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                                                             EXHIBIT 10.17

                             AVALON PROPERTIES, INC.
                      1993 STOCK OPTION AND INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the Avalon Properties, Inc. 1993 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees and Directors of Avalon Properties, Inc. (the
"Company") and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.

         The following terms shall be defined as set forth below:

         "ACT" means the Securities Exchange Act of 1934, as amended.

         "AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options and Non-Qualified
Stock Options.

         "BOARD" means the Board of Directors of the Company.

         "CAUSE" means and shall be limited to a vote of the Board of Directors
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or any Subsidiary or on the participant's ability to perform
services for the Company or any Subsidiary, including, without limitation, the
participant being convicted of any crime (other than ordinary traffic
violations), or (iii) any material misconduct or neglect of duties by the
participant in connection with the business or affairs of the Company or any
Subsidiary.

         "CHANGE OF CONTROL" is defined in Section 10.

         "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "COMMITTEE" means the Board or any Committee of the Board referred to
in Section 2.

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         "DISABILITY" means disability as set forth in Section 22(e)(3) of the
Code.

         "DISINTERESTED PERSON" means a Non-Employee Director who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under the Act.

         "EFFECTIVE DATE" means the date on which the Plan is approved by
shareholders as set forth in Section 12.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.

         "FAIR MARKET VALUE" on any given date means the last reported sale
price at which Stock is traded on such date or, if no Stock is traded on such
date, the most recent date on which Stock was traded, as reflected on the New
York Stock Exchange or, if applicable, any other national stock exchange on
which the Stock is traded. Notwithstanding the foregoing, the Fair Market Value
on the first day of the Company's initial public offering shall mean the initial
public offering price.

         "INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

         "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.

         "OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "STOCK" means the Common Stock, $.01 par value per share, of the
Company, subject to adjustments pursuant to Section 3.

         "SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the total combined voting power of all classes of
stock or other interests in one of the other corporations or entities in the
chain.

SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS

         (a) COMMITTEE. Prior to the date of the closing of the Company's
initial public offering, the Plan shall be administered by the Board. On and
after the date of the closing

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of the Company's initial public offering, the Plan shall be administered by all
of the Non-Employee Director members of the Compensation Committee of the Board,
or any other committee of not less than two Non-Employee Directors performing
similar functions, as appointed by the Board from time to time. Each member of
the Committee shall be a Disinterested Person on and after the date of the
closing of the Company's initial public offering.

         (b) POWERS OF COMMITTEE. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the officers and other employees of the Company
         and its Subsidiaries to whom Awards may from time to time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of Incentive Stock Options or Non-Qualified Stock Options
         granted to any one or more participants;

                  (iii) to determine the number of shares to be covered by any
         Award;

                  (iv) to determine and modify the terms and conditions,
         including restrictions, not inconsistent with the terms of the Plan, of
         any Award, which terms and conditions may differ among individual
         Awards and participants, and to approve the form of written instruments
         evidencing the Awards;

                  (v) to accelerate the exercisability or vesting of all or any
         portion of any Option;

                  (vi) subject to the provisions of Section 5(a)(iii), to extend
         the period in which Stock Options may be exercised; and

                  (vii) to adopt, alter and repeal such rules, guidelines and
         practices for administration of the Plan and for its own acts and
         proceedings as it shall deem advisable; to interpret the terms and
         provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.

         All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

         (a) SHARES ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 10% of the shares of Stock sold
in the Company's initial public offering. For purposes of this limitation, the
shares of Stock

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underlying any Awards which are forfeited, cancelled, reacquired by the Company,
satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock available for issuance
under the Plan so long as the participants to whom such Awards had been
previously granted received no benefits of ownership of the underlying shares of
Stock to which the Award related. Subject to such overall limitation, shares may
be issued up to such maximum number pursuant to any type or types of Award,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.

         (b) STOCK DIVIDENDS, MERGERS, ETC. In the event of a stock dividend,
stock split or similar change in capitalization affecting the Stock, the
Committee shall make appropriate adjustments in (i) the number and kind of
shares of stock or securities on which Awards may thereafter be granted, (ii)
the number and kind of shares remaining subject to outstanding Awards, and (iii)
the option or purchase price in respect of such shares. In the event of any
merger, consolidation, dissolution or liquidation of the Company, the Committee
in its sole discretion may, as to any outstanding Awards, make such substitution
or adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
Awards as it may determine and as may be permitted by the terms of such
transaction, or amend or terminate such Awards upon such terms and conditions as
it shall provide (which, in the case of the termination of the vested portion of
any Award, shall require payment or other consideration which the Committee
deems equitable in the circumstances).

         (c) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.

SECTION 4. ELIGIBILITY

         Participants in the Plan will be such full or part-time officers and
other employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Non-Employee Directors are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) below.

SECTION 5. STOCK OPTIONS

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

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         Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.

         No Incentive Stock Option shall be granted under the Plan after
November 11, 2003.

         (a) STOCK OPTIONS GRANTED TO EMPLOYEES. The Committee in its discretion
may grant Stock Options to employees of the Company or any Subsidiary. Stock
Options granted to employees pursuant to this Section 5(a) shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

                  (i) EXERCISE PRICE. The exercise price per share for the Stock
         covered by a Stock Option granted pursuant to this Section 5(a) shall
         be determined by the Committee at the time of grant but shall be not
         less than 100% of Fair Market Value on the date of grant. If an
         employee owns or is deemed to own (by reason of the attribution rules
         applicable under Section 424(d) of the Code) more than 10% of the
         combined voting power of all classes of stock of the Company or any
         Subsidiary or parent corporation and an Incentive Stock Option is
         granted to such employee, the option price shall be not less than 110%
         of Fair Market Value on the grant date.

                  (ii) GRANT OF OPTIONS IN LIEU OF CASH BONUS. Upon the request
         of an employee and with the consent of the Committee, such employee may
         elect to receive a Stock Option each calendar year in lieu of cash
         bonus to which he may become entitled during the following year
         pursuant to any other plan of the Company, but only if such employee
         makes an irrevocable election to waive receipt of all or a portion of
         such cash bonus. Such election shall be made no later than 15 days
         preceding January 1 of the calendar year in which the cash bonus would
         otherwise be paid. A Stock Option shall be granted to each employee who
         made such an irrevocable election on the date the waived cash bonus
         would otherwise be paid; provided, however, that with respect to an
         employee who is subject to Section 16 of the Act, if such grant date is
         not at least six months and one day from the date of the election, the
         grant shall be delayed until the date which is six months and one day
         from the date of the election (or the next following business day, if
         such date is not a business day). The exercise price per share shall be
         the Fair Market Value of the Stock on the date the Stock Option is
         granted. The number of shares subject to the Stock Option shall be
         determined by dividing the amount of the waived cash bonus by the Fair
         Market Value of the Stock on the date the Stock Option is granted. The
         Stock Option shall be granted for whole number of shares so determined;
         the value of any fractional share shall be paid in cash. An employee
         may revoke his election under this Section 5(a)(ii) on a prospective
         basis at any time; provided, however, that with respect to an employee
         who is subject to Section 16 of the Act, such revocation shall only be
         effective six months and one day following the date of such revocation.

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                  (iii) OPTION TERM. The term of each Stock Option shall be
         fixed by the Committee, but except as provided in Sections 5(a)(vii)
         and (viii) no Incentive Stock Option shall be exercisable more than ten
         years after the date the option is granted. If an employee owns or is
         deemed to own (by reason of the attribution rules of Section 424(d) of
         the Code) more than 10% of the combined voting power of all classes of
         stock of the Company or any Subsidiary or parent corporation and an
         Incentive Stock Option is granted to such employee, the term of such
         option shall be no more than five years from the date of grant.

                  (iv) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. Stock Options
         shall become vested and exercisable at such time or times, whether or
         not in installments, as shall be determined by the Committee at or
         after the grant date; provided, however, that Stock Options in lieu of
         cash bonus shall be exercisable immediately. The Committee may at any
         time accelerate the exercisability of all or any portion of any Stock
         Option. An optionee shall have the rights of a shareholder only as to
         shares acquired upon the exercise of a Stock Option and not as to
         unexercised Stock Options.

                  (v) METHOD OF EXERCISE. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods:

                           (A) In cash, by certified or bank check or other
                  instrument acceptable to the Committee;

                           (B) In the form of shares of Stock that are not then
                  subject to restrictions under any Company plan and that have
                  been held by the optionee for at least six months, if
                  permitted by the Committee in its discretion. Such surrendered
                  shares shall be valued at Fair Market Value on the exercise
                  date; or

                           (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company to pay
                  the purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Committee shall prescribe as a condition of such payment
                  procedure. Payment instruments will be received subject to
                  collection.

The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the Optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by

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the Company of the full purchase price for such shares and the fulfillment of
any other requirements contained in the Stock Option or applicable provisions of
laws.

                  (vi) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
         transferable by the optionee otherwise than by will or by the laws of
         descent and distribution and all Stock Options shall be exercisable,
         during the optionee's lifetime, only by the optionee.

                  (vii) TERMINATION BY DEATH. If any optionee's employment by
         the Company and its Subsidiaries terminates by reason of death, the
         Stock Option may thereafter be exercised, to the extent exercisable at
         the date of death, by the legal representative or legatee of the
         optionee, for a period of six months (or such longer period as the
         Committee shall specify at any time) from the date of death.

                  (viii) TERMINATION BY REASON OF DISABILITY.

                           (A) Any Stock Option held by an optionee whose
                  employment by the Company and its Subsidiaries has terminated
                  by reason of Disability may thereafter be exercised, to the
                  extent it was exercisable at the time of such termination, for
                  a period of twelve months (or such longer period as the
                  Committee shall specify at any time) from the date of such
                  termination of employment.

                           (B) The Committee shall have sole authority and
                  discretion to determine whether a participant's employment has
                  been terminated by reason of Disability.

                           (C) Except as otherwise provided by the Committee at
                  the time of grant, the death of an optionee during a period
                  provided in this Section 5(a)(viii) for the exercise of a
                  Non-Qualified Stock Option shall extend such period for six
                  months from the date of death.

                  (ix) TERMINATION FOR CAUSE. If any optionee's employment by
         the Company and its Subsidiaries has been terminated for Cause, any
         Stock Option held by such optionee shall terminate and be of no further
         force and effect after 30 days from the date of termination of
         employment or at the expiration of the stated term of the Option, if
         earlier.

                  (x) OTHER TERMINATION. Unless otherwise determined by the
         Committee, if an optionee's employment by the Company and its
         Subsidiaries terminates for any reason other than death, Disability, or
         for Cause, any Stock Option held by such optionee may thereafter be
         exercised, to the extent it was exercisable on the date of termination
         of employment, for three months (or such longer period as the Committee
         shall specify at any time) from the date of termination of employment
         or until the expiration of the stated term of the Option, if earlier.

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                  (xi) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the Stock with respect to which Incentive Stock Options
         granted under this Plan and any other plan of the Company or its
         Subsidiaries become exercisable for the first time by an optionee
         during any calendar year shall not exceed $100,000.

                  (xii) FORM OF SETTLEMENT. Shares of Stock issued upon exercise
         of a Stock Option shall be free of all restrictions under the Plan,
         except as otherwise provided in this Plan.

         (b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.

         (c) STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.

                  (i) AUTOMATIC GRANT OF OPTIONS. Each Non-Employee Director who
         becomes a Director of the Company on or before the date 30 days after
         the closing of the Company's initial public offering shall
         automatically be granted a Non-Qualified Stock Option to purchase 5,000
         shares of Stock on such date at a price per share equal to the greater
         of the Fair Market Value on the date of grant or $20.50. Each
         Non-Employee Director who is serving as Director of the Company on the
         fifth business day after each annual meeting of stockholders, beginning
         with the 1994 annual meeting, shall automatically be granted on such
         day a Non-Qualified Stock Option to acquire 3,000 shares of Stock.
         Except as provided in the preceding sentence, the exercise price per
         share for the Stock covered by a Stock Option granted hereunder shall
         be equal to the Fair Market Value of the Stock on the date the Stock
         Option is granted.

                  (ii) GRANT OF OPTIONS IN LIEU OF DIRECTOR'S FEES. Each
         Non-Employee Director shall receive a Non-Qualified Stock Option each
         calendar year in lieu of cash director's fees he would otherwise
         receive for such year, but only if the Non-Employee Director makes an
         irrevocable election to waive receipt of all or a portion of such cash
         director's fees. Such election shall be made during the 30-day period
         immediately preceding January 1 of a calendar year and shall be
         effective six months and one day following the date of such election. A
         Non-Qualified Stock Option shall be granted to each Non-Employee
         Director who made such an irrevocable election on each July 15 and
         January 15 (or the next following business day, if such date is not a
         business day) with respect to the waived amount of director's fees
         earned for the six-month period ending June 30 and December 31,

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         respectively. The exercise price per share shall be the Fair Market
         Value of the Stock on the date the Stock Option is granted. The number
         of shares subject to the Stock Option shall be determined by dividing
         the amount of the waived directors' fees for the applicable six-month
         period by the Fair Market Value of the Stock on the date the Stock
         Option is granted. The Stock Option shall be granted for whole number
         of shares so determined; the value of any fractional share shall be
         paid in cash. A Non-Employee Director may revoke his election under
         this Section 5(c)(ii) at any time; provided, however, that such
         revocation shall only be effective six months and one day following the
         date of such revocation.

                  (iii) EXERCISE; TERMINATION; NON-TRANSFERABILITY.

                           (A) Except as provided in Section 10, no Option
                  granted under Section 5(c)(i) may be exercised before the
                  first anniversary of the date upon which it was granted;
                  provided, however, that any Option so granted shall become
                  exercisable upon the termination of service of the
                  Non-Employee Director because of Disability or death. All
                  Options granted under Section 5(c)(ii) shall be immediately
                  exercisable. No Option issued under this Section 5(c) shall be
                  exercisable after the expiration of ten years from the date
                  upon which such Option is granted.

                           (B) The rights of a Non-Employee Director in an
                  Option granted under Section 5(c) shall terminate six months
                  after such Director ceases to be a Director of the Company or
                  the specified expiration date, if earlier; provided, however,
                  that if the Non-Employee Director ceases to be a Director for
                  Cause, the rights shall terminate immediately on the date on
                  which he ceases to be a Director.

                           (C) No Stock Option granted under this Section 5(c)
                  shall be transferable by the optionee otherwise than by will
                  or by the laws of descent and distribution, and such Options
                  shall be exercisable, during the optionee's lifetime only by
                  the optionee. Any Option granted to a Non-Employee Director
                  and outstanding on the date of his death may be exercised by
                  the legal representative or legatee of the optionee for a
                  period of six months from the date of death or until the
                  expiration of the stated term of the option, if earlier.

                           (D) Options granted under this Section 5(c) may be
                  exercised only by written notice to the Company specifying the
                  number of shares to be purchased. Payment of the full purchase
                  price of the shares to be purchased may be made by one or more
                  of the methods specified in Section 5(a)(v). An optionee shall
                  have the rights of a shareholder only as to shares acquired
                  upon the exercise of a Stock Option and not as to unexercised
                  Stock Options.

                  (iv) LIMITED TO NON-EMPLOYEE DIRECTORS. The provisions of this
         Section 5(c) shall apply only to Options granted or to be granted to
         Non-Employee

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         Directors, and shall not be deemed to modify, limit or otherwise apply
         to any other provision of this Plan or to any Option issued under this
         Plan to a participant who is not a Non-Employee Director of the
         Company. To the extent inconsistent with the provisions of any other
         Section of this Plan, the provisions of this Section 5(c) shall govern
         the rights and obligations of the Company and Non-Employee Directors
         respecting Options granted or to be granted to Non-Employee Directors.
         The provisions of this Section 5(c) which affect the price, date of
         exercisability, option period or amount of shares under an option shall
         not be amended more than once in any six-month period, other than to
         comport with changes in the Code or ERISA.

SECTION 6. TAX WITHHOLDING

         (a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) PAYMENT IN SHARES. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Stock to be issued pursuant to any Award a
number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due. With respect to any participant who is
subject to Section 16 of the Act, the following additional restrictions shall
apply:

                  (A) the election to satisfy tax withholding obligations
         relating to an Award in the manner permitted by this Section 6(b) shall
         be made either (1) during the period beginning on the third business
         day following the date of release of quarterly or annual summary
         statements of revenues of the Company and ending on the twelfth
         business day following such date, or (2) at least six months prior to
         the date as of which the receipt of such an Award first becomes a
         taxable event for Federal income tax purposes;

                  (B) such election shall be irrevocable;

                  (C) such election shall be subject to the consent or
         disapproval of the Committee; and

                  (D) the Stock withheld to satisfy tax withholding, if granted
         at the discretion of the Committee, must pertain to an Award which has
         been held by the participant for at least six months from the date of
         grant of the Award.

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Notwithstanding the foregoing, the first sentence of Section 6(b)(A) shall not
be applicable until the Company has been subject to the reporting requirements
of the Act for at least a year prior to the election and has filed all reports
and statements required to be filed pursuant to that Section for that year.

SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 8. AMENDMENTS AND TERMINATION

         The Board may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were
then initially granted under this Plan) for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder's consent. To the extent
required by the Code to ensure that Options granted hereunder qualify as
Incentive Stock Options and to the extent required by the Act to ensure that
Awards and Options granted under the Plan are exempt under Rule 16b-3
promulgated under the Act, Plan amendments shall be subject to approval by the
Company's stockholders.

SECTION 9. STATUS OF PLAN

         With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards.

SECTION 10. CHANGE OF CONTROL PROVISIONS

         Upon the occurrence of a Change of Control as defined in this Section
10:

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         (a) Each Stock Option shall automatically become fully exercisable
notwithstanding any provision to the contrary herein.

         (b) "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:

                  (i) any "PERSON," as such term is used in Sections 13(d) and
         14(d) of the Act (other than the Company, any of its Subsidiaries, any
         trustee, fiduciary or other person or entity holding securities under
         any employee benefit plan 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), directly or indirectly, of securities of the Company representing
         30% or more of either (A) the combined voting power of the Company's
         then outstanding securities having the right to vote in an election of
         the Company's Board of Directors ("Voting Securities") or (B) the then
         outstanding shares of Stock of the Company (in either such case other
         than as a result of acquisition of securities directly from the
         Company); or

                  (ii) persons who, as of the date of the closing of the
         Company's initial public offering, constitute the Company's Board of
         Directors (the "Incumbent Directors") cease for any reason, including,
         without limitation, as a result of a tender offer, proxy contest,
         merger or similar transaction, to constitute at least a majority of the
         Board, provided that any person becoming a director of the Company
         subsequent to the Closing of the Company's initial public offering
         whose election or nomination for election was approved by a vote of at
         least a majority of the Incumbent Directors shall, for purposes of this
         Plan, be considered an Incumbent Director; or

                  (iii) the stockholders of the Company shall approve (A) any
         consolidation or merger of the Company or any Subsidiary where the
         stockholders of the Company, immediately prior to the consolidation or
         merger, would not, immediately after the consolidation or merger,
         beneficially own (as such term is defined in Rule 13d-3 under the Act),
         directly or indirectly, shares representing in the aggregate 30% of the
         voting stock of the corporation issuing cash or securities in the
         consolidation or merger (or of its ultimate parent corporation, if
         any), (B) any sale, lease, exchange or other transfer (in one
         transaction or a series of transactions contemplated or arranged by any
         party as a single plan) of all or substantially all of the assets of
         the Company or (C) any plan or proposal for the liquidation or
         dissolution of the Company.

         Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of Stock beneficially owned by any person to
30% or more of the shares of Stock then outstanding or (y) 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

                                       12
<PAGE>

outstanding Voting Securities; PROVIDED, HOWEVER, that if any person referred to
in clause (x) or (y) of 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 OF CONTROL" shall be deemed to have occurred for purposes of the
foregoing clause (i).

SECTION 11. GENERAL PROVISIONS

         (a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
may require each person acquiring shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

         (b) DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

         (c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

SECTION 12. EFFECTIVE DATE OF PLAN

         The Plan shall become effective upon approval by the holders of a
majority of the shares of capital stock of the Company present or represented
and entitled to vote at a meeting of stockholders. Subject to such approval by
the stockholders, and to the requirement that no Stock may be issued hereunder
prior to such approval, Stock Options and other Awards may be granted hereunder
on and after adoption of the Plan by the Board.

SECTION 13. GOVERNING LAW

         This Plan shall be governed by Maryland law except to the extent such
law is preempted by federal law.

                                       13<PAGE>

                                                                   EXHIBIT 10.18

                             AVALON PROPERTIES, INC.

                           1995 ANNUAL INCENTIVE PLAN

         1. PURPOSE. The purpose of the Avalon Properties, Inc. (the "Company")
Annual Incentive Plan (the "Plan ") is to enhance the Company's ability to
attract, motivate, reward, and retain key employees, to strengthen their
commitment to the success of the Company and to align their interests with those
of the Company's shareholders by providing additional compensation to designated
key employees of the Company based on the achievement of performance objectives.
To this end, the Plan provides a means of rewarding participants based on the
performance of the Company.

         2. DEFINITIONS.

         "Award" means a Threshold Award, Target Award or Maximum Award, any of
which may not be a Code Section 163(m) Award, paid pursuant to this Plan.

         "Award Agreement" means the agreement entered into between the Company
and a participant, setting forth the terms and conditions applicable to an award
granted to the participant.

         "Code" means the Internal Revenue Code of 1986, and any successor
statute, and the regulations promulgated thereunder, as it or they may be
amended from time to time.

         "Code Section 162(m) Aware" means an Award intended to satisfy the
requirements of Code Section 162(m) and designated as such in the Award
Agreement.

         "Covered Employee" means a Covered Employee within the meaning of Cede
Section 162(m)(3).

         "FFO" means ______________.

         "Maximum Award" means the amount payable for achieving [150%] of the
Performance Goals for the Performance Period.

         "Performance Criteria" means one or more of the following criteria
selected by, and as further defined by, the Committee each Year to measure
achievement of Performance Goals for a Year:

                  1.       A.      [FFO Growth];

                           B.      [Stock Price]; and

                           C.      [FFO Multiple].

                  2. Any other criteria related to performance of the Company,
         individual performance or any other category of performance selected by
         the Committee.

                                       1
<PAGE>

         "Performance Goals" are the performance objectives applicable to each
Performance Period with respect to Performance Criteria established by the
Committee for the Company for the purpose of determining whether, and the extent
to which, awards under the Plan will be made for that Performance Period.

         "Performance Period" means each three-year period commencing on January
1 in any Year under the Plan and ending on December 31 in the third succeeding
Year.

         "Target Award" means the amount payable for achieving 100% of the
Performance Goals for the Performance Period.

         "Threshold Award" means the amount payable for achieving [50%] of the
Performance Goals for the Performance Period.

         "Year" means the Company's fiscal year.

         3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee") of the Company's Board of Directors (the "Board").

         The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated. Without limiting the generality of the foregoing, the Committee will
be entitled, among other things, to make non-uniform and selective
determinations and to establish non-uniform and selective Performance Criteria,
Performance Goals, the weightings thereof, and Threshold, Target and Maximum
Awards. Whenever the Plan refers to a determination being made by the Committee,
it shall be deemed to mean a determination by the Committee in its sole
discretion.

         It is the intent of the Company that this Plan and Code Section 162(m)
Awards hereunder satisfy and be interpreted in a manner that satisfy, in the
case of participants who are or may be Covered Employees, the applicable
requirements of Code Section 162(m), including the administration requirement of
Code Section 162(m)(4)(C), so that the Company's tax deduction for remuneration
in respect of such an award for services performed by such Covered Employees is
not disallowed in whole or in part by the operation of such Code section. If any
provision of this Plan would otherwise frustrate or conflict with the intent
expressed in this Article, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, [such provision shall be
deemed void as applicable to Covered Employees with respect to whom such
conflict exists.] Nothing herein shall be interpreted so as to preclude a
participant who is or may be a Covered Employee from receiving an award that is
not a Code Section 162(m) Award.

         The Committee shall have the discretion, subject to the limitations
described in Article 4 below relating to Code 162(m) Awards, to (a) determine
the Plan participants; (b) determine who will be treated as a Covered Employee;
(c) determine Performance Criteria and Performance Goals for each Performance
Period within the time period required by Code Section 162(m); (d) establish an
Award Schedule; (e) establish performance thresholds for payment of any awards;
(f) determine whether and to what extent the Performance Goals have been met or
exceeded; (g) make discretionary awards as may be appropriate in order to assure
the proper motivation and retention of personnel and attainment of business
goals; (h) to make adjustments to Performance Criteria, Performance Goals and
thresholds; and (i) determine the aggregate number of shares of the

                                       2
<PAGE>

Company's common stock, par value $.01 per share ( "Common Stock") available for
distribution as awards for each Performance Period. Subject to the provisions of
the Plan, the Committee shall be authorized to interpret the Plan, the make,
amend and rescind such rules as it deems necessary for the proper administration
of the Plan, to make all other determination necessary or advisable for the
administration of the Plan and to correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems desirable to carry the Plan into effect. Any action taken or
determination made by the Committee shall be conclusive on all parties.

         4. CODE SECTION 162(m) AWARDS. A participant who is or may be a Covered
Employee may receive a Code Section 162(m) Aware and/or an award that is not a
Code Section 162(m) Award. The Committee will determine who is to be treated as
a Covered Employee, determine who is eligible to be granted Code Section 162(m)
Awards and establish the Target Awards and Award Schedules for Code Section
162(m) Awards. Such determinations will be made in a timely manner, as required
by Code Section 162(m). Each award shall be evidenced by an Award Agreement
setting forth the Award Schedule and such other terms and conditions applicable
to the award, as determined by the Committee, not inconsistent with the terms of
the Plan. Notwithstanding anything else in this Plan to the contrary, the
aggregate maximum amount payable under the Plan to a Covered Employee with
respect to a Performance Period shall be [________]. In the event of any
conflict between an Award Agreement and the Plan, the terms of the Plan shall
govern.

         5. ALL AWARDS. Performance Criteria and Performance Goals will be
established by the Committee for each Performance Period, which, in the case of
Performance Criteria and Performance Goals for Covered Persons, will be
established within the time period required by Code Section 162(m). The
Committee also shall determine the extent to which each Performance Criteria
shall be weighted in determining awards. The Committee will establish an Award
Schedule for each award to each participant setting forth the Threshold, Target
and Maximum Awards for such participant payable at specified levels of
performance, based on the Performance Goal for each of the Performance Criteria
and the weighting established for such criteria. The Committee may vary the
Performance Criteria, performance Goals and weightings from participant to
participant, award to award and from Performance Period to Performance Period.
Notwithstanding the foregoing, the Performance Criteria with respect to a Code
Section 162(m) Award shall be limited to the Performance Criteria set forth in
Article 2.g.1.

         6. ELIGIBLE PERSONS. Any key employee of the Company who the Committee
determines, in its discretion, is responsible for producing profits for the
Company or otherwise has a significant effect on the operations of the Company
shall be eligible to participate in the Plan. Committee members are not eligible
to participate in the Plan. No employee shall have a right (a) to be selected
under the Plan, or (b) having once been selected, to (i) be selected again or
(ii) continue as an employee.

         7. AMOUNT AVAILABLE FOR AWARDS. The amount available for awards (the
"Bonus Pool") for each Performance Period shall be determined by the Committee.
The Bonus Pool created in respect of any fiscal year shall be allocated among
Plan participants in the manner established by the Committee prior to the
beginning of such fiscal year; provided, however, that the Committee in its sole
discretion may reduce at any time, including during or following the fiscal
year, the amount of the bonus payable to any or all participants in respect of
such fiscal year.

         8. DETERMINATION OF AWARDS. The Committee shall select the participants
and determine which participants, if any, are to be treated as Covered Employees
and which awards, if

                                       3
<PAGE>

any, are to be Code Section 162(m) Awards. Except in the case of Code Section
162(m) Awards, the Committee shall determine the actual award to each
participant for each Performance Period, taking into consideration, as it deems
appropriate, the performance for such Performance Period of the Company in
relation to the Performance Goals theretofore established by the Committee, and
the performance of the respective participants during such Performance Period.
The fact that an employee is selected as a participant for any Performance
Period shall not mean that such employee necessarily will receive an award for
that Performance Period. Except in the case of Code Section 162(m) Awards,
notwithstanding any other provisions of the Plan to the contrary, the Committee
may make discretionary awards as it sees fit under the Plan.

         A Code Section 162(m) Award payable to any Covered Employee may range
from zero (0) to [one hundred and fifty (150)] percent of the Covered Employee's
Target Award, depending upon whether, or the extent to which, the Performance
Goals with respect to such Code Section 162(m) Award have been achieved. Actual
Code Section 162(m) Awards will be derived from the Award Schedule based on the
level of performance achieved. All such determinations regarding the achievement
of Performance Goals and the determination of actual Code Section 162(m) Awards
will be made by the Committee; [provided, however, that with respect to a Code
Section 162(m) Award, the Committee may, in its sole discretion, decrease, but
not increase, the amount of the Award that otherwise would be payable].

         9. DISTRIBUTION OF AWARDS. Awards under the Plan for a particular
Performance Period shall be paid in shares of Common Stock as soon as
practicable after the end of that Performance Period. To the extent that the
Company's tax deduction for remuneration in respect of the payment of an Award
to a Covered Employee would be disallowed under Code Section 162(m) by reason of
the fact that such Covered Employee's applicable employee remuneration, as
defined in Code Section 162(m)(4), either exceeds or, if such Award were paid,
would exceed the $1,000,000 limitation in Code Section 162(m)(1), the Committee
may, in its sole discretion, defer the payment of such Award, but only to the
extent that, and for so long as, the Company's tax deduction in respect of the
payment thereof would be so disallowed; provided that the Committee may,
nevertheless, accelerate the payment of previously deferred Awards if it
determines that the amount of the tax deduction that would be disallowed is not
significant. Deferred Awards will be deemed credited with interest at a rate
determined by the Committee from time to time.

         10. TERMINATION OF EMPLOYMENT. A participant must be actively employed
by the Company on the date his or her award is determined by the Committee (the
"Payment Date") in order to be entitled to payment of any award for that
Performance Period. [In the event active employment of a participant shall be
terminated before the Payment Date for any reason other than discharge for cause
or voluntary resignation, such participant may receive such portion of his or
her award for the Year as may be determined by the Committee.] A participant
discharged for cause shall not be entitled to receive any award for the
Performance Period. A participant who voluntarily resigns prior to the Payment
Date shall not be entitled to receive any award for the Performance Period
unless otherwise determined by the Committee.

         11. MISCELLANEOUS.

                  a. NONASSIGNABILITY. No award will be assignable or
         transferable without the written consent of the Committee in its sole
         discretion, except by will or by the laws of descent and distribution.

                                       4
<PAGE>

                  b. WITHHOLDING TAXES. Whenever payments under the Plan are to
         be made, the Company will withhold therefrom an amount sufficient to
         satisfy any applicable governmental withholding tax requirements
         related thereto.

                  c. AMENDMENT OR TERMINATION OF THE PLAN. The Board of
         Directors of the Company may at any time amend, suspend or discontinue
         the Plan, in whole or in part. The Committee may at any time alter or
         amend any or all Award Agreements under the Plan to the extent
         permitted by law. No such action may, however, without approval of the
         stockholders of the Company, be effective with respect to any Code
         Section 162(m) Award to any Covered Employee if such approval is
         required by Code Section 162(m)(4)(C).

                  d. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan
         will be deemed in any way to limit or restrict the Company from making
         any award or payment to any person under any other plan, arrangement or
         understanding, whether now existing or hereafter in effect.

                  e. PAYMENTS TO OTHER PERSONS. If payments are legally required
         to be made to any person other than the person to whom any amount is
         available under the Plan, payments will be made accordingly. Any such
         payment will be a complete discharge of the liability of the Company.

                  f. LIMITS OF LIABILITY.

                           1. Any liability of the Company to any participant
                  with respect to an award shall be based solely upon
                  contractual obligations created by the Plan and the Award
                  Agreement.

                           2. Neither the Company, nor any member of its Board
                  of Directors or the Committee, nor any other person
                  participating in any determination of any question under the
                  Plan, or in the interpretation, administration or application
                  of the Plan, shall have any liability to any party for any
                  action taken or not taken in good faith under the Plan.

                  g. RIGHTS OF EMPLOYEES.

                           1. Status as an employee eligible to receive an award
                  under the Plan shall not be construed as a commitment that any
                  award will be made under this Plan to such employee or to
                  other such employees generally.

                           2. Nothing contained in this Plan or in any Award
                  Agreement (or in any other documents related to this Plan or
                  to any Award Agreement) shall confer upon any employee or
                  participant any right to continue in the employ or other
                  service of the Company or constitute any contract or limit in
                  any way the right of the Company to change such person's
                  compensation or other benefits or to terminate the employment
                  or other service of such person with or without cause.

                  h. SECTION HEADINGS. The section headings contained herein are
         for the purposes of convenience only, and in the event of any conflict,
         the text of the Plan, rather than the section headings, will control.

                                       5
<PAGE>

                  i. INVALIDITY. If any term or provision contained herein will
         to any extent be invalid or unenforceable, such term or provision will
         be reformed so that it is valid, and such invalidity or
         unenforceability will not affect any other provision or part thereof.

                  j. APPLICABLE LAW. The Plan, the Award Agreements and all
         actions taken hereunder or thereunder shall be governed by, and
         construed in accordance with, the laws of the State of California
         without regard to the conflict of law principles thereof.

                  k. EFFECTIVE DATE. The Plan shall be effective as of
         ___________, 1995.

                  l. SHAREHOLDER APPROVAL. The adoption of this Plan is subject
         to the approval of the shareholders of the Company.

                                       6

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