EXHIBIT 10.23
PROMISSORY NOTE AND PLEDGE AND SECURITY AGREEMENT
$450,000 June 15, 2000
FOR VALUE RECEIVED, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, who resides at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Borrower"), promises to pay to the order of AvalonBay
Communities, Inc., a Maryland corporation, and its successors and assigns at its
address of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the
"Lender" or "Company") or such other place as Lender may designate, the amount
of $450,000 on the Maturity Date (as such term is hereinafter defined) and to
pay interest on the unpaid principal amount outstanding hereunder from time to
time on the dates and at the rate or rates hereinafter provided.
(c) USE OF PROCEEDS.
The principal amount advanced on the date hereof will be used for
personal purposes, PROVIDED, HOWEVER, that $79,334 shall be used to
repay the principal and accrued interest outstanding under the
promissory notes given by the Borrower to the Lender as set forth on
EXHIBIT A hereto. Therefore, (i) the Lender shall advance on the date
hereof the net amount due the Borrower (i.e., $370,666), (ii) the
Lender shall promptly thereafter return to the Borrower the promissory
notes set forth on Exhibit A marked "cancelled" or "paid in full", and
(iii) the principal amount outstanding as of the date hereof shall be
$450,000.
(d) INTEREST.
The principal amount outstanding hereunder from time to time (which
principal amount shall include monthly compounded interest), to the
extent not paid (pursuant to Section 4(b)(i) hereof or otherwise),
shall compound and accrue monthly on the basis of a three hundred and
sixty-five (365) day year and the number of days actually elapsed at a
fixed rate (the "Interest Rate") per annum equal to the rate of
interest announced by the Internal Revenue Service as its "Long Term
Applicable Federal Rate" of even date herewith. In the event that all
principal and interest due hereunder are not paid before the fifth
(5th) anniversary of this Note, then the Note shall become immediately
due and payable at the option of and upon demand by Lender either upon
the fifth (5th) anniversary of this Note or any date thereafter (the
"Maturity Date"). Upon the fifth (5th) anniversary of this Note and
until the Maturity Date, interest shall continue 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%,
at the prevailing Short Term Applicable Federal Rate. All payments
shall be applied first to interest and the balance to principal.
(e) PLEDGE.
(a) PLEDGE OF STOCK. To secure payment and performance of all
Borrower's obligations hereunder, Borrower hereby pledges as
collateral to Lender all shares of common stock of the Company
(whether currently vested or still unvested) that were
previously granted to the Borrower under the Company's 1994
Stock Incentive Plan, as amended (the "Pledged Stock") and
agrees that the Company shall have all of the rights of a
secured creditor under the Uniform Commercial
Code with respect to the same. For clarity, EXHIBIT B sets
forth information regarding the Pledged Stock. Until such time
as the principal amount outstanding hereunder is paid in full,
Lender shall keep in its possession the Pledged Stock, and
shall cause a restrictive legend which precludes active
trading of the Pledged Stock without the Company's permission
to be placed on same. If the market value of the Company's
common stock (AVB; NYSE) declines such that the ratio of the
value of the Loan divided by the value of the market value of
the Pledged Stock (the "LTV Ratio") exceeds 50%, the Company
reserves the right to demand that the Borrower 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 the level of 50%.
(b) PLEDGE OF STOCK OPTIONS. To secure payment and performance of
all Borrower's obligations hereunder, Borrower hereby pledges
as collateral to Lender all of Borrower's rights in, to and
under the employee stock options that were previously granted
to the Borrower under the Company's 1994 Stock Incentive Plan,
as amended (the "Pledged Options"), whether currently vested
or unvested, and agrees that the Company shall have all of the
rights of a secured creditor under the Uniform Commercial Code
with respect to the same, including the right to all proceeds
thereof. For clarity, EXHIBIT C sets forth information
regarding the Pledged Options. Borrower agrees that he shall
have no right to exercise the Pledged Options or take any
other action with respect to the same until the principal
amount and accrued interest outstanding hereunder is paid in
full.
(f) PREPAYMENT.
(a) OPTIONAL PREPAYMENT. The Borrower may prepay this Note in
whole or in part without penalty or premium.
(b) MANDATORY PREPAYMENT.
(i) Until such time as the principal amount and accrued
interest outstanding hereunder is paid in full,
Borrower shall pay or cause to be paid to the Lender
all dividends related to the Pledged Stock when such
dividends are issued by the Company to its common
stockholders.
(ii) The Borrower shall be required to prepay the Loan in
its entirety within sixty (60) days following any
termination of the Borrower's employment by or with
the Company for any reason, including but not limited
to death or disability (the "Prepayment Date"). On
the Prepayment Date, for any reason, including death
or disability, Borrower shall immediately make such
prepayment together with interest accrued through the
date on which all amounts due hereunder are paid.
(g) DEFAULT.
If any payment to be made by Borrower under this Note is not made when
due (a "Default"), Lender, at its option, may (i) sell or otherwise
dispose of an amount of Pledged Stock and apply the proceeds to the
outstanding payment due to Lender and/or (ii) exercise all or a portion
of the Pledged Options and sell the underlying stock or cancel all or a
portion of the Pledged Options, in
$450,000 Promissory Note to ▇. ▇▇▇▇▇▇
June 15, 2000
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either case as described in Section 14 hereof. Borrower agrees to pay
all charges (including reasonable attorneys' fees) of the Lender in
connection with the collection and/or enforcement of this Note.
(h) NOTICES.
Any notice required or permitted to be delivered hereunder shall be in
writing and shall be deemed to be delivered on the earlier of (i) the
date received, or (ii) the date of delivery, refusal, or non-delivery
indicated on the return receipt, if deposited in a United States Postal
Service depository, postage prepaid, sent registered or certified mail,
return receipt requested, addressed to the party to receive the same at
the address of such party set forth at the beginning of this Note, or
at such other address as may be designated in a notice delivered or
mailed as herein provided.
(i) WAIVER.
(a) The failure of the Lender at any time to exercise any option
or right hereunder shall not constitute a waiver of the
Lender's right to exercise such option or right at any other
time.
(b) Borrower and all endorsers and guarantors of the Note hereby
jointly and severally waive presentment, demand, notice,
protest and all other suretyship defenses generally and agree
that (i) any renewal, extension or postponement of the time of
payment or any other indulgence, (ii) any modification,
supplement or alteration of any of the Borrower's obligations
undertaken in connection with this Note, or (iii) any
substitution, exchange or release of collateral or the
addition or release of any person or entity primarily or
secondarily liable, may be effected without notice to Borrower
or any endorser or guarantor or Borrower's obligations, and
without releasing Borrower or such endorser or guarantor from
any liability hereunder.
(j) MODIFICATION.
This Note may not be modified, altered, or amended in any manner or
form except by an agreement in writing, executed by a duly authorized
officer of Lender and the Borrower, which writing shall make specific
reference hereto.
(k) TRANSFER BY BORROWER.
Borrower will not sell, assign, transfer or otherwise dispose of,
directly or indirectly, nor grant any option with respect to, or pledge
or grant any security interest in or otherwise encumber any of the
Pledged Stock or the Pledged Options, any interest therein, except for
the pledge provided for in this Note.
(l) FURTHER ASSURANCES.
Borrower will from time to time execute and deliver to the Company all
such other and further instruments and documents and take or cause to
be taken all such other and further actions as the Company may
reasonably request in order to effect and confirm more securely in the
Company all rights contemplated in this Note and to maintain at all
times the perfection and first priority of the
$450,000 Promissory Note to ▇. ▇▇▇▇▇▇
June 15, 2000
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security interest herein granted in the Pledged Stock, including
without limitation, any UCC financing statements, reports, statements
or other documents required by any applicable law, rule or regulation.
A carbon photocopy or other reproduction of this note may be filed as a
financing statement.
(m) COSTS.
Borrower agrees to promptly reimburse the Company for actual reasonable
out-of-pocket expenses, including, without limitation, reasonable
counsel fees and disbursements, incurred by the Company in connection
with the administration and enforcement of this Note.
(n) FULL RECOURSE.
The Company's recourse against the Borrower under this Note for
satisfaction of the Loan and all other amounts due hereunder shall be
full recourse to the Borrower and all of Borrower's assets, and Lender
shall have no obligation to take any action against the collateral
granted hereunder prior to proceeding directly against Borrower.
13. USURY, ETC.
All agreements between the Borrower and the holder of this Note are
hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration or maturity of the indebtedness or
otherwise, shall the amount paid or agreed to be paid to the holder for
the use, forbearance or detention of the indebtedness evidenced hereby
exceed the maximum amount which the holder is permitted to receive
under applicable law. If, from any circumstances whatsoever,
fulfillment of any provision of this Note, at the time performance of
such provision shall be due, shall involve exceeding such amount, then
the obligation to be fulfilled shall automatically be reduced to the
limit of such maximum amount, and if from any circumstances the holder
should ever receive as interest an amount which would exceed such
maximum amount, such amount which would be excessive interest shall be
applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof; provided,
however, that in the event that there is a change in the law which
results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision
shall control every other provision of this Note.
14. VALUATION; MANNER OF DISPOSITION; CANCELLATION OF STOCK OPTIONS;
SECURITIES LAWS.
(a) The Borrower acknowledges and agrees that the Company may not
be able to or may not desire to effect a public sale of the
Pledged Stock and, accordingly, agrees that in the event of
any sale, collection, realization or other disposition of or
upon the Pledged Stock by the Company, in lieu of such public
sale, the Company may transfer all or any portion of the
Pledged Stock to itself and apply the value of such shares (at
a price per share equal to the closing sale reported on the
New York Stock Exchange (the "NYSE") on the date of such
action by the Company or, if the date of such action is not a
day on which the NYSE is open or the Company's stock is not
$450,000 Promissory Note to ▇. ▇▇▇▇▇▇
June 15, 2000
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traded on the NYSE on such date, the preceding business day or
trading date) to the amounts due under or in connection with
this Note.
(b) The Borrower acknowledges and agrees that, in the event of a
Default hereunder, the Company may cause the Pledged Options
to be exercised and the underlying common stock to be sold.
The Borrower acknowledges and agrees that, in lieu of such
exercise or sale, the Company may cancel all or a portion of
the Pledged Options and credit the Borrower with repayment of
an amount of principal and accrued interest equal to the
difference between (i) the product of (x) the number of
options cancelled and (y) the then value of the shares of
common stock underlying such options (such shares to be valued
at a price per share equal to the closing sale reported on the
NYSE on the date of cancellation of the options) less (ii) the
aggregate exercise price of the options so cancelled.
(c) The Borrower recognizes that a sale or other disposition of
the Pledged Stock or the Pledged Options can have adverse
consequences to the Borrower under Section 16 of the
Securities Exchange Act of 1934 or other securities laws. The
Lender shall in no event be liable for any such adverse
consequence and shall have no obligation to consider such
consequences when proceeding against the collateral after a
Default.
15. CHOICE OF LAW.
This Note shall be governed by, construed, and enforced in accordance
with the laws of the State of Connecticut.
16. POWER OF ATTORNEY.
The Borrower hereby grants the Company a power of attorney to take any
and all actions in connection with (i) any disposition or forfeiture of
the Pledged Stock upon a Default, or (ii) any exercise of the Pledged
Options upon a Default and disposition of the shares of common stock
received thereby or (iii) any forfeiture of the Pledged Options upon a
Default.
This Note shall have the effect of an instrument under seal.
Borower: \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Witness: \s\ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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$450,000 Promissory Note to ▇. ▇▇▇▇▇▇
June 15, 2000
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