Exhibit 10.2

 

FORM OF AVALONBAY COMMUNITIES, INC.
EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT
(1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED)

Pursuant to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan, as
amended and restated (the “Plan”), AvalonBay Communities, Inc. (the “Company”)
hereby grants to the Optionee named below an Option to purchase up to  the
number of shares of the Company’s Common Stock, par value $.01 per share
(“Common Stock”) set forth below.  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.

               

Optionee:

 

 

Date of Grant:

 

 

Number of Shares Subject to Option (“Option Shares”):

 

 

Exercise Price (Per Share):

 

 

Total Exercise Price:

 

 

Expiration Date:

 

 

 

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, this option shall become vested and exercisable with respect to the
following number of Option Shares at the expiration of the following periods
from the Date of Grant set out above:

 

Vesting Event

 

Option Shares Vested

[First Anniversary of Grant Date]

 

[One-Third]

[Second Anniversary of Grant Date]

 

[One-Third]

[Third Anniversary of Grant Date]

 

[One-Third]

 

 

 

[General Vesting Schedule provided above]

 

 

 

                                                                                                                       
In any event this Option shall become fully vested and exercisable with respect
to all of the Option Shares three years after the date hereof.

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.

AVALONBAY COMMUNITIES, INC.

 

OPTIONHOLDER:

 

 

 

 

By:

 

 

 

 

 

Signature

 

Signature

 

 

 

 

 

Title:

 

 

Name (Print):

 

Date:

 

 

Date:

 

 

 

ATTACHMENT:  Incentive Stock Option Agreement Terms

 

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AVALON BAY COMMUNITIES, INC.

1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED

 

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 Option only in the following manner: from time to time on or prior to the
Expiration Date, the Optionee may give written notice to the Company of his
election to purchase some or all of the Vested Option Shares purchasable at the
time of such notice, which notice shall specify the number of Option Shares to
be purchased.

 

                Payment of the purchase price for the Option Shares to be
purchased may be made by one or more of the following methods:  (a)in cash, by
certified bank check or other instrument acceptable to the Company; (b)through
the delivery (or attestation to the ownership) of shares of Common Stock that
have been beneficially owned by the Optionee for at least six (6) months and are
not then subject to restrictions under any Company plan and were not used in a
“stock swap” within the six (6) months preceding the option exercise, such
surrendered shares to be valued at the closing price of the Common Stock on the
principal exchange on which the Common Stock is listed on the date the Company
receives the exercise notice; (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 provided in this subsection(c),
the Optionee and the broker shall comply with such procedures and enter into
such agreements of indemnity and other agreements as the Company shall prescribe
as a condition of such payment procedure; or (d)with the consent of the Company,
a combination of (a), (b) and (c) above.  Payment instruments will be received
subject to collection.

 

                The delivery of certificates representing the Option Shares will
be contingent upon (i) the Company’s receipt from the Optionee of full payment
for the Option Shares, as set forth above, (ii)  the satisfaction of section 11
hereof, and (iii)  any agreement, statement or other evidence that the Company
may require to satisfy itself that the issuance of Option Shares to be purchased
pursuant to the exercise of Options under the Plan and any subsequent resale of
the shares will be in compliance with applicable laws and regulations.

 

                If requested upon the exercise of the Option, certificates for
Option Shares may be issued in the name of the Optionee jointly with another
person or in the name of the executor or administrator of the Optionee’s estate,
and the foregoing representations shall be modified accordingly.  The Optionee
shall not have the rights of a stockholder with respect to any Option Shares
prior to his acquisition of such Option Shares upon the exercise of this Option.

 

                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 shall
not be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution.  This Option shall be exercisable during the
Optionee’s lifetime only by the Optionee.

 

                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 may be exercised, to the
extent exercisable at the date of death, by the Optionee’s legal representative
or legatee for a period of six (6) months from the date of death, 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.

 

 

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                                                (b)           Termination Due to
Disability.  If the Optionee’s employment (or other business relationship)
terminates by reason of Disability (as defined in the Plan), any Option held by
the Optionee may be exercised, to the extent exercisable on the date of
termination, for a period of twelve (12) months from the date of termination, or
until the Expiration Date, if earlier.  The death of the Optionee during the
twelve (12) month period provided in this Section4(b) shall extend such period
for six (6) months from the date of death 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.

 

                                                (c)           Termination by
Reason of Retirement.  If the Optionee’s employment terminates by reason of
Retirement (as defined in the Plan), any Option held by the Optionee shall be
automatically vested on the date of termination, and shall be exercisable for a
period of twelve (12) months from the date of termination, or until the
Expiration Date, if earlier.  The death of the Optionee during the twelve (12)
month period provided in this Section 4(c) shall extend such period 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 in the Plan), any Option held by the Optionee shall
immediately terminate and be of no further force and effect.

 

(e)           Other Termination.  If the Optionee’s employment terminates for
any reason other than death, Disability, Retirement or Cause, and unless
otherwise determined by the Company, 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.”

 

                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 Change of Control.  Upon the occurrence
of a Change of Control, 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 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.  Accordingly,
the Optionee understands that in order to obtain the benefits of an incentive
stock option under Section 422 of the Code, no sale or other disposition may be
made of any Option Shares acquired upon exercise of the Option within the
one-year period beginning on the day after the day of the transfer of such
Option Shares to him or her, nor within the two-year period beginning on the day
after the grant of the Option.  If the Optionee intends to dispose or does
dispose (whether by sale, gift, transfer or otherwise) of any such Option Shares
within these periods, he or she will notify the Company within thirty (30) days
after such disposition.  In addition, no more than $100,000 of the aggregate
fair market value of Stock Options granted under the Plan may become exercisable
for the first time by the Optionee during any calendar year and be treated as
incentive stock options under Section 422 of the Code.

 

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                10.           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
acknowledges and agrees that the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an exercise of this Option, any federal, state or local
taxes of any kind required by law to be withheld with respect to the issuance of
shares of Stock to the Optionee.

 

                12.           Miscellaneous.  Notices hereunder shall be mailed
or delivered to the Company at its principal place of business, 2900 Eisenhower
Avenue, Suite 300, Alexandria, Virginia 22314, Attention:  Jenny Bercik, 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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[IN ACCORDANCE WITH THE EMPLOYMENT AGREEMENTS OF MESSRS. BLAIR, NAUGHTON,
SARGEANT, FULLER AND HOREY, THE COMPANY ENTERS INTO THE FOLLOWING ADDENDUM TO
ALL INCENTIVE STOCK OPTION AGREEMENTS WITH SUCH INDIVIDUALS.]

 

FORM OF ADDENDUM TO ISO STOCK OPTION AGREEMENT

FOR CERTAIN EXECUTIVE OFFICERS WITH EMPLOYMENT AGREEMENTS

                      

 

 

This Addendum to Stock Option Agreement is dated as of                   .

 

Reference is made to the following agreement (the “Unmodified Stock Option
Agreement”):

 

Incentive Stock Option Agreement between                  (“Employee”) and
AvalonBay Communities, Inc. (“AvalonBay”), dated                   , with
respect to            stock options (the “Options”) having an exercise price of
$        .

 

Capitalized terms used herein and not defined herein have the meanings set forth
in the Unmodified Stock Option Agreement.

 

                For the convenience of AvalonBay, the Unmodified Stock Option
Agreement is in a standard format commonly used by AvalonBay.  However, this
Addendum to Stock Option Agreement (the “Addendum”) contains one or more
provisions (the “Modifications”) approved by the Board of Directors of AvalonBay
(the “Board”) that are inconsistent with the terms of the Unmodified Stock
Option Agreement.  The Board approved the Modifications at the time it approved
the grant of the Options to Employee, and for ease of administration the Company
is documenting the grant of the Options with the Modifications by entering into
the Unmodified Stock Option Agreement and this Addendum.

 

                NOW, THEREFORE, intending to be legally bound and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, AvalonBay and Employee agree as follows:

 

If, pursuant to the terms of the Employment Agreement between the Company and
Employee dated               , as amended, or pursuant to the terms of a
successor agreement or arrangement (other than the Unmodified Stock Option
Agreement), the vesting of Employee’s stock options is accelerated upon the
termination of his employment, then the following shall apply:   any Option then
held by Employee may be exercised, to the extent exercisable on the date of
termination (after giving effect to accelerated vesting), for a period of one
(1) year from the date of termination, or until the Expiration Date, if earlier.

 

For clarification it is noted that the terms of the preceding paragraph will not
apply if vesting of Employee’s stock options is not accelerated upon a
termination of employment (e.g., if he voluntarily resigns without a
Constructive Termination Without Cause, as defined in the Employment
Agreement).  In such cases, the period of time following termination in which
the Options must be exercised will be determined by the Unmodified Stock Option
Agreement, which generally provides that the Options will terminate earlier than
one year from the date of termination.

 

 

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Except as stated above, the terms of the Unmodified Stock Option Agreement apply
in full to the Options.

 

 

 

AVALONBAY COMMUNITIES, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

                Receipt is hereby acknowledged of a copy of the Company’s Plan,
the Unmodified Stock Option Agreement and this Addendum.  The undersigned agrees
to be bound by the terms and conditions of the Plan, the Unmodified Stock Option
Agreement and this Addendum.

 

 

 

 

 

Optionee:

 

 

 

Address:

 

 

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