Sample Business Contracts


Employment Agreement - Bay Apartment Communities Inc. and Robert H. Slater

Employment Forms

  • Employers can customize an employment agreement that states the salary, benefits, working hours and other important provisions for their new or existing employee.
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  • Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
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                              EMPLOYMENT AGREEMENT

      EMPLOYMENT AGREEMENT (this "Agreement") made as of the 9th day of March,
1998 by and between Robert H. Slater ("Executive") and Bay Apartment
Communities, Inc., a Maryland corporation (the "Company").

      WHEREAS, Executive and Avalon Properties, Inc. ("Avalon") have previously
entered into an Employment Agreement, dated as of July 17, 1997 (the "Prior
Agreement"); and

      WHEREAS, pursuant to the Agreement and Plan of Merger, by and between the
Company and Avalon, dated as of March 9, 1998 (the "Merger Agreement"), Avalon
will merge into the Company (the "Merger"); and

      WHEREAS, Executive and the Company desire to enter into a new employment
agreement, effective as of the consummation of the merger contemplated by the
Merger Agreement (the "Effective Date"), to replace the Prior Agreement.

      NOW, THEREFORE, the parties hereto do hereby agree as follows.

1.    Term. Subject to the consummation of the merger contemplated by the Merger
      Agreement, the Company hereby agrees to employ Executive, and Executive
      hereby agrees to remain in the employ of the Company subject to the terms
      and conditions of this Agreement for the period commencing on the
      Effective Date and terminating on the third anniversary of the Effective
      Date (the "Original Term"), unless earlier terminated as provided in
      Section 7. The Original Term shall be extended automatically for
      additional 1 year periods (each a "Renewal Term"), unless notice that this
      Agreement will not be extended is given by either party to the other 6
      months prior to the expiration of the Original Term or any Renewal Term.
      Notwithstanding the foregoing, upon a Change in Control, the Employment
      Period shall be extended automatically to 3 years from the date of such
      Change in Control. (The period of Executive's employment hereunder within
      the Original Term and any Renewal Terms is herein referred to as the
      "Employment Period.")

2.    Employment Duties.

      a.    During the Employment Period, Executive shall be employed in the
            business of the Company and its affiliates. Executive shall serve as
            a corporate officer of the Company with the title of Senior Vice
            President-Property Operations. Executive's duties and authority
            shall be commensurate with his title and position with the Company,
            and shall not be materially diminished from, or materially
            inconsistent with, his primary duties and authority with Avalon
            immediately prior to the date of this Agreement.

<PAGE>   2

      Executive agrees to his employment as described in this Section 2 and
agrees to devote substantially all of his working time and efforts to the
performance of his duties under this Agreement; provided that nothing herein
shall be interpreted to preclude Executive from (i) participating with the prior
written consent of the Board of Directors as an officer or director of, or
advisor to, any other entity or organization that is not a customer or material
service provider to the Company or a Competing Enterprise, as defined in Section
8, so long as such participation does not interfere with the performance of
Executive's duties hereunder, whether or not such entity or organization is
engaged in religious, charitable or other community or non-profit activities,
(ii) investing in any entity or organization which is not a customer or material
service provider to the Company or a Competing Enterprise, so long as such
investment does not interfere with the performance of Executive's duties
hereunder, or (iii) delivering lectures or fulfilling speaking engagements so
long as such lectures or engagements do not interfere with the performance of
Executive's duties hereunder. The Company consents to Executive's status as a
"former partner" with a current financial interest in certain Midwest projects
of Trammell Crow Residential ("TCR"), and such activity shall not be treated as
a Competing Enterprise.

      b.    In performing his duties hereunder, Executive shall be available for
            reasonable travel as the needs of the business require. Executive
            shall be based in Alexandria, VA or otherwise in the greater
            Washington, D.C. metropolitan area.

      c.    Breach by either party of any of its respective obligations under
            this Section 2 shall be deemed a material breach of that party's
            obligations hereunder.

3.    Compensation/Benefits. In consideration of Executive's services hereunder,
      the Company shall provide Executive the following:

      a.    Base Salary. During the Employment Period, the Executive shall
            receive an annual rate of base salary ("Base Salary") in an amount
            not less than $300,000. Executive's Base Salary will be reviewed by
            the Company as of the first anniversary of the Effective Date, and
            may be adjusted upward (but not downward) at such time to reflect
            any inequities in compensation. Commencing as of January 1, 2000,
            Executive's Base Salary shall be reviewed no less frequently than
            annually by the Company and may be adjusted upward (but not
            downward) by the Company. Upon such annual review during the Renewal
            Term, if any, Executive's Base Salary shall be increased to the
            greatest of (i) an amount equal to Base Salary for the prior year
            plus 5%, (ii) a factor measured by the increase, if any, in the
            Consumer Price Index for Wage Earners and Clerical Workers (CPI-W)
            (City Average for Washington, D.C.-MD-VA 1982-84=100), as published
            by the Bureau of Labor Statistics, for the prior calendar year (the
            "CPI Adjustment") or (iii) such greater amount as may be agreed by
            Executive and the Company. Base Salary shall be payable in
            accordance with the Company's normal business practices, but in no
            event less frequently than monthly.

<PAGE>   3

      b.    Bonuses. Commencing at the close of each fiscal year during the
            Employment Period, the Company shall review the performance of the
            Company and of Executive during the prior fiscal year, and the
            Company may provide Executive with additional compensation as a
            bonus if the Board, or any compensation committee hereof, in its
            discretion, determines that Executive's contribution to the Company
            warrants such additional payment and the Company's anticipated
            financial performance of the present period permits such payment.
            The bonuses hereunder shall be paid as a lump sum not later than 60
            days after the end of the Company's preceding fiscal year.

      c.    Medical Insurance/Physical. During the Employment Period, the
            Company shall provide to Executive and Executive's immediate family
            a comprehensive policy of health insurance. During the Employment
            Period, Executive shall be entitled to a comprehensive annual
            physical performed, at the expense of the Company by the physician
            or medical group of Executive's choosing.

      d.    Life Insurance/Disability Insurance. During the Employment Period,
            the Company shall keep in force and pay the premiums on the
            split-dollar life insurance policy referenced in the Split Dollar
            Insurance Agreement between Avalon and Executive, subject to
            reimbursement by Executive as provided in such Split Dollar
            Insurance Agreement. The Company shall reimburse Executive for the
            cost of the comprehensive disability insurance policy, which is in
            effect on January 1, 1997, and shall also be responsible for any
            increases in premiums which become effective during the Employment
            Period as may be necessary to maintain the same level of insurance
            as in effect on January 1, 1997. Executive agrees to submit to such
            medical examinations as may be required in order to maintain such
            policies of insurance.

      e.    Vacations. Executive shall be entitled to reasonable paid vacations
            during the Employment Period in accordance with the then regular
            procedures of the Company governing executives, not to exceed 6
            weeks per annum, in the aggregate.

      f.    Office/Secretary, etc. During the Employment Period, Executive shall
            be entitled to secretarial services and a private office
            commensurate with his title and duties.

      g.    Avalon Stock Option. The Company acknowledges that, notwithstanding
            the consummation of the Merger, Avalon granted to Executive on March
            8, 1998, a non-qualified employee stock option to purchase 104,126
            shares of common stock of Avalon, par value $.01 per share (the
            "Avalon Stock Option"). The Avalon Stock Option was granted at an
            exercise price equal to $28.8125. Upon termination of Executive's
            employment, vesting and exercisability of the Avalon

<PAGE>   4

            Stock Option shall be governed by the terms of the stock option
            agreement and this Agreement, as applicable. During the Employment
            Period, Executive shall be eligible for future employee stock option
            grants on the same basis as other senior management of the Company.

      h.    Automobile. The Company shall provide Executive with a monthly car
            allowance during the Employment Period of not less than $750 per
            month (adjusted annually for inflation by the CPI Adjustment);
            provided that, at Executive's election, the Company may instead
            purchase or lease, and maintain insurance for, an automobile of
            comparable value for use by Executive, who shall be responsible for
            maintaining such automobile, at his own expense, with the same
            standard of care Executive applies to his own property and as may be
            required under any applicable lease agreement.

      i.    Other Benefits. During the Employment Period, the Company shall
            provide to Executive such other benefits, excluding severance
            benefits, but including the right to participate in such retirement
            or pension plans, as are made generally available to executives of
            the Company from time to time, and shall be given credit for
            purposes of eligibility and vesting of employee benefits and benefit
            accrual for service with Avalon, its affiliates and TCR prior to the
            Effective Date under each benefit plan of the Company and its
            subsidiaries to the extent such service had been credited under
            employee benefit plans of Avalon and its subsidiaries, provided that
            no such crediting of service results in duplication of benefits.

4.    Expenses/Indemnification.

      a.    During the Employment Period, the Company shall reimburse Executive
            for the reasonable business expenses incurred by Executive in the
            course of performing his duties for the Company hereunder, upon
            submission of invoices, vouchers or other appropriate documentation,
            as may be required in accordance with the policies in effect from
            time to time for executive employees of the Company.

      b.    To the fullest extent permitted by law, the Company shall indemnify
            Executive with respect to any actions commenced against Executive in
            his capacity as an officer or director or former officer or director
            of the Company, or any affiliate thereof for which he may render
            service in such capacity, whether by or on behalf of the Company,
            its shareholders or third parties, and the Company shall advance to
            Executive on a timely basis an amount equal to the reasonable fees
            and expenses incurred in defending such actions, after receipt of an
            itemized request for such advance, and an undertaking from Executive
            to repay the amount of such advance, with interest at a reasonable
            rate from the date of the request, as

<PAGE>   5

            determined by the Company, if it shall ultimately be determined that
            he is not entitled to be indemnified against such expenses. The
            Company agrees to use its best efforts to secure and maintain
            officers and directors' liability insurance with respect to
            Executive.

5.    Employer's Authority/Policies.

      a.    General. Executive agrees to observe and comply with the rules and
            regulations of the Company as adopted by its Board respecting the
            performance of his duties and to carry out and perform orders,
            directions and policies communicated to him from time to time by the
            Board.

      b.    Ethics Policies. Executive agrees to comply with and be bound by the
            Ethics Policies of the Company, as reflected in the attachment at
            Annex A hereto and made a part hereof.

6.    Records/Nondisclosure/Company Policies.

      a.    General. All records, financial statements and similar documents
            obtained, reviewed or compiled by Executive in the course of the
            performance by him of services for the Company, whether or not
            confidential information or trade secrets, shall be the exclusive
            property of the Company. Executive shall have no rights in such
            documents upon any termination of this Agreement.

      b.    Nondisclosure Agreement. Without limitation of the Company's rights
            under Section 6(a), Executive agrees to abide by and be bound by the
            Nondisclosure Agreement of the Company executed by Executive and the
            Company as reflected in the attachment at Annex B and made a part
            hereof.

7.    Termination; Severance and Related Matters.

      a.    At-Will Employment. Executive's employment hereunder is "at will"
            and, therefore, may be terminated at any time, with or without
            Cause, at the option of the Company, subject only to the severance
            obligations under this Section 7. Upon any termination hereunder,
            the Employment Period shall expire.

      b.    Definitions. For purposes of this Section 7, the following terms
            shall have the indicated definitions:

            i.     Cause.  "Cause" shall mean:

                   (1)  Executive is convicted of or enters a plea of nolo
                        contendere to an

<PAGE>   6

                        act which is defined as a felony under any federal,
                        state or local law, not based upon a traffic violation,
                        which conviction or plea has or can be expected to have,
                        in the good faith opinion of the Board of Directors, a
                        material adverse impact on the business or reputation of
                        the Company;

                   (2)  any one or more acts of theft, larceny, embezzlement,
                        fraud or material intentional misappropriation from or
                        with respect to the Company;

                   (3)  a breach by Executive of his fiduciary duties under
                        Maryland law as an officer;

                   (4)  Executive's commission of any one or more acts of gross
                        negligence or willful misconduct which in the good faith
                        opinion of the Board of Directors has resulted in
                        material harm to the business or reputation of the
                        Company; or

                   (5)  default by Executive in the performance of his material
                        duties under this Agreement, without correction of such
                        action within 15 days of written notice thereof.

      Notwithstanding the foregoing, no termination of Executive's employment by
the Company shall be treated as for Cause or be effective until and unless all
of the steps described in subparagraphs (i) through (iii) below have been
complied with:

i.Notice of intention to terminate for Cause has been given by the Company
within 120 days after the Board of Directors learns of the act, failure or event
(or latest in a series of acts, failures or events) constituting "Cause";

ii.The Board of Directors has voted (at a meeting of the Board of Directors duly
called and held as to which termination of Executive is an agenda item) to
terminate Executive for Cause after Executive has been given notice of the
particular acts or circumstances which are the basis for the termination for
Cause and has been afforded at least 20 days notice after the meeting and an
opportunity to present his position in writing; and

iii.The Board of Directors has given a Notice of Termination to Executive within
20 days of such Board meeting.

      The Company may suspend Executive with pay at any time during the period
commencing with the giving of notice to Executive under clause (i) above until
final Notice of Termination is given under clause (iii) above. Upon the giving
of notice as provided in clause

<PAGE>   7

(iii) above, no further payments shall be due Executive.

            ii.    Change in Control. A "Change in Control" shall mean the
                   occurrence of any one or more of the following events
                   following the Effective Date:

                   (1)  Any individual, entity or group (a "Person") within
                        the meaning of Sections 13(d) and 14(d) of the
                        Securities Exchange Act of 1934 (the "Act") (other than
                        the Company, any corporation, partnership, trust or
                        other entity controlled by the Company (a
                        "Subsidiary"), or any trustee, fiduciary or other
                        person or entity holding securities under any employee
                        benefit plan or trust of the Company or any of its
                        Subsidiaries), together with all "affiliates" and
                        "associates" (as such terms are defined in Rule 12b-2
                        under the Act) of such Person, shall become the
                        "beneficial owner" (as such term is defined in Rule
                        13d-3 under the Act) of securities of the Company
                        representing 30% or more of the combined voting power
                        of the Company's then outstanding securities having the
                        right to vote generally in an election of the Company's
                        Board of Directors ("Voting Securities"), other than as
                        a result of (A) an acquisition of securities directly
                        from the Company or any Subsidiary or (B) an
                        acquisition by any corporation pursuant to a
                        reorganization, consolidation or merger if, following
                        such reorganization, consolidation or merger the
                        conditions described in clauses (A), (B) and (C) of
                        subparagraph (iii) of this Section 7(b)(2) are
                        satisfied; or
                         
                   (2)  Individuals who, as of the Effective Date, constitute
                        the Company's Board of Directors (the "Incumbent
                        Directors") cease for any reason to constitute at least
                        a majority of the Board, provided, however, that any
                        individual becoming a director of the Company
                        subsequent to the date hereof (excluding, for this
                        purpose, (A) any such individual whose initial
                        assumption of office is in connection with an actual or
                        threatened election contest relating to the election of
                        members of the Board of Directors or other actual or
                        threatened solicitation of proxies or consents by or on
                        behalf of a Person other than the Board of Directors,
                        including by reason of agreement intended to avoid or
                        settle any such actual or threatened contest or
                        solicitation, and (B) any individual whose initial
                        assumption of office is in connection with a
                        reorganization, merger or consolidation, involving an
                        unrelated entity and occurring during the Employment
                        Period), whose election or nomination for election by
                        the Company's shareholders was
                         
<PAGE>   8

                        approved by a vote of at least a majority of the persons
                        then comprising Incumbent Directors shall for purposes
                        of this Agreement be considered an Incumbent Director;
                        or
                  
                   (3)  Consummation of a reorganization, merger or
                        consolidation of the Company, unless, following such
                        reorganization, merger or consolidation, (A) more than
                        50% of, respectively, the then outstanding shares of
                        common stock of the corporation resulting from such
                        reorganization, merger or consolidation and the
                        combined voting power of the then outstanding voting
                        securities of such corporation entitled to vote
                        generally in the election of directors is then
                        beneficially owned, directly or indirectly, by all or
                        substantially all of the individuals and entities who
                        were the beneficial owners, respectively, of the
                        outstanding Voting Securities immediately prior to such
                        reorganization, merger or consolidation, (B) no Person
                        (excluding the Company, any employee benefit plan (or
                        related trust) of the Company, a Subsidiary or the
                        corporation resulting from such reorganization, merger
                        or consolidation or any subsidiary thereof, and any
                        Person beneficially owning, immediately prior to such
                        reorganization, merger or consolidation, directly or
                        indirectly, 30% or more of the outstanding Voting
                        Securities), beneficially owns, directly or indirectly,
                        30% or more of, respectively, the then outstanding
                        shares of common stock of the corporation resulting
                        from such reorganization, merger or consolidation or
                        the combined voting power of the then outstanding
                        voting securities of such corporation entitled to vote
                        generally in the election of directors, and (C) at
                        least a majority of the members of the board of
                        directors of the corporation resulting from such
                        reorganization, merger or consolidation were members of
                        the Incumbent Board at the time of the execution of the
                        initial agreement providing for such reorganization,
                        merger or consolidation;
                         
                   (4)  Approval by the shareholders of the Company of a
                        complete liquidation or dissolution of the Company; or
                         
                   (5)  The sale, lease, exchange or other disposition of all
                        or substantially all of the assets of the Company,
                        other than to a corporation, with respect to which
                        following such sale, lease, exchange or other
                        disposition (A) more than 50% of, respectively, the
                        then outstanding shares of common stock of such
                        corporation and the combined voting power of the then
                        outstanding voting securities of
                         
<PAGE>   9

                        such corporation entitled to vote generally in the
                        election of directors is then beneficially owned,
                        directly or indirectly, by all or substantially all of
                        the individuals and entities who were the beneficial
                        owners of the outstanding Voting Securities immediately
                        prior to such sale, lease, exchange or other
                        disposition, (B) no Person (excluding the Company and
                        any employee benefit plan (or related trust) of the
                        Company or a Subsidiary or such corporation or a
                        subsidiary thereof and any Person beneficially owning,
                        immediately prior to such sale, lease, exchange or
                        other disposition, directly or indirectly, 30% or more
                        of the outstanding Voting Securities), beneficially
                        owns, directly or indirectly, 30% or more of,
                        respectively, the then outstanding shares of common
                        stock of such corporation and the combined voting power
                        of the then outstanding voting securities of such
                        corporation entitled to vote generally in the election
                        of directors and (C) at least a majority of the members
                        of the board of directors of such corporation were
                        members of the Incumbent Board at the time of the
                        execution of the initial agreement or action of the
                        Board of Directors providing for such sale, lease,
                        exchange or other disposition of assets of the Company.
                       
      Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to have occurred for purposes of this Agreement solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Voting Securities outstanding, increases the proportionate voting power
represented by the Voting Securities beneficially owned by any Person to 30% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any Person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Stock or
other Voting Securities (other than pursuant to a stock split, stock dividend,
or similar transaction), then a "Change in Control" shall be deemed to have
occurred for purposes of this Agreement.

      iii.  Complete Change in Control. A "Complete Change in Control" shall
            mean that a Change in Control has occurred, after modifying the
            definition of "Change in Control" by deleting clause (i) from
            Section 7(b)(2) of this Agreement.

      iv.   Constructive Termination Without Cause. "Constructive Termination
            Without Cause" shall mean a termination of Executive's employment
            initiated by Executive not later than 12 months following the
            occurrence (not including any time during which an arbitration
            proceeding referenced below is pending), without Executive's prior
            written consent, of one or more of the following events (or the
            latest to occur in a series of events),

<PAGE>   10

            and effected after giving the Company not less than 10 working days'
            written notice of the specific act or acts relied upon and right to
            cure:

            (1)    a material adverse change in the functions, duties or
                   responsibilities of Executive's position which would reduce
                   the level, importance or scope of such position; or any
                   removal of Executive from or failure to reappoint or reelect
                   Executive to any position set forth in this Agreement, except
                   in connection with the termination of Executive's employment
                   for Disability, Cause, as a result of Executive's death or by
                   Executive other than for a Constructive Termination Without
                   Cause;

            (2)    any material breach by the Company of this Agreement;

            (3)    any purported termination of Executive's employment for Cause
                   by the Company which does not comply with the terms of
                   Section 7(b)(1) of this Agreement;

            (4)    the failure of the Company to obtain an agreement,
                   satisfactory to the Executive, from any successor or assign
                   of the Company, to assume and agree to perform this
                   Agreement, as contemplated in Section 10 of this Agreement;

            (5)    the failure by the Company to continue in effect any
                   compensation plan in which Executive participates immediately
                   prior to a Change in Control which is material to Executive's
                   total compensation, unless comparable alternative
                   arrangements (embodied in ongoing substitute or alternative
                   plans) have been implemented with respect to such plans, or
                   the failure by the Company to continue Executive's
                   participation therein (or in such substitute or alternative
                   plans) on a basis not materially less favorable, in terms of
                   the amount of benefits provided and the level of Executive's
                   participation relative to other participants, as existed
                   during the last completed fiscal year of the Company prior to
                   the Change in Control;

            (6)    the relocation of the Company's Alexandria offices to a new
                   location more than fifty (50) miles from Alexandria or the
                   failure to locate Executive's own office at the Alexandria
                   office (or at the office to which such office is relocated
                   which is within 50 miles of Alexandria) or, following a
                   Change in Control, the failure to locate Executive's office
                   at the Company's principal executive office or the

<PAGE>   11

                   relocation of the Company's principal executive office to a
                   location more than 50 miles from Alexandria; or

            (7)    any termination of employment by the Executive for any reason
                   during the 12-month period immediately following a Complete
                   Change in Control of the Company.

Notwithstanding the foregoing, a Constructive Termination Without Cause shall
not be treated as having occurred unless Executive has given a final Notice of
Termination delivered after expiration of the Company's cure period. Executive
or the Company may, at any time after the expiration of the Company's cure
period and either prior to or up until three months after giving a final Notice
of Termination, commence an arbitration proceeding to determine the question of
whether, taking into account the actions complained of and any efforts made by
the Company to cure such actions, a termination by Executive of his employment
should be treated as a Constructive Termination Without Cause for purposes of
this Agreement. If the Executive or the Company commences such a proceeding
prior to delivery by Executive of a final Notice of Termination, the
commencement of such a proceeding shall be without prejudice to either party and
Executive's and the Company's rights and obligations under this Agreement shall
continue unaffected unless and until the arbitrator has determined such question
in the affirmative, or, if earlier, the date on which Executive or the Company
has delivered a Notice of Termination in accordance with the provisions of this
Agreement.

      v.    Covered Average Compensation. "Covered Average Compensation" shall
            mean the sum of Executive's Covered Compensation as calculated for
            the calendar year in which the Date of Termination occurs and for
            each of the two preceding calendar years, divided by three.

      vi.   Covered Compensation. "Covered Compensation," for any calendar year,
            shall mean an amount equal to the sum of (i) Executive's Base Salary
            for the calendar year (disregarding any decreases made effective
            during the Employment Period), (ii) the cash bonus actually earned
            by Executive with respect to such calendar year, and (iii) the value
            of all stock and other equity-based compensation awards made to
            Executive during such calendar year.

      Covered Compensation shall be calculated according to the following rules:

                   (a)  In valuing awards for purposes of clause (iii) above,
                        all such awards shall be treated as if fully vested when
                        granted, stock grants shall be valued by reference to
                        the fair market value on the date of grant of the
                        Company's common stock, par value $.01 per share (or of
                        the common stock of

<PAGE>   12

                        Avalon, as the case may be) and other equity-based
                        compensation awards shall be valued at the value
                        established by the Compensation Committee of the Board
                        of Directors on the date of grant.

                   (b)  In determining the cash bonus actually paid with respect
                        to a calendar year, if no cash bonus has been paid with
                        respect to the calendar year in which the Date of
                        Termination occurs, the cash bonus paid with respect to
                        the immediately preceding calendar year shall be assumed
                        to have been paid in each of the current and immediately
                        preceding calendar years, and if no cash bonus has been
                        paid by the Date of Termination with respect to the
                        immediately preceding calendar year, the cash bonus paid
                        with respect to the second preceding calendar year shall
                        be assumed to have been paid in all three of the
                        calendar years taken into account in determining Covered
                        Average Compensation.

                   (c)  If any cash bonus paid with respect to the current or
                        immediately preceding calendar year was paid within
                        three months of Executive's Date of Termination, and is
                        lower than the last cash bonus paid more than three
                        months from the Date of Termination, any such cash bonus
                        paid within three months of the Date of Termination
                        shall be disregarded and the last cash bonus paid more
                        than three months from the Date of Termination shall be
                        substituted for each cash bonus so disregarded.

                   (d)  In determining the amount of stock and other
                        equity-based compensation awards made during a calendar
                        year during the averaging period, rules similar to those
                        set forth in subparagraphs (B) and (C) of this Section
                        7(b)(6) shall be followed, except that all awards made
                        in connection with the Company's initial public offering
                        shall be disregarded.

      vii.  Disability. "Disability" shall mean Executive has been determined to
            be disabled and to qualify for long-term disability benefits under
            the long-term disability insurance policy obtained pursuant to
            Section 3(d) of this Agreement.

c.    Rights Upon Termination.
<PAGE>   13

            (1)    Payment of Benefits Earned Through Date of Termination. Upon
                   any termination of Executive's employment during the
                   Employment Period, Executive, or his estate, shall in all
                   events be paid all accrued but unpaid Base Salary and all
                   earned but unpaid cash incentive compensation earned through
                   his Date of Termination. Executive shall also retain all such
                   rights with respect to vested equity-based awards as are
                   provided under the circumstances under the applicable grant
                   or award agreement, and shall be entitled to all other
                   benefits which are provided under the circumstances in
                   accordance with the provisions of the Company's generally
                   applicable employee benefit plans, practices and policies,
                   other than severance plans.

            (2)    Death. In the event of Executive's death during the
                   Employment Period, the Company shall, in addition to paying
                   the amounts set forth in Section 7(c)(i), take whatever
                   action is necessary to cause all of Executive's unvested
                   equity-based awards to become fully vested as of the date of
                   death and, in the case of equity-based awards which have an
                   exercise schedule, to become fully exercisable and continue
                   to be exercisable for such period as is provided in the case
                   of vested and exercisable awards in the event of death under
                   the terms of the applicable award agreements.

            (3)    Disability. In the event the Company elects to terminate
                   Executive's employment during the Employment Period on
                   account of Disability, the Company shall, in addition to
                   paying the amounts set forth in Section 7(c)(i), pay to
                   Executive, in one lump sum, no later than 31 days following
                   the Date of Termination, an amount equal to two times Covered
                   Average Compensation. The Company shall also, commencing upon
                   the Date of Termination:

                   (a)  Continue, without cost to Executive, benefits comparable
                        to the medical and disability benefits provided to
                        Executive immediately prior to the Date of Termination
                        under Section 3(c) and Section 3(d) for a period of 24
                        months following the Date of Termination or until such
                        earlier date as Executive obtains comparable benefits
                        through other employment;

                   (b)  Continue to pay, or reimburse Executive, for all
                        premiums then due or thereafter payable on the
                        whole-life portion of the split-dollar insurance policy
                        referenced under Section

<PAGE>   14

                        3(d) for so long as such payments are due; and

                   (c)  Take whatever action is necessary to cause Executive to
                        become vested as of the Date of Termination in all stock
                        options, restricted stock grants, and all other
                        equity-based awards and be entitled to exercise and
                        continue to exercise all stock options and all other
                        equity-based awards having an exercise schedule and to
                        retain such grants and awards to the same extent as if
                        they were vested upon termination of employment in
                        accordance with their terms.

            (4)    Non-Renewal. In the event the Company gives Executive a
                   notice of non-renewal pursuant to Section 1 above, the
                   Company shall, in addition to paying the amounts set forth in
                   Section 7(c)(i), commencing upon the Date of Termination:

                   (a)  Pay to Executive, for 12 consecutive months, commencing
                        with the first day of the month immediately following
                        the Date of Termination, a monthly amount equal to the
                        result obtained by dividing Covered Average Compensation
                        by twelve;

                   (b)  Continue, without cost to Executive, benefits comparable
                        to the medical and disability benefits provided to
                        Executive immediately prior to the Date of Termination
                        under Section 3(c) and Section 3(d) for a period of 24
                        months following the Date of Termination or until such
                        earlier date as Executive obtains comparable benefits
                        through other employment; and

                   (c)  Take whatever action is necessary to cause Executive to
                        become vested as of the Date of Termination in all stock
                        options, restricted stock grants, and all other
                        equity-based awards and be entitled to exercise and
                        continue to exercise all stock options and all other
                        equity-based awards having an exercise schedule and to
                        retain such grants and awards to the same extent as if
                        they were vested upon termination of employment in
                        accordance with their terms; and

                   (d)  Continue to pay, or reimburse Executive for, all
                        premiums then due or thereafter payable on the
                        whole-life portion of the split-dollar insurance policy
                        referenced under Section

<PAGE>   15

                        3(d) for so long as such payments are due.

            (5)    Termination Without Cause; Constructive Termination Without
                   Cause. In the event the Company or any successor to the
                   Company terminates Executive's employment without Cause, or
                   if Executive terminates his employment in a Constructive
                   Termination without Cause, the Company shall, in addition to
                   paying the amounts provided under Section 7(c)(i), pay to
                   Executive, in one lump sum no later than 31 days following
                   the Date of Termination, an amount equal to three times
                   Covered Average Compensation. The Company shall also,
                   commencing upon the Date of Termination:

                   (a)  Continue, without cost to Executive, benefits comparable
                        to the medical and disability benefits provided to
                        Executive immediately prior to the Date of Termination
                        under Section 3(c) and Section 3(d) for a period of 36
                        months following the Date of Termination or until such
                        earlier date as Executive obtains comparable benefits
                        through other employment;

                   (b)  Continue to pay, or reimburse Executive, for so long as
                        such payments are due, all premiums then due or payable
                        on the whole-life portion of the split-dollar insurance
                        policy referenced under Section 3(d); and

                   (c)  Take whatever action is necessary to cause Executive to
                        become vested as of the Date of Termination in all stock
                        options, restricted stock grants, and all other
                        equity-based awards and be entitled to exercise and
                        continue to exercise all stock options and all other
                        equity-based awards having an exercise schedule and to
                        retain such grants and awards to the same extent as if
                        they were vested upon termination of employment in
                        accordance with their terms.

            (6)    Termination for Cause; Voluntary Resignation. In the event
                   Executive's employment terminates during the Employment
                   Period other than in connection with a termination meeting
                   the conditions of subparagraphs (ii), (iii), (iv), or (v) of
                   this Section 7(c), Executive shall receive the amounts set
                   forth in Section 7(c)(i) in full satisfaction of all of his
                   entitlements from the Company. All equity-based awards not
                   vested as of the Date of Termination shall terminate (unless
                   otherwise provided in the applicable award

<PAGE>   16

                   agreement) and Executive shall have no further entitlements
                   with respect thereto.

d.    Additional Benefits.

            (1)    Anything in this Agreement to the contrary notwithstanding,
                   in the event it shall be determined that any payment or
                   distribution by the Company to or for the benefit of
                   Executive, whether paid or payable or distributed or
                   distributable (1) pursuant to the terms of Section 7 of this
                   Agreement, (2) pursuant to or in connection with any
                   compensatory or employee benefit plan, agreement or
                   arrangement, including but not limited to any stock options,
                   restricted or unrestricted stock grants issued to or for the
                   benefit of Executive and forgiveness of any loans by the
                   Company to Executive or (3) otherwise (collectively,
                   "Severance Payments"), would be subject to the excise tax
                   imposed by Section 4999 of the Internal Revenue Code of 1986,
                   as amended (the "Code"), and any interest or penalties are
                   incurred by Executive with respect to such excise tax (such
                   excise tax, together with any such interest and penalties,
                   are hereinafter collectively referred to as the "Excise
                   Tax"), then Executive shall be entitled to receive an
                   additional payment (a "Partial Gross-Up Payment"), such that
                   the net amount retained by Executive, before accrual or
                   payment of any Federal, state or local income tax or
                   employment tax, but after accrual or payment of the Excise
                   Tax attributable to the Partial Gross-Up Payment, is equal to
                   the Excise Tax on the Severance Payments.

            (2)    Subject to the provisions of Section 7(d)(iii), all
                   determinations required to be made under this Section 7,
                   including whether a Partial Gross-Up Payment is required and
                   the amount of such Partial Gross-Up Payment, shall be made by
                   Coopers & Lybrand LLP or such other nationally recognized
                   accounting firm as may at that time be the Company's
                   independent public accountants immediately prior to the
                   Change in Control (the "Accounting Firm"), which shall
                   provide detailed supporting calculations both to the Company
                   and Executive within 15 business days of the Date of
                   Termination, if applicable, or at such earlier time as is
                   reasonably requested by the Company or Executive. The initial
                   Partial Gross-Up Payment, if any, as determined pursuant to
                   this Section 7(d)(ii), shall be paid to Executive within five
                   days of the receipt of the Accounting Firm's determination.
                   If the Accounting Firm determines that no Excise Tax is
                   payable by Executive, the

<PAGE>   17

                   Company shall furnish Executive with an opinion of counsel
                   that failure to report the Excise Tax on Executive's
                   applicable federal income tax return would not result in the
                   imposition of a negligence or similar penalty. Any
                   determination by the Accounting Firm shall be binding upon
                   the Company and Executive. As a result of the uncertainty in
                   the application of Section 4999 of the Code at the time of
                   the initial determination by the Accounting Firm hereunder,
                   it is possible that Partial Gross-Up Payments which will not
                   have been made by the Company should have been made (an
                   "Underpayment"). In the event that the Company exhausts its
                   remedies pursuant to Section 7(d)(iii) and Executive
                   thereafter is required to make a payment of any Excise Tax,
                   the Accounting Firm shall determine the amount of the
                   Underpayment that has occurred, consistent with the
                   calculations required to be made hereunder, and any such
                   Underpayment, and any interest and penalties imposed on the
                   Underpayment and required to be paid by Executive in
                   connection with the proceedings described in Section
                   7(d)(iii), and any related legal and accounting expenses,
                   shall be promptly paid by the Company to or for the benefit
                   of Executive.

            (3)    Executive shall notify the Company in writing of any claim by
                   the Internal Revenue Service that, if successful, would
                   require the payment by the Company of the Partial Gross-Up
                   Payment. Such notification shall be given as soon as
                   practicable but no later than 10 business days after
                   Executive knows of such claim and shall apprise the Company
                   of the nature of such claim and the date on which such claim
                   is requested to be paid. Executive shall not pay such claim
                   prior to the expiration of the 30-day period following the
                   date on which he gives such notice to the Company (or such
                   shorter period ending on the date that any payment of taxes
                   with respect to such claim is due). If the Company notifies
                   Executive in writing prior to the expiration of such period
                   that it desires to contest such claim, Executive shall:

                   (a)  give the Company any information reasonably requested by
                        the Company relating to such claim,

                   (b)  take such action in connection with contesting such
                        claim as the Company shall reasonably request in writing
                        from time to time, including, without limitation,
                        accepting legal representation with respect to such
                        claim by an attorney

<PAGE>   18

                        selected by the Company,

                   (c)  cooperate with the Company in good faith in order
                        effectively to contest such claim, and

                   (d)  permit the Company to participate in any proceedings
                        relating to such claim; provided, however that the
                        Company shall bear and pay directly all costs and
                        expenses attributable to the failure to pay the Excise
                        Tax (including related additional interest and
                        penalties) incurred in connection with such contest and
                        shall indemnify and hold Executive harmless, for any
                        Excise Tax up to an amount not exceeding the Partial
                        Gross-Up Payment, including interest and penalties with
                        respect thereto, imposed as a result of such
                        representation, and payment of related legal and
                        accounting costs and expenses (the "Indemnification
                        Limit"). Without limitation on the foregoing provisions
                        of this Section 7(d)(iii), the Company shall control all
                        proceedings taken in connection with such contest and,
                        at its sole option may pursue or forego any and all
                        administrative appeals, proceedings, hearings and
                        conferences with the taxing authority in respect of such
                        claim and may, at its sole option, either direct
                        Executive to pay the tax claimed and sue for a refund or
                        contest the claim in any permissible manner, and
                        Executive agrees to prosecute such contest to a
                        determination before any administrative tribunal, in a
                        court of initial jurisdiction and in one or more
                        appellate courts, as the Company shall determine;
                        provided, however, that if the Company directs Executive
                        to pay such claim and sue for a refund, the Company
                        shall advance so much of the amount of such payment as
                        does not exceed the Excise Tax, and related interest and
                        penalties, to Executive on an interest-free basis and
                        shall indemnify and hold Executive harmless, from any
                        related legal and accounting costs and expenses, and
                        from any Excise Tax, including related interest or
                        penalties imposed with respect to such advance or with
                        respect to any imputed income with respect to such
                        advance up to an amount not exceeding the
                        Indemnification Limit; and further provided that any
                        extension of the statute of limitations relating to
                        payment of taxes for the taxable year of Executive with
                        respect to which such contested amount

<PAGE>   19

                        is claimed to be due is limited solely to such contested
                        amount. Furthermore, the Company's control of the
                        contest shall be limited to issues with respect to which
                        a Partial Gross-Up Payment would be payable hereunder
                        and Executive shall be entitled to settle or contest, as
                        the case may be, any other issues raised by the Internal
                        Revenue Service or any other taxing authority.

            (4)    If, after the receipt by Executive of an amount advanced by
                   the Company pursuant to Section 7(d)(iii), Executive becomes
                   entitled to receive any refund with respect to such claim,
                   Executive shall (subject to the Company's complying with the
                   requirements of Section 7(d)(iii)) promptly pay to the
                   Company so much of such refund (together with any interest
                   paid or credited thereon after taxes applicable thereto) (the
                   "Refund") as is equal to (A) if the Company advanced or paid
                   the entire amount required to be so advanced or paid pursuant
                   to Section 7(d)(iii) hereof (the "Required Section 7(d)
                   Advance"), the aggregate amount advanced or paid by the
                   Company pursuant to this Section 7(d) less the portion of
                   such amount advanced to Executive to reimburse him for
                   related legal and accounting costs, or (B) if the Company
                   advanced or paid less than the Required Section 7(d) Advance,
                   so much of the aggregate amount so advanced or paid by the
                   Company pursuant to this Section 7(d) as is equal to the
                   difference, if any, between (C) the amount refunded to
                   Executive with respect to such claim and (D) the sum of the
                   portion of the Required Section 7(d) Advance that was paid by
                   Executive and not paid or advanced by the Company plus
                   Executive's related legal and accounting fees, as applicable.
                   If, after the receipt by Executive of an amount advanced by
                   the Company pursuant to Section 7(d)(iii), a determination is
                   made that Executive shall not be entitled to any refund with
                   respect to such claim and the Company does not notify
                   Executive in writing of its intent to contest such denial of
                   refund prior to the expiration of 30 days after such
                   determination, then such advance shall be forgiven and shall
                   not be required to be repaid and the amount of such advance
                   shall offset, to the extent thereof, the amount of Partial
                   Gross-Up Payment required to be paid.

      e.    Notice of Termination. Notice of non-renewal of this Agreement
            pursuant to Section 1 hereof or of any termination of Executive's
            employment (other than by reason of death) shall be communicated by
            written notice (a "Notice of

<PAGE>   20

            Termination") from one party hereto to the other party hereto in
            accordance with this Section 7 and Section 9.

      f.    Date of Termination. "Date of Termination," with respect to any
            termination of Executive's employment during the Employment Period,
            shall mean (i) if Executive's employment is terminated for
            Disability, 30 days after Notice of Termination is given (provided
            that Executive shall not have returned to the full-time performance
            of Executive's duties during such 30 day period), (ii) if
            Executive's employment is terminated for Cause, the date on which a
            Notice of Termination is given which complies with the requirements
            of Section 7(b)(1) hereof, and (iii) if Executive's employment is
            terminated for any other reason, the date specified in the Notice of
            Termination. In the case of a termination by the Company other than
            for Cause, the Date of Termination shall not be less than 30 days
            after the Notice of Termination is given. In the case of a
            termination by Executive, the Date of Termination shall not be less
            than 15 days from the date such Notice of Termination is given.
            Notwithstanding the foregoing, in the event that Executive gives a
            Notice of Termination to the Company, the Company may unilaterally
            accelerate the Date of Termination and such acceleration shall not
            result in the termination being treated as a Termination without
            Cause. Upon any termination of his employment, Executive will
            concurrently resign his membership on the Board of Directors.

      g.    No Mitigation. The Company agrees that, if Executive's employment by
            the Company is terminated during the term of this Agreement,
            Executive is not required to seek other employment, or to attempt in
            any way to reduce any amounts payable to Executive by the Company
            pursuant to Section 7(d)(i) hereof. Further, the amount of any
            payment provided for in this Agreement shall not be reduced by any
            compensation earned by Executive as the result of employment by
            another employer, by retirement benefits, or, except for amounts
            then due and payable in accordance with the terms of any promissory
            notes given by Executive in favor of the Company, by offset against
            any amount claimed to be owed by Executive to the Company or
            otherwise.

      h.    Nature of Payments. The amounts due under this Section 7 are in the
            nature of severance payments considered to be reasonable by the
            Company and are not in the nature of a penalty. Such amounts are in
            full satisfaction of all claims Executive may have in respect of his
            employment by the Company or its affiliates and are provided as the
            sole and exclusive benefits to be provided to Executive, his estate,
            or his beneficiaries in respect of his termination of employment
            from the Company or its affiliates.

8.    Non-Competition; Non-Solicitation; Specific Enforcement.

<PAGE>   21

      a.    Non-Competition. Because Executive's services to the Company are
            special and because Executive has access to the Company's
            confidential information, Executive covenants and agrees that,
            during the Employment Period and, for a period of one year following
            the Date of Termination by the Company for Cause or a termination by
            Executive (other than a Constructive Termination Without Cause)
            prior to a Change in Control, Executive shall not, without the prior
            written consent of the Board of Directors, become associated with,
            or engage in any "Restricted Activities" with respect to any
            "Competing Enterprise," as such terms are hereinafter defined,
            whether as an officer, employee, principal, partner, agent,
            consultant, independent contractor or shareholder. "Competing
            Enterprise," for purposes of this Agreement, shall mean any person,
            corporation, partnership, venture or other entity which (a) is a
            publicly traded real estate investment trust, or (b) is engaged in
            the business of managing, owning, leasing or joint venturing
            residential real estate within 30 miles of residential real estate
            owned or under management by the Company or its affiliates.
            "Restricted Activities," for purposes of this Agreement, shall mean
            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.

      b.    Non-Solicitation. During the Employment Period, and for a period of
            one year following the Date of Termination, Executive shall not,
            without the prior written consent of the Company, except in the
            course of carrying out his duties hereunder, solicit or attempt to
            solicit for employment with or on behalf of any corporation,
            partnership, venture or other business entity, any employee 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.

      c.    Specific Enforcement. Executive and the Company agree that the
            restrictions, prohibitions and other provisions of this Section 8
            are reasonable, fair and equitable in scope, terms, and duration,
            are necessary to protect the legitimate business interests of the
            Company and are a material inducement to the Company to enter into
            this Agreement. Should a decision be made by a court of competent
            jurisdiction that the character, duration or geographical scope of
            the provisions of this Section_8 is unreasonable, the parties intend
            and agree that this Agreement shall be construed by the court in
            such a manner as to impose all of those restrictions on Executive's
            conduct that are reasonable in light of the circumstances and as are
            necessary to assure to the Company the benefits of this Agreement.
            The Company and Executive further agree that the services to be
            rendered under this Agreement by Executive are special, unique and
            of extraordinary character, and that in the event of the breach by
            Executive of the

<PAGE>   22

            terms and conditions of this Agreement or if Executive, without the
            prior consent of the Board of Directors, shall take any action in
            violation of this Section 8, the Company will suffer irreparable
            harm for which there is no adequate remedy at law. Accordingly,
            Executive hereby consents to the entry of a temporary restraining
            order or ex parte injunction, in addition to any other remedies
            available at law or in equity, to enforce the provisions hereof. Any
            proceeding or action seeking equitable relief for violation of this
            Section 8 must be commenced in the federal or state courts, in
            either case in Virginia. Executive and the Company irrevocably and
            unconditionally submit to the jurisdiction of such courts and agree
            to take any and all future action necessary to submit to the
            jurisdiction of such courts.

9.    Notice. Any notice required or permitted hereunder shall be in writing and
      shall be deemed sufficient when given by hand or by nationally recognized
      overnight courier or by Express, registered or certified mail, postage
      prepaid, return receipt requested, and addressed, if to the Company at
      5904 Richmond Avenue, Alexandria, VA 22303, and if to Executive at the
      address set forth in the Company's records (or to such other address as
      may be provided by notice).

10.   Miscellaneous. This Agreement, together with Annex A and Annex B and the
      Split Dollar Insurance Agreement, constitutes the entire agreement between
      the parties concerning the subjects hereof and supersedes any and all
      prior agreements or understandings, including, without limitation, any
      plan or agreement providing benefits in the nature of severance, but
      excluding benefits provided under other Company plans or agreements,
      except to the extent this Agreement provides greater rights than are
      provided under such other plans or agreements. As of the Effective Date,
      this Agreement supersedes the Prior Agreement which will have no further
      force or effect. Executive hereby waives, to the extent applicable, the
      effect of the transactions contemplated by the Merger Agreement (or
      shareholder approval of such transaction) on any change in control
      provisions in any Avalon employee benefit plan or agreement. This
      Agreement shall terminate upon termination of the Merger Agreement and
      abandonment of the merger contemplated by the Merger Agreement. This
      Agreement may not be assigned by Executive without the prior written
      consent of the Company, and may be assigned by the Company and shall be
      binding upon, and inure to the benefit of, the Company's successors and
      assigns. The Company will require any successor (whether direct or
      indirect, by purchase, merger, consolidation or otherwise) to all or
      substantially all of the business and/or assets of the Company to assume
      expressly and agree to perform this Agreement in the same manner and to
      the same extent that the Company would be required to perform it if no
      such succession had taken place. As used in this Agreement, "Company"
      shall mean the Company as hereinbefore defined and any successor to its
      business and/or assets as aforesaid which assumes and agrees to perform
      this Agreement by operation of law, or otherwise. Headings herein are for
      convenience of reference only

<PAGE>   23

      and shall not define, limit or interpret the contents hereof.

11.   Amendment. This Agreement may be amended, modified or supplemented by the
      mutual consent of the parties in writing, but no oral amendment,
      modification or supplement shall be effective. No waiver by either party
      of any breach by the other party of any condition or provision contained
      in this Agreement to be performed by such other party shall be deemed a
      waiver of a similar or dissimilar condition or provision at the same or
      any prior or subsequent time. Any waiver must be in writing and signed by
      Executive or an authorized officer of the Company, as the case may be.

12.   Severability. The provisions of this Agreement are severable. The
      invalidity of any provision shall not affect the validity of any other
      provision, and each provision of this Agreement shall be valid and
      enforceable to the fullest extent permitted by law.

13.   Resolution of Disputes.

      a.    Procedures and Scope of Arbitration. Except for any controversy or
            claim seeking equitable relief pursuant to Section 8 of this
            Agreement, all controversies and claims arising under or in
            connection with this Agreement or relating to the interpretation,
            breach or enforcement thereof and all other disputes between the
            parties, shall be resolved by expedited, binding arbitration, to be
            held in Virginia in accordance with the National Rules of the
            American Arbitration Association governing employment disputes (the
            "National Rules"). In any proceeding relating to the amount owed to
            Executive in connection with his termination of employment, it is
            the contemplation of the parties that the only remedy that the
            arbitrator may award in such a proceeding is an amount equal to the
            termination payments, if any, required to be provided under the
            applicable provisions of Section 7(c) and, if applicable, Section
            7(d) hereof, to the extent not previously paid, plus the costs of
            arbitration and Executive's reasonable attorneys fees and expenses
            as provided below. Any award made by such arbitrator shall be final,
            binding and conclusive on the parties for all purposes, and judgment
            upon the award rendered by the arbitrator may be entered in any
            court having jurisdiction thereof.

      b.    Attorneys Fees.

                   (1)  Reimbursement After Executive Prevails. Except as
                        otherwise provided in this paragraph, each party shall
                        pay the cost of his or its own legal fees and expenses
                        incurred in connection with an arbitration proceeding.
                        Provided an award is made in favor of Executive in such
                        proceeding, all of his reasonable attorneys fees and
                        expenses incurred in pursuing or defending such
                        proceeding

<PAGE>   24

                        shall be promptly reimbursed to Executive by the Company
                        within five days of the entry of the award.

                   (2)  Reimbursement in Actions to Stay, Enjoin or Collect. In
                        any case where the Company or any other person seeks to
                        stay or enjoin the commencement or continuation of an
                        arbitration proceeding, whether before or after an award
                        has been made, or where Executive seeks recovery of
                        amounts due after an award has been made, or where the
                        Company brings any proceeding challenging or contesting
                        the award, all of Executive's reasonable attorneys fees
                        and expenses incurred in connection therewith shall be
                        promptly reimbursed by the Company to Executive, within
                        five days of presentation of an itemized request for
                        reimbursement, regardless of whether Executive prevails,
                        regardless of the forum in which such proceeding is
                        brought, and regardless of whether a Change in Control
                        has occurred.

                   (3)  Reimbursement After a Change in Control. Without
                        limitation on the foregoing, solely in a proceeding
                        commenced by the Company or by Executive after a Change
                        in Control has occurred, the Company shall advance to
                        Executive, within five days of presentation of an
                        itemized request for reimbursement, all of Executive's
                        legal fees and expenses incurred in connection
                        therewith, regardless of the forum in which such
                        proceeding was commenced, subject to delivery of an
                        undertaking by Executive to reimburse the Company for
                        such advance if he does not prevail in such proceeding
                        (unless such fees are to be reimbursed regardless of
                        whether Executive prevails as provided in clause (ii)
                        above).

14.   Survivorship. The provisions of Sections 4(b), 6, 8 and 13 of this
      Agreement shall survive Executive's termination of employment. Other
      provisions of this Agreement shall survive any termination of Executive's
      employment to the extent necessary to the intended preservation of each
      party's respective rights and obligations.

15.   Board Action. Where an action called for under this Agreement is required
      to be taken by the Board of Directors, such action shall be taken by the
      vote of not less than a majority of the members then in office and
      authorized to vote on the matter.

16.   Withholding. All amounts required to be paid by the Company shall be
      subject to reduction in order to comply with applicable federal, state and
      local tax withholding requirements.

<PAGE>   25

17.   Counterparts. This Agreement may be executed in two or more counterparts,
      each of which shall be deemed to be an original but all of which together
      shall constitute one and the same instrument. The execution of this
      Agreement may be by actual or facsimile signature.

18.   Governing Law. This Agreement shall be construed and regulated in all
      respects under the laws of the State of Maryland.

<PAGE>   26

      IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.

                                                 Bay Apartment Communities, Inc.




                                                 By: /S/ GILBERT M. MEYER




                                                 Its: Chairman of the Board



                                                 /S/ ROBERT H. SLATER
                                                 Robert H. Slater

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