs this Agreement. Employee further represents and warrants that Employee has made no assignment, sale, delivery, transfer or conveyance of any rights [he] [she] has asserted or may have against any of the Company Parties with respect to any Released Claim.
6.Additional Acknowledgments and Rights. Employee acknowledges that:
a.Employee has carefully read this Agreement.
b.Employee has been advised, and hereby is advised in writing, to seek legal counsel before signing this Agreement, and [he] [she] has had adequate opportunity to do so.
Exhibit A-3

c.Employee has been given adequate time [and at least twenty-one (21) days]6 to review and consider this Agreement. [If Employee signs this Agreement before the expiration of twenty-one (21) days after Employee’s receipt of this Agreement, Employee has knowingly and voluntarily waived any longer consideration period than the one provided to Employee. No changes (whether material or immaterial) to this Agreement shall restart the running of this twenty-one (21) day period.]
d.[Employee has seven (7) days after signing this Agreement to revoke it (such seven-day period is referred to as the “Release Revocation Period”). This Agreement will not become effective or enforceable until the Release Revocation Period has expired without Employee exercising Employee’s revocation right. Any notice of revocation of the Agreement is effective only if such revocation is in writing and received by the Company, care of [NAME], at the address or e-mail address referenced in Section 2 above, on or before the expiration of the Release Revocation Period. Employee understands that if Employee revokes [his] [her] acceptance of this Agreement pursuant to this Section 6(d), neither the Company nor any other Company Party will provide Employee with any Severance Benefits, and all other terms of this Agreement will become null and void (provided, however, that the terms of Section 1 shall remain in effect).]7
e.Employee agrees and acknowledges that Employee is receiving, pursuant to this Agreement, consideration in addition to anything of value to which Employee is already entitled.
f.Employee fully understands the final and binding effect of this Agreement; the only promises made to Employee to sign this Agreement are those stated within the four corners of this document; and Employee is signing this Agreement knowingly, voluntarily and of Employee’s own free will, and Employee understands and agrees to each of the terms of this Agreement.
g.No Company Party has provided any tax or legal advice regarding this Agreement to Employee, and Employee has had an adequate opportunity to receive sufficient tax and legal advice from advisors of Employee’s own choosing such that Employee enters into this Agreement with full understanding of the tax and legal implications thereof.
7.Return of Company Property. Employee represents and warrants that Employee has returned (and not retained copies of) all property belonging to the Company or any of its Affiliates, including the originals and all copies of any records, files, computer discs or other materials which contain information about the Company’s business. Employee further represents and warrants that, by signing this Agreement, Employee has performed a search of Employee’s personal electronic storage devices and returned to the Company [or deleted] all of the
6 Twenty-one days only required if Employee is over 40 years old.
7 Revocation option included only if Employee is over 40 years old.
Exhibit A-4

Company’s business and confidential and proprietary information from Employee’s personal electronic devices, including smartphones, tables, computers, and other storage devices.
8.No Waiver. No failure by any party at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
9.Applicable Law; Dispute Resolution.
a.This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Georgia without reference to the principles of conflicts of law thereof.
b.Any dispute, controversy, or claim arising out of or related to the Plan will be finally settled by arbitration in Atlanta, Georgia before, and in accordance with the applicable rules for the resolution of such disputes then in effect of, the American Arbitration Association, as well as any requirements imposed by state law. The arbitration award shall be final and binding on all parties. Nothing in this Section 9(b) shall prohibit the Company, any Affiliate, or an Eligible Individual from instituting litigation to enforce any arbitration award or to obtain a temporary restraining order or temporary injunctive relieve as contemplated by any provision of the Plan or an applicable Participation Agreement. Additionally, by agreeing to submit the claims described in this Section 9(b) to binding arbitration, Employee does not waive the right to file a claim or charge with a federal, state or local administrative agency such as the Equal Employment Opportunity Commission, National Labor Relations Board, Department of Labor, or similar agency, but does knowingly and voluntarily waive the right to file, or participate or obtain relief in, a court action of any nature against the Company, except as specifically described herein. THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY ARE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVING THEIR RIGHTS TO A JURY TRIAL.
10.Interpretation. In this Agreement, (a) the use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole, and not to any particular subdivision unless expressly so limited; (d) references in any Article or Section or definition to any clause means such clause of such Article, Section or definition; (e) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified (including any waiver or consent) and in effect from time to time in accordance with the terms thereof; (f) reference to any law
Exhibit A-5

means such law as amended, modified, codified, reenacted or replaced and in effect from time to time; and (g) references to “or” shall be interpreted to mean “and/or”. The Section titles and headings in this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties.
11.Severability. To the extent permitted by applicable law, the Company and Employee hereby agree that any term or provision of this Agreement that renders such term or provision or any other term or provision hereof invalid or unenforceable in any respect shall be severable and shall be modified or severed to the extent necessary to avoid rendering such term or provision invalid or unenforceable, and such modification or severance shall be accomplished in the manner that most nearly preserves the benefit of the parties’ bargain hereunder.
12.Withholding of Taxes and Other Employee Deductions. The Company may withhold from all payments made pursuant to this Agreement all federal, state, local, and other taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling.
13.Counterparts. This Agreement may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
14.Third-Party Beneficiaries; Assignment. Each Company Party that is not a signatory hereto shall be an intended third-party beneficiary of Employee’s covenants, representations, and release of claims set forth in this Agreement and shall be entitled to enforce such covenants, representations, and release as if a party hereto. The Company has the right to assign this Agreement, including to any successor, but Employee does not. This Agreement inures to the benefit of the successors and assigns of the Company, who are intended third party beneficiaries of this Agreement.
15.Entire Agreement; Amendment. This Agreement, the Severance Plan, the Employee’s Participation Agreement, the Stock Incentive Plan, and the terms of any outstanding equity award agreements relating to the Stock Incentive Plan represent the entire agreement between the Company and Employee regarding the subject matter herein; provided, however, this Agreement complements and is in addition to (and does not supersede or replace) any agreements between the Parties that create obligations for Employee with respect to the return of Company property or other materials, confidentiality or non-disclosure. Subject to Section 13, this Agreement may not be changed orally but only by an agreement in writing agreed to and signed by Employee and the Company.
[Signatures begin on the following page]
Exhibit A-6



Exhibit A-7

IN WITNESS WHEREOF, the parties hereto have executed this Agreement with the intent to be legally bound.

[EMPLOYEE NAME]

        
[Employee name]

Date: 



PREFERRED APARTMENT COMMUNITIES, INC.

By: 
Name:  
Title:

Exhibit A-8

Document

PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE-IN-CONTROL PLAN
PARTICIPATION AGREEMENT
This Participation Agreement (the “Participation Agreement” or this “Agreement”) is entered into effective as of __________________________, 2020 (the “Participation Date”), by and between Preferred Apartment Advisors, LLC. (the “Employer”) and you (the “Participant”), pursuant to the Preferred Apartment Communities, Inc. Executive Severance and Change in Control Plan (the “Plan”). The Participant agrees that the terms and conditions of this Agreement and the Plan will govern the Participant’s rights with respect to the severance and change-in-control benefits provided under Section 5(c) of the Plan (the “Benefits”). The Employer agrees to be bound by all the terms of the Plan that apply to it as the employing Affiliate of the Company. The Participant and the Employer agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Participation Agreement. Except as defined in this Participation Agreement (including Exhibit A attached hereto), capitalized terms have the same meanings ascribed to them in the Plan.
The Participant and the Employer have entered into this Participation Agreement and have agreed to the terms and conditions included in Exhibit A as an express incentive for the Participant and the Employer to enter into the Participation Agreement and in consideration for the Employer or any of its Affiliates providing the consideration set forth in the Participation Agreement and Confidential Information to the Participant, to further protect the trade secrets and Confidential Information disclosed or entrusted to the Participant, to protect the business goodwill of the Company Group and its Affiliates, to protect the business opportunities disclosed or entrusted to the Participant, and to protect the other legitimate business interests of the Company Group and its Affiliates. In executing this Participation Agreement, the Participant expressly acknowledges and agrees that (a) the Participation Agreement aligns the Participant’s interests with the Company Group’s and its Affiliates’ long-term business interests and creates a further incentive for the Participant to build the Company Group’s and its Affiliates’ goodwill, and (b) the provisions contained in Exhibit A are reasonably related to the Company Group’s and its Affiliates’ legitimate interests in protecting their goodwill.
The terms and conditions of this Participation Agreement as offered herein must be accepted by the Participant within five business days of the date this Agreement is signed by the Employer below. Failure to timely accept the terms by such time will result in immediate and irrevocable cancellation of the participation offered.
1. Participation. In accordance with, and subject to, the terms and conditions of the Plan, the Employer hereby allows the Participant to participate in the Plan and to be treated as an Eligible Individual under the Plan.
2. Applicable Severance Multiplier. Pursuant to the Participant’s participation as an Eligible Individual under the Plan, upon a qualifying termination of employment as provided in Section 5(c) of the Plan, the Participant will be entitled to receive certain severance benefits that
1


are based upon the Participant’s Applicable Severance Multiple. The Participant’s Applicable Severance Multiple is 1.5 for purposes of Section 5(c) of the Plan. For the avoidance of doubt, the Participant is not designated as eligible to receive severance benefits pursuant to Section 5(b)(ii) of the Plan.
3. Restrictive Covenants; Recovery of Payments. In exchange for the Employer’s entry into this Agreement, the Participant agrees to the obligations set forth in Exhibit A. If the Committee determines that the Participant has committed a breach of any such obligations, upon notice from the Employer, the Participant shall forfeit and/or reimburse to the Employer all or a portion of the Benefits subject to this Participation Agreement and the Plan, as the Committee deems appropriate under the circumstances.

[Signature Page Follows]
PREFERRED APARTMENT ADVISORS, LLC

By: __________________________________ 
Name: _______________________________
Title: _______________________________




PREFERRED APARTMENT COMMUNITIES, INC.

By: _____________________________________ 
Name: ______________________________
Title: _______________________________


PARTICIPANT
____________________________________________ 
Date: ________________________
[Insert Name]
2



EXHIBIT A
TO PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN
PARTICIPATION AGREEMENT

1. Defined Terms; Employment Relationship; Application of Exhibit A. Capitalized terms used in this Exhibit A that are not defined in this Exhibit A shall have the meanings assigned to such terms in the Preferred Apartment Communities Severance and Change in Control Plan (the “Plan”) or in the Participation Agreement to which this Exhibit A is attached (the “Agreement”), as applicable. This Exhibit A supersedes any other similar restrictive covenants contained in any other agreement between the Participant and any member of the Company Group and any of their Affiliates.
As used in this Exhibit A, the following terms shall have the following meanings:
1.(a) “Business” means the Company Group’s business at the time of the Participant’s termination of employment, as described in the filings of Preferred Apartment Communities, Inc. with the Securities and Exchange Commission; provided, however, that if the Participant’s termination of employment occurs within 60 days following the occurrence of a Change in Control, “Business” shall mean the business described in this Section 1(a) as in existence immediately prior to the Change in Control.
2.(b) the “Company Group” means and includes, by virtue of existing agreements to control and safeguard the intellectual property developed, licensed, used, maintained and owned by each of, Preferred Apartment Communities, Inc., which is domiciled in Atlanta, Georgia, and all other companies in which Preferred Apartment Communities, Inc. owns a direct or indirect controlling interest or is the controlling shareholder, together with all direct and indirect subsidiaries and successors of all such companies.
3.(c)  “Confidential Information” means any of the following: (i) non-public information, (ii) knowledge, (iii) data, (iv) Trade Secrets and any other information that provides any member of the Company Group with a competitive advantage by virtue of not being publicly known, (v) proprietary information, (vi) confidential information, or (vii) non-public information provided to any member of the Company Group by its tenants, lenders, borrowers, or any other customers, suppliers, contractors, subcontractors, agents or representatives with an expectation of confidentiality that is obtained by or disclosed to the Participant as a result of the Participant’s employment or affiliation with the Company Group.
4.(d) “Competing Business” means any business, individual, partnership, firm, corporation, or other entity which engages in the Business in the Restricted Area. In no event will any member of the Company Group be deemed a Competing Business.
5.(e) “Developments” means any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation,
         
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formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein, whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection.
6.(f) “Fund” means any investment fund, pooling vehicle or separate account managed or established by any member of the Company Group or any of such members’ Affiliates (regardless of sector or geographic focus).
7.(g) “Governmental Authority” means any governmental, quasi-governmental, state, county, city, or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.
8.(h) “Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations, and occupational, safety, and health standards or controls, including those arising under environmental laws) of any Governmental Authority.
9.(i) “Noncompetition Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending on the earlier of (A) six (6) months following the date on which the Participant is no longer employed by any member of the Company Group or (B) if the Participant’s employment is terminated by the Employer for a reason other than for Cause, the last day of any applicable severance period; provided that if no severance is payable to the Participant following such termination by the Employer for a reason other than Cause, then the Noncompetition Prohibited Period shall end on the date on which the Participant is no longer employed by any member of the Company Group.
10.(j) “Nonsolicitation Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending twenty-four (24) months following the date on which the Participant is no longer employed by any member of the Company Group.
11.(k) “Prohibited Period” means the Noncompetition Prohibited Period and/or the Nonsolicitation Prohibited Period, as applicable.
12.(l) “Portfolio Company” means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, or other entity of any kind in which any Fund has an investment (or such equivalent term as defined in the applicable fund or separate account governing documents).
13.(m) “Records” means all files, records, documents, memoranda, books, papers, plans, information, letters, drawings, specifications, equipment and similar items, and copies thereof or therefrom, in any physical or electronic form (e.g., printed copies, electronically stored files, computer hard drive, microfilm, etc.), relating to the business of any member of the
         
A-2



Company Group, whether prepared by the Participant or otherwise coming into the Participant’s presence.
14.(n) “Restricted Area” means any geographical area within 25 miles of any location in which any member of the Company Group engages in the Business, which, for the sake of clarity, includes any property site managed, operated, financed, or otherwise utilized in the Business by any member of the Company Group.
15.(o) “Trade Secrets” means the trade secrets of the Company Group as defined under applicable law.
2. Confidential Information
i.The Participant acknowledges that all Confidential Information is the property of the Company Group.
ii.The Participant will not disclose or use for the Participant’s own benefit or purposes or the benefit or purposes of any other person, entity or enterprise, other than the Company Group, any Confidential Information; provided that the foregoing shall not apply to the disclosure of information which (i) has become public other than as a result of the Participant’s breach of this covenant or a third party’s breach of obligations owed to the Company Group, (ii) is acquired by the Participant from others who have no direct or indirect confidential commitment to the any member of the Company Group with respect to same, (iii) is independently developed by the Participant, (iv) is required by law to be disclosed, so long as the Participant has provided the Employer with at least five (5) days’ written notice prior to any disclosure required by law. The Participant understands that the covenant contained in the foregoing sentence shall apply (A) with respect to Confidential Information other than Trade Secrets, at all times during employment with the Employer or any other member of the Company Group and for three (3) years thereafter, and (B) with respect to Trade Secrets, at all times such data or information constitutes a “trade secret” under applicable law.
For purposes of clarity, the Participant acknowledges that as used in this Agreement, the meaning of Confidential Information shall also include, without limitation, proprietary or confidential information relating to: any information (whether oral or written) with respect to, or any matter relating to any member of the Company Group, any Portfolio Company or any Fund, or any Affiliate of any of the foregoing, including any and all reports, data, interpretations, forecasts, records, analyses, compilations, studies or other documents prepared by or provided to the Participant in connection with the Participant’s provision of services to any member of the Company Group or an Affiliate or in connection with any existing or contemplated transaction or investment related activities of any member of the Company Group, any Fund, any Portfolio Company, or any Affiliate of any of the foregoing (whether or not such information was prepared by or provided to the Participant in his or her capacity as an employee or in connection with the Participant’s provision of services).
iii.The Participant agrees that even if information in the Participant’s possession is not within or covered by the description set forth in Section 2(b), if the information in the
         
A-3



Participant’s possession gives any member of the Company Group a competitive advantage over its competitors by virtue of it not being publicly known, then it is still deemed to constitute Confidential Information for purposes of this Agreement.
iv.The Participant acknowledges that if Confidential Information were disclosed to third parties or used by third parties and/or the Participant without written permission of the Employer, that the disclosure or use would seriously and irreparably damage the Company Group and would cause the Company Group to lose certain competitive advantages.
v.The Participant agrees that all Records shall remain the exclusive property of the applicable member of the Company Group and shall not be removed from the premises of the applicable member of the Company Group unless in accordance with a written policy of the Employer or upon the written consent of the General Counsel of the Employer.
vi.The Participant agrees that upon the effective date of the termination of the Participant’s employment with the Employer for any reason, the Participant will immediately return to the Employer all Records and not retain any copies thereof.
vii.Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict Participant from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Participant from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Participant to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Employer that Participant has engaged in any such conduct.
3. Non-Disparagement: The Participant shall refrain, both during and for a period of thirty-six (36) months after the termination of the employment relationship, from publishing any oral or written statements about any member of the Company Group or any of their affiliates, or any member of the Company Group’s or such affiliates’ directors, officers, employees, consultants, agents, representatives, customers, or suppliers that are disparaging, slanderous, libelous, or defamatory or that place any member of the Company Group or any of their affiliates, or any member of the Company Group’s or any such affiliates’ directors, officers, employees, consultants, agents, or representatives in a false light before the public.
         
A-4



4. Non-Competition; Non-Solicitation. The Participant and the Employer agree to the non-competition and non-solicitation provisions of this Exhibit A in consideration for the Confidential Information provided by the Company Group and its Affiliates to the Participant pursuant to the Participant’s employment with the Employer, to further protect the Trade Secrets and Confidential Information disclosed or entrusted to the Participant or created or developed by the Participant for the Company Group or its Affiliates, to protect the business goodwill of the Company Group and its Affiliates developed through the efforts of the Participant and the business opportunities disclosed or entrusted to the Participant and the other legitimate business interests of the Company Group and its Affiliates, and as an express incentive for the Employer to enter into the Agreement.
1.Subject to the exceptions set forth in Section 4(b) below, the Participant expressly covenants and agrees that during the Noncompetition Prohibited Period, the Participant will refrain from carrying on or engaging in, directly or indirectly, any Competing Business . Accordingly, the Participant will not, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner, or member of, control or participate in, be connected with or loan money to, sell or lease equipment or property to, serve as a consultant to, or as a member of the board of directors of, or otherwise be affiliated with any Competing Business in the Restricted Area.
2.Notwithstanding the restrictions contained in Section 4(a), the Participant or any of the Participant’s affiliates may, without violating the provisions of Section 4(a) maintain as a passive investment an ownership interest in any entity or investment vehicle, whether public or private; provided, that neither the Participant nor any of the Participant’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such entity and is not involved in the management of such entity.
3.The Participant further expressly covenants and agrees that during the Nonsolicitation Prohibited Period, the Participant will not, and the Participant will cause the Participant’s affiliates not, to engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of any member of the Company or any of their Affiliates, canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a retail or office tenant of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates, to the extent such activity is to the detriment of the Company Group, or (iii) canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted, or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a borrower of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates. Notwithstanding the foregoing, the restrictions of Section 4(c)(i) shall not apply with respect to an officer or employee who responds to a general solicitation that is not specifically directed at officers and employees of any member of the Company Group or any of their Affiliates.
         
A-5



4.Before accepting employment, engaging in service, or otherwise becoming affiliated with any other person or entity during any Prohibited Period, the Participant will inform such person or entity of the restrictions contained in this Exhibit A.
5. Relief. The Participant and the Employer agree and acknowledge that the limitations as to time, geographical area, and scope of activity to be restrained as set forth in Section 4 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company Group and its Affiliates. The Participant and the Employer also acknowledge that money damages would not be a sufficient remedy for any breach of this Exhibit A by the Participant, and the Employer shall be entitled to enforce the provisions of this Exhibit A by terminating payments then owing to the Participant under the Plan (or to recoup payments previously made thereunder) or otherwise, and any member of the Company Group or its Affiliates shall be entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Exhibit A but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Participant and the Participant’s agents.
6. Reasonableness; Enforcement. The Participant hereby represents that the Participant has read and understands, and agrees to be bound by, the terms of this Exhibit A. The Participant acknowledges that the geographic scope and duration of the covenants contained in this Exhibit A are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the Company Group’s operations of the Business, (b) the Participant’s contact with the Company Group’s business in all jurisdictions in which it is conducted, which includes the entire Restricted Area, and (c) the amount of confidential information that the Participant is receiving in connection with the performance of the Participant’s duties on behalf of the Company Group and/or its Affiliates and the amount of goodwill with which the Participant is and/or will be connected and will help build on behalf of the Company Group and its Affiliates. It is the desire and intent of the parties that the provisions of this Exhibit A be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect; therefore, to the extent permitted by applicable Legal Requirements, the Participant and the Employer hereby waive any provision of applicable Legal Requirements that would render any provision of this Exhibit A invalid or unenforceable.
7. Reformation; Severability. The Employer and the Participant agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Exhibit A would cause irreparable injury to the Company Group and its Affiliates. The Participant understands that the foregoing restrictions may limit the Participant’s ability to engage in certain businesses anywhere in the Restricted Area during the Noncompetition Prohibited Period, but acknowledges that the Participant will receive sufficient consideration from the Employer and its Affiliates to justify such restriction. Further, the Participant acknowledges that the Participant’s skills are such that the Participant can be gainfully employed in non-competitive employment and that the agreement to not compete will not prevent the Participant from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as
         
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to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. If, due to applicable law, a court is not permitted to modify a restriction within this Exhibit A that it deems overly broad, then the court shall have the power to, and shall, sever such overly broad restriction (or any portion thereof) so that the restrictions after such severance are enforceable and shall be fully enforced. By agreeing to this contractual modification prospectively at this time, the Employer and the Participant intend to make this Exhibit A enforceable under the law or laws of all applicable states and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made to the Participant under the Plan.
8. Applicable Law; Venue. This Participation Agreement is governed by Georgia law, without giving effect to its conflicts of law principles. The Participant consents to the jurisdiction of the Fulton County District State Court in Atlanta, Georgia although the Company Group may choose to seek enforcement of the Restrictive Covenants in any jurisdiction where the Participant may be found.
9. Third Party Beneficiary. The Participant and Employer agree that any member of the Company Group who is not a party to this agreement shall be a third-party beneficiary and is entitled to enforce the obligations set forth in this Exhibit A as if a party hereto.



         
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Document
[CEO/CFO Form]
PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE-IN-CONTROL PLAN
PARTICIPATION AGREEMENT
This Participation Agreement (the “Participation Agreement” or this “Agreement”) is entered into effective as of __________________________, 2020 (the “Participation Date”), by and between Preferred Apartment Advisors, LLC. (the “Employer”) and you (the “Participant”), pursuant to the Preferred Apartment Communities, Inc. Executive Severance and Change in Control Plan (the “Plan”). The Participant agrees that the terms and conditions of this Agreement and the Plan will govern the Participant’s rights with respect to the severance and change-in-control benefits provided under Sections 5(b) and 5(c) of the Plan (the “Benefits”). The Employer agrees to be bound by all the terms of the Plan that apply to it as the employing Affiliate of the Company. The Participant and the Employer agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Participation Agreement. Except as defined in this Participation Agreement (including Exhibit A attached hereto), capitalized terms have the same meanings ascribed to them in the Plan.
The Participant and the Employer have entered into this Participation Agreement and have agreed to the terms and conditions included in Exhibit A as an express incentive for the Participant and the Employer to enter into the Participation Agreement and in consideration for the Employer or any of its Affiliates providing the consideration set forth in the Participation Agreement and Confidential Information to the Participant, to further protect the trade secrets and Confidential Information disclosed or entrusted to the Participant, to protect the business goodwill of the Company Group and its Affiliates, to protect the business opportunities disclosed or entrusted to the Participant, and to protect the other legitimate business interests of the Company Group and its Affiliates. In executing this Participation Agreement, the Participant expressly acknowledges and agrees that (a) the Participation Agreement aligns the Participant’s interests with the Company Group’s and its Affiliates’ long-term business interests and creates a further incentive for the Participant to build the Company Group’s and its Affiliates’ goodwill, and (b) the provisions contained in Exhibit A are reasonably related to the Company Group’s and its Affiliates’ legitimate interests in protecting their goodwill.
The terms and conditions of this Participation Agreement as offered herein must be accepted by the Participant within five business days of the date this Agreement is signed by the Employer below. Failure to timely accept the terms by such time will result in immediate and irrevocable cancellation of the participation offered.
1. Participation. In accordance with, and subject to, the terms and conditions of the Plan, the Employer hereby allows the Participant to participate in the Plan and to be treated as an Eligible Individual under the Plan.
2. Applicable Severance Multiplier. The Participant is hereby designated as eligible to receive severance benefits pursuant to Section 5(b) of the Plan. Pursuant to the Participant’s participation as an Eligible Individual under the Plan, upon a qualifying termination of


employment as provided in Section 5(b) or Section 5(c) of the Plan, the Participant will be entitled to receive certain severance benefits that are based upon the Participant’s Applicable Severance Multiple. The Participant’s Applicable Severance Multiple is 2.0, for purposes of Section 5(b) of the Plan and 3.0 for purposes of Section 5(c) of the Plan.
3. “Cause” Definition. The following clause shall be added to the end of the definition of “Cause” under the Plan:
“No termination of employment shall be for Cause as set forth in clause (i), (ii), (vi), or (vii) above until there shall have been delivered to the Eligible Individual a copy of a written notice setting forth that the Eligible Individual has engaged in the conduct described in clause (i), (ii), (vi), or (vii), as applicable, and specifying the particulars thereof in detail. No act, nor failure to act, on the Eligible Individual’s part shall be considered “willful” unless he has acted, or failed to act, with an absence of good faith and without reasonable belief that his action or failure to act was in the best interest of the Company and its Affiliates. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Eligible Individual after Notice of Termination is given by the Eligible Individual shall constitute Cause.”
4. “Good Reason” Definition. The following clause (v) shall be added to the end of the first sentence included in the definition of “Good Reason” under the Plan:
“, or (v) following a Change in Control, (A) the Eligible Individual ceasing to serve as the [Chief Executive Officer] [Chief Financial Officer] of the acquiring or successor company, reporting directly to the Board of Directors of such entity, or (B) the acquiring or successor company not existing as a publicly traded corporation.”
In addition, the reference to “clauses (i) through (iv) above” in the penultimate sentence of the “Good Reason” definition under the Plan shall be substituted with a reference to “clauses (i) through (v) above.”
5. Restrictive Covenants; Recovery of Payments. In exchange for the Employer’s entry into this Agreement, the Participant agrees to the obligations set forth in Exhibit A. If the Committee determines that the Participant has committed a breach of any such obligations, upon notice from the Employer, the Participant shall forfeit and/or reimburse to the Employer all or a portion of the Benefits subject to this Participation Agreement and the Plan, as the Committee deems appropriate under the circumstances.

[Signature Page Follows]


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PREFERRED APARTMENT ADVISORS, LLC

By: __________________________________ 
Name: _______________________________
Title: _______________________________



PREFERRED APARTMENT COMMUNITIES, INC.

By: ___________________________________  
Name: ______________________________
Title: _______________________________


PARTICIPANT
____________________________________________ 
Date: ________________________
[Insert Name]

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EXHIBIT A
TO PREFERRED APARTMENT COMMUNITIES, INC.
EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN
PARTICIPATION AGREEMENT

1. Defined Terms; Employment Relationship; Application of Exhibit A. Capitalized terms used in this Exhibit A that are not defined in this Exhibit A shall have the meanings assigned to such terms in the Preferred Apartment Communities Severance and Change in Control Plan (the “Plan”) or in the Participation Agreement to which this Exhibit A is attached (the “Agreement”), as applicable. This Exhibit A supersedes any other similar restrictive covenants contained in any other agreement between the Participant and any member of the Company Group and any of their Affiliates.
As used in this Exhibit A, the following terms shall have the following meanings:
1.(a) “Business” means the Company Group’s business at the time of the Participant’s termination of employment, as described in the filings of Preferred Apartment Communities, Inc. with the Securities and Exchange Commission; provided, however, that if the Participant’s termination of employment occurs within 60 days following the occurrence of a Change in Control, “Business” shall mean the business described in this Section 1(a) as in existence immediately prior to the Change in Control.
2.(b) the “Company Group” means and includes, by virtue of existing agreements to control and safeguard the intellectual property developed, licensed, used, maintained and owned by each of, Preferred Apartment Communities, Inc., which is domiciled in Atlanta, Georgia, and all other companies in which Preferred Apartment Communities, Inc. owns a direct or indirect controlling interest or is the controlling shareholder, together with all direct and indirect subsidiaries and successors of all such companies.
3.(c)  “Confidential Information” means any of the following: (i) non-public information, (ii) knowledge, (iii) data, (iv) Trade Secrets and any other information that provides any member of the Company Group with a competitive advantage by virtue of not being publicly known, (v) proprietary information, (vi) confidential information, or (vii) non-public information provided to any member of the Company Group by its tenants, lenders, borrowers, or any other customers, suppliers, contractors, subcontractors, agents or representatives with an expectation of confidentiality that is obtained by or disclosed to the Participant as a result of the Participant’s employment or affiliation with the Company Group.
4.(d) “Competing Business” means any business, individual, partnership, firm, corporation, or other entity which engages in the Business in the Restricted Area. In no event will any member of the Company Group be deemed a Competing Business.
5.(e) “Developments” means any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation,
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formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein, whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection.
6.(f) “Fund” means any investment fund, pooling vehicle or separate account managed or established by any member of the Company Group or any of such members’ Affiliates (regardless of sector or geographic focus).
7.(g) “Governmental Authority” means any governmental, quasi-governmental, state, county, city, or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.
8.(h) “Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations, and occupational, safety, and health standards or controls, including those arising under environmental laws) of any Governmental Authority.
9.(i) “Noncompetition Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending twelve (12) months following the date on which the Participant is no longer employed by any member of the Company Group.
10.(j) “Nonsolicitation Prohibited Period” means the period during which the Participant is employed by any member of the Company Group and ending twenty-four (24) months following the date on which the Participant is no longer employed by any member of the Company Group.
11.(k) “Prohibited Period” means the Noncompetition Prohibited Period and/or the Nonsolicitation Prohibited Period, as applicable.
12.(l) “Portfolio Company” means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, or other entity of any kind in which any Fund has an investment (or such equivalent term as defined in the applicable fund or separate account governing documents).
13.(m) “Records” means all files, records, documents, memoranda, books, papers, plans, information, letters, drawings, specifications, equipment and similar items, and copies thereof or therefrom, in any physical or electronic form (e.g., printed copies, electronically stored files, computer hard drive, microfilm, etc.), relating to the business of any member of the Company Group, whether prepared by the Participant or otherwise coming into the Participant’s presence.
14.(n) “Restricted Area” means any geographical area within 25 miles of any location in which any member of the Company Group engages in the Business, which, for the
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sake of clarity, includes any property site managed, operated, financed, or otherwise utilized in the Business by any member of the Company Group.
15.(o) “Trade Secrets” means the trade secrets of the Company Group as defined under applicable law.
2. Confidential Information
i.The Participant acknowledges that all Confidential Information is the property of the Company Group.
ii.The Participant will not disclose or use for the Participant’s own benefit or purposes or the benefit or purposes of any other person, entity or enterprise, other than the Company Group, any Confidential Information; provided that the foregoing shall not apply to the disclosure of information which (i) has become public other than as a result of the Participant’s breach of this covenant or a third party’s breach of obligations owed to the Company Group, (ii) is acquired by the Participant from others who have no direct or indirect confidential commitment to the any member of the Company Group with respect to same, (iii) is independently developed by the Participant, (iv) is required by law to be disclosed, so long as the Participant has provided the Employer with at least five (5) days’ written notice prior to any disclosure required by law. The Participant understands that the covenant contained in the foregoing sentence shall apply (A) with respect to Confidential Information other than Trade Secrets, at all times during employment with the Employer or any other member of the Company Group and for three (3) years thereafter, and (B) with respect to Trade Secrets, at all times such data or information constitutes a “trade secret” under applicable law.
For purposes of clarity, the Participant acknowledges that as used in this Agreement, the meaning of Confidential Information shall also include, without limitation, proprietary or confidential information relating to: any information (whether oral or written) with respect to, or any matter relating to any member of the Company Group, any Portfolio Company or any Fund, or any Affiliate of any of the foregoing, including any and all reports, data, interpretations, forecasts, records, analyses, compilations, studies or other documents prepared by or provided to the Participant in connection with the Participant’s provision of services to any member of the Company Group or an Affiliate or in connection with any existing or contemplated transaction or investment related activities of any member of the Company Group, any Fund, any Portfolio Company, or any Affiliate of any of the foregoing (whether or not such information was prepared by or provided to the Participant in his or her capacity as an employee or in connection with the Participant’s provision of services).
iii.The Participant agrees that even if information in the Participant’s possession is not within or covered by the description set forth in Section 2(b), if the information in the Participant’s possession gives any member of the Company Group a competitive advantage over its competitors by virtue of it not being publicly known, then it is still deemed to constitute Confidential Information for purposes of this Agreement.
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iv.The Participant acknowledges that if Confidential Information were disclosed to third parties or used by third parties and/or the Participant without written permission of the Employer, that the disclosure or use would seriously and irreparably damage the Company Group and would cause the Company Group to lose certain competitive advantages.
v.The Participant agrees that all Records shall remain the exclusive property of the applicable member of the Company Group and shall not be removed from the premises of the applicable member of the Company Group unless in accordance with a written policy of the Employer or upon the written consent of the General Counsel of the Employer.
vi.The Participant agrees that upon the effective date of the termination of the Participant’s employment with the Employer for any reason, the Participant will immediately return to the Employer all Records and not retain any copies thereof.
vii.Notwithstanding the foregoing, nothing in this Agreement shall prohibit or restrict Participant from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Participant from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Participant to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Employer that Participant has engaged in any such conduct.
3. Non-Disparagement: The Participant shall refrain, both during and for a period of thirty-six (36) months after the termination of the employment relationship, from publishing any oral or written statements about any member of the Company Group or any of their affiliates, or any member of the Company Group’s or such affiliates’ directors, officers, employees, consultants, agents, representatives, customers, or suppliers that are disparaging, slanderous, libelous, or defamatory or that place any member of the Company Group or any of their affiliates, or any member of the Company Group’s or any such affiliates’ directors, officers, employees, consultants, agents, or representatives in a false light before the public.
4. Non-Competition; Non-Solicitation. The Participant and the Employer agree to the non-competition and non-solicitation provisions of this Exhibit A in consideration for the Confidential Information provided by the Company Group and its Affiliates to the Participant
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pursuant to the Participant’s employment with the Employer, to further protect the Trade Secrets and Confidential Information disclosed or entrusted to the Participant or created or developed by the Participant for the Company Group or its Affiliates, to protect the business goodwill of the Company Group and its Affiliates developed through the efforts of the Participant and the business opportunities disclosed or entrusted to the Participant and the other legitimate business interests of the Company Group and its Affiliates, and as an express incentive for the Employer to enter into the Agreement.
1.Subject to the exceptions set forth in Section 4(b) below, the Participant expressly covenants and agrees that during the Noncompetition Prohibited Period, the Participant will refrain from carrying on or engaging in, directly or indirectly, any Competing Business. Accordingly, the Participant will not, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner, or member of, control or participate in, be connected with or loan money to, sell or lease equipment or property to, serve as a consultant to, or as a member of the board of directors of, or otherwise be affiliated with any Competing Business in the Restricted Area.
2.Notwithstanding the restrictions contained in Section 4(a), the Participant or any of the Participant’s affiliates may, without violating the provisions of Section 4(a) maintain as a passive investment an ownership interest in any entity or investment vehicle, whether public or private; provided, that neither the Participant nor any of the Participant’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such entity and is not involved in the management of such entity .
3.The Participant further expressly covenants and agrees that during the Nonsolicitation Prohibited Period, the Participant will not, and the Participant will cause the Participant’s affiliates not, to engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of any member of the Company or any of their Affiliates, canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a retail or office tenant of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates, to the extent such activity is to the detriment of the Company Group, or (iii) canvass, solicit, approach, divert or entice away, or cause to be canvassed, solicited, approached, diverted, or enticed away, from any member of the Company Group or any of their Affiliates any person who or which is a borrower of any of such entities during the period during which the Participant was employed by any member of the Company Group or any such members’ Affiliates. Notwithstanding the foregoing, the restrictions of Section 4(c)(i) shall not apply with respect to an officer or employee who responds to a general solicitation that is not specifically directed at officers and employees of any member of the Company Group or any of their Affiliates.
4.Before accepting employment, engaging in service, or otherwise becoming affiliated with any other person or entity during any Prohibited Period, the Participant will inform such person or entity of the restrictions contained in this Exhibit A.
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5. Relief. The Participant and the Employer agree and acknowledge that the limitations as to time, geographical area, and scope of activity to be restrained as set forth in Section 4 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company Group and its Affiliates. The Participant and the Employer also acknowledge that money damages would not be a sufficient remedy for any breach of this Exhibit A by the Participant, and the Employer shall be entitled to enforce the provisions of this Exhibit A by terminating payments then owing to the Participant under the Plan (or to recoup payments previously made thereunder) or otherwise, and any member of the Company Group or its Affiliates shall be entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Exhibit A but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Participant and the Participant’s agents.
6. Reasonableness; Enforcement. The Participant hereby represents that the Participant has read and understands, and agrees to be bound by, the terms of this Exhibit A. The Participant acknowledges that the geographic scope and duration of the covenants contained in this Exhibit A are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the Company Group’s operations of the Business, (b) the Participant’s contact with the Company Group’s business in all jurisdictions in which it is conducted, which includes the entire Restricted Area, and (c) the amount of confidential information that the Participant is receiving in connection with the performance of the Participant’s duties on behalf of the Company Group and/or its Affiliates and the amount of goodwill with which the Participant is and/or will be connected and will help build on behalf of the Company Group and its Affiliates. It is the desire and intent of the parties that the provisions of this Exhibit A be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect; therefore, to the extent permitted by applicable Legal Requirements, the Participant and the Employer hereby waive any provision of applicable Legal Requirements that would render any provision of this Exhibit A invalid or unenforceable.
7. Reformation; Severability. The Employer and the Participant agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Exhibit A would cause irreparable injury to the Company Group and its Affiliates. The Participant understands that the foregoing restrictions may limit the Participant’s ability to engage in certain businesses anywhere in the Restricted Area during the Noncompetition Prohibited Period, but acknowledges that the Participant will receive sufficient consideration from the Employer and its Affiliates to justify such restriction. Further, the Participant acknowledges that the Participant’s skills are such that the Participant can be gainfully employed in non-competitive employment and that the agreement to not compete will not prevent the Participant from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. If, due to applicable law, a court is not permitted to modify a restriction within this Exhibit A that it deems overly broad, then the court
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shall have the power to, and shall, sever such overly broad restriction (or any portion thereof) so that the restrictions after such severance are enforceable and shall be fully enforced. By agreeing to this contractual modification prospectively at this time, the Employer and the Participant intend to make this Exhibit A enforceable under the law or laws of all applicable states and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made to the Participant under the Plan.
8. Applicable Law; Venue. This Participation Agreement is governed by Georgia law, without giving effect to its conflicts of law principles. The Participant consents to the jurisdiction of the Fulton County District State Court in Atlanta, Georgia although the Company Group may choose to seek enforcement of the Restrictive Covenants in any jurisdiction where the Participant may be found.
9. Third Party Beneficiary. The Participant and Employer agree that any member of the Company Group who is not a party to this agreement shall be a third-party beneficiary and is entitled to enforce the obligations set forth in this Exhibit A as if a party hereto.


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