8-KLeadership ChangesExhibits & Filings

AVALONBAY COMMUNITIES INC 8-K Report, Executive Changes (May 22, 2008)

Filed May 22, 2008For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) filed an 8-K on May 22, 2008, to announce the implementation of its 2008 Performance Plan, effective June 1, 2008. This multiyear plan is designed to incentivize senior management and other selected officers through Deferred Stock Awards. The awards are contingent upon the company achieving specific total shareholder return (TRS) targets over a three-year performance period ending May 31, 2011. These targets include both an absolute TRS hurdle of 32% and outperforming the FTSE NAREIT Apartment Index. The payout structure is tied to a "Total Funding Pool," which is capped at $60 million. If performance targets are met, a portion of the earned awards will convert into unrestricted common stock, with the remainder subject to a one-year vesting period. The plan includes provisions for forfeiture or accelerated vesting based on employment termination scenarios (including death, disability, retirement, termination without cause, termination for cause, or voluntary resignation) and change of control events. Key executives have been allocated specific "Participation Percentages" of the potential funding pool.

Key Highlights

  • 1Introduction of the 2008 Performance Plan, effective June 1, 2008, for senior management and selected officers.
  • 2Awards are in the form of Deferred Stock Awards, contingent on achieving multi-year total shareholder return (TRS) targets.
  • 3Performance measurement period is three years, from June 1, 2008, to May 31, 2011.
  • 4Key performance hurdles include an Absolute TRS Target of 32% and outperformance relative to the FTSE NAREIT Apartment Index.
  • 5A "Total Funding Pool," capped at $60 million, determines award payouts based on achieved TRS.
  • 6Earned awards will convert into 50% unrestricted stock and 50% restricted stock with a one-year vesting period.
  • 7Specific provisions for forfeiture, pro-rata vesting, and accelerated vesting are outlined for various employment termination and change of control events.

Frequently Asked Questions

The primary purpose of the 2008 Performance Plan is to incentivize senior management and selected officers of AvalonBay Communities, Inc. by tying a significant portion of their compensation to the company's long-term total shareholder return (TRS) performance over a three-year period, relative to both absolute targets and a relevant industry benchmark.

To earn awards, the company must achieve an Absolute TRS Target of at least 32% and outperform the total shareholder return of the FTSE NAREIT Apartment Index over the three-year performance period. If both conditions are met, a "Total Funding Pool" is calculated, from which individual awards are determined based on each participant's "Participation Percentage."

In the event of a change in control, the performance period ends immediately, and any earned awards become fully vested. For terminations, awards are generally forfeited during the initial periods of the performance measurement. However, if termination occurs after a specified period due to death, disability, retirement, or without cause, participants may receive a pro-rated vested award at the end of the performance period. Termination for cause or voluntary resignation can lead to forfeiture of unvested restricted stock.

The "Total Funding Pool" is calculated based on exceeding performance targets but is capped at a maximum of $60 million, regardless of how much shareholder value is created beyond the target thresholds.