8-KLeadership ChangesExhibits & Filings

AVALONBAY COMMUNITIES INC 8-K Report, Executive Changes (Nov 15, 2011)

Filed November 15, 2011For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) filed an 8-K on November 15, 2011, primarily detailing changes to its executive compensation and severance policies. The company announced a leadership transition where Timothy J. Naughton will assume the CEO role from Bryce Blair on January 1, 2012, with Mr. Blair remaining as Chairman. In anticipation of this transition and a broader strategy to phase out individual employment agreements, the Board of Directors amended and restated the Officer Severance Plan. The revised plan enhances severance benefits for officers in the event of termination without cause or departure for good reason in connection with a "Sale Event," including increased multiples of covered compensation and the inclusion of prorated long-term equity incentives.

Key Highlights

  • 1Leadership transition: Timothy J. Naughton to become CEO effective January 1, 2012, succeeding Bryce Blair, who will remain as Chairman.
  • 2Amendment to Officer Severance Plan: Changes made to provide enhanced severance packages for officers.
  • 3Increased severance multiples: Severance for CEO increased to 3x Covered Compensation, EVPs/CFOs to 2x, and VPs to 1x (previously all were 1x).
  • 4Inclusion of prorated LTI in severance: Severance now includes a prorated portion of the target long-term equity incentive award.
  • 5Extended COBRA coverage: Payment for COBRA continuation benefits increased to up to 18 months.
  • 6Revised 'Sale Event' timeline: Termination window for severance related to a sale event adjusted to 6 months prior and 18 months following the event.
  • 7CEO compensation adjustment: Timothy J. Naughton's target compensation for 2012 increased to $4.0 million, reflecting his new CEO role.

Frequently Asked Questions

The primary purpose of this filing is to inform investors about significant changes in executive leadership and compensation, specifically the amendment and restatement of the Officer Severance Plan and an adjustment to the new CEO's compensation package.

The amended plan increases the severance multiple of 'Covered Compensation' for the CEO (3x), Executive Vice Presidents/CFO (2x), and Vice Presidents (1x). It also now includes a prorated portion of the target long-term equity incentive award and extends COBRA coverage for up to 18 months, offering a more robust severance package, particularly in the context of a 'Sale Event'.

A 'Sale Event' is defined as the sale of substantially all of the company's assets or stock. The timeline for a termination to be considered 'in connection with a Sale Event' has been adjusted to the six months prior to and 18 months following the event, a reduction from the previous 24-month post-event window.

Effective January 1, 2012, upon becoming CEO, Timothy J. Naughton's target compensation will increase from $3.0 million to $4.0 million. This includes an increase in base salary to $800,000, target bonus to $1,000,000, and target long-term incentives to $2,200,000.