Summary
This 8-K filing by AvalonBay Communities, Inc. (AVB) on December 21, 2011, primarily details changes to executive employment agreements, effective January 1, 2012, following the retirement of CEO Bryce Blair. Timothy J. Naughton will assume the CEO role in addition to his current President title, while Mr. Blair will transition to Chairman of the Board. The company is phasing out individual employment agreements for its top executives, replacing existing agreements with new ones for Messrs. Naughton, Sargeant (CFO), and Horey (EVP-Operations).
Key Highlights
- 1Effective January 1, 2012, Timothy J. Naughton will become CEO, succeeding Bryce Blair, who will remain Chairman.
- 2AvalonBay is transitioning away from individual executive employment agreements, replacing prior agreements with new ones for Messrs. Naughton, Sargeant, and Horey.
- 3New employment agreements for Messrs. Naughton, Sargeant, and Horey have a fixed term ending December 31, 2015, replacing evergreen provisions in their prior agreements.
- 4Severance multiples in the new agreements are generally lower than previously, particularly in cases of termination without cause, and specific triggers for severance have been reduced (e.g., no severance for death, disability, or non-renewal).
- 5Messrs. Sargeant and Horey will receive one-time restricted stock awards as consideration for relinquishing benefits under their prior agreements and facilitating the CEO transition.
- 6Certain perquisites previously provided under the old agreements, such as an annual allowance, have been eliminated in the new agreements.
- 7The new agreements eliminate 'golden parachute' tax gross-up provisions for severance payments.
Frequently Asked Questions
The primary purpose of this filing is to announce changes in executive leadership and to detail the terms of new employment agreements for key officers, Timothy J. Naughton, Thomas J. Sargeant, and Leo S. Horey, which replace their previous agreements.
Bryce Blair is retiring as CEO at the end of 2011 but will remain as Chairman of the Board, providing continuity. Timothy J. Naughton, currently President, will assume the CEO role. This leadership transition is accompanied by updated executive compensation structures, which may signal a move towards more standardized executive terms.
The new agreements have fixed terms (expiring Dec 31, 2015), unlike the prior evergreen provisions. Severance benefits have been modified, generally reduced in multiples and scope, with no severance for death, disability, or non-renewal. Perquisites and 'golden parachute' tax gross-ups have also been eliminated.
Messrs. Sargeant and Horey are receiving one-time restricted stock awards (valued at $1 million and $300,000 respectively) as a form of compensation for agreeing to the new employment terms, which involve relinquishing certain benefits and protections from their prior agreements, and to help ensure a smooth CEO transition.