<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AVALONBAY COMMUNITIES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[LOGO]
2900 EISENHOWER AVENUE, SUITE 300
ALEXANDRIA, VIRGINIA 22314
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2000
------------------------
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of AvalonBay Communities, Inc. (the "Company") will be held on
Wednesday, May 10, 2000 at 9:30 a.m. local time at The Plaza Hotel, Fifth Avenue
and Central Park South, New York, NY 10019, for the following purposes:
1. To elect the following eight (8) directors to serve until the 2001
Annual Meeting of Stockholders and until their respective successors are
elected and qualified: Gilbert M. Meyer, Richard L. Michaux, Bruce A.
Choate, Michael A. Futterman, John J. Healy, Jr., Brenda J. Mixson, Lance R.
Primis and Allan D. Schuster.
2. To transact such other business that may be properly brought before
the Annual Meeting and at any adjournments thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned.
The Board of Directors has fixed the close of business on March 20, 2000 as
the record date for determining the stockholders entitled to receive notice of
and to vote at the Annual Meeting and at any adjournments thereof. Only
stockholders of record of the Company's common stock, par value $0.01 per share
(the "Common Stock"), at the close of business on that date will be entitled to
notice of and to vote at the Annual Meeting and at any adjournments thereof.
You are requested to fill in and sign the enclosed Proxy Card, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy delivered by a holder of Common
Stock may be revoked by a writing delivered to the Company stating that the
proxy is revoked or by delivery of a later dated proxy. Stockholders of record
of the Company's Common Stock who attend the Annual Meeting may vote in person,
even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Edward M. Schulman
SECRETARY
Alexandria, Virginia
April 5, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF COMMON
STOCK IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY
CARD.
<PAGE>
AVALONBAY COMMUNITIES, INC.
2900 EISENHOWER AVENUE, SUITE 300
ALEXANDRIA, VIRGINIA 22314
------------------------
PROXY STATEMENT
------------------------
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2000
April 5, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AvalonBay Communities, Inc. (the "Company")
for use at the 2000 Annual Meeting of Stockholders of the Company to be held on
Wednesday, May 10, 2000 at 9:30 a.m. and at any adjournments thereof (the
"Annual Meeting"). At the Annual Meeting, stockholders will be asked to vote
upon the election of eight (8) directors of the Company and act upon any other
matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about April 5, 2000. The Board
of Directors has fixed the close of business on March 20, 2000 as the record
date for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting (the "Record Date"). Only stockholders of record of
the Company's common stock, par value $.01 per share (the "Common Stock"), at
the close of business on the Record Date will be entitled to receive notice of
and to vote at the Annual Meeting. As of the Record Date, there were 65,870,745
shares of Common Stock outstanding and entitled to vote at the Annual Meeting.
Holders of Common Stock outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held.
The presence, in person or by proxy, of holders of a majority of all of the
shares of Common Stock entitled to be cast is necessary to constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and "broker
non-votes" will be counted for purposes of determining whether a quorum is
present for the transaction of business at the Annual Meeting. A "broker
non-vote" refers to a share represented at the Annual Meeting which is held by a
broker or other nominee who has not received instructions from the beneficial
owner or person entitled to vote such share and with respect to which, on one or
more but not all proposals, such broker or nominee does not have discretionary
voting power to vote such share.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED BUT NOT
MARKED AS TO A PARTICULAR ITEM, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE
EIGHT (8) NOMINEES FOR DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT.
IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE PROXY
STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE
PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS.
A stockholder of record of the Company's Common Stock may revoke a proxy at
any time before it has been exercised by filing a written revocation with the
Secretary of the Company at the address of the Company set forth above, by
filing a duly executed proxy bearing a later date, or by appearing in person and
voting by ballot at the Annual Meeting. Any stockholder of record of the
Company's Common Stock as of the Record Date attending the Annual Meeting may
vote in person whether or not a proxy has been previously given, but the
presence (without further action) of a stockholder at the Annual Meeting will
not constitute revocation of a previously delivered proxy.
<PAGE>
The Company's 1999 Annual Report, including financial statements for the
fiscal year ended December 31, 1999, is being mailed to stockholders
concurrently with this Proxy Statement. The Annual Report, however, is not part
of the proxy solicitation material. A copy of the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission may be obtained by
writing to AvalonBay Communities, Inc., 2900 Eisenhower Avenue, Suite 300,
Alexandria, Virginia 22314, Attention: Chief Financial Officer.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of nine (9) members. One current
member of the Board of Directors, Richard W. Miller, has determined not to stand
for re-election. Accordingly, eight (8) directors will be elected at the Annual
Meeting to serve until the 2001 Annual Meeting and until their successors are
elected and qualified. The following persons who have chosen to stand for
re-election as directors of the Company have been nominated by the Board of
Directors: Gilbert M. Meyer, Richard L. Michaux, Bruce A. Choate, Michael A.
Futterman, John J. Healy, Jr., Brenda J. Mixson, Lance R. Primis and Allan D.
Schuster (the "Nominees"). The Board of Directors anticipates that each of the
Nominees, if elected, will serve as a director. However, if any person nominated
by the Board of Directors is unable to accept election, the proxies will be
voted for the election of such other person as the Board of Directors may
recommend. The Board of Directors will consider a nominee for election to the
Board of Directors recommended by a stockholder of record if the stockholder
submits the nomination in compliance with the requirements of the Company's
Bylaws. See "Other Matters--Stockholder Proposals for Annual Meetings" for a
summary of these requirements.
REQUIRED VOTE AND RECOMMENDATION
Only stockholders of record of the Company's Common Stock are entitled to
vote on this proposal. Proxies will be voted for Proposal 1 unless contrary
instructions are set forth on the enclosed Proxy Card. A plurality of the votes
cast for the election of a Nominee for director shall elect such Nominee.
Accordingly, abstentions and broker non-votes will have no effect on this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE
NOMINEES.
INFORMATION REGARDING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Nominees for election as directors at the Annual Meeting based on information
furnished to the Company by each Nominee. Unless otherwise specified, the
following information is as of February 10, 2000 and is based upon 65,870,294
shares of Common Stock outstanding at the close of business on such date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
DIRECTOR OWNERSHIP OF OF
NAME OF NOMINEE AGE SINCE COMMON STOCK (1) CLASS
- --------------- -------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Gilbert M. Meyer............................... 55 1978 1,254,813(2) 1.9%
Richard L. Michaux............................. 56 1998 696,896(3) 1.1
Bruce A. Choate................................ 52 1994 32,500(4)(5) *
Michael A. Futterman........................... 57 1998 50,974(5)(6)(7) *
John J. Healy, Jr.............................. 53 1996 31,000(8)(9) *
Brenda J. Mixson............................... 47 1994 37,000(4) *
Lance R. Primis................................ 53 1998 12,000(10) *
Allan D. Schuster.............................. 58 1998 56,876(7) *
</TABLE>
- ------------------------
* Less than one percent.
2
<PAGE>
(1) Except as otherwise noted, each individual in this table has sole voting and
investment power over the shares listed.
(2) Includes 340,500 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000. Does not include 24,977 shares issuable in
the future under deferred stock awards granted to Mr. Meyer pursuant to
elections made under the 1994 Stock Incentive Plan, as amended and restated
(the "Stock Incentive Plan").
(3) Includes (i) 264,026 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000, (ii) 2,173 shares owned indirectly by
Mr. Michaux's spouse, and (iii) 52,244 shares owned indirectly by The
Michaux Family LLC.
(4) Includes 31,000 shares issuable upon the exercise of stock options that vest
on or before April 10, 2000.
(5) Does not include 5,415 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to elections made under the Stock
Incentive Plan.
(6) Includes 7,683 shares held jointly with spouse.
(7) Includes 39,195 shares issuable upon the exercise of stock options that vest
on or before April 10, 2000.
(8) Includes 25,000 shares issuable upon the exercise of stock options that vest
on or before April 10, 2000.
(9) Does not include 2,090 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to an election made under the Stock
Incentive Plan.
(10) Does not include 2,217 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to an election made under the Stock
Incentive Plan.
The following biographical descriptions set forth certain information with
respect to the Nominees, the director of the Company who is not standing for
re-election, the executive officers of the Company who are not directors, and
the senior vice presidents of the Company, based on information furnished to the
Company by each Nominee, director, executive officer and senior vice president.
There is no family relationship between any director, executive officer or
senior vice president of the Company. Officers of the Company are elected
annually at the first meeting of the Board of Directors following each annual
meeting of stockholders. Each officer holds office until the first meeting of
the Board of Directors following the next annual meeting of stockholders and
until his or her successor is duly elected and qualified or until his or her
death, resignation or removal in the manner provided in the Company's Bylaws.
NOMINEES FOR ELECTION AS DIRECTORS
GILBERT M. MEYER is the founder and Executive Chairman of the Company and,
since 1978, has been continuously involved with the Company as an executive
officer, director and stockholder. The Company and Mr. Meyer recently announced
that Mr. Meyer will retire as Executive Chairman following the 2000 Annual
Meeting; however, Mr. Meyer is standing for re-election as a director and
intends to continue to serve on the Board of Directors. Mr. Meyer has also
entered into a three year consulting agreement with the Company that will begin
following the 2000 Annual Meeting (see "Certain Relationships and Related
Transactions"). Prior to the completion of the merger of the Company and Avalon
Properties, Inc. ("Avalon Properties") in June 1998 (the "Merger"), Mr. Meyer
served as the Company's Chairman, President and Chief Executive Officer.
Mr. Meyer is also the founder and remains a major stockholder and a member of
the board of directors of Greenbriar Homes Communities, Inc., a private for-sale
single family home building company in the San Francisco
3
<PAGE>
Bay area. Prior to founding the Company, Mr. Meyer was Chief Financial Officer
for BAS Homes and prior to that was a Vice President responsible for real estate
workouts for Boise Cascade Credit Corporation. Mr. Meyer is a licensed certified
public accountant and general contractor, and holds a B.A. degree from St.
Mary's College of California and an M.B.A. degree from the University of
California at Berkeley. In addition, he has served as a member of the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT"), as a member of the Policy Advisory Board of the Fisher Center for
Real Estate and Urban Economics, University of California at Berkeley, and as
local president of the Home Builders Association, an affiliate of the National
Association of Home Builders.
RICHARD L. MICHAUX has been a director and Chief Executive Officer of the
Company since the Merger, and he assumed the additional office of President in
February 1999. He had previously been a director and the Chief Executive Officer
of Avalon Properties from its formation in August 1993 through the consummation
of the Merger in June 1998. Prior to the formation of Avalon Properties,
Mr. Michaux was a partner of Trammell Crow Residential ("TCR"), which he joined
in 1980, and served as one of the three Group Managing Partners of TCR from 1986
to 1993. In that capacity, he was responsible for residential development in the
Mid-Atlantic, Northeastern and Midwestern states. Mr. Michaux graduated from the
United States Naval Academy with distinction and holds an M.B.A. degree from the
University of North Carolina at Chapel Hill, where he was a Morehead Fellow and
a Dean's Scholar. Mr. Michaux's professional affiliations include: past Chairman
of the National Multi Housing Council; Vice Chairman of the Gold Flight Council
of the Urban Land Institute (the "ULI"); member of the Executive Committee of
the Board of Governors of NAREIT; Vice President/Treasurer of the United States
Naval Academy Class of 1966 Foundation; and founding Board member of the D.C.
Early Child Care Collaborative.
BRUCE A. CHOATE has been a director of the Company since April 1994. Since
1991, Mr. Choate has served as Chief Financial Officer of Watson Land Company, a
privately-held real estate investment trust ("REIT") in Carson, California.
Prior to joining Watson Land Company, Mr. Choate was employed by Bixby Ranch
Company, a privately-held real estate investment company in Seal Beach,
California, as Senior Vice President and Chief Financial Officer. Mr. Choate
graduated from the University of California, Los Angeles and attended the
Graduate School of Business at the University of Southern California.
MICHAEL A. FUTTERMAN has been a director of the Company since June 1998 and
was a director of Avalon Properties from December 1993 through the consummation
of the Merger in June 1998. Since 1983, Mr. Futterman has been Chairman of
American Realty Capital Inc., a closely held real estate company which has
arranged over $1.5 billion of investments in property for its partners and
stockholders. From 1988 to 1992, Mr. Futterman also held the position of
President of Elders American Realty Capital, Inc., a participating mortgage
lender subsidiary of Elders IXL, an Australian public company. Prior to joining
American Realty Capital Inc., Mr. Futterman was employed by Eastdil
Realty, Inc. from 1969 to 1983, where he was most recently Executive Vice
President and a director. Mr. Futterman also served as a director of Dollar Dry
Dock Savings Bank from July 1989 to March 1990, and Trustee of the International
Center of Photography from 1986 to 1992. Mr. Futterman graduated from the
Carnegie Institute of Technology and the Georgetown University Law School.
JOHN J. HEALY, JR. has been a director of the Company since May 1996.
Mr. Healy is co-founder and Chief Executive Officer of Hyde Street
Holdings, Inc., a company formed in 1996 to pursue the creation of value in real
estate and real estate related entities. In 1999, Mr. Healy co-founded Urban
Media Communications Corporation, a telecommunications firm formed to specialize
in the delivery of services in partnership with owners of portfolios of office
buildings. From 1988 to 1996, Mr. Healy was a founder and a managing principal
of the Hanford/Healy Companies, a national commercial real estate services
company acquired by General Motors Acceptance Corporation--CM in
September 1996. Mr. Healy has also held various management positions with real
estate and financial firms (or their
4
<PAGE>
subsidiaries or affiliates) including: The Federal Asset Disposition Association
(predecessor to the Resolution Trust Corporation), Bank of America and
Manufacturers Hanover Trust Company. Mr. Healy has undergraduate (B.B.A.) and
graduate (M.B.A.) degrees in Finance from Hofstra University.
BRENDA J. MIXSON has been a director of the Company since April 1994. In
March 1999, Ms. Mixson joined First Union Real Estate Equity and Mortgage
Investments as Chief Financial Officer. From December 1997 until March 1999,
Ms. Mixson worked at Prime Capital Holding, LLC, where she most recently served
as Chief Financial and Investment Officer and Managing Director. From
February 1996 until December 1997, Ms. Mixson was a Managing Director of the
Emerging Markets, Fixed Income Department for ING Barings (U.S.)
Securities, Inc., a member of the ING Group. Ms. Mixson previously served as
Vice President--Real Estate Finance of ING Capital Corporation from March 1995
to February 1996. She served as an Executive Vice President and Chief Operating
Officer of Reichmann International from April 1994 to March 1995. Ms. Mixson
graduated from the University of Minnesota with a B.S. degree in Economics.
LANCE R. PRIMIS has been a director of the Company since June 1998. Since
1997, Mr. Primis has been the managing partner of Lance R. Primis & Partners,
LLC, a management consulting firm with clients in the media industry. From 1969
to 1996, Mr. Primis was employed in various positions by The New York Times
Company, including the positions of President and Chief Operating Officer which
he held from 1992 to 1996. In addition, Mr. Primis was the President and General
Manager of The New York Times from 1988 to 1992. Mr. Primis currently serves as
Chairman of PressPoint, Inc., a company that enables the transmission of
newspapers through a digital satellite network to readers anywhere in the world
upon demand. In addition, Mr. Primis is a member of the Board of Directors of
the Torstar Corporation, Plum Holdings, LLC and the Partnership for a Drug Free
America. Mr. Primis received a B.A. degree from the University of Wisconsin, and
he completed the Marketing Management Program at Harvard Business School and the
Stanford Executive Program at Stanford University.
ALLAN D. SCHUSTER has been a director of the Company since June 1998 and was
a director of Avalon Properties from December 1993 through June 1998. He has
been a private investor since June 1993. From April 1988 until June 1993, he was
Chairman and Chief Executive Officer of the Travelers Realty Investment Company,
where he directed that company's investment activities in commercial and
agricultural real estate. During Mr. Schuster's tenure, Travelers' portfolio of
mortgages, equities and joint ventures ranged between $12 billion and
$20 billion. During this same period, Mr. Schuster was Chairman and Chief
Executive Officer of Prospect Company, a $2 billion real estate development
company. From December 1972 to September 1987, Mr. Schuster was with Citibank,
N.A., where during the last five years he was Managing Director of Citicorp Real
Estate, Inc. He is a Member of the Appraisal Institute and the ULI.
DIRECTORS WHO ARE NOT STANDING FOR RE-ELECTION
RICHARD W. MILLER, 59, has been a director of the Company since June 1998
and was a director of Avalon Properties from May 1997 through the consummation
of the Merger in June 1998. From 1993 through 1997, he served as Senior
Executive Vice President and Chief Financial Officer of AT&T and as a member of
AT&T's Chairman's Office. For the three years prior to joining AT&T, Mr. Miller
was Chairman, President and Chief Executive Officer of Wang Laboratories, Inc.
From 1982 through 1988, he was with RCA Corporation and the General Electric
Company, which acquired RCA in 1986, first as RCA's Executive Vice President and
Chief Financial Officer, then as RCA's Executive Vice President Consumer
Products and Entertainment, overseeing what was then the largest consumer
electronics business in the U.S., and finally as GE's Senior Vice
President--Consumer Electronics. From 1970 to 1982, Mr. Miller was with Penn
Central Corporation, including positions as the Chief Financial Officer of the
parent company and Executive Vice President of its principal real estate
subsidiary, Arvida Corporation. Mr. Miller holds a B.B.A. degree in economics
from Case Western Reserve University
5
<PAGE>
and an M.B.A. in Finance from the Harvard Business School. Mr. Miller also
serves as a director of Closure Medical Corporation, SBA Communications, Inc and
MPower Communications Corporation.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
BRYCE BLAIR, 41, has been Chief Operating Officer of the Company since
February 1999. Prior to assuming that office, Mr. Blair had, since the Merger,
served as Senior Vice President--Development/ Acquisitions, the same position he
held with Avalon Properties from its formation in August 1993 through
June 1998. Mr. Blair joined the Northeast Group of TCR in 1985 and was the
partner responsible for overseeing development and acquisition of multifamily
opportunities throughout Massachusetts, Rhode Island and Long Island, New York.
Prior to joining the Northeast Group of TCR in 1985, he was a Project Manager
with the Exxon Corporation responsible for managing the design, development and
construction of capital improvement properties. Mr. Blair is a 1985 graduate of
the Harvard Business School. He graduated MAGNA CUM LAUDE with an undergraduate
degree in Civil Engineering from the University of New Hampshire. He is a member
of the ULI, the Real Estate Finance Association of Greater Boston Real Estate
Board, and the Real Estate Investment Advisory Council.
ROBERT H. SLATER, 46, has been Executive Vice President--Property Operations
since February 1999, and in that capacity is responsible for direct oversight of
all of the Company's property operations, ancillary services and marketing.
Prior to assuming that office, Mr. Slater had, since the Merger, served as
Senior Vice President--Property Operations, the same position he held with
Avalon Properties from its formation in August 1993 through June 1998. He served
previously as Chief Operating Officer of Trammell Crow Residential Services for
the Mid-Atlantic region. His responsibilities included all aspects of property
management including property operations, marketing, training, human resources,
risk management, resident services, engineering services and business
development. Mr. Slater was responsible for opening and managing the Raleigh,
North Carolina TCR office and was responsible for the development of several
multifamily apartment communities. Prior to joining TCR in 1988, Mr. Slater
served as law clerk to (now retired) Justice James G. Exum, Jr. of the Supreme
Court of North Carolina and, thereafter, engaged in the private practice of law.
Mr. Slater is a 1980 graduate of the University of Virginia School of Law with
an undergraduate degree, CUM LAUDE, from Vanderbilt University.
THOMAS J. SARGEANT, 41, has been Chief Financial Officer and Treasurer since
the Merger. In addition, since January 2000, Mr. Sargeant has held the
additional title of Executive Vice President and, prior to that, held the
additional title of Senior Vice President. Mr. Sargeant is responsible for all
of the financial operations of the Company, including capital markets/finance,
financial reporting and financial services. Mr. Sargeant is also the chief
officer in charge of information technologies. From March 1995 through
June 1998, Mr. Sargeant served as the Chief Financial Officer and Secretary of
Avalon Properties, and he was Treasurer of Avalon Properties from its formation
in August 1993 through June 1998. He previously served as Group Financial
Officer for the Northeast Group of TCR, the Mid-Atlantic Group of TCR and the
Midwest Group of TCR and oversaw the financial services operations (including
accounting and financial reporting, cash management, payroll, information
systems and internal audit) as well as project finance for the Midwest Group of
TCR. Mr. Sargeant joined TCR in 1986 as Controller and was promoted to Chief
Financial Officer in 1989 and to Group Financial Officer in 1992. Prior to
joining TCR, Mr. Sargeant was with Arthur Andersen & Co., where he specialized
in the construction and real estate industries, serving both private and
publicly held clients. Mr. Sargeant, a certified public accountant, is a MAGNA
CUM LAUDE graduate of the University of South Carolina where he was elected to
Phi Beta Kappa and the Honors College.
6
<PAGE>
SENIOR VICE PRESIDENTS
SAMUEL B. FULLER, 38, has been Senior Vice
President--Development/Construction since January 2000. Prior to assuming that
office, Mr. Fuller served as the Company's Regional Vice President--
Development/Acquisitions, with responsibility in the Northeast and Pacific
Northwest regions of the country. Prior to the Merger, he held the same position
with Avalon Properties. From the formation of Avalon Properties in August 1993
through March 1998, Mr. Fuller was Vice President of Development for Connecticut
and New York. Mr. Fuller joined the Northeast Group of TCR in 1989 and was the
partner responsible for overseeing development and acquisition of multifamily
opportunities throughout Connecticut and New York state excluding Long Island.
Before joining TCR, Mr. Fuller was a Project Manager at Texas Instruments, Inc.
Mr. Fuller is a 1989 graduate of the Harvard Business School and has a Bachelor
of Science Degree in Mechanical Engineering from the University of New Hampshire
College of Engineering and Physical Sciences.
JAMES R. LIBERTY, 60, has been Senior Vice President--Construction
Operations since June 1999. Prior to assuming that office, Mr. Liberty served as
Vice President--Construction, with responsibilities in the East Coast and
Midwest. Prior to the Merger, he held the same position with Avalon Properties.
Mr. Liberty joined Avalon Properties in September 1996 as Senior Construction
Manager for the Mid-Atlantic region, a position he held until April 1997. His
previous experience included officerships in and positions with several
prominent real estate development companies since the 1960's, where his
management responsibilities have included high-volume multifamily housing and
mid- and high-rise office building complexes in New York, New Jersey,
Washington, D.C., Chicago and Detroit. He is a graduate of Rochester Institute
of Technology and a licensed real estate broker.
TIMOTHY J. NAUGHTON, 38, has been Senior Vice President--Chief Investment
Officer since January 2000. Prior to assuming that office, Mr. Naughton served
as the Company's Regional Vice President--Development/Acquisitions, with
responsibility in the Mid-Atlantic and Midwest regions of the country. Prior to
the Merger, he held the same position with Avalon Properties. From the formation
of Avalon Properties in August 1993 until March 1998, Mr. Naughton was Vice
President of Development, with responsibility for the Virginia and Maryland
markets. He was previously a Development Partner with the Mid-Atlantic Group of
TCR, which he joined in 1989. Mr. Naughton received his Master's Degree in
Business Administration from the Harvard Business School in 1987 and an
undergraduate degree in economics from the University of Virginia.
CHARLENE ROTHKOPF, 48, joined the Company in March 2000 as Senior Vice
President--Human Resources. Immediately prior to joining the Company,
Ms. Rothkopf was founder and President of Human Capital Group, a management
consulting firm specializing in strategic planning and human resource
development. From 1996 to 1999, Ms. Rothkopf was Vice President of Operations
Human Resources for Host Marriott Services Corporation, and from 1993 to 1996
she was Vice President of Human Resources Planning and Development for Host
Marriott Corporation. From 1983 to 1993, Ms. Rothkopf was employed by Marriott
Corporation, most recently as Director of Benefit Operations. Ms. Rothkopf holds
an undergraduate degree and a masters degree in administration and supervision
from the University of Maryland, and she performed doctoral work at George
Washington University in Human Resources Development and Management Science.
BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. The Board of Directors currently consists of nine
(9) members. The Board of Directors met five times during 1999. Each of the
directors attended at least 75% of the total number of meetings of the Board of
Directors and meetings of the committees of the Board of Directors that he or
she was eligible to attend.
AUDIT COMMITTEE. The Board of Directors has established an Audit Committee
consisting of Bruce A. Choate (Chair), Richard W. Miller, Lance R. Primis and
Allan D. Schuster, all of whom are
7
<PAGE>
independent of the Company's management. The Audit Committee, among other
things, makes recommendations concerning the engagement of independent public
accountants, reviews the plans and results of the audit engagement with the
independent public accountants, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees, reviews the
adequacy of the Company's internal accounting controls and performs such other
oversight functions as may be requested from time to time by the Board of
Directors. The Audit Committee met two times during 1999.
COMPENSATION COMMITTEE. The Board of Directors has established a
Compensation Committee consisting of Lance R. Primis (Chair), Bruce A. Choate,
Michael A. Futterman and Brenda J. Mixson, all of whom are independent of the
Company's management. The Compensation Committee exercises all powers of the
Board of Directors in connection with compensation matters, including incentive
compensation and benefit plans. The Compensation Committee also has authority to
grant awards under the 1994 Stock Incentive Plan, as amended and restated (the
"Stock Incentive Plan"), to the employee directors, management and other
employees of the Company and its subsidiaries. The Compensation Committee met
six times during 1999.
NOMINATING COMMITTEE. Following the 1999 Annual Meeting, the Board of
Directors established a Nominating Committee consisting of Richard W. Miller
(Chair), John J. Healy, Jr., Richard L. Michaux and Gilbert M. Meyer. The
Nominating Committee was formed to consider, and make proposals to the full
Board regarding, issues relating to Board composition and performance. The
Nominating Committee did not meet during 1999.
INVESTMENT AND FINANCE COMMITTEE. Prior to the 1999 Annual Meeting, the
Board of Directors had established a Finance Committee and an Investment
Committee. Following the 1999 Annual Meeting, the Board of Directors combined
those two committees into an Investment and Finance Committee. The Investment
and Finance Committee was formed to provide oversight and support with respect
to (i) financings and maintenance of the capital structure of the Company and
(ii) investment activities. The Investment and Finance Committee has authority,
subject to certain limits and guidelines set by the Board of Directors and
Maryland law, to approve financing and investment activity. The Investment and
Finance Committee, which consists of Allan D. Schuster (Chair), Michael A.
Futterman, John J. Healy, Jr., Brenda J. Mixson, Gilbert M. Meyer and Richard L.
Michaux, met six times during 1999. Prior to the establishment of the Investment
and Finance Committee, the Investment Committee met one time during 1999 and the
Finance Committee met two times during 1999.
DIRECTOR COMPENSATION
Directors of the Company who are also employees receive no additional
compensation for their services as directors. Under the Stock Incentive Plan, on
the fifth business day following each annual meeting of stockholders, each of
the Company's non-employee directors automatically receives options to purchase
10,000 shares of Common Stock at the last reported sale price of the Common
Stock on the NYSE on such date, and a restricted stock (or deferred stock award)
grant of 2,000 shares of Common Stock. Subject to accelerated vesting under
certain limited circumstances, all of such stock options become exercisable one
year after the date of grant and such shares of restricted stock (or deferred
stock awards) granted to non-employee directors vest at the rate of 20% on the
date of issuance and on each of the first four anniversaries of the date of
issuance. If a director elects to receive a deferred stock award in lieu of
restricted stock, then at the time of such election, the director also elects at
what time in the future he or she will receive shares of stock in respect of the
vested portion of the deferred stock award.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for each of the Company's last three fiscal
years, the annual compensation awarded to the Company's chief executive officer
and the four other executive officers of the Company who, on the basis of annual
salary and bonus, were the most highly compensated officers of the Company
during 1999 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------------- ----------------------------
SECURITIES RESTRICTED ALL OTHER
UNDER-LYING STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(#)(2) AWARDS($)(3) ($)(4)(5)
- --------------------------- -------- -------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert M. Meyer(6)....... 1999 $377,500 $243,200 59,400 $245,025(7) $140,889
Executive Chairman 1998 338,462(8) 262,500(8) 62,000 198,400(9) 73,846
1997 294,455(10) 250,287(10) 100,000 379,375(11) 1,000
Richard L. Michaux(12).... 1999 377,500 243,200 59,400 238,275(13) 136,288
President and Chief 1998 231,542 252,000 62,000 198,400(14) 120,268
Executive Officer
Bryce Blair(12)........... 1999 327,500 248,186 49,500 192,037(15) 46,167
Chief Operating Officer 1998 180,212 241,941 46,500 150,720(16) 32,288
Robert H. Slater(12)...... 1999 313,750 214,828 46,200 189,337(17) 55,767
Executive Vice 1998 178,621 225,000 46,500 158,720(18) 41,150
President--Property
Operations
Thomas J. Sargeant(12).... 1999 270,000 228,472 39,600 141,412(19) 42,420
Executive Vice President, 1998 160,758 205,309 37,200 125,760(20) 32,288
Chief Financial Officer
</TABLE>
- ------------------------
(1) Cash bonuses may be paid under the Company's corporate bonus program in the
discretion of the Compensation Committee to executive officers upon the
attainment of performance-based criteria established by the Committee. For
a general description of the program, see "Compensation Committee Report on
Executive Compensation."
(2) The options to purchase Common Stock that are listed for 1999, 1998 and
1997 consist of options granted on February 28, 2000, February 17, 1999 and
January 30, 1998, respectively. The Summary Compensation Table does not
include options to purchase common stock of Avalon Properties that were
converted into the right to purchase Common Stock of the Company in
connection with the Merger. On March 8, 1998, Avalon Properties granted
options to purchase common stock of Avalon Properties to Messrs. Blair,
Slater and Sargeant and, upon consummation of the Merger, these options
converted into options to purchase 80,000, 80,000 and 70,000 shares of
Common Stock of the Company, respectively.
(3) During the period from March 1994 through December 31, 1999, 56,000 shares
of restricted stock were granted by the Company to the Named Executive
Officers, of which 40,800 shares had not yet vested. Based on the last
reported sale price of the Company's Common Stock on the NYSE on
December 31, 1999 of $34.3125 per share, the aggregate dollar value of
these 40,800 shares of restricted stock was $1,399,950. This does not
include shares of restricted stock of Avalon Properties that were granted
to officers of Avalon Properties prior to the Merger.
(4) For 1999, includes (i) amounts contributed by the Company to the Named
Executive Officers' 401(k) accounts in the following amounts:
Mr. Meyer--$2,896; Mr. Michaux--$4,800; Mr. Blair--$4,800;
Mr. Slater--$4,800; and Mr. Sargeant--$4,800, and (ii) premiums paid by the
Company for the Named Executive Officers' split dollar life insurance
policies in the following amounts:
9
<PAGE>
Mr. Meyer--$126,593; Mr. Michaux--$115,468; Mr. Blair--$27,464;
Mr. Slater--$36,273; and Mr. Sargeant--$27,464.
(5) For 1998, includes (i) amounts contributed by the Company to the Named
Executive Officers' 401(k) accounts in the following amounts:
Mr. Michaux--$4,800; Mr. Blair--$4,800; Mr. Slater--$4,800; and
Mr. Sargeant--$4,800 and (ii) premiums paid by the Company for the Named
Executive Officers' split dollar life insurance policies in the following
amounts: Mr. Meyer--$73,846; Mr. Michaux--$115,468; Mr. Blair--$27,488;
Mr. Slater--$36,350; and Mr. Sargeant--$27,488.
(6) Prior to the Merger, Mr. Meyer was the Company's Chairman, President and
Chief Executive Officer.
(7) Consists of 7,260 shares of restricted stock awarded as of February 28,
2000, valued at $33.75 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(8) An aggregate of $315,028 of Mr. Meyer's salary and bonus compensation in
1998 was deferred pursuant to an election under the Stock Incentive Plan.
Such deferred compensation will be payable in the form of Common Stock on a
date or dates in the future elected by Mr. Meyer.
(9) Consists of 6,200 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(10) An aggregate of $265,493 of Mr. Meyer's salary and bonus compensation in
1997 was deferred pursuant to an election under the Stock Incentive Plan.
Such deferred compensation will be payable in the form of Common Stock on a
date or dates in the future elected by Mr. Meyer.
(11) Consists of 10,000 shares of restricted stock awarded as of January 30,
1998, valued at $37.9375 per share. These shares vest in five equal annual
installments beginning on January 30, 1999. Dividends are payable on these
shares.
(12) These Named Executive Officers began employment on June 4, 1998, the date
of the Merger. The salaries indicated for 1998 consist of salary payments
from June 4, 1998 through December 31, 1998 based on the following annual
base salaries: Mr. Michaux--$350,000; Mr. Blair--$300,000;
Mr. Slater--$300,000; and Mr. Sargeant--$270,000.
(13) Consists of 7,060 shares of restricted stock awarded as of February 28,
2000, valued at $33.75 per shares. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(14) Consists of 6,200 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(15) Consists of 5,690 shares of restricted stock awarded as of February 28,
2000, valued at $33.75 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(16) Consists of 4,710 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(17) Consists of 5,610 shares of restricted stock awarded as of February 28,
2000, valued at $33.75 per shares. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of
10
<PAGE>
the shares vest in four equal installments on each of the first four
anniversaries of the date of issuance. Dividends are payable on these
shares.
(18) Consists of 4,960 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(19) Consists of 4,190 shares of restricted stock awarded as of February 28,
2000, valued at $33.75 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
(20) Consists of 3,930 shares of restricted stock awarded as of February 17,
1999, valued at $32.00 per share. Twenty percent of these shares vested on
the date of issuance and the remaining 80% of the shares vest in four equal
installments on each of the first four anniversaries of the date of
issuance. Dividends are payable on these shares.
OPTION GRANTS WITH RESPECT TO FISCAL YEAR 1999
The following table sets forth the options granted with respect to the
fiscal year ended December 31, 1999 to the Company's Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SHARES TOTAL OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(1)
GRANTED FOR FISCAL PRICE EXPIRATION -----------------------
NAME (#) (2) YEAR 1999 ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gilbert M. Meyer.................... 59,400(3) 7.0% $33.75 2/28/10 $1,260,776 $3,195,055
Richard L. Michaux.................. 59,400(3) 7.0 33.75 2/28/10 1,260,776 3,195,055
Bryce Blair......................... 49,500(3) 5.8 33.75 2/28/10 1,050,647 2,662,546
Robert H. Slater.................... 46,200(3) 5.4 33.75 2/28/10 980,604 2,485,043
Thomas J. Sargeant.................. 39,600(3) 4.6 33.75 2/28/10 840,518 2,130,037
</TABLE>
- ------------------------
(1) The options will only have value if they are exercised, and that value will
depend entirely on the share price on the exercise date. Potential
realizable values are based on assumed compound annual appreciation rates
specified by the Securities and Exchange Commission (the "SEC"). These
increases in value are based on speculative assumptions and are not intended
to forecast possible future appreciation, if any, of the Company's stock
price.
(2) A total of 848,434 options to purchase Common Stock of the Company were
granted to employees of the Company with respect to fiscal year end
December 31, 1999. This chart excludes options granted on February 17, 1999
with respect to the fiscal year ended December 31, 1998 in the following
amounts: Mr. Meyer--62,000; Mr. Michaux--62,000; Mr. Blair--49,500;
Mr. Slater--46,500 and Mr. Sargeant--37,200.
(3) These options were granted on February 28, 2000 and become exercisable in
three equal installments on the first, second and third anniversaries of the
date of grant.
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<PAGE>
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth the aggregate number of options to purchase
Common Stock that were exercised in 1999 and the value of options held as of
December 31, 1999 by the Company's Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND
FISCAL YEAR-END 1999 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED ON YEAR-END YEAR-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE($)(1)
- ---- ----------- ----------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Gilbert M. Meyer............... 0 $0 265,000/197,000 $2,715,625/$252,750
Richard L. Michaux............. 0 0 243,359/125,961 879,344/143,375
Bryce Blair.................... 0 0 132,950/128,003 381,049/107,531
Robert H. Slater............... 0 0 132,950/128,003 381,049/107,531
Thomas J. Sargeant............. 0 0 88,615/129,988 263,803/86,025
</TABLE>
- ------------------------
(1) Based on the last reported sale price of the Company's Common Stock on the
NYSE on December 31, 1999 of $34.3125 per share.
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
On March 9, 1998, the Company entered into three-year employment agreements
(collectively, as amended, the "Employment Agreements") with the Named Executive
Officers, all of which became effective upon completion of the Merger. In
consideration of the new employment agreements and option grants made by their
respective companies in connection with the Merger, all of the Named Executive
Officers waived any change in control benefits (such as severance payments or
acceleration of option or restricted stock vesting) that could have become
payable to them as a result of the Merger pursuant to any prior agreements with
the Company or Avalon Properties, as the case may be. The Employment Agreements
provide for automatic one year renewals after the third year, unless an advance
notice of non-renewal is provided by either party to the other at least six
months prior to the expiration of the employment term, and an automatic
extension of three years upon a change in control of the Company.
The Employment Agreements also provide for (i) base salary and
(ii) incentive compensation in the form of cash awards, stock options and stock
grants subject to the discretion of, and attainment of performance goals
established by, the Compensation Committee. Each Employment Agreement provides
that the officer's base salary will be reviewed no less frequently than annually
and may be increased but not decreased. During any renewal term, base salary
increases will be equal to the greater of 5% of the prior year's base salary, a
factor based on increases in the consumer price index, or an amount agreed upon
by the parties.
In the event the Company terminates the executive without Cause (as defined
in the Employment Agreements), the executive resigns for Good Reason (as defined
in the Employment Agreements, including a material adverse change in duties
and/or position, involuntary relocation, and material breach of the agreement by
the Company), or if the executive resigns for any reason within twelve
(12) months following a change in control, then the executive is entitled to
severance benefits equal to: (A) three times the sum of a three year average of
(i) base salary, (ii) cash bonus earned and (iii) the value of stock and
equity-based compensation awards granted (which value is to be determined by the
Compensation Committee) (such average is referred to as the executive's "Covered
Average Compensation"); (B) 36 months of welfare insurance benefits; (C) the
vesting of equity awards; and (D) continued payment of the whole-life portion of
the premiums due on a split-dollar life insurance
12
<PAGE>
policy for so long as such payments are due. In addition, if the Company elects
not to renew the term of any of the Employment Agreements still in effect, it
will be required to provide the executive with the following severance benefits:
(i) twelve (12) months of Covered Average Compensation; (ii) 24 months of
welfare insurance benefits; (iii) vesting of equity awards; and (iv) continued
payment of the whole-life portion of the premiums due on a split-dollar life
insurance policy for so long as such payments are due. In the event any of the
payments made exceeds three times the executive's average total annual
compensation includable in income during the preceding five years ("base
amount"), the excess over the executive's base amount could, under certain
circumstances, constitute an "excess parachute payment" under the Code and
subject the executive to a 20% excise tax and not be deductible by the Company.
The Employment Agreements provide for a partial gross-up payment to the
executive in such an event so that the executive is made whole for such excise
tax, other than the income tax liability resulting from such gross-up payment.
Each of the Employment Agreements provides that, in general, for one year
following termination by the Company for Cause or termination by the executive
(other than in the event of a constructive termination without Cause) prior to a
change in control, each executive will not, without the prior consent of the
Board of Directors, become associated with, or engage in any executive,
managerial, directorial, administrative, strategic, business development or
supervisory responsibilities and activities relating to all aspects of
residential real estate ownership, management, residential real estate
franchising and residential real estate joint venturing with respect to any
person, corporation, partnership, venture or other entity which is engaged in
the business of managing, owning, leasing, or joint venturing multifamily rental
real estate within 30 miles of residential real estate owned or under management
by the Company or its affiliates. In addition, the Employment Agreements provide
that for one year following termination, each executive will not, without the
prior written consent of the Company, solicit or attempt to solicit for
employment, with or on behalf of any corporation, partnership, venture or other
business entity, any employees of the Company or any of its affiliates or any
person who was formerly employed by the Company or any of its affiliates within
the preceding six months unless such person's employment was terminated by the
Company or any of such affiliates.
During 1999, the employment of two executive officers who were covered by
employment agreements of the type described above was terminated, and those
officers were paid severance in accordance with those employment agreements.
Charles H. Berman, formerly the President of the Company, was paid severance of
$5,738,757, and Jeffrey B. Van Horn, formerly the Senior Vice
President--Investments of the Company, was paid severance of $3,687,310. In
addition to such payments, Messrs. Berman and Van Horn received or are receiving
the other benefits described above (e.g., accelerated vesting of options and
restricted stock awards, continued insurance coverage). Certain option grants
that had been made to Mr. Berman and that totaled 317,075 options in the
aggregate were amended so that the terms of such options would not expire until
the end of the original grant term. In connection with such payments, the
Company and each officer entered into mutual releases of claims. The payments
described above were included in a non-recurring charge that was taken during
the first quarter of 1999.
In March 2000, the Company and Mr. Meyer announced that Mr. Meyer would
retire as Executive Chairman following the May 10, 2000 Annual Meeting. Although
Mr. Meyer is retiring from his position as an executive officer of the Company,
he is standing for re-election as a director and intends to continue to serve as
a director of the Company. In connection with his retirement, the Company
entered into a Mutual Release and Separation Agreement and a Retirement
Agreement with Mr. Meyer. Under the terms of the Company's Stock Incentive Plan,
by reason of his retirement, the vesting of Mr. Meyer's stock options will
accelerate. In recognition of Mr. Meyer's contributions to the Company during
the 22 years he served the Company, among the arrangements provided for in the
Retirement Agreement is the payment to Mr. Meyer following his retirement of
$73,374 as a prorated bonus for his services during a portion of 2000; the
continued payment of the whole-life portion of the premiums on his split-dollar
life insurance policy for so long as such premiums are due; and the
13
<PAGE>
forgiveness of a loan made by the Company in the amount of approximately
$91,000. In addition, certain option grants that have been made to Mr. Meyer and
that totaled 259,400 options in the aggregate were amended so that the terms of
such options would not expire until the end of the original grant terms.
Mr. Meyer also entered into a three year consulting agreement with the Company.
For a description of Mr. Meyer's consulting arrangement, see "Certain
Relationships and Related Transactions."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPOSITION OF COMPENSATION COMMITTEE. The Compensation Committee consists
of Lance R. Primis (Chair), Bruce A. Choate, Michael A. Futterman and Brenda J.
Mixson. The following is a summary of the compensation policies of the Company.
OBJECTIVES OF EXECUTIVE COMPENSATION. The Company's executive compensation
program is intended to attract, retain and reward experienced, highly motivated
executives who are capable of leading the Company effectively and contributing
to its long-term growth and profitability. The Company's objective is to utilize
a combination of cash and equity-based compensation to provide appropriate
incentives for executives while aligning their interests with those of the
Company's stockholders.
The Company compensates its executive officers through a combination of
annual base salary, annual cash bonuses and awards under the Stock Incentive
Plan. The Company's goal is to provide total compensation to its executive
officers that is competitive with those levels of total compensation paid in the
REIT industry for companies with similar property portfolios and of similar
size, makeup and performance. For purposes of evaluating relative executive
compensation amounts, the Compensation Committee reviewed the total compensation
paid by comparable REITs and other real estate companies that were selected
based primarily on financial performance, property type, market capitalization
and geographic market diversity.
The Company's compensation program has three principal elements: base
salary, a "corporate bonus program" under which an annual cash bonus is paid,
and a "long-term incentive goal program" under which stock options and
restricted stock are granted.
BASE SALARY. The Company establishes base salary levels for its key
executives after reviewing their duties, making a subjective evaluation of
recent performance, and after reviewing base salary levels for key executives of
comparable REITs.
CASH BONUS. Under the Company's corporate bonus program, the Compensation
Committee may award annual cash bonuses to executive officers and certain other
members of management for the achievement of specified performance goals for the
Company and the individual. Each year, the Compensation Committee sets for each
officer the maximum cash bonus that may be awarded that officer if maximum goals
are achieved. For bonuses in respect of 1999, the goals for determining the
percentage of such maximum cash bonus that were actually awarded were (i) the
achievement of a targeted level of Funds from Operations ("FFO") per share and
(ii) an evaluation of management performance, with the weighting between these
goals set in advance. For 2000, the goals will be (i) the achievement of a
targeted level of FFO per share, (ii) the achievement of a targeted level of
growth in same store net operating income, (iii) the achievement of a targeted
average fixed charge coverage ratio, and (iv) an evaluation of management
performance; the weightings applicable to each goal have been set in advance.
For the management performance factor in determining the cash bonus to be paid
to officers, the Committee will make a subjective evaluation of the performance
of management, as a whole, in accomplishing certain goals of the Company; in
making that subjective evaluation, the Committee will evaluate the yields on
development communities, the maintenance of construction and lease-up schedules,
the execution of capital markets transactions, the maintenance of balance sheet
strength and flexibility, the turnover of employees, and the control of general
overhead expenses.
14
<PAGE>
LONG-TERM INCENTIVE AWARDS. Stock options and restricted stock granted
under the Company's Stock Incentive Plan are designed to provide long-term
performance incentives and rewards tied to the price of the Company's Common
Stock. Generally, options will vest over a period of three years and restricted
shares will vest over a period of four years. Each year, the Compensation
Committee sets for each officer the maximum number of options and restricted
shares that may be granted that officer if maximum goals are achieved. The goals
for determining the percentage of such maximum number of options and shares that
were actually awarded in respect of 1999 included (i) total shareholder return
on the Company's Common Stock, (ii) growth in FFO per share, (iii) the multiple
that the price of the Company's Common Stock represents to the Company's FFO per
share; in each case, achievement of these goals was determined by measuring the
Company's performance against a peer group of apartment REITs. For 2000, the
goals will include (i) total shareholder return on Common Stock during 2000, and
(ii) the multiple that the price of the Company's Common Stock represents to the
Company's FFO per share, as measured against a peer group of apartment REITs. A
portion of an officer's long-term incentive awards are determined on a
discretionary basis. Each year, the weightings between each goal (including the
portion attributable to an evaluation of officer performance) is set in advance.
The Compensation Committee views stock options and restricted stock as a means
of aligning management and stockholder interests and expanding management's
long-term perspective. During 1999, the Committee decided that, for 2000,
restricted stock would be a larger part of the long-term incentive awards than
in 1999 and that options would be a smaller part; while both forms of awards are
important in attracting and retaining executives and both forms of awards will
continue to be major components of the Company's compensation arrangements, the
Committee believed that it was important to give more emphasis to restricted
shares than had been the case in 1999.
COMPENSATION COMMITTEE PROCEDURES. The Company's executive compensation
program is administered under the direction of the Company's Compensation
Committee, none of whom are employed by the Company. Final compensation
determinations for each fiscal year are generally made after the end of the
fiscal year after financial statements for such year become available. At that
time, cash bonuses and grants of stock options and restricted stock, if any, are
determined based on the past year's performance, and base salaries and maximum
cash bonuses and long term incentive awards for the following fiscal year are
set. At a meeting held on February 28, 2000, the Compensation Committee
determined annual cash bonuses under the corporate bonus program and awards of
stock options and restricted stock under the long-term incentive goal program
for its officers and certain key employees, as described in the Summary
Compensation Table included in this Proxy Statement. The Committee also set
financial targets to be used, along with areas for subjective evaluations of
management and individual performance, in determining 2000 bonuses.
COMPENSATION OF THE EXECUTIVE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER. The
Compensation Committee considers the Company's financial performance to be the
principal determinant in the overall compensation package of the Executive
Chairman and the Chief Executive Officer. In determining the cash bonuses and
long term incentive awards that should be provided these officers, the
Compensation Committee considers the same financial criteria that are used for
other officers. The Committee also considers individual performance of these
officers.
The annual base salary for each of Messrs. Meyer and Michaux for 1999 was
$380,000, and the Compensation Committee believes that this rate, when
considered together with their cash bonuses and long-term equity incentive
compensation, is consistent with the Company's performance and their
contributions to such performance and is in accord with industry practices.
Under their Employment Agreements, the base salary for each officer is reviewed
annually and may be increased but not decreased. Under the corporate bonus
program, the Compensation Committee approved a $243,200 cash bonus for each of
Messrs. Meyer and Michaux with respect to 1999. The Compensation Committee also
awarded each officer options to purchase 59,400 shares of Common Stock based
upon 1999 performance. These options will become exercisable in equal
installments over a three-year period at an exercise price of $33.75 per share,
the last reported sale price of the Common Stock on the
15
<PAGE>
NYSE on the date of grant, February 28, 2000. This grant of options is intended
to enhance each officer's long-term incentive to contribute to the Company's
success, and was made without regard for their current share ownership. Finally,
the Compensation Committee approved an award of 7,260 shares of restricted stock
to Mr. Meyer and 7,060 shares of restricted stock to Mr. Michaux based upon 1999
performance. One-fifth of these shares vested on February 28, 2000, and the
remaining shares vest in four equal annual installments. These cash bonuses and
long term incentive awards were made following a review by the Committee of the
financial performance of the Company and the individual performance of these
officers, as described above.
COMPENSATION OF OTHER EXECUTIVE OFFICERS. The Company's executive
compensation program for other executive officers is based on the same
performance goals and other factors described above for the Executive Chairman
and Chief Executive Officer. The quantitative performance goals and the relative
weighting of the quantitative performance factors described above is the same;
the factors used in making a subjective evaluation of officer performance
varies, however. The Compensation Committee considers the evaluations and
recommendations of the Executive Chairman and Chief Executive Officer with
respect to the other executive officers of the Company. In recognition of the
Company's achievements during 1999, the Compensation Committee approved the
Named Executive Officers' cash bonuses described in the Summary Compensation
Table for the Company's fiscal year 1999 pursuant to the corporate bonus
program.
For all of the Named Executive Officers, the Compensation Committee also
considers stock options and restricted stock grants to be an important component
of total compensation. As a result of such grants, the Named Executive Officers
will, like the Company's other stockholders, benefit from an appreciation in the
Company's Common Stock price. Based on 1999 performance, following the end of
1999 the Compensation Committee authorized the grant to Messrs. Blair, Slater
and Sargeant, of options to purchase 49,500, 46,200 and 39,600 shares of Common
Stock, respectively. All of these options become exercisable in three equal
annual installments at an exercise price of $33.75 per share, the last reported
sale price of the Common Stock on the NYSE on the date of grant, February 28,
2000. In addition, the Compensation Committee approved the grant to each of
Messrs. Blair, Slater and Sargeant of 5,690, 5,610, 4,190 shares of restricted
stock, respectively. In each case, one-fifth of the shares granted vested on
February 28, 2000, and the remaining four-fifths vest in four equal annual
installments.
The SEC requires that this report comment upon the Company's policy with
respect to Section 162(m) of the Code, which limits the deductibility on the
Company's tax return of compensation over $1 million to any of the Named
Executive Officers of the Company unless, in general, the compensation is paid
pursuant to a plan which is performance-related, non-discretionary and has been
approved by the Company's stockholders. The Company believes that, because it
qualifies as a REIT under the Code and because all distribution requirements
under the Code were satisfied, the Company is not subject to federal income
taxes, and the payment of compensation that does not satisfy the requirements of
Section 162(m) will not affect the Company's net income. To the extent that
compensation does not qualify for deduction under Section 162(m) a larger
portion of stockholder distributions may be subject to federal income taxation
as dividend income rather than return of capital. The Company does not believe
that Section 162(m) will materially affect the taxability of stockholder
distributions, although no assurance can be given in this regard due to the
variety of factors that affect the tax position of each stockholder. For these
reasons, the Compensation Committee's compensation policy and practices are not
directly guided by considerations relating to Section 162(m).
SUBMITTED BY THE COMPENSATION COMMITTEE:
Lance R. Primis (Chair)
Bruce A. Choate
Michael A. Futterman
Brenda J. Mixson
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<PAGE>
STOCK PERFORMANCE GRAPH
The following graph provides a comparison, from December 1994 through
December 1999, of the cumulative total stockholder return (assuming reinvestment
of any dividends) among the Company, the Standard & Poor's ("S&P") 500 Index,
and a peer group index composed of 22 publicly-traded apartment REITs, including
the Company (the "NAREIT Apartment Index"). The NAREIT Apartment Index includes
only REITs that invest directly or indirectly solely in the equity ownership of
multifamily residential apartment communities. Upon written request to the
Company's Secretary, the Company will provide any stockholder with a list of the
REITs included in the NAREIT Apartment Index.
<TABLE>
<CAPTION>
12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AvalonBay 100 98.75 127.58 140.55 201.29 211.80 228.05 227.21 213.93 238.26
Apartment REITs 100 100.34 112.26 119.13 144.75 153.73 167.96 164.36 153.22 173.81
S&P 500 100 120.15 137.43 151.30 168.98 203.81 225.37 265.30 289.78 325.64
<CAPTION>
12/99
--------
<S> <C>
AvalonBay 229.89
Apartment REITs 169.66
S&P 500 350.72
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AvalonBay 100 98.75 127.58 140.55 201.29 211.80 228.05 227.21 213.93 238.26 229.89
Apartment REITs 100 100.34 112.26 119.13 144.75 153.73 167.96 164.36 153.22 173.81 169.66
S&P 500 100 120.15 137.43 151.30 168.98 203.81 225.37 265.30 289.78 325.64 350.72
</TABLE>
The historical information set forth above is not necessarily indicative of
future performance. Data for the NAREIT Equity Index, the NAREIT Apartment Index
and the S&P 500 Index were provided to the Company by NAREIT.
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Lance R. Primis, Bruce A. Choate,
Michael A. Futterman and Brenda J. Mixson. None of them has served as an officer
of the Company or any of its subsidiaries. None of the members of the
Compensation Committee has any other business relationship or affiliation with
the Company or any of its subsidiaries (other than his or her service as a
director). For a discussion of an arrangement in which Mr. Futterman has an
indirect interest, see "Certain Relationships and Related Transactions."
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as to (i) each person or entity who is known by the Company to have
beneficially owned more than five percent of the Company's Common Stock as of
December 31, 1999, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, and (iv) all directors and executive officers as a group,
based on representations of officers and directors of the Company as of
February 10, 2000 (unless otherwise indicated) and filings through
February 2000 received by the Company on Schedule 13G under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All such information was
provided by the stockholders listed (unless otherwise indicated) and reflects
their beneficial ownership known by the Company. All percentages have been
calculated as of February 10, 2000 and are based upon 65,870,294 shares of
Common Stock outstanding at the close of business on such date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND BUSINESS OF COMMON STOCK PERCENT
ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS
--------------------------- ---------------------- --------
<S> <C> <C>
Gilbert M. Meyer......................................... 1,254,813(2) 1.9%
Richard L. Michaux....................................... 696,896(3) 1.1%
Bruce A. Choate.......................................... 32,500(4)(5) *
Michael A. Futterman..................................... 50,974(5)(6)(7) *
John J. Healy, Jr........................................ 31,000(8)(9) *
Richard W. Miller........................................ 21,139(5)(10) *
Brenda J. Mixson......................................... 37,000(4) *
Lance R. Primis.......................................... 12,000(11) *
Allan D. Schuster........................................ 56,876(7) *
Bryce Blair.............................................. 274,265(12) *
Thomas J. Sargeant....................................... 181,593(13) *
Robert H. Slater......................................... 291,026(12)(14) *
All directors and executive officers as a group (12
persons)............................................... 2,940,082(15) 4.4%
LaSalle Investment Management, Inc.
200 East Randolph Drive, Chicago, IL 60601............. 5,100,526(16) 7.7%
Cohen & Steers Capital Management, Inc.
757 Third Avenue, New York, NY 10017-2013.............. 5,863,400(17) 8.9%
</TABLE>
- ------------------------
* Less than one percent
(1) Except as otherwise noted, each individual in the table above has the sole
voting and investment power over the shares listed. Each individual
disclaims beneficial ownership as to any reported ownership by a spouse or
child.
(2) Includes 340,500 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000. Does not include 24,977 shares issuable
in the future under deferred stock awards granted to Mr. Meyer, pursuant to
elections made under the Stock Incentive Plan.
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<PAGE>
(3) Includes (i) 264,026 shares issuable upon the exercise of stock options
that vest on or April 10, 2000, (ii) 2,173 shares owned indirectly by
Mr. Michaux's spouse, and (iii) 52,244 shares owned indirectly by The
Michaux Family LLC.
(4) Includes 31,000 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000.
(5) Does not include 5,415 shares issuable in the future under a deferred stock
award granted pursuant to an election under the Stock Incentive Plan.
(6) Includes 7,683 shares held jointly with spouse.
(7) Includes 39,195 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000.
(8) Includes 25,000 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000.
(9) Does not include 2,090 shares issuable in the future under a deferred stock
award granted to the Nominee pursuant to an election under the Stock
Incentive Plan.
(10) Includes 17,683 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000.
(11) Does not include 2,217 shares issuable in the future under a deferred stock
award granted pursuant to an election under the Stock Incentive Plan.
(12) Includes 201,783 shares issuable upon the exercise of stock options that
vest on or before April 10, 2000.
(13) Includes (i) 147,682 shares issuable upon the exercise of stock options
that vest on or before April 10, 2000, (ii) 1,352 shares held by
Mr. Sargeant's spouse and (iii) 1,382 shares owned indirectly for minor
children.
(14) Includes 1,152 shares owned indirectly for minor children.
(15) Does not include the beneficial ownership of executive officers whose
employment with the Company terminated prior to the date of this Proxy
Statement.
(16) The information reported includes 4,017,182 shares beneficially owned by
LaSalle Investment Management (Securities), L.P. ("LaSalle Securities"), a
Maryland limited partnership, the limited partner of which is LaSalle
Investment Management, Inc. ("LaSalle"). Information reported is based upon
a Schedule 13G filed with the SEC on February 10, 2000 reporting beneficial
ownership as of December 31, 1999. The Schedule 13G indicates that the
reporting entities are investment advisers registered under Section 203 of
the Investment Advisers Act of 1940 and that they have different advisory
clients. The Schedule 13G also indicates that (i) LaSalle has sole
dispositive and sole voting power with respect to 174,062 shares, shared
dispositive power with respect to 909,282 shares and shared voting power
with respect to 295,858 shares, and (ii) LaSalle Securities has sole
dispositive power with respect to 252,392 shares, shared dispositive power
with respect to 3,764,790 shares, sole voting power with respect to 310,686
shares and shared voting power with respect to 3,550,507 shares.
(17) Information reported is based upon a Schedule 13G filed with the SEC on
February 10, 2000 reporting beneficial ownership as of December 31, 1999.
This Schedule 13G indicates that the reporting entity is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940. The Schedule 13G also indicates that the reporting entity has sole
dispositive power with respect to all of the shares and sole voting power
with respect to 5,015,800 of the shares. The reporting entity has no shared
dispositive or voting power with respect to the shares.
19
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires persons who are officers of the
Company as defined by Section 16 and directors and persons who own more than 10%
of a registered class of the Company's equity securities (collectively,
"Insiders") to file reports of ownership and changes in ownership with the SEC
and one national securities exchange on which such securities are registered. In
accordance with Rule 16a-3(c) under the Exchange Act, the Company has designated
the NYSE as the national securities exchange with which reports pursuant to
Section 16(a) of the Exchange Act need be filed. Insiders are required by the
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on a review of copies of
such reports and written representations that no other reports were required
during the fiscal year ended December 31, 1999, all filing requirements
applicable to the Insiders were timely satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS
PURCHASE OF MORTGAGE LOAN. Messrs. Michaux and Blair are partners of an
entity that is the general partner of Arbor Commons Associates Limited
Partnership ("Arbor Commons Associates"). Concurrently with Avalon Properties'
initial public offering in November 1993 (the "Avalon Properties Offering"),
Avalon Properties purchased an existing participating mortgage loan made to
Arbor Commons Associates that was originated by CIGNA Investments, Inc. The
mortgage loan is secured by the borrower's interests in the Avalon Arbor
community. Avalon Properties purchased the mortgage loan, rather than the Avalon
Arbor community, to avoid the current recapture of certain low income housing
tax credits by certain unaffiliated third party investors. This loan has an
outstanding principal amount of approximately $30 million and accrues interest
at a fixed rate of 10.2% per annum, payable at 9% per annum. Under the terms of
the loan, the Company (as successor to Avalon Properties) receives (as
contingent interest) 50% of the cash flow after the 10.2% accrual rate is paid
and 50% of the residual profits upon the sale of the community.
INDEBTEDNESS OF MANAGEMENT.
AVALON COMPANY LOAN PROGRAM. The Company has adopted a loan program under
which the Company lends amounts to or on behalf of employees ("Stock Loans")
equivalent to the employees' tax liabilities related to grants of restricted
stock to the employees under the Stock Incentive Plan (the "Grant Awards"). The
amount of each advance extended to an employee under a Stock Loan is determined
on the date or dates on which the Grant Award vests and equals the amount of the
tax liability related to the portion of the Grant Award then vesting, calculated
using the employee's actual blended state, local and federal tax rate up to a
maximum rate of 40% plus the tax liability related to the then current projected
annual dividend income generated by the Grant Award calculated at a 40% tax rate
(federal, state and local combined). Each employee who received such a Stock
Loan executes a promissory note (a "Note") payable to the Company.
Each Note bears interest at the Long Term Applicable Federal Rate (5.67% for
Stock Loans made in 1999) in effect on the date of the Note (the "Interest
Rate") and such rate is fixed until the fifth anniversary of the Note, on or
after which date the Note becomes immediately due and payable upon demand by the
Company (the "Maturity Date"). After the fifth anniversary of the Note and until
the Maturity Date, interest continues to accrue at either the Interest Rate or,
if the prevailing Short Term Applicable Federal Rate is greater or less than the
Interest Rate by an increment of 4.0%, then interest accrues at the prevailing
Short Term Applicable Federal Rate. Vested shares of the Grant Award serve as
collateral (the "Pledged Stock") for each Note until such time as the Note has
been paid in full. All dividends related to the employee's Grant Award
(including dividends on unvested shares) are applied to the outstanding Stock
Loan balance, first to interest, then to outstanding principal. If the market
20
<PAGE>
value of the Pledged Stock declines such that the Stock Loan exceeds 50% of the
value of the Pledged Stock (the "LTV ratio"), then the Company may require the
employee to make a cash payment sufficient to bring the LTV ratio below 50%, or
the Company may sell or otherwise dispose of the amount of Pledged Stock needed
to bring the LTV ratio below 50%. The Company's recourse against an employee
under the Notes for satisfaction of the Stock Loans and all other amounts due is
limited to the Company's rights in the Pledged Stock.
As of December 31, 1999, the Company had extended Stock Loans totaling
$723,265 to its employees, including the amounts of $90,746, $210,877, $98,629,
$68,435 which were extended to Messrs. Meyer, Michaux, Blair and Sargeant,
respectively.
ARRANGEMENT REGARDING COMMISSION PAYABLE BY A THIRD PARTY.
In 1998, American Realty Capital Inc., a closely held real estate company of
which Michael A. Futterman, a director of the Company, is the Chairman, became
aware that a parcel of land was available for sale in Stamford, Connecticut.
Mr. Futterman informed the President of Avalon Properties that the site was
available and introduced representatives of Avalon Properties to the person
holding a purchase right to the site (the "Site Contract Owner"). After review,
Avalon Properties decided that it was not interested at that time in pursuing
the acquisition of the site. After Avalon Properties determined that it would
not pursue the site, American Realty Capital Inc. entered into an agreement with
the Site Contract Owner that provided that, if American Realty successfully
acted as agent in locating a buyer for the site, American Realty would earn a
commission. After the Merger, AvalonBay determined that, due to changed
circumstances, the site could fit well with the Company's development strategy,
and the Company has negotiated a purchase agreement with the Site Contract
Owner. Pursuant to American Realty's agreement with the Site Contract Owner, if
the Company's purchase agreement closes then American Realty will earn a
commission of $250,000. Mr. Futterman is a member of the Board's Compensation
Committee; as a result of this transaction, if the Board desires to implement an
exemption from the operation of Section 16 of the Exchange Act for grants of
stock and options to executive officers of the Company by way of having such
grants approved by a committee of "non-employee directors" (as defined in
Rule 16b-3 under the Exchange Act) then in such case Mr. Futterman will abstain
during 2000 on votes relating to grants of options and shares to executive
officers.
CONSULTING AND NONCOMPETITION ARRANGEMENT WITH MR. MEYER.
In March 2000, the Company and Mr. Meyer announced that Mr. Meyer would
retire as Executive Chairman of the Company following the 2000 Annual Meeting.
Although Mr. Meyer will cease his day to day involvement with the Company as an
executive officer, Mr. Meyer is standing for re-election as a director and
intends to continue to serve as a director following the 2000 Annual Meeting. In
addition, pursuant to a consulting agreement Mr. Meyer has agreed that he will
serve as a consultant to the Company for three years following his retirement.
In such capacity he will assist with respect to transitional matters that may
arise in connection with his retirement, he will respond to requests for
assistance or information concerning business matters with which he became
familiar while employed, and he will provide business advice and counsel to the
Company with respect to business strategies and acquisitions, dispositions,
development and redevelopment of multifamily rental properties. In addition,
Mr. Meyer has agreed that during the three year consulting period he will not
participate, as an officer, employee, consultant or in any other manner, in the
affairs of a publicly-traded real estate investment trust or publicly-traded
real estate company that, in either case, is primarily or significantly involved
in the ownership, operation, management or rental of multifamily apartment
homes. During the three year consulting and noncompetition arrangement, the
Company will pay to Mr. Meyer an annual fee of $1,395,000. In addition, in
recognition of extra efforts that will be needed during the first four calendar
quarters of his retirement on account of transitional matters, the Company will
grant to Mr. Meyer an
21
<PAGE>
additional 5,880 shares of Common Stock per calendar quarter. In addition to the
consulting agreement, in connection with Mr. Meyer's retirement the Company also
entered into a Mutual Release and Separation Agreement and a Retirement
Agreement (see "Employment Agreements and Severance Arrangements"). Pursuant to
the Retirement Agreement, additional noncompetition arrangements of a more
restrictive nature than described above will apply for so long as Mr. Meyer
serves as a director of the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
On November 11, 1998, PricewaterhouseCoopers LLP was dismissed and Arthur
Andersen LLP was engaged as the principal independent public accountant for the
Company. The decision to change accountants was unanimously approved by the
Company's Board of Directors.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Company for the years ended December 31, 1996 and 1997 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope, or accounting principles. During the Company's
fiscal years ended December 31, 1996 and 1997, and the subsequent interim period
through November 11, 1998, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused them to make reference thereto in their reports on the
financial statements for such years.
During the Company's fiscal years ended December 31, 1996 and 1997, and the
subsequent interim period through November 11, 1998, Arthur Andersen LLP was not
engaged as an independent accountant to audit either the Company's financial
statements or the financial statements of any of its subsidiaries, nor was it
consulted regarding the application of the Company's accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so. They are also expected to be available to respond to appropriate
questions. Representatives of PricewaterhouseCoopers LLP are not expected to be
present at the Annual Meeting.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETINGS
Stockholder proposals (including director nominations) submitted pursuant to
Exchange Act Rule 14a-8 for inclusion in the Company's proxy statement and form
of proxy for the 2001 Annual Meeting of Stockholders must be received by the
Company by December 11, 2000. Such a proposal must also comply with the
requirements as to form and substance established by the SEC for such a proposal
to be included in the proxy statement and form of proxy.
22
<PAGE>
For a proposal of a stockholder (including director nominations) to be
presented at the Company's 2001 Annual Meeting of Stockholders, other than a
stockholder proposal submitted pursuant to Rule 14a-8 of the Exchange Act, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company, together with all supporting
documentation required by the Company's Bylaws, (A) not prior to November 11,
2000 nor later than February 24, 2001 or (B) in the event that the 2000 Annual
Meeting of Stockholders is called for a date prior to May 3, 2001, not later
than the close of business on (1) the twentieth (20th) calendar day (or if that
day is not a business day for the Company, on the next succeeding business day)
following the earlier of (x) the date on which notice of the date of such
meeting was mailed to stockholders, or (y) the date on which the date of such
meeting was publicly disclosed, or (2) if such date of notice or public
disclosure occurs more than seventy-five (75) calendar days prior to the
scheduled date of such meeting, then the later of (x) the twentieth (20th)
calendar day (or if that day is not a business day for the Company, on the next
succeeding business day) following the date of the first to occur of such notice
or public disclosure or (y) the seventy-fifth (75th) calendar day prior to such
scheduled date of such meeting (or if that day is not a business day for the
Company, on the next succeeding business day).
Any such proposals should be mailed to: AvalonBay Communities, Inc., 2900
Eisenhower Avenue, Suite 300, Alexandria, Virginia 22314, Attention: Secretary.
OTHER MATTERS TO BE PRESENTED
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
23
<PAGE>
FOLD AND DETACH HERE
- -------------------------------------------------------------------------------
PROXY FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS OF
AVALONBAY COMMUNITIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of AvalonBay Communities, Inc. (the
"Company") hereby appoints Messrs. Richard L. Michaux and Thomas J. Sargeant,
and each of them singly, as proxies, each with full power of substitution,
for and in the name of the undersigned at the 2000 Annual Meeting of
Stockholders of the Company to be held at The Plaza Hotel, Fifth Avenue and
Central Park South, New York, NY 10019 on May 10, 2000 at 9:30 a.m. local
time, and at any and all adjournments thereof, to vote all shares of common
stock of the Company held of record by the undersigned on March 20, 2000, as
if the undersigned were present and voting the shares.
/X/ PLEASE MARK VOTE AS IN THIS EXAMPLE.
1. To elect eight directors to hold office until the 2001 Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
NOMINEES: Gilbert M. Meyer, Richard L. Michaux, Bruce A. Choate, Michael A.
Futterman, John J. Healy, Jr., Brenda J. Mixson, Lance R. Primis
and Allan D. Schuster
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed above (except as indicated to vote for the nominees
to the contrary). listed above.
(INSTRUCTIONS: To withhold authority to vote for any nominee, write the
nominee's name on the space provided below.)
- -------------------------------------------------------------------------------
2. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
FOLD AND DETACH HERE
- -------------------------------------------------------------------------------
(continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IN
THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED FOR EACH NOMINEE NAMED
IN PROPOSAL 1, AND IN ACCORDANCE WITH THE PROXIES' DISCRETION ON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW:
Date:___________________________, 2000
______________________________________
Signature
______________________________________
Signature if held jointly
NOTE: (Please date this Proxy and sign
exactly as your name appears hereon.
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If there
is more than one trustee, all should
sign. All joint owners should sign.)
