Exhibit 10.1

 

[Final Award Terms for Performance Plan Awards-2013]

 

AWARD TERMS OF

PERFORMANCE-BASED RESTRICTED STOCK UNITS

 

GRANTED UNDER THE

AVALONBAY COMMUNITIES, INC.

2009 STOCK OPTION AND INCENTIVE PLAN

 

(As approved by the Board of Directors and its Compensation Committee in
February 2013)

 

Introduction

 

You have been granted performance-based restricted stock units under the
AvalonBay Communities, Inc. 2009 Stock Option and Incentive Plan (as the same
has or may be amended, the “Plan”), subject to the following Award Terms. This
grant is also subject to the terms of (i) your Personal Performance Award
Agreement Exhibit (“Personal Exhibit”), as further explained herein, (ii) the
attached form of Restricted Stock Award Agreement, (iii) the attached forms of
Employee Stock Option Agreements, and (iv) the Plan, which is hereby
incorporated by reference. To the extent that an Award Term conflicts with the
Plan, the Plan shall govern.

 

 

 

Type of Award

 

You are being awarded performance-based restricted stock units (the “Units”). 
Units are bookkeeping entries only, and you shall have no rights as a
stockholder of the Company, and no dividend and voting rights, with respect to
the Units, nor shall a notional amount be reinvested in respect of “phantom
dividends” for the purpose of crediting your account with additional Units.

 

 

 

Certain Principal
Terms

 

 

Your Personal Exhibit sets forth certain principal terms about the Units awarded
for the applicable Performance Period, such as the performance metrics which
will apply to determine the final number of Units earned. The terms included in
your Personal Exhibit include the following:

 

 

 

 

 

·      Date of Grant

 

 

·      Number of Target Units Awarded

 

 

·      Performance Period

 

 

·      Total Shareholder Return Performance Metrics

 

 

·      Summary Terms of Restricted Stock

 

 

·      Summary Terms of Employee Stock Options

 

 

 

No Transfers

 

You may not sell, gift, or otherwise transfer or dispose of any of the Units.

 

 

 

Performance Metrics

 

If you remain an active employee of AvalonBay from the Date of Grant through the
last day of the Performance Period, then the number of Units you will earn at
the end of the Performance Period will be based upon the performance of the
Company’s Total Shareholder Return over the Performance Period as described in
your Personal Exhibit.

 

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The Company’s Total Shareholder Return represents the change in the value of an
investment in one share of AvalonBay common stock over the Performance Period,
expressed as a percentage, assuming the following:

 

 

 

 

 

Beginning Stock Price: average closing price of a share of AvalonBay common
stock over the 20 trading days immediately prior to the first day of the
Performance Period.

 

 

 

 

 

Ending Stock Price: average closing price of a share of AvalonBay common stock
over the last 20 trading days of the Performance Period.

 

 

 

 

 

Dividends reinvested in additional shares of AvalonBay common stock on the ex
dividend date for such dividend at the closing price of a share of AvalonBay
common stock.

 

 

 

 

 

If the Company’s Total Shareholder Return is measured on a relative basis
against an index, the Total Shareholder Return of the index will be measured by
using a 20 trading day average of the beginning and ending price or level of the
index.

 

 

 

 

 

The Compensation Committee of the Board of Directors (the “Compensation
Committee”), as promptly as practicable (but in no event later than 60 days)
following the conclusion of the Performance Period, shall determine (i) the
performance of the Company’s Total Shareholder Return over the Performance
Period as compared against the Performance Metrics established for the period,
and (ii)  the actual number of Units that are earned by you, which shall be a
percentage (from zero to 200%) of the Target Units you are awarded at the
beginning of the Performance Period. You shall forfeit any portion of this Award
that is not earned upon the conclusion of the Performance Period (i.e., any
Target Units you are awarded that are in excess of the number of Units earned at
the end of the Performance Period, as determined by the Compensation Committee,
shall be forfeited).

 

 

 

Forfeiture for
Termination of
Employment

 

 

 

In the event your employment terminates for any reason during the Performance
Period, whether with or without cause, or by reason of death or disability or
your voluntary departure or retirement, you shall forfeit all Units and none of
the Units shall be earned.

 

 

 

Leaves of
Absence

 

 

In the event that you take a leave of absence during the Performance Period,
then, unless prohibited by law, the Company may adjust, in its sole discretion
and up to a full forfeiture, the percentage of Units that are earned hereunder
to equitably reflect such absence. Without limiting the foregoing, it is noted
that such adjustment may be made by prorating the number of Units that would
otherwise be earned without a leave of absence by the portion of the year worked
without a leave of absence during the last year of the Performance Period (e.g.,
if nine months are worked during the last year of the Performance Period, there
may be a 25% downward adjustment in the percentage of Units that are earned).

 

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Sale Event

 

If a Sale Event occurs during the Performance Period, then

 

 

 

 

 

(i) if more than 12 months remain in the Performance Period, Units with respect
to such Performance Period shall be forfeited unless the successor makes other
arrangements for the continuation of the Units, and

 

 

 

 

 

(ii) if less than 12 months remains in the Performance Period, then (x) such
Performance Period shall be deemed complete on the date of completion of the
Sale Event, (y) achievement against the Performance Metrics for such shortened
Performance Period shall be determined in good faith by the Compensation
Committee (without any proration on account of the shortened period), and (z) a
holder of such Units shall receive vested shares of common stock for any Units
so earned.

 

 

 

Issuance of Restricted

 

 

Stock and Options

 

 

Following the

 

 

Performance Period

 

Following the end of the Performance Period, as of the date of the Compensation
Committee’s final determination (the “Determination Date”) of (i) the Company’s
Total Shareholder Return for the Performance Period and how it compared to the
Performance Metrics and (ii) the number of Units earned by you, the earned
portion of this Award shall be settled with the issuance to you of Restricted
Shares of AvalonBay Common Stock and (if you so elected) an award of Employee
Stock Options as described below:

 

 

 

 

 

In settlement of the Units that you may earn at the completion of the
Performance Period, you shall receive either

 

 

 

 

 

(a) one share of Restricted Stock for each Unit earned, subject to the vesting
and other terms summarized in your Personal Performance Award Agreement
Exhibit and in the form of Restricted Stock Agreement attached hereto as
Exhibit A, provided, however that if before the end of the Performance Period
you make an Option Election as defined below, then you shall receive instead

 

 

 

 

 

(b) 0.75 share of Restricted Stock for each Unit earned, on the terms described
in the preceding clause (a), plus the Option Number of employee stock options,
subject to the vesting and other terms summarized in your Personal Performance
Award Agreement Exhibit and in the form of Non-Qualified Employee Stock Option
or Incentive Stock Option attached hereto as Exhibit B-1 or Exhibit B-2.

 

 

 

 

 

An Option Election means an irrevocable election, made before the end of the
Performance Period and by such time, on such form and with such delivery as the
Company may provide, pursuant to which you elect to receive employee stock
options in lieu of 25% of the shares of Restricted Stock you would otherwise
receive in settlement of your earned Units.

 

 

 

 

 

The Option Number means a number of employee stock options to be delivered to
you determined as follows: [(the closing price of a share of AvalonBay common
stock on

 

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the Determination Date) x (25% of the Units earned)] divided by the value of an
employee stock option as of the last day of the Performance Period as determined
by the Company consistent with past practice. Any employee stock options so
issued shall have an exercise price equal to the closing price of AvalonBay
common stock on the Determination Date.

 

 

 

Notices

 

Any notice to be given under the terms of this Award Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to you shall be addressed to you at your address as set forth in the
Company’s records. Either party may hereafter designate a different address for
notices to be given to it or him or her.

 

 

 

Titles

 

Titles and captions are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Award Agreement.
Capitalized terms used but not defined herein shall have the respective meanings
ascribed thereto in the Plan or as the context otherwise reasonably indicates.

 

 

 

Amendment

 

This Award Agreement may be amended only by a writing executed by the parties
hereto which specifically states that it is amending this Award Agreement.

 

 

 

Governing Law

 

The laws of the State of Maryland shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Award Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

 

 

 

Data Privacy Consent

 

In order to administer the Plan and this Award Agreement and to implement or
structure future equity grants, the Company, its subsidiaries and affiliates and
certain agents thereof (together, the “Relevant Companies”) may process any and
all personal or professional data, including but not limited to Social Security
or other identification number, home address and telephone number, date of birth
and other information that is necessary or desirable for the administration of
the Plan and/or this Award Agreement (the “Relevant Information”). By entering
into this Award Agreement, you (i) authorize the Company to collect, process,
register and transfer to the Relevant Companies all Relevant Information;
(ii) waive any privacy rights you may have with respect to the Relevant
Information; (iii) authorize the Relevant Companies to store and transmit such
information in electronic form; and (iv) authorize the transfer of the Relevant
Information to any jurisdiction in which the Relevant Companies consider
appropriate. You shall have access to, and the right to change, the Relevant
Information. Relevant Information will only be used in accordance with
applicable law.

 

 

 

Electronic Delivery

 

The Company may, in its sole discretion, decide to deliver any documents related
to current or future participation in the Plan by electronic means. You hereby
consent to receive such documents by electronic delivery and agree to
participate in the Plan through an on-line or electronic system established and
maintained by the Company or a third party designated by the Company. By
electronically accepting the Award Agreement and participating in the Plan, you
agree to be bound by the terms and conditions in the Plan and this Award
Agreement.

 

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Non-Solicitation

 

By accepting an award of Units, you agree that, for a period of at least 12
months following your termination of employment with the Company for any reason,
you will not, without the prior written consent of the Company, solicit or
attempt to solicit for employment with or on behalf of any other person, firm or
entity any employee of the Company or any of its affiliates or any other 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 such affiliates.

 

 

 

Recoupment Policy

 

The Company’s Board of Directors has adopted a Policy for Recoupment of
Incentive Compensation (the “Recoupment Policy”), which may be amended from time
to time and is available on the Company’s website at www.AvalonBay.com/investors
under “Corporate Governance Documents”. By accepting an award of Units, you
agree that you have had an opportunity to review the Recoupment Policy and
further agree to be bound by the terms of the Recoupment Policy, including
without limitation all provisions relating to the recoupment of Incentive
Compensation as defined in the Recoupment Policy.

 

 

 

Counterparts

 

This Award Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

 

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[Exhibit A -Form of Restricted Stock Agreement]

 

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[Employee Restricted Stock Agreement for Perf Award Exhibit - Final]

 

AVALONBAY COMMUNITIES, INC.
STOCK GRANT AND RESTRICTED STOCK AGREEMENT

 

Pursuant to the terms of the AvalonBay Communities, Inc. 2009 Stock Option and
Incentive Plan (the “Plan”), in consideration for services rendered and to be
rendered to AvalonBay Communities, Inc. (the “Company”) and for other good and
valuable consideration, the Company is issuing to the Employee named in the
Grant Award Acceptance contemporaneously herewith the Shares identified in the
Grant Award Acceptance, upon the terms and conditions set forth herein and in
the Restricted Stock Agreement Terms (the “Terms”) which are attached hereto and
incorporated herein in their entirety.  Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Plan or in the
Terms, as applicable.

 

Vesting Schedule:                     Subject to the provisions of the Terms and
the discretion of the Company to accelerate the vesting schedule, the Employee’s
ownership interest in the Shares shall vest, and the status of the Shares as
Restricted Stock and all Restrictions with respect to the Shares shall
terminate, in accordance with the following schedule of events:  33.3% on
March 1 of the first year following the year of grant (as set forth in the Grant
Award Acceptance), 33.3% on March 1 of the second year following the year of
grant, and 33.4% on March 1 of the third year following the year of grant.(1)

 

The Shares shall also vest upon the occurrence of the following events:

 

Termination of the Employee’s Employment by the Company, other than for Cause

 

100% of the Award

The death or Disability of the Employee

 

100% of the Award

The Employee’s Retirement

 

100% of the Award

If earlier than any of the above events, a Sale Event

 

100% of the Award

 

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*or, if fewer, all Restricted Shares

 

The Administrator’s determination of the reason for termination of the
Employee’s employment shall be conclusive and binding on the Employee and his or
her representatives or legatees.

 

Additional Terms/Acknowledgements: The undersigned Employee acknowledges receipt
of, and understands and agrees to, this Stock Grant and Restricted Stock
Agreement, including, without limitation, the Terms.  Employee further
acknowledges that as of the Award Date, this Stock Grant and Restricted Stock
Agreement, including, without limitation, the Terms, sets forth the entire
understanding between Employee and the Company regarding the stock grant
described herein and supersedes all prior oral and written agreements on that
subject.

 

ATTACHMENT:  Restricted Stock Agreement Terms

 

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(1)  For Performance Award granted in February 2013 maturing on December 31,
2013, the vesting schedule is 15% on March 1 of the year of grant, 42.5% on
March 1 of the first year following the year of grant, and 42.5% on March 1 of 
the second year following the year of grant.

 

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AVALONBAY COMMUNITIES, INC.

 

RESTRICTED STOCK AGREEMENT TERMS

 

ARTICLE I

 

DEFINITIONS

 

The following terms used below in this Agreement shall have the meaning
specified below unless the context clearly indicates to the contrary. 
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Plan.

 

Section 1.1 — Cause

 

“Cause” shall mean a vote of the Board resolving that the Employee should be
dismissed as a result of (i) any material breach by the Employee of any
agreement to which the Employee and the Company are parties, (ii) any act (other
than retirement) or omission to act by the Employee which may have a material
and adverse effect on the business of the Company or any Subsidiary or on the
Employee’s ability to perform services for the Company or any Subsidiary,
including, without limitation, the commission of any crime (other than ordinary
traffic violations), or (iii) any material misconduct or neglect of duties by
the Employee in connection with the business or affairs of the Company or any
Subsidiary.

 

Section 1.2 — Common Stock

 

“Common Stock” shall mean the common stock of the Company, $.01 par value.

 

Section 1.3 — Disability

 

“Disability” shall mean the Employee’s inability to perform his normal required
services for the Company and its Subsidiaries for a period of six consecutive
months by reason of the individual’s mental or physical disability, as
determined by the Committee in good faith in its sole discretion.

 

Section 1.4  — Restricted Stock

 

“Restricted Stock” shall mean the Shares issued under this Agreement for as long
as such shares are subject to the Restrictions (as hereinafter defined) imposed
by this Agreement.

 

Section 1.5 - Restrictions

 

“Restrictions” shall mean the restrictions set forth in Article III of this
Agreement.

 

Section 1.6 - Retirement

 

“Retirement” shall mean the termination of the Employee’s employment (and other
business relationships) with the Company and its Subsidiaries, other than for
Cause, following the date on which the sum of the following equals or exceeds 70
years: (i) the number of full months of the Employee’s employment and other
business relationships with the Company and any predecessor Company and (ii) the
Employee’s age on the date of termination (i.e., a person whose age is 55 years,
6 months and who has worked at the Company for 14 years, 6 months meets the 70
years requirement); provided that:

 

(x)                                 the Employee’s employment by (or other
business relationships with) the Company and any predecessor company of the
Company have continued for a period of at least 120 continuous full months at
the time of termination and, on the date of termination, the Employee is at
least 50 years old;

 

(y)                                 in the case of termination of employment,
the Employee gives at least six months’ prior written notice to the Company of
his or her intention to retire; and

 

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(z)                                  in the case of termination of employment,
the Employee enters into a “Non-Compete and Non-Solicitation Agreement,” as
hereinafter defined, and a general release of all claims in a form that is
reasonably satisfactory to the Company.

 

As used in the foregoing sentence, “Non-Compete and Non-Solicitation Agreement”
shall mean a written agreement between the Employee and the Company providing
that, for a period of at least 12 months following the Employee’s termination of
employment with the Company (A) the Employee shall not, without the prior
written consent of the Company, 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, and (B) the
Employee shall not, without the prior written consent of the Company, solicit or
attempt to solicit for employment with or on behalf of any Competing Enterprise
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.  “Competing Enterprise,” for purposes of this section, shall
mean any person, corporation, partnership, venture or other entity which is
engaged in the business of managing, owning, leasing, or joint-venturing
multifamily rental real estate within 30 miles of multifamily rental real estate
owned or under management by the Company or its affiliates.  “Restricted
Activities,” for purposes of this section, shall mean executive, managerial,
directorial, administrative, strategic, business development or supervisory
responsibilities and activities relating to any aspects of multifamily rental
real estate ownership, management, multifamily rental real estate franchising,
and multifamily rental real estate joint-venturing.

 

Section 1.7 - Secretary

 

“Secretary” shall mean the secretary of the Company.

 

ARTICLE II

 

RESTRICTED STOCK

 

Section 2.1 - Restricted Stock

 

Any shares of Common Stock granted pursuant to this Agreement which vest on a
date other than the Award Date shall be considered Restricted Stock for purposes
of this Agreement and shall be subject to the Restrictions until such time or
times and except to the extent that the Employee’s ownership interest in Shares
vests in accordance with the Vesting Schedule set forth on the first page of
this Agreement.

 

Section 2.2 - Escrow

 

If the Restricted Stock is certificated, the Secretary or such other escrow
holder as the Company may from time to time appoint shall retain physical
custody of the certificates representing Restricted Stock, until all of the
Restrictions expire or shall have been removed; provided, however, that in no
event shall the Employee retain physical custody of any certificates
representing Restricted Stock issued to him.  The Company may cause a book entry
deposit of Restricted Stock at the Company’s transfer agent in lieu of physical
custody.

 

Section 2.3 - Rights as Stockholder

 

From and after the Award Date, the Employee shall have all the rights of a
stockholder with respect to the Shares, subject to the Restrictions herein
(including the provisions of Article IV), including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares unless and to the extent that the Employee’s interest in Restricted
Stock shall have terminated and the Restricted Stock reverts to the Company as
provided in Section 3.1 of this Agreement.

 

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ARTICLE III

 

RESTRICTIONS

 

 

Section 3.1 - Reversion of Restricted Stock

 

Except as provided in Section 2.3, this Section 3.1, and the Vesting Schedule
set forth on the first page of this Agreement, the Restricted Stock shall be the
property of the Company for as long as and to the extent that the Shares are
Restricted Stock pursuant to Section 2.1.  In the event that the Employee’s
employment by the Company terminates for any reason other than (a) death,
(b) Disability, (c) Retirement, or (d) termination of the Employee’s employment
by the Company other than for Cause, any interest of the Employee in Shares that
are Restricted Stock shall thereupon immediately terminate and all rights with
respect to the Restricted Stock shall immediately revert to and unconditionally
be the property of the Company; provided, however, that the Employee shall be
entitled to retain any cash dividends paid before the date of such event on the
Restricted Stock.

 

Section 3.2 - Restricted Stock Not Transferable

 

No Restricted Stock or any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Employee or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law or judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that the Employee may designate one or
more trusts or other similar arrangements for the benefit of the Employee or
members of his immediate family as the registered holders of Restricted Stock if
and as long as the Employee acts as trustee or in a similar capacity with
respect to such trust or arrangement.  Any Restricted Stock so registered shall
for all purposes hereunder be deemed to be held of record by the Employee and
shall be subject to all of the terms and conditions of this Agreement, including
but not limited to the Restrictions and the provisions of Article III of this
Agreement.

 

Section 3.3 - Legend

 

Certificates representing shares of Restricted Stock or book entries for shares
of Restricted Stock issued pursuant to this Agreement shall, until all
Restrictions lapse and new certificates are issued pursuant to Section 3.4, bear
the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING
REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE TO AVALONBAY COMMUNITIES, INC.
(THE “COMPANY”) UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY
AND BETWEEN THE COMPANY AND THE HOLDER OF THE SECURITIES.  PRIOR TO VESTING OF
OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED,
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNDER ANY CIRCUMSTANCES.  COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE
AT AND MAY BE OBTAINED ON REQUEST AND WITHOUT CHARGE FROM THE OFFICES OF THE
COMPANY AT 671 NORTH GLEBE ROAD, SUITE 800, ARLINGTON, VA  22203.”

 

Section 3.4 - Lapse of Restrictions

 

Upon the vesting of some or all of the Restricted Stock as provided in the
Vesting Schedule set forth on the first page of this Agreement, and subject to
the conditions to issuance set forth in Article IV, if such Shares are
certificated, the Company shall cause new certificates to be issued with respect
to such vested Shares and delivered to the Employee or his legal representative,
free from the legend provided for in Section 3.3.

 

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ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1 - Conditions to Issuance of Stock

 

The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock or enter the Employee’s name as the stockholder
of record on the books of the Company pursuant to this Agreement prior to
fulfillment of all of the following conditions:

 

(a)                                 The admission of such shares to listing on
all stock exchanges on which such class of stock is then listed; and

 

(b)                                 The completion of any registration or other
qualification of such shares under any state or Federal law or under rulings or
regulations of the Securities and Exchange Commission or of any other
governmental regulatory body, which the Company shall deem necessary or
advisable; and

 

(c)                                  The obtaining of any approval or other
clearance from any state or Federal governmental agency which the Company shall,
in its absolute discretion, determine to be necessary or advisable; and

 

(d)                                 The payment by the Employee of all amounts
required to be withheld under federal, state and local tax laws, with respect to
the issuance of Restricted Stock and/or the lapse or removal of any of the
Restrictions.

 

Section 4.2 - Notices

 

Any notice to be given under the terms of this Agreement to the Company shall be
addressed to the Company in care of its Secretary, and any notice to be given to
the Employee shall be addressed to him at his address as set forth in the
Company’s records.  By a notice given pursuant to this Section 4.2, either party
may hereafter designate a different address for notices to be given to it or
him.  Any notice which is required to be given to the Employee shall, if the
Employee is then deceased, be given to the Employee’s personal representative if
such representative has previously informed the Company of his status and
address by written notice under this Section 4.2.  Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid and deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.

 

Section 4.3 - Titles

 

Titles and captions are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.

 

Section 4.4 - Amendment

 

This Agreement may be amended only by a writing executed by the parties hereto
which specifically states that it is amending this Agreement.

 

Section 4.5 - Tax Withholding

 

The Company’s obligation (i) to issue or deliver to the Employee any certificate
or certificates for unrestricted shares of stock or (ii) to pay to the Employee
any dividends or make any distributions with respect to the Common Stock issued
under this Agreement is expressly conditioned on the Company’s satisfaction of
its obligation, if any, to withhold taxes.  The Employee shall, not later than
the date as of which the receipt of this Award becomes a taxable event for
Federal income tax purposes, pay to the Company or make arrangements
satisfactory to the Administrator for payment of any Federal, state, and local
taxes required by law to be withheld on account of such taxable event.  The
Employee may elect to have the required minimum tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Stock to be issued or released by the transfer agent a number of
shares of Stock with an aggregate Fair Market Value that would satisfy the
withholding amount due.

 

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Section 4.6 — Governing Law

 

The laws of the State of Maryland shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

 

Section 4.7 - Counterparts

 

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

Section 4.8 - No Special Employment Rights

 

This Agreement does not, and shall not be interpreted to, create any right on
the part of the Employee to continue in the employ of the Company or any
subsidiary or affiliate thereof, nor to any continued compensation,
prerequisites or other current or future benefits or other incidents of
employment.

 

Section 4.9 — Non-Solicitation

 

Employee hereby agrees that, for a period of at least 12 months following
Employee’s termination of employment with the Company for any reason, Employee
shall not, without the prior written consent of the Company, solicit or attempt
to solicit for employment with or on behalf of any other person, firm or 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.

 

Section 4.10 — Recoupment Policy

 

To the extent Employee is a “Covered Officer”, as defined in the Policy for
Recoupment of Incentive Compensation adopted by the Company’s Board of
Directors, as amended from time to time (the “Recoupment Policy”), the Shares
and any proceeds received in connection with any sale of such Shares shall be
subject to the Recoupment Policy.

 

[End of Text]

 

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[Final Award Terms for Performance Plan Awards-2013]

 

[Exhibit B-1 - Form of Non-Qualified Stock Option Agreement]

 

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[NQSO Agreement for Perf Award Exhibit - Final]

 

AVALONBAY COMMUNITIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(2009 STOCK OPTION AND INCENTIVE PLAN)

 

Pursuant to the AvalonBay Communities, Inc. 2009 Stock Option and Incentive Plan
(the “Plan”), AvalonBay Communities, Inc. (the “Company”) hereby grants to the
Optionee named in the Grant Award Acceptance related hereto an Option to
purchase on or prior to the tenth anniversary of the grant date of this option
award as set forth in the Grant Award Acceptance (the “Expiration Date”) up to
the number of shares of the Company’s Common Stock, par value $.01 per share
(“Common Stock”) set forth in the Grant Award Acceptance at the Exercise Price
set forth in the Grant Award Acceptance.  This option is subject to all of the
terms and conditions as set forth herein, in the Non-Qualified Stock Option
Agreement Terms (the “Terms”) which are attached hereto and incorporated herein
in their entirety, and in the Plan.  Capitalized terms used but not defined
herein or in the Terms shall have the respective meanings ascribed thereto in
the Plan.

 

Non-Qualified Stock

Option:                                                                            
This Option does not qualify as an incentive stock option under Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”), and consequently
shall be treated as a non-qualified stock option for tax purposes.

 

Vesting Schedule:                     Subject to the provisions of Section 4 and
6 of the Terms and the discretion of the Company to accelerate the vesting
schedule, the options shall vest as follows: 33.3% on March 1 of the first year
following the year of grant (as set forth in the Grant Award Acceptance), 33.3%
on March 1 of the second year following the year of grant, and 33.4% on March 1
of the third year following the year of grant.

 

In any event this Option shall become fully vested and exercisable with respect
to all of the Option Shares on March 1 of the third year following the year of
grant.

 

Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt
of, and understands and agrees to, this Non-Qualified Stock Option Agreement,
including, without limitation, the Terms.  Optionee further acknowledges receipt
of a copy of the Plan.  Optionee further acknowledges that as of the Date of
Grant, this Non-Qualified Stock Option Agreement, including, without limitation,
the Terms, and the Plan set forth the entire understanding between Optionee and
the Company regarding the Options described herein and supersede all prior oral
and written agreements on that subject.

 

ATTACHMENT:  Non-Qualified Stock Option Agreement Terms

 

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AVALONBAY COMMUNITIES, INC.

2009 STOCK OPTION AND INCENTIVE PLAN

 

NON-QUALIFIED STOCK OPTION AGREEMENT TERMS

 

1.                                      Vested Option Shares.  Subject to
Section 4, when this Option is vested with respect to any of the Option Shares,
this Option shall continue to be exercisable with respect to such Option Shares
(“Vested Option Shares”) at any time or times prior to the Expiration Date.

 

2.                                      Manner of Exercise.  The Optionee may
exercise this Option only in the following manner:  from time to time on or
prior to the Expiration Date of this Stock Option, the Optionee may give written
notice to the Administrator of his or her election to purchase some or all of
the Option Shares purchasable at the time of such notice.  This notice shall
specify the number of Option Shares to be purchased.

 

Payment of the purchase price for the Option Shares may be made by one or more
of the following methods:  (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or
attestation to the ownership) of shares of Common Stock that have been purchased
by the Optionee on the open market or that are beneficially owned by the
Optionee and are not then subject to any restrictions under any Company plan and
that otherwise satisfy any holding periods as may be required by the
Administrator; (iii) 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 option purchase price, provided that in the event the
Optionee chooses to pay the option 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 Administrator shall prescribe as a
condition of such payment procedure; (iv) by a “net exercise” arrangement
pursuant to which the Company will reduce the number of shares of Common Stock
issuable upon exercise by the largest whole number of shares with a Fair Market
Value that does not exceed the aggregate exercise price; or (v) a combination of
(i), (ii), (iii) and (iv) above.  Payment instruments will be received subject
to collection.

 

The transfer to the Optionee on the records of the Company or of the transfer
agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth
above, (ii) the fulfillment of any other requirements contained herein or in the
Plan or in any other agreement or provision of laws, and (iii) the receipt by
the Company of any agreement, statement or other evidence that the Company may
require to satisfy itself that the issuance of Common Stock to be purchased
pursuant to the exercise of Stock Options under the Plan and any subsequent
resale of the shares of Stock will be in compliance with applicable laws and
regulations.  In the event the Optionee chooses to pay the purchase price by
previously-owned shares of Common Stock through the attestation method, the
number of shares of Common Stock transferred to the Optionee upon the exercise
of the Stock Option shall be net of the Shares attested to.

 

The shares of Common Stock purchased upon exercise of this Option shall be
transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all
requirements under applicable laws or regulations in connection with such
issuance and with the requirements hereof and of the Plan.  The determination of
the Administrator as to such compliance shall be final and binding on the
Optionee.  The Optionee shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common Stock subject to
this Option unless and until this Option shall have been exercised pursuant to
the terms hereof, the Company or the transfer agent shall have transferred the
shares to the Optionee, and the Optionee’s name shall have been entered as the
stockholder of record on the books of the Company.  Thereupon, the Optionee
shall have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.

 

The minimum number of shares with respect to which this Option may be exercised
at any one time shall be 100 shares, unless the number of shares with respect to
which this Option is being exercised is the total number of shares subject to
exercise under this Option at the time.

 

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Notwithstanding any other provision hereof or of the Plan, no portion of this
Option shall be exercisable after the Expiration Date hereof.

 

3.                                      Non-transferability of Option.  This
Option is personal to the Optionee, is non-assignable and is not transferable in
any manner, by operation of law or otherwise, other than by will or the laws of
descent and distribution.  This Stock Option is exercisable, during the
Optionee’s lifetime, only by the Optionee, and thereafter, only by the
Optionee’s legal representative or legatee.

 

4.                                      Termination of Employment.  If the
Optionee’s employment (or other business relationship) by the Company or a
Subsidiary (as defined in the Plan) is terminated, the period within which to
exercise the Option may be subject to earlier termination as set forth below.

 

(a)                                 Termination Due to Death.  If the Optionee’s
employment (or other business relationship) terminates by reason of death, any
Option held by the Optionee shall be automatically vested on the date of
termination and shall be exercisable by the Optionee’s legal representative or
legatee (i) for a period of twelve (12) months from the date of termination or
until the fifth anniversary of the grant date of this option award, if later, or
(ii) until the Expiration Date, if earlier.

 

(b)                                 Termination Due to Disability.  If the
Optionee’s employment (or other business relationship) terminates by reason of
Disability (as defined below), any Option held by the Optionee shall be
automatically vested on the date of termination, and shall be exercisable
(i) for a period of twelve (12) months from the date of termination or until the
fifth anniversary of the grant date of this option award, if later, or
(ii) until the Expiration Date, if earlier.  The death of the Optionee during
the period provided in this Section 4(b) shall extend such period (if it would
otherwise expire) for six (6) months from the date of death or until the
Expiration Date, if earlier.

 

(c)                                  Termination by Reason of Retirement.  If
the Optionee’s employment terminates by reason of Retirement (as defined below),
any Option held by the Optionee shall be automatically vested on the date of
termination, and shall be exercisable (i) for a period of twelve (12) months
from the date of termination or until the fifth anniversary of the grant date of
this option award, if later, or (ii) until the Expiration Date, if earlier.  The
death of the Optionee during the period provided in this Section 4(c) shall
extend such period (if it would otherwise expire) for six (6) months from the
date of death, or until the Expiration Date, if earlier.

 

(d)                                 Termination for Cause.  If the Optionee’s
employment (or other business relationship) terminates for Cause (as defined
below), any Option held by the Optionee shall immediately terminate and be of no
further force and effect.

 

(e)                                  Termination Without Cause.  If the
Optionee’s employment (or other business relationship) is terminated by the
Company without Cause, any option held by the Optionee shall be automatically
vested on the date of termination, and shall be exercisable (i) for a period of
twelve (12) months from the date of termination or until the fifth anniversary
of the grant date of this option award, if later, or (ii)  until the Expiration
Date, if earlier.  The death of the Optionee during the provided in this
Section 4(e) shall extend such period (if it would otherwise expire) for six
(6) months from the date of death, or until the Expiration Date, if earlier.

 

(f)                                   Termination at the Election of the
Optionee.  If the Optionee’s employment (or other business relationship) is
voluntarily terminated at the election of the Optionee (i.e., is terminated
other than for death, Disability, Retirement, or a termination at the Company’s
election whether for Cause or without Cause), any option held by the Optionee
may be exercised, to the extent exercisable on the date of termination, for a
period of three (3) months from the date of termination, or until the Expiration
Date, if earlier.  For clarification, it is noted that this means that the
remaining unvested portion of the Option shall terminate immediately and be of
no further force or effect.

 

For this purpose, neither a transfer of employment from the Company to a
Subsidiary (or from a Subsidiary to the Company) nor an approved leave of
absence shall be deemed a “termination of employment.”  The Administrator’s

 

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determination of the reason for termination of the Optionee’s employment shall
be conclusive and binding on the Optionee and his or her representatives or
legatees.

 

For purposes of this Option, following terms shall have the meaning specified
below:

 

“Cause” shall mean a vote of the Board resolving that the Optionee should be
dismissed as a result of (i) any material breach by the Optionee of any
agreement to which the Optionee and the Company are parties, (ii) any act (other
than retirement) or omission to act by the Optionee which may have a material
and adverse effect on the business of the Company or any Subsidiary or on the
Optionee’s ability to perform services for the Company or any Subsidiary,
including, without limitation, the commission of any crime (other than ordinary
traffic violations), or (iii) any material misconduct or neglect of duties by
the Optionee in connection with the business or affairs of the Company or any
Subsidiary.

 

“Disability” shall mean the Optionee’s inability to perform his normal required
services for the Company and its Subsidiaries for a period of six consecutive
months by reason of the individual’s mental or physical disability, as
determined by the Committee in good faith in its sole discretion.

 

“Retirement” shall mean the termination of the Optionee’s employment (and other
business relationships) with the Company and its Subsidiaries, other than for
Cause, following the date on which the sum of the following equals or exceeds 70
years: (i) the number of full months of the Optionee’s employment and other
business relationships with the Company and any predecessor Company and (ii) the
Optionee’s age on the date of termination (i.e., a person whose age is 55 years,
6 months and who has worked at the Company for 14 years, 6 months meets the 70
years requirement); provided that:

 

(x)                                 the Optionee’s employment by (or other
business relationships with) the Company and any predecessor company of the
Company have continued for a period of at least 120 continuous full months at
the time of termination and, on the date of termination, the Optionee is at
least 50 years old;

 

(y)                                 in the case of termination of employment,
the Optionee gives at least six months’ prior written notice to the Company of
his or her intention to retire; and

 

(z)                                  in the case of termination of employment,
the Optionee enters into a “Non-Compete and Non-Solicitation Agreement,” as
hereinafter defined, and a general release of all claims in a form that is
reasonably satisfactory to the Company.

 

As used in the foregoing sentence, “Non-Compete and Non-Solicitation Agreement”
shall mean a written agreement between the Optionee and the Company providing
that, for a period of at least 12 months following the Optionee’s termination of
employment with the Company (A) the Optionee shall not, without the prior
written consent of the Company, 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, and (B) the
Optionee shall not, without the prior written consent of the Company, solicit or
attempt to solicit for employment with or on behalf of any Competing Enterprise
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.  “Competing Enterprise,” for purposes of this section, shall
mean any person, corporation, partnership, venture or other entity which is
engaged in the business of managing, owning, leasing, or joint-venturing
multifamily rental real estate within 30 miles of multifamily rental real estate
owned or under management by the Company or its affiliates.  “Restricted
Activities,” for purposes of this section, shall mean executive, managerial,
directorial, administrative, strategic, business development or supervisory
responsibilities and activities relating to any aspects of multifamily rental
real estate ownership, management, multifamily rental real estate franchising,
and multifamily rental real estate joint-venturing.

 

5.                                      Option Shares.  The Option Shares are
shares of the Common Stock of the Company as constituted on the date of this
Option, subject to adjustment as provided in the Plan.

 

6.                                      Effect of a Sale Event.  Upon the
occurrence of a Sale Event, as defined in the Plan, this Option shall
automatically become fully exercisable.

 

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7.                                      No Special Employment Rights.  This
Option will not confer upon the Optionee any right with respect to continuance
of employment by the Company or a Subsidiary, nor will it interfere in any way
with any right of the Optionee’s employer to terminate the Optionee’s employment
at any time.

 

8.                                      Rights as a Shareholder.  The Optionee
shall have no rights as a shareholder with respect to any shares of Common Stock
that may be purchased upon exercise of this Option unless and until a
certificate or certificates representing such shares are duly issued and
delivered to the Optionee.  Except as otherwise expressly provided in the Plan,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.

 

9.                                      Incorporation of Plan.  Notwithstanding
anything herein to the contrary, this Stock Option shall be subject to and
governed by all the terms and conditions of the Plan, including the powers of
the Administrator set forth in  Section 2(b) of the Plan.  In the event of any
discrepancy or inconsistency between this Agreement and the Plan, the terms and
conditions of the Plan shall control.

 

10.                               Withholding Taxes.  The Optionee shall, not
later than the date as of which the exercise of this Option becomes a taxable
event for federal income tax purposes, pay to the Company (or make arrangements
satisfactory to the Company for payment of) any Federal, state and local taxes
required by law to be withheld on account of such taxable event.  The Optionee
may elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Common
Stock to be issued a number of shares of Stock with an aggregate Fair Market
Value that would satisfy the withholding amount due.

 

11.                               Non-Solicitation.  Optionee hereby agrees
that, for a period of at least 12 months following Optionee’s termination of
employment with the Company for any reason, Optionee shall not, without the
prior written consent of the Company, solicit or attempt to solicit for
employment with or on behalf of any other person, firm or 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.

 

12.                               Recoupment Policy.  To the extent Optionee is
a “Covered Officer”, as defined in the Policy for Recoupment of Incentive
Compensation adopted by the Company’s Board of Directors, as amended from time
to time (the “Recoupment Policy”), the Option, and shares of common Stock
received pursuant to exercise of the Option, and any proceeds received in
connection with any sale of shares of Common Stock shall be subject to the
Recoupment Policy.

 

13.                               Miscellaneous.  Notices hereunder shall be
mailed or delivered to the Company at its principal place of business, 671 North
Glebe Road, Suite 800, Arlington, Virginia 22203, Attention:  Director of
Compensation and Benefits, and shall be mailed or delivered to Optionee at his
address set forth in the Company’s records, or in either case at such other
address as one party may subsequently furnish to the other party in writing. 
This Option shall be governed by the laws of the State of Maryland, except to
the extent such law is preempted by federal law.

 

[End of Text]

 

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[Final Award Terms for Performance Plan Awards-2013]

 

[Exhibit B-2 - Form of Incentive Stock Option Agreement]

 

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[ISO Agreement for Perf Award Exhibit - Final]

 

AVALONBAY COMMUNITIES, INC.
INCENTIVE STOCK OPTION AGREEMENT
(2009 STOCK OPTION AND INCENTIVE PLAN)

 

Pursuant to the AvalonBay Communities, Inc. 2009 Stock Option and Incentive Plan
(the “Plan”), AvalonBay Communities, Inc. (the “Company”) hereby grants to the
Optionee named in the Grant Award Acceptance related hereto an Option to
purchase on or prior to the tenth anniversary of the grant date of this option
award as set forth in the Grant Award Acceptance (the “Expiration Date”) up to
the number of shares of the Company’s Common Stock, par value $.01 per share
(“Common Stock”) set forth in the Grant Award Acceptance at the Exercise Price
set forth in the Grant Award Acceptance.  This option is subject to all of the
terms and conditions as set forth herein, in the Incentive Stock Option
Agreement Terms (the “Terms”) which are attached hereto and incorporated herein
in their entirety, and in the Plan.  Capitalized terms used but not defined
herein or in the Terms shall have the respective meanings ascribed thereto in
the Plan.

 

Incentive Stock

Option:                                                                            
This Option shall be construed in a manner to qualify it as an “incentive stock
option” under Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).

 

Vesting Schedule:                     Subject to the provisions of Section 4 and
6 of the Terms and the discretion of the Company to accelerate the vesting
schedule, the options shall vest as follows: 33.3% on March 1 of the first year
following the year of grant (as set forth in the Grant Award Acceptance), 33.3%
on March 1 of the second year following the year of grant, and 33.4% on March 1
of the third year following the year of grant.

 

In any event this Option shall become fully vested and exercisable with respect
to all of the Option Shares on March 1 of the third year following the year of
grant.

 

Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt
of, and understands and agrees to, this Incentive Stock Option Agreement,
including, without limitation, the Terms.  Optionee further acknowledges receipt
of a copy of the Plan.  Optionee further acknowledges that as of the Date of
Grant, this Incentive Stock Option Agreement, including, without limitation, the
Terms, and the Plan set forth the entire understanding between Optionee and the
Company regarding the Options described herein and supersede all prior oral and
written agreements on that subject.

 

ATTACHMENT:  Incentive Stock Option Agreement Terms

 

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AVALON BAY COMMUNITIES, INC.

2009 STOCK OPTION AND INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT TERMS

 

1.                                      Vested Option Shares.  Subject to
Section 4, when this Option is vested with respect to any of the Option Shares,
this Option shall continue to be exercisable with respect to such Option Shares
(“Vested Option Shares”) at any time or times prior to the Expiration Date.

 

2.                                      Manner of Exercise.  The Optionee may
exercise this Stock Option only in the following manner:  from time to time on
or prior to the Expiration Date of this Option, the Optionee may give written
notice to the Administrator of his or her election to purchase some or all of
the Option Shares purchasable at the time of such notice.  This notice shall
specify the number of Option Shares to be purchased.

 

Payment of the purchase price for the Option Shares may be made by one or more
of the following methods:  (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or
attestation to the ownership) of shares of Common Stock that have been purchased
by the Optionee on the open market or that are beneficially owned by the
Optionee and are not then subject to any restrictions under any Company plan and
that otherwise satisfy any holding periods as may be required by the
Administrator; (iii) 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 option purchase price, provided that in the event the
Optionee chooses to pay the option 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 Administrator shall prescribe as a
condition of such payment procedure; or (iv) a combination of (i), (ii) and
(iii) above.  Payment instruments will be received subject to collection.

 

The transfer to the Optionee on the records of the Company or of the transfer
agent of the Option Shares will be contingent upon (i) the Company’s receipt
from the Optionee of the full purchase price for the Option Shares, as set forth
above, (ii) the fulfillment of any other requirements contained herein or in the
Plan or in any other agreement or provision of laws, and (iii) the receipt by
the Company of any agreement, statement or other evidence that the Company may
require to satisfy itself that the issuance of Common Stock to be purchased
pursuant to the exercise of Options under the Plan and any subsequent resale of
the shares of Common Stock will be in compliance with applicable laws and
regulations.  In the event the Optionee chooses to pay the purchase price by
previously-owned shares of Common Stock through the attestation method, the
number of shares of Common Stock transferred to the Optionee upon the exercise
of the Option shall be net of the shares attested to.

 

The shares of Common Stock purchased upon exercise of this Option shall be
transferred to the Optionee on the records of the Company or of the transfer
agent upon compliance to the satisfaction of the Administrator with all
requirements under applicable laws or regulations in connection with such
issuance and with the requirements hereof and of the Plan.  The determination of
the Administrator as to such compliance shall be final and binding on the
Optionee.  The Optionee shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common Stock subject to
this Option unless and until this Option shall have been exercised pursuant to
the terms hereof, the Company or the transfer agent shall have transferred the
shares to the Optionee, and the Optionee’s name shall have been entered as the
stockholder of record on the books of the Company.  Thereupon, the Optionee
shall have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.

 

The minimum number of shares with respect to which this Option may be exercised
at any one time shall be 100 shares, unless the number of shares with respect to
which this Option is being exercised is the total number of shares subject to
exercise under this Option at the time.

 

Notwithstanding any other provision hereof or of the Plan, no portion of this
Option shall be exercisable after the Expiration Date hereof.

 

3.                                      Non-transferability of Option.  This
Option is personal to the Optionee, is non-assignable and is not transferable in
any manner, by operation of law or otherwise, other than by will or the laws of
descent and distribution.  This Option is exercisable, during the Optionee’s
lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal
representative or legatee.

 

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4.                                      Termination of Employment.  If the
Optionee’s employment (or other business relationship) by the Company or a
Subsidiary (as defined in the Plan) is terminated, the period within which to
exercise the Option may be subject to earlier termination as set forth below.

 

(a)                                 Termination Due to Death.  If the Optionee’s
employment (or other business relationship) terminates by reason of death, any
Option held by the Optionee shall be automatically vested on the date of
termination and shall be exercisable by the Optionee’s legal representative or
legatee (i) for a period of twelve (12) months from the date of termination or
until the fifth anniversary of the grant date of this option award, if later, or
(ii) until the Expiration Date, if earlier.

 

(b)                                 Termination Due to Disability.  If the
Optionee’s employment (or other business relationship) terminates by reason of
Disability (as defined below), any Option held by the Optionee shall be
automatically vested on the date of termination, and shall be exercisable
(i) for a period of twelve (12) months from the date of termination or until the
fifth anniversary of the grant date of this option award, if later, or
(ii) until the Expiration Date, if earlier.  The death of the Optionee during
the period provided in this Section 4(b) shall extend such period (if it would
otherwise expire) for six (6) months from the date of death or until the
Expiration Date, if earlier.

 

(c)                                  Termination by Reason of Retirement.  If
the Optionee’s employment terminates by reason of Retirement (as defined below),
any Option held by the Optionee shall be automatically vested on the date of
termination, and shall be exercisable (i) for a period of twelve (12) months
from the date of termination or until the fifth anniversary of the grant date of
this option award, if later, or (ii) until the Expiration Date, if earlier.  The
death of the Optionee during the period provided in this Section 4(c) shall
extend such period (if it would otherwise expire) for six (6) months from the
date of death, or until the Expiration Date, if earlier.

 

(d)                                 Termination for Cause.  If the Optionee’s
employment (or other business relationship) terminates for Cause (as defined
below), any Option held by the Optionee shall immediately terminate and be of no
further force and effect.

 

(e)                                  Termination Without Cause.  If the
Optionee’s employment (or other business relationship) is terminated by the
Company without Cause, any option held by the Optionee shall be automatically
vested on the date of termination, and shall be exercisable (i) for a period of
twelve (12) months from the date of termination or until the fifth anniversary
of the grant date of this option award, if later, or (ii) until the Expiration
Date, if earlier.  The death of the Optionee during the period provided in this
Section 4(e) shall extend such period (if it would otherwise expire) for six
(6) months from the date of death, or until the Expiration Date, if earlier.

 

(f)                                   Termination at the Election of the
Optionee.  If the Optionee’s employment (or other business relationship) is
voluntarily terminated at the election of the Optionee (i.e., is terminated
other than for death, Disability, Retirement, or a termination at the Company’s
election whether for Cause or without Cause), any option held by the Optionee
may be exercised, to the extent exercisable on the date of termination, for a
period of three (3) months from the date of termination, or until the Expiration
Date, if earlier.  For clarification, it is noted that this means that the
remaining unvested portion of the Option shall terminate immediately and be of
no further force or effect.

 

For this purpose, neither a transfer of employment from the Company to a
Subsidiary (or from a Subsidiary to the Company) nor an approved leave of
absence shall be deemed a “termination of employment.”  The Administrator’s
determination of the reason for termination of the Optionee’s employment shall
be conclusive and binding on the Optionee and his or her representatives or
legatees.

 

For purposes of this Option, following terms shall have the meaning specified
below:

 

“Cause” shall mean a vote of the Board resolving that the Optionee should be
dismissed as a result of (i) any material breach by the Optionee of any
agreement to which the Optionee and the Company are parties, (ii) any act (other
than retirement) or omission to act by the Optionee which may have a material
and adverse effect on the business of the Company or any Subsidiary or on the
Optionee’s ability to perform services for the Company or any

 

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Subsidiary, including, without limitation, the commission of any crime (other
than ordinary traffic violations), or (iii) any material misconduct or neglect
of duties by the Optionee in connection with the business or affairs of the
Company or any Subsidiary.

 

“Disability” shall mean the Optionee’s inability to perform his normal required
services for the Company and its Subsidiaries for a period of six consecutive
months by reason of the individual’s mental or physical disability, as
determined by the Committee in good faith in its sole discretion.

 

“Retirement” shall mean the termination of the Optionee’s employment (and other
business relationships) with the Company and its Subsidiaries, other than for
Cause, following the date on which the sum of the following equals or exceeds 70
years: (i) the number of full months of the Optionee’s employment and other
business relationships with the Company and any predecessor Company and (ii) the
Optionee’s age on the date of termination (i.e., a person whose age is 55 years,
6 months and who has worked at the Company for 14 years, 6 months meets the 70
years requirement); provided that:

 

(x)                                 the Optionee’s employment by (or other
business relationships with) the Company and any predecessor company of the
Company have continued for a period of at least 120 continuous full months at
the time of termination and, on the date of termination, the Optionee is at
least 50 years old;

 

(y)                                 in the case of termination of employment,
the Optionee gives at least six months’ prior written notice to the Company of
his or her intention to retire; and

 

(z)                                  in the case of termination of employment,
the Optionee enters into a “Non-Compete and Non-Solicitation Agreement,” as
hereinafter defined, and a general release of all claims in a form that is
reasonably satisfactory to the Company.

 

As used in the foregoing sentence, “Non-Compete and Non-Solicitation Agreement”
shall mean a written agreement between the Optionee and the Company providing
that, for a period of at least 12 months following the Optionee’s termination of
employment with the Company (A) the Optionee shall not, without the prior
written consent of the Company, 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, and (B) the
Optionee shall not, without the prior written consent of the Company, solicit or
attempt to solicit for employment with or on behalf of any Competing Enterprise
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.  “Competing Enterprise,” for purposes of this section, shall
mean any person, corporation, partnership, venture or other entity which is
engaged in the business of managing, owning, leasing, or joint-venturing
multifamily rental real estate within 30 miles of multifamily rental real estate
owned or under management by the Company or its affiliates.  “Restricted
Activities,” for purposes of this section, shall mean executive, managerial,
directorial, administrative, strategic, business development or supervisory
responsibilities and activities relating to any aspects of multifamily rental
real estate ownership, management, multifamily rental real estate franchising,
and multifamily rental real estate joint-venturing.

 

5.                                      Option Shares.  The Option Shares are
shares of the Common Stock of the Company as constituted on the date of this
Option, subject to adjustment as provided in the Plan.

 

6.                                      Effect of a Sale Event.  Upon the
occurrence of a Sale Event, as defined in the Plan, this Option shall
automatically become fully exercisable.

 

7.                                      No Special Employment Rights.  This
Option will not confer upon the Optionee any right with respect to continuance
of employment by the Company or a Subsidiary, nor will it interfere in any way
with any right of the Optionee’s employer to terminate the Optionee’s employment
at any time.

 

8.                                      Rights as a Shareholder.  The Optionee
shall have no rights as a shareholder with respect to any shares of Common Stock
that may be purchased upon exercise of this Option unless and until a
certificate or certificates representing such shares are duly issued and
delivered to the Optionee.  Except as otherwise expressly

 

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provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock certificate is issued.

 

9.                                      Qualification under Section 422.  It is
understood and intended that the Option granted hereunder shall qualify as an
“incentive stock option” as defined in Section 422 of the Code, but the Company
does not represent or warrant that this Stock Option qualifies as such.  The
Optionee should consult with his or her own tax advisors regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements.  To the extent any portion of this Option does not
so qualify as an “incentive stock option,” such portion shall be deemed to be a
non-qualified stock option.  If the Optionee intends to dispose or does dispose
(whether by sale, gift, transfer or otherwise) of any Option Shares within the
one-year period beginning on the date after the transfer of such shares to him
or her, or within the two-year period beginning on the day after the grant of
this Option, he or she will so notify the Company within 30 days after such
disposition.

 

10.                               Incorporation of Plan.  Notwithstanding
anything herein to the contrary, this Stock Option shall be subject to and
governed by all the terms and conditions of the Plan, including the powers of
the Administrator set forth in  Section 2(b) of the Plan.  In the event of any
discrepancy or inconsistency between this Agreement and the Plan, the terms and
conditions of the Plan shall control.

 

11.                               Withholding Taxes.  The Optionee shall, not
later than the date as of which the exercise of this Option becomes a taxable
event for federal income tax purposes, pay to the Company (or make arrangements
satisfactory to the Company for payment of) any Federal, state and local taxes
required by law to be withheld on account of such taxable event.  The Optionee
may elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Stock to
be issued a number of shares of Stock with an aggregate Fair Market Value that
would satisfy the withholding amount due.

 

12.                               Non-Solicitation.  Optionee hereby agrees
that, for a period of at least 12 months following Optionee’s termination of
employment with the Company for any reason, Optionee shall not, without the
prior written consent of the Company, solicit or attempt to solicit for
employment with or on behalf of any other person, firm or 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.

 

13.                               Recoupment Policy.  To the extent Optionee is
a “Covered Officer”, as defined in the Policy for Recoupment of Incentive
Compensation adopted by the Company’s Board of Directors, as amended from time
to time (the “Recoupment Policy”), the Option, and shares of common Stock
received pursuant to exercise of the Option, and any proceeds received in
connection with any sale of shares of Common Stock shall be subject to the
Recoupment Policy.

 

14.                               Miscellaneous.  Notices hereunder shall be
mailed or delivered to the Company at its principal place of business, 671 North
Glebe Road, Suite 800, Arlington, Virginia 22203, Attention:  Director of
Compensation and Benefits, and shall be mailed or delivered to Optionee at his
address set forth in the Company’s records, or in either case at such other
address as one party may subsequently furnish to the other party in writing. 
This Option shall be governed by the laws of the State of Maryland, except to
the extent such law is preempted by federal law.

 

[End of Text]

 

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