Exhibit 10.3


FORM OF AVALONBAY COMMUNITIES, INC. 

EMPLOYEE NON-QUALIFIED 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 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.


                


	
  Optionee:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

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

  	
   

  	
   

  
	
  Exercise Price (Per
  Share):

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  



 


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, 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 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.


	
  AVALONBAY COMMUNITIES, INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name (Print):

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
							



 


ATTACHMENT:  Non-qualified Stock Option Agreement Terms


 


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AVALONBAY COMMUNITIES, INC.


1994
STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED


 


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, 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 this 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, (ii)
the satisfaction of section 10 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 this 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. 
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 and
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 Section 4(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 (or other
business relationship) 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.             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 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 


 


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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.


 


11.           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
NON-QUALIFIED STOCK OPTION AGREEMENTS WITH SUCH INDIVIDUALS.]


 


FORM
OF ADDENDUM TO NQSO 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”):


 


Non-Qualified 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.


 


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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.


 


 


 


                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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