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                                                                   Exhibit 10.15

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT (this "Agreement") made as of the July day of 15
1997 by and between Richard L. Michaux, residing at 1142 Custis Street,
Alexandria, VA 22308 (hereinafter referred to as "Executive") and Avalon
Properties, Inc., a Maryland corporation, having its principal place of business
at 5904 Richmond Avenue, Alexandria, VA 22303 (hereinafter referred to as the
"Company").

         WHEREAS, Executive and the Company have previously entered into an
Employment Agreement dated as of November 18, 1993, as amended as of December
16, 1994; and

         WHEREAS, Executive and the Company desire to amend and restate such
Employment Agreement effective as of January 1, 1997 on the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, the parties hereto do hereby amend and restate such
Employment Agreement as follows.

         1.       Term. The term of this Agreement originally commenced on
November 18, 1993 and, unless earlier terminated as provided in Section 8 below,
shall terminate on December 31, 1999 (the "Original Term"). 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. (The period of Executive's employment hereunder within the
Original Term and any Renewal Terms are 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 with the title Chairman of the Board and Chief
Executive Officer. In the performance of his duties, Executive shall be subject
to the direction of the Board of Directors of the Company (the "Board of
Directors") and shall not be required to take direction from or report to any
other person. Executive's duties and authority shall be commensurate with his
title and position with the Company.

                  (b)    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



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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 9, 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, or (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. The Company
consents to Executive's status as a "former partner" with a current financial
interest in certain Midwest projects of Trammell Crow Residential.

                  (c)    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. 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. The Company shall pay Executive an annual
salary at least equal to the following amounts during the Employment Period
("Base Salary"): from January 1, 1997 through December 31, 1997, $230,000;
beginning January 1, 1998, $265,000; beginning January 1, 1999, $300,000. If the
Employment Period is extended beyond December 31, 1999, Executive's Base Salary
shall be reviewed no less frequently than annually by the Company commencing
January 1, 2000 and 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.

                  (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


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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 the Company and Executive annexed hereto as Exhibit 1, subject
to reimbursement by Executive as provided in such Split Dollar 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 six 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)    Club Membership. The Company will pay, or at
Executive's election reimburse, during the Employment Period (i) the membership
dues and special assessments (exclusive of initiation or admittance costs) for
country club memberships of Executive's choice in an aggregate amount not to
exceed $10,000 per year, increased but not decreased for each succeeding twelve
month period during the Employment Period by the CPI Adjustment plus (ii) other
costs and fees of use of such country club(s) reasonably related to the
Company's business, subject to substantiation thereof in accordance with the
Company's policies in effect from time to time for executive employees of the
Company.


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                  (h)    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 employees of the Company from time to
time.

         4.       Automobile. The Company shall provide Executive with a monthly
car allowance during the Employment Period of not less than $925 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.

         5.       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 full 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 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.

         6.       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 previously


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executed by Executive, as reflected in the attachment at Annex A hereto and made
a part hereof.

         7.       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 on the
Company's rights under Section 7(a), Executive agrees to abide by and be bound
by the Nondisclosure Agreement of the Company previously executed by Executive
and the Company as reflected in the attachment at Annex B and made a part
hereof.

         8.       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 8. Upon any termination hereunder, the Employment Period shall
expire.

                  (b)    Definitions. For purposes of this Section 8, the
following terms shall have the indicated definitions:

                         (1)    Cause. "Cause" shall mean:

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

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

                              (iii)    a breach by Executive of his fiduciary
duties under Maryland law as an officer or member of the Board of Directors;

                               (iv)    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


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

                                (2)    Change in Control. A "Change in Control"
shall mean the occurrence of any one or more of the following events:

                                (i)    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


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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 8(b)(2) are satisfied; or

                         (ii) Individuals who, as of the date hereof, 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 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

                         (iii) Approval by the shareholders of the Company 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


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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;

                         (iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or

                         (v) 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 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.


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                         (3)    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
8(b)(2) of the Agreement.

                         (4)    Constructive Termination Without Cause.
"Constructive Termination Without Cause" shall mean a termination of Executive's
employment after a Change in Control 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), 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:

                                (i)    a reduction in, or delay in payment of,
Executive's Base Salary, or a reduction in, delay in payment of, or adverse
change in the terms and conditions of, any cash bonus, stock grant or stock
award, or a failure to make or pay such an award in accordance with the terms,
conditions and performance targets, if any, established with respect thereto
before or after the date of the Change in Control;

                               (ii)    the failure by the Company to continue in
effect any compensation plan in which Executive participates immediately prior
to the Change in Control which is material to Executive's total compensation,
including, but not limited to, the Avalon Properties, Inc. Mid-Term Incentive
Plan (February 1995) and the Avalon Properties, Inc. Amended and Restated 1995
Equity Incentive Plan (the "Incentive Plans"), or any substitute plans adopted
prior to the Change in Control, 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;

                              (iii)    a material diminution of Executive's
responsibilities, or the assignment to Executive of responsibilities materially
inconsistent with the level of his responsibilities as Chief Executive Officer
of the Company immediately prior to the Change in Control;

                               (iv)    the failure to locate the Executive's own
office at the Company's principal executive office or the relocation of the
Company's principal executive office (for purposes of this Agreement, 5904
Richmond Avenue, Alexandria, VA 22303) to a location more than 50 miles from
Alexandria, VA; or


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                                (v)    the failure of the Company to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company within 15
days after a Change in Control.

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.

                  (5)    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.

                  (6)    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 paid to 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, 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.


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                         (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 8(b)(6) shall be followed, except that all awards made in
connection with the Company's initial public offering shall be disregarded.

                  (6)    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.

                                (i)    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.

                               (ii)    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 8(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,


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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.

                              (iii)    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 8(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 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.

                               (iv)    Non-Renewal. In the event the Company
gives Executive a Notice of Non-Renewal pursuant to Section 1 above within two
years following the occurrence of a Change in Control, the Executive shall
receive the benefits required to be provided under Section 8(c)(vi) hereof
instead of the benefits described in this Section 8(c)(iv). In the event the
Company gives Executive a notice of non-renewal pursuant to Section 1 above,
either prior to the occurrence of a Change in Control or more than two years
following the occurrence of a Change in Control, the Company shall, in addition
to paying the amounts set forth in Section 8(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;


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

                                (v)    Termination Without Cause. In the event
the Company terminates Executive's employment without Cause, either prior to the
occurrence of a Change in Control or more than two years following the
occurrence of a Change in Control, the Company shall, in addition to paying the
amounts set forth in Section 8(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 two times 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-


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<PAGE>   14

life portion of the split-dollar insurance policy referenced under Section 3(d)
for so long as such payments are due.

                               (vi)    Termination Without Cause after Change in
Control; Constructive Termination Without Cause; Termination after Complete
Change in Control. In the event the Company or any successor to the Company
terminates Executive's employment without Cause, within two years after a Change
in Control, or if Executive terminates his employment at any time after a Change
in Control in a Constructive Termination Without Cause effected in the manner
prescribed by Section 8(b)(4), or if Executive terminates his employment for any
reason within one year after a Complete Change in Control, the Company shall, in
addition to paying the amounts provided under Section 8(c)(i), pay to Executive,
in one lump sum no later than 31 days following the Date of Termination, an
amount equal to (x) three times Covered Average Compensation, or (y) if
Executive terminates his employment more than two years after a Change in
Control in a Constructive Termination Without Cause, 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 36 months following the Date of Termination (24
months, if Executive terminates his employment in a Constructive Termination
Without Cause more than two years after a Change in Control) 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.

                              (vii)    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), (v) or (vi) of this Section 8(c),
Executive shall receive the amounts set forth in Section 8(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



                                       14

<PAGE>   15

and Executive shall have no further entitlements with respect thereto.

                  (d)    Additional Benefits.

                         (i)    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 8
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.

                         (ii)   Subject to the provisions of Section 8(d)(iii),
all determinations required to be made under this Section 8, 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 (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 8(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 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


                                       15

<PAGE>   16

should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 8(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 8(d)(iii), and
any related legal and accounting expenses, shall be promptly paid by the Company
to or for the benefit of Executive.

                         (iii)  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 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 8(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


                                       16

<PAGE>   17

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 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.

                                (iv)   If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 8(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 8(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 8(d)(iii) hereof (the "Required Section
8(d) Advance"), the aggregate amount advanced or paid by the Company pursuant to
this Section 8(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 8(d) Advance, so much of the
aggregate amount so advanced or paid by the Company pursuant to this Section
8(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 8(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 8(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



                                       17

<PAGE>   18

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 Termination") from one party hereto to the other party
hereto in accordance with this Section 8 and Section 10.

                  (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 8(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
8(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
8 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


                                       18

<PAGE>   19

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.

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

                  (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 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 9 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


                                       19

<PAGE>   20

9 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 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 9, 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 9 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.

         10.      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
the address indicated above and if to Executive at the address indicated below
(or to such other address as may be provided by notice).

         11.      Miscellaneous. This Agreement, together with Schedule 1 and
Annex A and Annex B, 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. 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. Headings herein
are for convenience of reference only and shall not define, limit or interpret
the contents hereof.

         12.      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



                                       20

<PAGE>   21

signed by Executive or an authorized officer of the Company, as the case may be.

         13.      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.

         14.      Resolution of Disputes.

                  (a)    Procedures and Scope of Arbitration. Except for any
controversy or claim seeking equitable relief pursuant to Section 9 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 8(c) and, if applicable, Section 8(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.

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

                         (ii)   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


                                       21

<PAGE>   22

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.

                         (iii)  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).

         15.      Survivorship. The provisions of Sections 5(b), 7, 9 and 14 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.

         16.      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.

         17.      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.

         18.      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.

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



                                       22

<PAGE>   23

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

                                       AVALON PROPERTIES, INC.

                                       By:
                                          --------------------------------
                                             Its

                                       -----------------------------------
                                       RICHARD L. MICHAUX




                                       23