**ASSOCIATED ESTATES REALTY CORPORATIONELECTIVE DEFERRED COMPENSATION PLAN**

Associated Estates Realty Corporation hereby establishes,effective as of June 18, 2007,  the Associated Estates Realty CorporationElective Deferred Compensation Plan on the terms and conditions set forthbelow.  The Plan is unfunded and maintained primarily for the purpose ofproviding deferred compensation to a select group of management or highlycompensated employees.  The Plan provides certain eligible employees with theopportunity to defer portions of their base salary and incentive compensationall in accordance with the provisions of the Plan.   

### ARTICLEIDEFINITIONS

For purposes of the Plan, the following words and phrasesshall have the meanings set forth below, unless their context clearly requiresa different meaning: 

 "**Account**" means the bookkeeping accountmaintained by the Committee on behalf of each Participant pursuant to thisPlan.  The sum of each Participant's Sub-Accounts, in the aggregate, shallconstitute his Account.  The Account and each and every Sub-Account shall be abookkeeping entry only and shall be used solely as a device to measure anddetermine the amounts, if any, to be paid to a Participant or his Beneficiaryunder the Plan.

"**Affiliated Group**" means (i) the Company,and (ii) all entities with whom the Company would be considered a singleemployer under Sections 414(b) and 414(c) of the Code, provided that inapplying Section 1563(a)(1), (2), and (3) for purposes of determining acontrolled group of corporations under Section 414(b) of the Code, the language"at least 50 percent" is used instead of "at least 80percent" each place it appears in Section 1563(a)(1), (2), and (3), and inapplying Treasury Regulation Section 1.414(c)-2 for purposes of determining tradesor businesses (whether or not incorporated) that are under common control forpurposes of Section 414(c), "at least 50 percent" is used instead of"at least 80 percent" each place it appears in that regulation.   Such term shall be interpreted in a manner consistent with the definition of"service recipient" contained in Section 409A of the Code.   

"**Award**" means any Incentive Compensationwhich is payable in the form of restricted shares of the Company.

"**Base Salary**" means the annual base rateof cash compensation payable by the Affiliated Group to a Participant during acalendar year, excluding Incentive Compensation, bonuses, severance payments,qualified plan contributions or benefits, expense reimbursements, fringebenefits and all other payments, and prior to reduction for any deferrals underthis Plan or any other plan of the Affiliated Groups under Sections 125 or401(k) of the Code.   For purposes of this Plan, Base Salary payable after thelast day of a calendar year solely for services performed during the finalpayroll period described in Section 3401(b) of the Code containing December 31of such year shall be treated as earned during the subsequent calendar year.

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"**Beneficiary**" or "**Beneficiaries**"means the person or persons, including one or more trusts, designated by aParticipant in accordance with the Plan to receive payment of the remainingbalance of the Participant's Account in the event of the death of theParticipant prior to the Participant's receipt of the entire vested amount creditedto his Account. 

"**Beneficiary Designation Form**" means theform established from time to time by the Committee (in a paper or electronicformat) that a Participant completes signs and returns to the Committee todesignate one or more Beneficiaries.   

"**Board**" means the Board of Directors ofthe Company. 

 "**Change inControl**" means the occurrence of a "change in theownership," a "change in the effective control" or a"change in the ownership of a substantial portion of the assets" ofthe Company within the meaning of Section 409A of the Code.[1]    

"**Code**" means the Internal Revenue Codeof 1986, as amended.

"**Commencement Date**" has the meaninggiven to such term in Section 2.3 hereof.   

"**Committee**" means the committeeappointed to administer the Plan.  Unless and until otherwise specified, theCommittee under the Plan shall be the Executive Compensation Committee, or itsdesignee.  

"**Company**" means Associated EstatesRealty Corporation and its successors, including, without limitation, thesurviving corporation resulting from any merger or consolidation of AssociatedEstates Realty Corporation with any other corporation, limited liabilitycompany, joint venture, partnership or other entity or entities. 

"**Deferral Election**" means theParticipant's election on a form approved by the Committee to defer a portionof his Base Salary, Incentive Compensation or both in accordance with theprovisions of Article III.

"**Disability**" means the condition ofbeing unable to engage in any substantial gainful activity by reason of anymedically determinable physical or mental impairment that can be expected toresult in death or can be expected to last for a continuous period of not lessthan 12 months, as determined by the Committee.

"**Eligible Employee**" has the meaninggiven to such term in Section 2.1 hereof. 

"**ERISA**" means the Employee RetirementIncome Security Act of 1974, as amended.

"**Incentive Compensation**" means cashcompensation or restricted share awards provided as an annual bonus or pursuantto an incentive compensation or retention plan, including but not limited to anannual or long-term incentive compensation plan, whether such plan is now ineffect or hereafter established by the Company or Affiliated Group, which theCommittee may designate from time to time. 

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"**In-Service Sub-Account**" means eachbookkeeping In-Service Sub-Account maintained by the Committee on behalf ofeach Participant pursuant to Article IV hereof.  

"**Participant**" means any EligibleEmployee who (i) at any time elected to defer the receipt of Base Salary and/orIncentive Compensation in accordance with the Plan, and (ii) in conjunctionwith his Beneficiary, has not received a complete payment of the vested amountcredited to his Account.

"**Payment Election**" means theParticipant's election on a form approved by the Committee that is filed alongwith a Deferral Election and that sets forth the time and form of payment ofsuch deferrals as provided in Article IV.

"**Performance-Based Compensation**" meansIncentive Compensation that is based on services performed over a period of atleast twelve (12) months and that constitutes "performance-basedcompensation" within the meaning of Section 409A of the Code.  Where aportion of an amount of Incentive Compensation would qualify as Performance-BasedCompensation if the portion were the sole amount available under a designatedincentive plan, that portion of the award will not fail to qualify asPerformance-Based Compensation if that portion is designated separately by theCommittee on the Deferral Election or is otherwise separately identifiableunder the terms of the designated incentive plan, and the amount of eachportion is determined independently of the other.

"**Performance Period**" means, with respectto any Incentive Compensation, the period of time during which such IncentiveCompensation is earned.     

"**Plan**" means this deferred compensationplan, which shall be known as the Associated Estates Realty CorporationDeferred Elective Compensation Plan.

"**Retirement Sub-Account**" means thebookkeeping Retirement Sub-Account maintained by the Committee on behalf ofeach Participant pursuant to Article IV hereof.

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"**Separation from Service**" means atermination of employment with the Affiliated Group in such a manner as toconstitute a "separation from service" as defined under Section 409Aof the Code.  For this purpose, the employment relationship is treated ascontinuing intact while a Participant is on military leave, sick leave, orother bona fide leave of absence if the period of such leave does not exceed six(6) months, or if longer, so long as the individual retains a right toreemployment with the Affiliated Group under an applicable statute or bycontract.  For purposes of this definition, a leave of absence constitutes abona fide leave of absence only if there is a reasonable expectation that theParticipant will return to perform services for the Affiliated Group.  If theperiod of leave exceeds six (6) months and the Participant does not retain aright to reemployment under an applicable statute or by contract, theemployment relationship is deemed to terminate on the first date immediatelyfollowing such six-month period.  Notwithstanding the foregoing, where a leaveof absence is due to any medically determinable physical or mental impairmentthat can be expected to result in death or can be expected to last for acontinuous period of not less than six (6) months, where such impairment causesthe Participant to be unable to perform the duties of his or her position ofemployment or any substantially similar position of employment, a 29-monthperiod of absence may be substituted for such six-month period.[2]

"**Specified Employee**" means a keyemployee (as defined in Section 416(i) of the Code without regard to Section416(i)(5) of the Code) of the Company (or any entity which would be consideredto be a single employer with the Company under Section 414(b) or Section 414(c)of the Code) at any time during the twelve (12) month period ending on December31.  Notwithstanding the foregoing, a Participant who is a key employeedetermined under the preceding sentence will be deemed a Specified Employeesolely for the period of April 1 through March 31 following such December 31.Such term shall be interpreted in a manner consistent with Section 409A of theCode.[3]

"**Stock Deferral Sub-Account**" means eachbookkeeping Stock Deferral Sub-Account maintained by the Committee on behalf ofeach Participant pursuant to Article IV hereof.

"**Stock Deferral Unit**" means a unit of aphantom investment that mirrors the performance of Company common stock.

"**Sub-Account**" means each bookkeepingRetirement Sub-Account and In-Service Sub-Account maintained by the Committeeon behalf of each Participant pursuant to the Plan.

"**Subsequent Payment Election**" has themeaning given to such term in Section 7.1(c) hereof.  

"**Unforeseeable Emergency**" means a severefinancial hardship to a Participant resulting from (i) an illness or accidentof the Participant or Beneficiary or his spouse or dependent (as defined inSection 152(a) of the Code without regard to Sections 152(b)(1), (b)(2), and(d)(1)(B)), (ii) loss of the Participant's property due to casualty (includingthe need to rebuild a home following damage to a home not otherwise covered byinsurance, for example, not as a result of a natural disaster), or (iii) othersimilar extraordinary and unforeseeable circumstance arising as a result ofevents beyond the control of the Participant.  For example, the imminentforeclosure of or eviction from the Participant's primary residence mayconstitute an unforeseeable emergency.  In addition, the need to pay formedical expenses, including nonrefundable deductibles, as well as for the costsof prescription drug medication, may constitute an unforeseeable emergency. Finally, the need to pay for the funeral expenses of a spouse, a Beneficiary,or a dependent (as defined above) may also constitute an UnforeseeableEmergency.  Except as otherwise provided above, the purchase of a home and thepayment of college tuition are not unforeseeable emergencies.  Such term shallbe interpreted in a manner consistent with the definition of"unforeseeable emergency" contained in Section 409A of the Code.

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### ARTICLEIIELIGIBILITY

### **2.1.           ****Selection by Committee**.  Participation in the Plan islimited to those employees of the Affiliated Group who are (i) expresslyselected by the Committee, in its sole discretion, to participate in the Plan,and (ii) a member of a "select group of management or highly compensatedemployees," within the meaning of Sections 201, 301 and 401 of ERISA (the"Eligible Employees"); provided that on the date the Plan becomeseffective the Eligible Employees shall be each appointed or elected officer ofthe Company.  In lieu of expressly selecting Eligible Employees for Planparticipation, the Committee may establish eligibility criteria (consistentwith the requirements of paragraph (ii) of this Section) providing forparticipation of all Eligible Employees who satisfy such criteria.  TheCommittee may at any time, in its sole discretion, change the eligibility criteriafor Eligible Employees, or determine that one or more Participants will ceaseto be an Eligible Employee.    

### **2.2.           ****Enrollment Requirements**.  As a condition toparticipation, each selected Eligible Employee shall complete, execute andreturn to the Committee a Deferral Election, Payment Election and BeneficiaryDesignation Form no later than the date or dates specified by the Committee. In addition, the Committee may establish from time to time such otherenrollment requirements as it determines in its sole discretion are necessary. 

### **2.3.           ****Commencement Date**.  Each Eligible Employee shallcommence participation on the date designated by the Committee (the"Commencement Date"), provided that the Commencement Date for personswho are Eligible Employees on the date the Plan becomes effective, shall beJune 18, 2007; and provided, further, that if an Eligible Employee has notsatisfied the applicable enrollment requirements of Section 2.2 within thirty(30) days of his Commencement Date (or such earlier date as specified by theCommittee), such Eligible Employee's Commencement Date shall be the first dayof the calendar year next following the date the Eligible Employee satisfiessuch enrollment requirements.   

### **2.4.           ****Termination**.  An Eligible Employee's entitlement todefer Base Salary and Incentive Compensation shall cease with respect to thecalendar year (or the Performance Period, as the case may be) following thecalendar year (or the Performance Period, as the case may be) in which heceases to be an Eligible Employee, although such individual shall continue tobe subject to all of the terms and conditions of the Plan for as long as heremains a Participant.

### ARTICLEIIIDEFERRAL ELECTIONS

### **3.1.           ****New Participants**.  

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### (a)               Qualification as a New Participant.  This Section 3.1applies to each Eligible Employee (i) whose Commencement Date occurs after thefirst day of a calendar year but prior to October 1 of such calendar year (orsuch earlier or later date as specified by the Committee from time to time),and (ii) who was not previously eligible to participate in the Plan or anotherplan that is required to be aggregated with the Plan under Section 409A of theCode.  For this purpose, where an Eligible Employee has ceased being eligibleto participate in a Plan (other than the accrual of earnings), regardless ofwhether his entire Account balance has been paid, and subsequently becomes anEligible Employee again, the individual may be treated as being initiallyeligible to participate in the Plan if the individual had not been an EligibleEmployee at any time during the 24-month period ending on the date theindividual again becomes and Eligible Employee.  

### (b)              Deferral Election.  An Eligible Employee described inSection 3.1(a) may elect to defer his Base Salary earned during such calendaryear or his Incentive Compensation earned during a Performance Period thatcommences in such calendar year by filing a Deferral Election with theCommittee in accordance with the following rules:

### (i)                 *Timing; Irrevocability*.  The Deferral Election must befiled with the Committee by, and shall become irrevocable as of, the thirtieth(30th) day following the Participant's Commencement Date (or such earlier dateas specified by the Committee on the Deferral Election).   

### (ii)               *Base Salary*.  The Deferral Election shall only apply toBase Salary earned during such calendar year beginning with the first payrollperiod that begins immediately after the date that the Deferral Electionbecomes irrevocable in accordance with Section 3.1(b)(i) hereof.  

### (iii)              *Incentive Compensation*.  Where a Deferral Election is madein the first year of eligibility but after the commencement of a PerformancePeriod, then, except as otherwise provided in Section 3.2 below, the DeferralElection shall only apply to that portion of Incentive Compensation earned for suchPerformance Period equal to the total amount of the Incentive Compensationearned during such Performance Period multiplied by a fraction, the numeratorof which is the number of days beginning on the day immediately after the datethat the Deferral Election becomes irrevocable in accordance with Section3.1(b)(i) hereof and ending on the last day of the Performance Period, and thedenominator of which is the total number of days in the PerformancePeriod.      

### **3.2.           ****Annual Deferral Elections**.  Unless Section 3.1applies, each Eligible Employee may elect to defer Base Salary for a calendaryear or his Incentive Compensation for a Performance Period, as the case maybe, by filing a Deferral Election with the Committee in accordance with thefollowing rules: 

### (a)               Base Salary. The Deferral Election with respect to BaseSalary must be filed with the Committee by, and shall become irrevocable as of,December 31 (or such earlier date as specified by the Committee on the DeferralElection) of the calendar year next preceding the calendar year for which suchBase Salary would otherwise be earned.      

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### (b)              Incentive Compensation.  The Deferral Election withrespect to Incentive Compensation must be filed with the Committee by, andshall become irrevocable as of, December 31 (or such earlier date as specifiedby the Committee on the Deferral Election) of the calendar year next precedingthe first day of the Performance Period for which such Incentive Compensationwould otherwise be earned.  

### (c)               Performance-Based Compensation.  

### (i)                 Notwithstanding anything contained in this 3.2 to the contrary,and only to the extent permitted by the Committee, the Deferral Election withrespect to Incentive Compensation that constitutes Performance-BasedCompensation must be filed with the Committee by, and shall become irrevocableas of, the date that is 6 months before the end of the applicable PerformancePeriod (or such earlier date as specified by the Committee on the DeferralElection), provided that in no event may such Deferral Election be made aftersuch Incentive Compensation has become "readily ascertainable" withinthe meaning of Section 409A of the Code. 

### (ii)               In order to make a Deferral Election under this Section 3.2(c),the Participant must perform services continuously from the later of the beginningof the Performance Period or the date the performance criteria are establishedthrough the date a Deferral Election becomes irrevocable under this Section3.2(c).  

### (iii)              A Deferral Election made under this Section 3.2(c) shall notapply to any portion of the Performance-Based Compensation that is actuallyearned by a Participant regardless of satisfaction of the performance criteria.

### (iv)             To the extent permitted by the Committee, an Eligible Employeedescribed in Section 3.1(a) hereof shall be permitted to make a DeferralElection with respect to Performance-Based Compensation in accordance with thisSection 3.2(c) provided that the Eligible Employee satisfies all of the otherrequirements of this Section.    

### (d)              Deferral of Awards.  In the event that any IncentiveCompensation is provided as an Award, a Participant may elect to have all orpart of the Award cancelled and converted into an equal number of StockDeferral Units under the Plan and to have such Stock Deferral Units credited toa Stock Deferral Sub-Account pursuant to Article IV.  The provisions of thisArticle III shall apply to such elections, in addition to the following:

### (i)                 Each Stock Deferral Sub-Account shall be either a Stock DeferralRetirement Sub-Account or a Stock Deferral In-Service Sub-Account, as electedby the Participant, to be maintained and distributed in accordance with theprovisions of the Plan governing Retirement Sub-Accounts and In-ServiceSub-Accounts, respectively, except as otherwise provided herein (includingSection 4.2(c)(iv)).

### (ii)               The amount of dividends of other distributions to shareholdersthat a Participant would have received had the Participant's Stock DeferralUnits been actual shares of common stock of the Company as of the date of thedividend or other payment shall be credited to the Participant's Stock DeferralSub-Account with reference to which determined and immediately converted intothe appropriate number of Stock Deferral Units based upon the fair market valueof shares of common stock of the Company on such date.

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### (e)               Compensation Subject to Vesting.   With respect toIncentive Compensation that is subject to a forfeiture condition requiring theParticipant's continued services for a period of at least twelve (12) monthsfrom the date that the Participant obtains a "legally binding right"to such compensation (within the meaning of Section 409A of the Code), theDeferral Election must be filed with the Committee by, and shall becomeirrevocable as of, the thirtieth (30th) day following the date that theParticipant obtains the legally binding right to such compensation, providedthat the election is made at least twelve (12) months in advance of theearliest date at which the forfeiture condition could lapse.   For thispurpose, a condition will not be treated as failing to require the Participantto continue to provide services for a period of at least 12 months merelybecause the condition immediately lapses upon the death or disability (asdefined in Section 409A) of the Participant, or upon a Change in Control, providedthat if death, disability, or Change in Control occurs and the condition lapsesbefore the end of such 12-month period, the Deferral Election made under thisSection 3.2(e) shall not apply to such compensation.  To the extent permittedby the Committee, an Eligible Employee described in Section 3.1(a) hereof shallbe permitted to make a Deferral Election in accordance with this Section3.2(e).

### **3.3.           ****Amount Deferred**.  A Participant shall designate on theDeferral Election the portion of his Base Salary, Incentive Compensation orboth that is to be deferred in accordance with this Article III.  Unlessotherwise determined by the Committee, a Participant may defer (in 1%increments) up to 90% of his Base Salary and up to 100% of his IncentiveCompensation for any Plan Year; provided, however, that the Participant shallnot be permitted to defer less than 1% of his Base Salary or his IncentiveCompensation during any one calendar year or Performance Period, as the casemay be, and any attempted deferral of a lesser amount shall not beeffective.    

### **3.4.           ****Duration and Cancellation of Deferral Elections**.  

### (a)               Duration.  Once irrevocable, a Deferral Election shallonly be effective for the calendar year or Performance Period with respect towhich such election was timely filed with the Committee.  Notwithstanding thepreceding sentence, the Committee may provide, in its sole discretion, that anyDeferral Elections shall apply from calendar year to calendar year, orPerformance Period to Performance Period, until terminated or modified by aParticipant in accordance with the terms of Sections 3.2.  Except as providedin Section 3.4(b) hereof, a Deferral Election, once irrevocable, cannot becancelled during a calendar year or Performance Period.

### (b)              Cancellation.  

### (i)                 The Committee may, in its sole discretion, cancel a Participant'sDeferral Election where such cancellation occurs by the later of the end of theParticipant's taxable year or the 15th day of the third month following thedate the Participant incurs a "disability."  For purposes of thisSection 3.4(b)(i), a disability refers to any medically determinable physicalor mental impairment resulting in the Participant's inability to perform theduties of his or her position or any substantially similar position, where suchimpairment can be expected to result in death or can be expected to last for acontinuous period of not less than six months. 

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### (ii)               The Committee may, in its sole discretion, cancel a Participant'sDeferral Election due to an Unforeseeable Emergency or a hardship distributionpursuant to Treasury Regulation Section 1.401(k)-1(d)(3).

### (iii)              If a Participant's Deferral Election is cancelled with respect toa particular calendar year or Performance Period in accordance with thisSection 3.4(b), he may make a new Deferral Election for a subsequent calendaryear or Performance Period, as the case may be, only in accordance with Section3.2 hereof.   

### ARTICLEIVSUB-ACCOUNTS; PAYMENT ELECTIONS

### **4.1.           ****Sub-Accounts**.  The Committee shall establish andmaintain separate Retirement Sub-Accounts (including a Stock DeferralRetirement Sub-Account), and one or more In-Service Sub-Accounts (includingStock Deferral In-Service Sub-Accounts) for each Participant.  The Committee,in its sole discretion, shall specify the maximum number (including zero) ofpermitted In-Service Sub-Accounts for each Participant.  Amounts credited to aRetirement Sub-Account shall commence to be paid following the Participant'sSeparation from Service as provided in Article VII.  Amounts credited to anIn-Service Sub-Account shall commence to be paid in a year specified by theParticipant as provided in Section 4.2 and Article VII below.  

### **4.2.           ****Payment Elections**.  A Participant shall file a PaymentElection in accordance with the following rules:

### (a)               Timing; Irrevocability.  

### (i)                 Payment Elections with respect to a deferral of Base Salary orIncentive Compensation shall be filed with the Committee by, and shall becomeirrevocable as of, the applicable election filing deadline of the relatedDeferral Election as specified in Article III.  

### (ii)               Once irrevocable, a Payment Election may only be changed inaccordance with Section 7.1(c) hereof.  

### (b)              Allocation of Deferrals Among Sub-Accounts.  

### (i)                 The Payment Election with respect to a deferral of Base Salary orIncentive Compensation shall contain the Participant's allocation of deferralsof Base Salary and Incentive Compensation among a Retirement Sub-Account and,to the extent permitted by the Committee from time to time, one or moreIn-Service Sub-Accounts.  In the event that a Participant allocates deferrals ofBase Salary or Incentive Compensation to an In-Service Sub-Account, theParticipant must designate the year in which payments will  commence to bepaid, which year may not be earlier than two years after the date on which suchPayment Election becomes irrevocable.  Base Salary or Incentive Compensationthat a Participant elects to defer shall be treated as if it were set aside inone or more Sub-Accounts on the date the Base Salary or Incentive Compensationwould otherwise have been paid to the Participant.  

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### (ii)               To the extent that a Participant does not designate theSub-Account to which deferrals of Base Salary or Incentive Compensation shallbe credited on a Payment Election as provided in this Section 4.2(b) (or suchdesignation does not comply with the terms of the Plan), such deferrals shallbe credited to the Participant's Retirement Sub-Account.

### (c)               Form of Payment for Sub-Accounts.  

### (i)                 A Participant may elect, on the first Payment Election that hedelivers to the Committee, to receive his Retirement Sub-Account in cash in asingle lump sum or in a number of approximately equal annual installments overa specified period not exceeding four years.  The form of payment designated onthat first Payment Election will apply to all amounts credited to the RetirementSub-Account under the Plan (whether attributable to deferrals of Base Salary orIncentive Compensation, or earnings on such amounts) unless changed inaccordance with the rules of Section 7.1(c).

### (ii)               A Participant may elect, on the first Payment Election that hedelivers to the Committee pursuant to which deferrals of Base Salary orIncentive Compensation are credited to an In-Service Sub-Account, to receivethe In-Service Sub-Account in cash in a single lump sum or in a number ofapproximately equal annual installments over a specified period not exceedingfour years.  The form of payment designated on that first Payment Election willapply to all amounts credited to that In-Service Sub-Account under the Plan(whether attributable to deferrals of Base Salary or Incentive Compensation, orearnings on such amounts) unless changed in accordance with the rules ofSection 7.1(c).  A Participant may choose different forms of payment for eachseparate In-Service Sub-Account in accordance with this Section 4.2(c).  

### (iii)              To the extent that a Participant does not designate the form ofpayment of a Sub-Account on a Payment Election as provided in this Section4.2(c) (or such designation does not comply with the terms of the Plan), suchSub-Account shall be paid in cash in a single lump sum.   

### (iv)             Notwithstanding anything contained in the Plan to the contrary,for purposes of distribution the Stock Deferral Units held in a Stock DeferralSub-Account shall be converted to whole shares of Company common stock and cashfor any fractional shares.  To the extent that delivery of any shares ofCompany common stock to a Participant under this Plan otherwise would cause allor any portion of the Plan to be considered an "equity compensationplan" as such term is defined in Section 303A(8) of the New York StockExchange Listed Company Manual or any successor rule ("Listed CompanyManual"), then such shares shall be paid from, and shall count against thereserve of, a Company - sponsored "equity compensation plan" designatedby the Committee that complies with the shareholder approval requirementscontained in the Listed Company Manual. 

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### ARTICLEVVESTING 

### **5.1.           ****General.**  Each Participant shall at all times have afully vested and nonforfeitable interest in the portion of his Accountattributable to voluntary deferrals of Base Salary and Incentive Compensation.

### **5.2.           ****Awards. **Notwithstanding the provisions of Section5.1, the portion of each Participant's Account, if any, attributable todeferral of an Award shall be subject to such vesting schedule as was applicableto the restricted shares for which Stock Deferral Units were credited as aresult of an election under the Plan.

### ARTICLEVICREDITING OF GAINS, LOSSES AND EARNINGS TO ACCOUNTS

### **6.1.           ****General.**

To the extent provided by the Committee in its solediscretion, each Participant's Account will be credited with gains, losses andearnings based on investment directions made by the Participant in accordancewith investment deferral crediting options and procedures established from timeto time by the Committee.  The Committee specifically retains the right in itssole discretion to change the investment deferral crediting options andprocedures from time to time.  

By electing to defer any amount under the Plan (or byreceiving or accepting any benefit under the Plan), each Participantacknowledges and agrees that the Affiliated Group is not and shall not berequired to make any investment in connection with the Plan, nor is it requiredto follow the Participant's investment directions in any actual investment itmay make or acquire in connection with the Plan or in determining the amount ofany actual or contingent liability or obligation of the Company or any othermember of the Affiliated Group thereunder or relating thereto.  Any amountscredited to a Participant's Account with respect to which a Participant doesnot provide investment direction shall be credited with gains, losses andearnings as if such amounts were invested in an investment option to beselected by the Committee in its sole discretion.  

### **6.2.           ****Stock Deferral Sub-Accounts.**

Notwithstanding the provisions of Section 6.1, ShareDeferral Sub-Accounts shall be accounted for in the form of Stock DeferralUnits and Participants shall not provide investment directions with respect tothem.

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If there shall occur any merger, consolidation,liquidation, issuance of rights or warrants to purchase securities,recapitalization, reclassification, stock dividend, spin-off, split-off, stocksplit, reverse stock split, or other distribution with respect to shares of theCompany, or any similar corporate transaction or event in respect to suchshares, then the Committee shall, in the manner and to the extent that it deemsappropriate and equitable to the Participant and consistent with the terms ofthe Plan, cause a proportionate adjustment to be made in the number and kind ofshares deemed held under the Plan.  Moreover, in the event of any suchtransaction or event, the Committee, in its discretion, may provide insubstitution for any or all outstanding shares under the Plan such alternativecompensation as it, in good faith, may determine to be equitable under thecircumstances. 

### ARTICLEVIIPAYMENTS

### **7.1.           ****Date of Payment of Sub-Accounts**.  Except as otherwiseprovided in this Article VII, a Participant's Sub-Accounts shall commence to bepaid as follows:

### (a)               Retirement Sub-Account.  Thevested amounts credited to a Participant's Retirement Sub-Account shallcommence to be paid in the calendar year following the calendar year of theParticipant's Separation from Service, but in no event before the first businessday of the seventh month following the Participant's Separation from Service(or if earlier, upon the Participant's death).  Such amounts shall bepaid in the form of payment selected by the Participant in accordance withSection 4.2(c).  Subject to Section 7.2 hereof, the Committee has thediscretion to establish administrative procedures for designating the datewithin the applicable calendar year upon which payments shall commence.  

### (b)              In-Service Sub-Account. 

### (i)                 In general, the vested amounts credited to a Participant'sIn-Service Sub-Account shall commence to be paid in January of the yearspecified by the Participant for such Sub-Account in accordance with Section4.2(b) hereof.  Each In-Service Sub-Account shall be paid in the form ofpayment selected by the Participant with respect to that In-Service Sub-Accountin accordance with Section 4.2(c).  

### (ii)               If a Participant's Separation from Service occurs after paymentof his In-Service Sub-Account has commenced, the remaining balance of suchIn-Service Sub-Account will continue to be paid to him in accordance with thepayment schedule that has already commenced.  If, however, a Participant'sSeparation from Service occurs prior to the commencement of one or moreIn-Service Sub-Accounts, then amounts credited to such In-Service Sub-Accountsshall immediately be transferred to the Participant's Retirement Sub-Accountand payment of the transferred amounts shall thereafter be governed by theterms and conditions applicable to the Retirement Sub-Account, including, withoutlimitation, Section 7.2 hereof.   

### (c)               Subsequent Payment Elections.  A Participant may elect ona form provided by the Committee to change the Payment Election with respect toone or more of his Sub-Accounts (a "Subsequent Payment Election"). The Subsequent Payment Election shall become irrevocable upon receipt by theCommittee and shall be made in accordance with the following rules:  

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### (i)                 *In General*.  The Subsequent Payment Election may not takeeffect until at least twelve (12) months after the date on which it is acceptedby the Committee. The Subsequent Payment Election most recently accepted by theCommittee and that satisfies the requirements of this Section 7.1(c) shallgovern the payout of the Sub-Accounts notwithstanding anything contained in Section7.1(a) or (b) hereof to the contrary.

### (ii)               *Retirement Sub-Account*.  A Participant may make a one-timeelection to change the form of payment of his Retirement Sub-Account to a formotherwise permitted under the Plan.   Except in the event of the death or UnforeseeableEmergency of the Participant, the payment of such Sub-Account will be delayeduntil the fifth (5th) anniversary of the first day of the calendar year thatthe Sub-Account would otherwise have been paid under the Plan if suchSubsequent Payment Election had not been made (or, in the case of installmentpayments, which are treated as a single payment for purposes of this Section,on the fifth (5th) anniversary of the first day of the calendar year that thefirst installment payment was scheduled to be made).

### (iii)              *In-Service Sub-Account*.  A Participant may make one ormore elections to delay the payment date or change the form of payment of oneor more In-Service Sub-Account(s) to a time or form permitted under the Plan. Such Subsequent Payment Election must be filed with the Committee at leasttwelve (12) months prior to the first day of the calendar year that theSub-Account would otherwise have been paid under the Plan (or, in the case ofinstallment payments, at least twelve (12) months from the first day of thecalendar year that the first installment payment was scheduled to be made).  Onsuch Subsequent Payment Election, the Participant must delay the payment datefor a period of at least five (5) years after the first day of the calendaryear that the Sub-Account would otherwise have been paid under the Plan (or, inthe case of installment payments, at least five (5) years from the first day ofthe calendar year that the first installment payment was scheduled to bemade).  

### (iv)             *Acceleration Prohibited*.  The Committee shall disregardany Subsequent Payment Election by a Participant to the extent such electionwould result in an acceleration of the time or schedule of any payment oramount scheduled to be paid under the Plan within the meaning of Section 409Aof the Code.

### (d)              Small Payments.  In the event that a Sub-Account is paidin installments and the balance of the remaining amounts to be paid ininstallments falls below $25,000 (either as of the date that the installmentspayments commence to be paid or at the time any subsequent installment is to bepaid thereafter), then the remaining installments shall be paid to theParticipant in a single lump sum within 30 days.    

### **7.2.           ****Mandatory Six-Month Delay**.  Except as otherwiseprovided in Sections 7.7(a), 7.7(b) and 7.7(c), in no event may payments from aRetirement Sub-Account commence prior to the first business day of the seventhmonth following the Participant's Separation from Service (or if earlier, uponthe Participant's death).

### **7.3.           ****Death of Participant**.  

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### (a)               Each Participant shall file a Beneficiary Designation Form withthe Committee at the time the Participant files an initial Deferral Election. A Participant's Beneficiary Designation Form may be changed at any time priorto his death by the execution and delivery of a new Beneficiary DesignationForm. The Beneficiary Designation Form on file with the Committee that bearsthe latest date at the time of the Participant's death shall govern.  If aParticipant fails to properly designate a Beneficiary in accordance with thisSection 7.3(a), then his Beneficiary shall be his estate.  

### (b)              In the event of the Participant's death, the remaining amount ofthe Participant's vested Sub-Accounts shall be paid to the Beneficiary orBeneficiaries designated on a Beneficiary Designation Form, in accordance withthe following rules: (i) if a Participant dies after payment of a Sub-Accounthas commenced, the remaining balance of such Sub-Account will continue to bepaid to his Beneficiary or Beneficiaries in accordance with the paymentschedule that has already commenced; and (ii) if a Participant dies beforepayments from a Sub-Account have commenced, such Sub-Account will be paid tohis Beneficiary or Beneficiaries in a single lump sum in the calendar yearfollowing the calendar year of the Participant's death.  The Committee has thediscretion to establish administrative procedures for designating the datewithin the applicable calendar year upon which the payment shall be made.

### **7.4.           ****Disability of Participant. **In the event of the Participant'sDisability, the Participant's vested Sub-Accounts shall be paid to theParticipant, in accordance with the following rules:  (i) if the Participantincurs a Disability after payment of a Sub-Account has commenced, the remainingbalance of such Sub-Account will continue to be paid to the Participant inaccordance with the payment schedule that has already commenced; and (ii) if aParticipant incurs a Disability before payments from a Sub-Account havecommended, such Sub-Account will be paid to the Participant in a single sumwithin thirty (30) days following the determination by the Committee that theParticipant has incurred a Disability, or such later date as may be requiredunder Section 7.2 hereof.

### **7.5.           ****Change in Control**.  Notwithstanding any provision ofthe Plan to the contrary, upon the occurrence of  a Change in Control, theremaining amount of the Participant's vested Account shall be paid to theParticipant or his Beneficiary within thirty (30) days following the Change inControl, or such later date as required by Section 7.2 hereof.  

### **7.6.           ****Withdrawal Due to Unforeseeable Emergency**.  AParticipant shall have the right to request, on a form provided by theCommittee, an accelerated payment of all or a portion of his Account in a lumpsum if he experiences an Unforeseeable Emergency.  The Committee shall have thesole discretion to determine whether to grant such a request and the amount tobe paid pursuant to such request.  

                                                                      14

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### (a)               Determination of Unforeseeable Emergency.  Whether aParticipant is faced with an unforeseeable emergency permitting a payment underthis Section 7.6 is to be determined based on the relevant facts andcircumstances of each case, but, in any case, a payment on account of anUnforeseeable Emergency may not be made to the extent that such emergency is ormay be relieved through reimbursement or compensation from insurance orotherwise, by liquidation of the Participant's assets, to the extent theliquidation of such assets would not cause severe financial hardship, or bycessation of deferrals under the Plan.  Payments because of an UnforeseeableEmergency must be limited to the amount reasonably necessary to satisfy theemergency need (which may include amounts necessary to pay any Federal, state,local, or foreign income taxes or penalties reasonably anticipated to resultfrom the payment). Determinations of amounts reasonably necessary to satisfythe emergency need must take into account any additional compensation that isavailable if the Plan provides for cancellation of a Deferral Election upon apayment due to an Unforeseeable Emergency.  However, the determination ofamounts reasonably necessary to satisfy the emergency need is not required totake into account any additional compensation that due to the UnforeseeableEmergency is available under another nonqualified deferred compensation planbut has not actually been paid, or that is available due to the UnforeseeableEmergency under another plan that would provide for deferred compensationexcept due to the application of the effective date provisions of Section 409Aof the Code.  

### (b)              Payment of Account.  Payment shall be made within thirty(30) days following the determination by the Committee that a withdrawal willbe permitted under this Section 7.6, or such later date as may be requiredunder Section 7.2 hereof.

### **7.7.           ****Discretionary Acceleration of Payments**. To the extent permitted by Section 409A of the Code, theCommittee may, in its sole discretion, accelerate the time or schedule of apayment under the Plan as provided in this Section.  The provisions of thisSection are intended to comply with the exception to accelerated payments underTreasury Regulation Section 1.409A-3(j) and shall be interpreted andadministered accordingly.    

### (a)               Domestic Relations Orders.  The Committee may, in its solediscretion, accelerate the time or schedule of a payment under the Plan to anindividual other than the Participant as may be necessary to fulfill a domesticrelations order (as defined in Section 414(p)(1)(B) of the Code).  

### (b)              Conflicts of Interest.  The Committee may, in its solediscretion, provide for the acceleration of the time or schedule of a paymentunder the Plan to the extent necessary for any Federal officer or employee inthe executive branch to comply with an ethics agreement with the Federalgovernment.  Additionally, the Committee may, in its sole discretion, providefor the acceleration of the time or schedule of a payment under the Plan the tothe extent reasonably necessary to avoid the violation of an applicableFederal, state, local, or foreign ethics law or conflicts of interest law(including where such payment is reasonably necessary to permit the Participantto participate in activities in the normal course of his or her position inwhich the Participant would otherwise not be able to participate under anapplicable rule). 

### (c)               Employment Taxes.  The Committee may, in its solediscretion, provide for the acceleration of the time or schedule of a paymentunder the Plan to pay the Federal Insurance Contributions Act (FICA) tax imposedunder Sections 3101, 3121(a), and 3121(v)(2) of the Code, or the RailroadRetirement Act (RRTA) tax imposed under Sections 3201, 3211, 3231(e)(1), and3231(e)(8) of the Code, where applicable, on compensation deferred under thePlan (the FICA or RRTA amount). Additionally, the Committee may, in its solediscretion, provide for the acceleration of the time or schedule of a payment,to pay the income tax at source on wages imposed under Section 3401 of the Codeor the corresponding withholding provisions of applicable state, local, orforeign tax laws as a result of the payment of the FICA or RRTA amount, and topay the additional income tax at source on wages attributable to the pyramidingSection 3401 of the Code wages and taxes. However, the total payment under thisacceleration provision must not exceed the aggregate of the FICA or RRTAamount, and the income tax withholding related to such FICA or RRTA amount. 

                                                                      15

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### (d)              Limited Cash-Outs.  Subject to Section 7.2 hereof, theCommittee may, in its sole discretion, require a mandatory lump sum payment ofamounts deferred under the Plan that do not exceed the applicable dollar amountunder Section 402(g)(1)(B) of the Code, provided that the payment results inthe termination and liquidation of the entirety of the Participant's interestunder the Plan, including all agreements, methods, programs, or otherarrangements with respect to which deferrals of compensation are treated ashaving been deferred under a single nonqualified deferred compensation planunder Section 409A of the Code.  

### (e)               Payment Upon Income Inclusion Under Section 409A.  Subjectto Section 7.2 hereof, the Committee may, in its sole discretion, provide forthe acceleration of the time or schedule of a payment under the Plan at anytime the Plan fails to meet the requirements of Section 409A of the Code. Thepayment may not exceed the amount required to be included in income as a resultof the failure to comply with the requirements of Section 409A of the Code.

### (f)                Payment of state, local, or foreign taxes. Subject toSection 7.2 hereof, the Committee may, in its sole discretion, provide for theacceleration of the time or schedule of a payment under the Plan to reflectpayment of state, local, or foreign tax obligations arising from participationin the Plan that apply to an amount deferred under the Plan before the amountis paid or made available to the participant (the state, local, or foreign taxamount). Such payment may not exceed the amount of such taxes due as a resultof participation in the Plan.  The payment may be made in the form ofwithholding pursuant to provisions of applicable state, local, or foreign lawor by payment directly to the participant.  Additionally, the Committee may, inits sole discretion, provide for the acceleration of the time or schedule of apayment under the Plan to pay the income tax at source on wages imposed underSection 3401 of the Code as a result of such payment and to pay the additionalincome tax at source on wages imposed under Section 3401 of the Codeattributable to such additional wages and taxes. However, the total paymentunder this acceleration provision must not exceed the aggregate of the state,local, and foreign tax amount, and the income tax withholding related to suchstate, local, and foreign tax amount.

### (g)               Certain Offsets.  Subject to Section 7.2 hereof, theCommittee may, in its sole discretion, provide for the acceleration of the timeor schedule of a payment under the Plan as satisfaction of a debt of theParticipant to the Company (or any entity which would be considered to be asingle employer with the Company under Section 414(b) or Section 414(c) of theCode), where such debt is incurred in the ordinary course of the servicerelationship between the Company (or any entity which would be considered to bea single employer with the Company under Section 414(b) or Section 414(c) ofthe Code) and the Participant, the entire amount of reduction in any of thetaxable years of the Company (or any entity which would be considered to be asingle employer with the Company under Section 414(b) or Section 414(c) of theCode) does not exceed $5,000, and the reduction is made at the same time and inthe same amount as the debt otherwise would have been due and collected fromthe Participant.  

                                                                      16

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### (h)               Bona fide disputes as to a right to a payment.  Subject toSection 7.2 hereof, the Committee may, in its sole discretion, provide for theacceleration of the time or schedule of a payment under the Plan where suchpayments occur as part of a settlement between the Participant and the Company(or any entity which would be considered to be a single employer with theCompany under Section 414(b) or Section 414(c) of the Code) of an arm's length,bona fide dispute as to the Participant's right to the deferred amount.

### (i)                 Plan Terminations and Liquidations.  Subject to Section7.2 hereof, the Committee may, in its sole discretion, provide for theacceleration of the time or schedule of a payment under the Plan as provided inSection 9.2 hereof.

### Except as otherwise specifically provided in thisPlan, including but not limited to Section 3.4(b), this Section 7.7 and Section9.2 hereof, the Committee may not accelerate the time or schedule of anypayment or amount scheduled to be paid under the Plan within the meaning ofSection 409A of the Code.

### **7.8.           ****Delay of Payments**.** **To the extent permittedunder Section 409A of the Code, the Committee may, in its sole discretion,delay payment under any of the following circumstances, provided that theCommittee treats all payments to similarly situated Participants on areasonably consistent basis:  

### (a)               Payments subject to Section 162(m).  A payment may bedelayed to the extent that the Committee reasonably anticipates that if thepayment were made as scheduled, the Company's deduction with respect to suchpayment would not be permitted due to the application of Section 162(m) of theCode.  If a payment is delayed pursuant to this Section 7.8(a), then thepayment must be made either (i) during the Company's first taxable year inwhich the Committee reasonably anticipates, or should reasonably anticipate,that if the payment is made during such year, the deduction of such paymentwill not be barred by application of Section 162(m) of the Code, or (ii) duringthe period beginning with the first business day of the seventh month followingthe Participant's Separation from Service (the "six monthanniversary") and ending on the later of (x) the last day of the taxableyear of the Company in which the six month anniversary occurs or (y) the 15thday of the third month following the six month anniversary.  Where anyscheduled payment to a specific Participant in a Company's taxable year isdelayed in accordance with this paragraph, all scheduled payments to thatParticipant that could be delayed in accordance with this paragraph must alsobe delayed.  The Committee may not provide the Participant an election withrespect to the timing of the payment under this Section 7.8(a).  For purposesof this Section 7.8(a), the term Company includes any entity which would beconsidered to be a single employer with the Company under Section 414(b) orSection 414(c) of the Code.

### (b)              Federal Securities Laws or Other Applicable Law.  APayment may be delayed where the Committee reasonably anticipates that themaking of the payment will violate federal securities laws or other applicablelaw; provided that the delayed payment is made at the earliest date at whichthe Committee reasonably anticipates that the making of the payment will notcause such violation.  For purposes of the preceding sentence, the making of apayment that would cause inclusion in gross income or the application of anypenalty provision or other provision of the Code is not treated as a violationof applicable law.

### (c)               Other Events and Conditions.  A payment may be delayedupon such other events and conditions as the Internal Revenue Service mayprescribe in generally applicable guidance published in the Internal RevenueBulletin.  

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### **7.9.           ****Calculation of Installment Payments**.  In the eventthat a Sub-Account is paid in installments (i) the amount of each installmentshall equal the quotient obtained by dividing the Participant's vestedSub-Account balance as of the end of the month immediately preceding the monthof such installment payment by the number of installment payments remaining tobe paid at the time of the calculation, and (ii) the amount of such Sub-Accountremaining unpaid shall continue to be credited with gains, losses and earningsas provided in Article VI hereof.  By way of example, if the Participant electsto receive payments of a Sub-Account in equal annual installments over a periodof four (4) years, the first payment shall equal 1/4 of the vested Sub-Accountbalance, calculated as described in this Section 7.9.  The following year, thepayment shall be 1/3 of the vested Sub-Account balance, calculated as describedin this Section 7.9.

### **7.10.       ****Actual Date of Payment**.** **To the extentpermitted by Section 409A of the Code, the Committee may delay payment in theevent that it is not administratively possible to make payment on the date (orwithin the periods) specified in this Article VII, or the making of the paymentwould jeopardize the ability of the Company (or any entity which would beconsidered to be a single employer with the Company under Section 414(b) orSection 414(c) of the Code) to continue as a going concern.  Notwithstandingthe foregoing, payment must be made no later than the latest possible datepermitted under Section 409A of the Code.  

### **7.11.       ****Discharge of Obligations**.  The payment to aParticipant or his Beneficiary of a his Sub-Account in a single lump sum or thenumber of installments elected by the Participant pursuant to this Article VIIshall discharge all obligations of the Affiliated Group to such Participant orBeneficiary under the Plan with respect to that Sub-Account.  

### ARTICLEVIIIADMINISTRATION

### **8.1.           ****General**.  The Company, through the Committee, shall beresponsible for the general administration of the Plan and for carrying out theprovisions hereof.  The Committee shall have the full power, discretion andauthority to carry out the provisions of the Plan, including the authority to(a) resolve all questions relating to eligibility for participation in the Planand the amount in the Account of any Participant and all questions pertainingto claims for benefits and procedures for claim review, (b) resolve all otherquestions arising under the Plan, including any factual questions and questionsof construction, and (c) take such further action as the Company shall deemadvisable in the administration of the Plan.  The actions taken and thedecisions made by the Committee hereunder shall be final, conclusive, andbinding on all persons, including the Company, its shareholders, the othermembers of the Affiliated Group, employees, Participants, and their estates andBeneficiaries. In accordance with the provisions of Section 503 of ERISA, theCommittee shall provide a procedure for handling claims of Participants ortheir Beneficiaries under the Plan.  Such procedure shall be in accordance withregulations issued by the Secretary of Labor and shall provide adequate writtennotice within a reasonable period of time with respect to the denial of anysuch claim as well as a reasonable opportunity for a full and fair review bythe Committee of any such denial.  

### **8.2.           ****Compliance with Section 409A of the Code**.  

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### (a)               It is intended that the Plan comply with the provisions ofSection 409A of the Code, so as to prevent the inclusion in gross income of anyamounts deferred hereunder in a taxable year that is prior to the taxable yearor years in which such amounts would otherwise actually be paid or madeavailable to Participants or Beneficiaries. This Plan shall be construed,administered, and governed in a manner that effects such intent, and theCommittee shall not take any action that would be inconsistent with suchintent.

### (b)              Although the Committee shall use its best efforts to avoid theimposition of taxation, interest and penalties under Section 409A of the Code,the tax treatment of deferrals under this Plan is not warranted or guaranteed. Neither the Company, the other members of the Affiliated Group, the Board, northe Committee (nor its designee) shall be held liable for any taxes, interest,penalties or other monetary amounts owed by any Participant, Beneficiary orother taxpayer as a result of the Plan.  

### (c)               Any reference in this Plan to Section 409A of the Code will alsoinclude any proposed, temporary or final regulations, or any other guidance,promulgated with respect to such Section 409A by the U.S. Department ofTreasury or the Internal Revenue Service.  For purposes of the Plan, the phrase"permitted by Section 409A of the Code," or words or phrases ofsimilar import, shall mean that the event or circumstance shall only bepermitted to the extent it would not cause an amount deferred or payable underthe Plan to be includible in the gross income of a Participant or Beneficiaryunder Section 409A(a)(1) of the Code.

### ARTICLEIXAMENDMENT AND TERMINATION

### **9.1.           ****Amendment**.  The Company reserves the right to amend,terminate or freeze the Plan, in whole or in part, at any time by action of theBoard.  Moreover, the Committee may amend the Plan at any time in its solediscretion to ensure that the Plan complies with the requirements of Section409A of the Code or other applicable law; provided, however, thatsuch amendments, in the aggregate, may not materially increase the benefitcosts of the Plan to the Company.  In no event shall any such action by theBoard or Committee adversely affect any Participant or Beneficiary who has anAccount, or result in any change in the timing or manner of payment of theamount of any Account (except as otherwise permitted under the Plan), withoutthe consent of the Participant or Beneficiary, unless the Board or theCommittee, as the case may be, determines in good faith that such action isnecessary to ensure compliance with Section 409A of the Code.  To the extentpermitted by Section 409A of the Code, the Committee may, in its solediscretion, modify the rules applicable to Deferral Elections, PaymentElections and Subsequent Payment Elections to the extent necessary to satisfythe requirements of the Uniformed Service Employment and Reemployment RightsAct of 1994, as amended, 38 U.S.C. 4301-4334.

### **9.2.           ****Payments Upon Termination of Plan.**  In the event thatthe Plan is terminated, the amounts allocated to a Participant's Sub-Accountsshall be paid to the Participant or his Beneficiary on the dates on which theParticipant or his Beneficiary would otherwise receive payments hereunderwithout regard to the termination of the Plan.  Notwithstanding the precedingsentence, and subject to Section 7.2 hereof:

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### (a)               Liquidation; Bankruptcy.  The Board shall have theauthority, in its sole discretion, to terminate the Plan and pay eachParticipant's entire Account to the Participant or, if applicable, hisBeneficiary within twelve (12) months of a corporate dissolution taxed underSection 331 of the Code or with the approval of a bankruptcy court pursuant to11 U.S.C. 503(b)(1)(a), provided that the amounts are included in theParticipant's gross income in the latest of the following years (or, ifearlier, the taxable year in which the amount is actually or constructivelyreceived):  (i) the calendar year in which the Plan termination and liquidationoccurs; (ii) the first calendar year in which the amount is no longer subjectto a substantial risk of forfeiture as defined under Section 409A of the Code;or (iii) the first calendar year in which the payment is administrativelypracticable.  

### (b)              Discretionary Terminations.  The Board shall have theauthority, in its sole discretion, to terminate the Plan and pay eachParticipant's entire Account to the Participant or, if applicable, hisBeneficiary, provided that: (i) the termination and liquidation does not occurproximate to a downturn in the financial health of the Company (or any entitywhich would be considered to be a single employer with the Company underSection 414(b) or Section 414(c) of the Code); (ii) The Company (or any entitywhich would be considered to be a single employer with the Company under Section414(b) or Section 414(c) of the Code) terminates and liquidates all agreements,methods, programs, and other arrangements sponsored by the Company (or anyentity which would be considered to be a single employer with the Company underSection 414(b) or Section 414(c) of the Code) that would be aggregated with anyterminated and liquidated agreements, methods, programs, and other arrangementsunder Section 409A of the Code if the same Participant had deferrals ofcompensation under all of the agreements, methods, programs, and otherarrangements that are terminated and liquidated; (iii) no payments inliquidation of the Plan are made within 12 months of the date the Board takesall necessary action to irrevocably terminate and liquidate the Plan other thanpayments that would be payable under the terms of the Plan if the action toterminate and liquidate the Plan had not occurred; (iv) all payments are madewithin 24 months of the date the Board takes all necessary action toirrevocably terminate and liquidate the Plan; and (v) the Company (or anyentity which would be considered to be a single employer with the Company underSection 414(b) or Section 414(c) of the Code) does not adopt a new plan thatwould be aggregated with any terminated and liquidated plan under Section 409Aof the Code if the same Participant participated in both plans, at any timewithin three years following the date the Board takes all necessary action toirrevocably terminate and liquidate the Plan. 

### (c)               Other Events.  The Board shall have the authority, in itssole discretion, to terminate the Plan and pay each Participant's entireAccount to the Participant or, if applicable, his Beneficiary upon such otherevents and conditions as the Internal Revenue Service may prescribe in generallyapplicable guidance published in the Internal Revenue Bulletin.

### ARTICLEXMISCELLANEOUS

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### **10.1.       ****Nonalienation of Deferred Compensation**.  Except aspermitted by the Plan, no right or interest under the Plan of any Participantor Beneficiary shall, without the written consent of the Company, be (i)assignable or transferable in any manner, (ii) subject to alienation,anticipation, sale, pledge, encumbrance, attachment, garnishment or other legalprocess or (iii) in any manner liable for or subject to the debts or liabilitiesof the Participant or Beneficiary.  Notwithstanding the foregoing, to theextent permitted by Section 409A of the Code and subject to Section 7.7(a)hereof, the Committee shall honor a judgment, order or decree from a statedomestic relations court which requires the payment of part or all of aParticipant's or Beneficiary's interest under this Plan to an "alternatepayee" as defined in Section 414(p) of the Code. 

### **10.2.       ****Participation by Employees of Affiliates**.  Any memberof the Affiliated Group may, by action of its board of directors or equivalentgoverning body and with the consent of the Company's Board of Directors, adoptthe Plan; provided that the Company's Board of Directors may waive therequirement that such board of directors or equivalent governing body effectsuch adoption.  By its adoption of or participation in the Plan, the adoptingmember of the Affiliated Group shall be deemed to appoint the Company itsexclusive agent to exercise on its behalf all of the power and authorityconferred by the Plan upon the Company and accept the delegation to theCommittee of all the power and authority conferred upon it by the Plan. Theauthority of the Company to act as such agent shall continue until the Plan isterminated as to the participating affiliate.  An Eligible Employee who isemployed by a member of the Affiliated Group and who elects to participate inthe Plan shall participate on the same basis as an Eligible Employee of theCompany.  The Account of a Participant employed by a participating member ofthe Affiliated Group shall be paid in accordance with the Plan solely by suchmember to the extent attributable to Base Salary or Incentive Compensation thatwould have been paid by such participating member in the absence of deferralpursuant to the Plan, unless the Board otherwise determines that the Companyshall be the obligor.

### **10.3.       ****Interest of Participant**.

### (a)               The obligation of the Company and any other participating memberof the Affiliated Group under the Plan to make payment of amounts reflected inan Account merely constitutes the unsecured promise of the Company (or, ifapplicable, the participating members of the Affiliated Group) to make paymentsfrom their general assets and no Participant or Beneficiary shall have anyinterest in, or a lien or prior claim upon, any property of the AffiliatedGroup.  Nothing in the Plan shall be construed as guaranteeing futureemployment to Eligible Employees.  It is the intention of the Affiliated Groupthat the Plan be unfunded for tax purposes and for purposes of Title I ofERISA.  The Company may create a trust to hold funds to be used in payment ofits and the Affiliated Group's obligations under the Plan, and may fund suchtrust; provided, however, that any funds contained therein shall remain liablefor the claims of the general creditors of the Company and the otherparticipating members of the Affiliated Group. 

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### (b)              In the event that, in the sole discretion of the Committee, theCompany and/or the other members of the Affiliated Group purchases an insurancepolicy or policies insuring the life of any Participant (or any other property)to allow the Company and/or the other members of the Affiliated Group torecover the cost of providing the benefits, in whole or in part, hereunder,neither the Participants nor their Beneficiaries or other distributees shallhave nor acquire any rights whatsoever therein or in the proceeds therefrom. The Company and/or the other members of the Affiliated Group shall be the soleowner and beneficiary of any such policy or policies and, as such, shallpossess and may exercise all incidents of ownership therein.  A Participant'sparticipation in the underwriting or other steps necessary to acquire suchpolicy or policies may be required by the Company and, if required, shall notbe a suggestion of any beneficial interest in such policy or policies to suchParticipant or any other person. 

### **10.4.       ****Claims of Other Persons**.  The provisions of the Planshall in no event be construed as giving any other person, firm or corporationany legal or equitable right as against the Affiliated Group or the officers,employees or directors of the Affiliated Group, except any such rights as arespecifically provided for in the Plan or are hereafter created in accordancewith the terms and provisions of the Plan. 

### **10.5.       ****Severability**.  The invalidity and unenforceability ofany particular provision of the Plan shall not affect any other provisionhereof, and the Plan shall be construed in all respects as if such invalid orunenforceable provision were omitted.   

### **10.6.       ****Governing Law**.  Except to the extent preempted byfederal law, the provisions of the Plan shall be governed and construed inaccordance with the laws of the State of Delaware.

### **10.7.       ****Relationship to Other Plans**.  The Plan is intended toserve the purposes of and to be consistent with any incentive compensation planapproved by the Committee for purposes of the Plan. 

### **10.8.       ****Successors**.  The Company shall require any successor(whether direct or indirect, by purchase, merger, consolidation, reorganizationor otherwise) to all or substantially all of the business and/or assets of theCompany expressly to assume this Plan.  This Plan shall be binding upon andinure to the benefit of the Company and any successor of or to the Company,including without limitation any persons acquiring directly or indirectly allor substantially all of the business and/or assets of the Company whether bysale, merger, consolidation, reorganization or otherwise (and such successorshall thereafter be deemed the "Company" for the purposes of this Plan),and the heirs, beneficiaries, executors and administrators of eachParticipant.  

### **10.9.       ****Withholding of Taxes**.  Subject to Section 7.7 hereof,to the extent required by the law in effect at the time payments are made, theAffiliated Group may withhold or cause to be withheld from any amounts deferredor payable under the Plan all federal, state, local and other taxes as shall belegally required.  The Affiliated Group shall have the right in its solediscretion to (i) require a Participant to pay or provide for payment of theamount of any taxes that the Affiliated Group may be required to withhold withrespect to amounts that the Company credits to a Participant's Account or (ii)deduct from any amount of salary, bonus, incentive compensation or other paymentotherwise payable in cash to the Participant the amount of any taxes that theCompany may be required to withhold with respect to amounts that the Companycredits to a Participant's Account.

### **10.10.   ****Electronicor Other Media**.  Notwithstanding any other provision of the Plan to thecontrary, including any provision that requires the use of a writteninstrument, the Committee may establish procedures for the use of electronic orother media in communications and transactions between the Plan or theCommittee and Participants and Beneficiaries.  Electronic or other media mayinclude, but are not limited to, e-mail, the Internet, intranet systems andautomated telephonic response systems.   

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### **10.11.   ****Headings;Interpretation**.  Headings in this Plan are inserted for convenience ofreference only and are not to be considered in the construction of theprovisions hereof.  Unless the context clearly requires otherwise, themasculine pronoun wherever used herein shall be construed to include thefeminine pronoun.  

### **10.12.   ****ParticipantsDeemed to Accept Plan**.  By accepting any benefit under the Plan, eachParticipant and each person claiming under or through any such Participantshall be conclusively deemed to have indicated his acceptance and ratificationof, and consent to, all of the terms and conditions of the Plan and any actiontaken under the Plan by the Board, the Committee or the Company or the othermembers of the Affiliated Group, in any case in accordance with the terms andconditions of the Plan.

***       *        ***

**                       **EXECUTED this               day ofJune, 2007.

                                                            ASSOCIATEDESTATES REALTY CORPORATION

                                                            By:        /s/Kara Florack

                                                            Title:     Vice President of Human Resources

                                                                      23

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**SECTION 409A DEFINITION OF A CHANGE IN CONTROL EVENT**

A deferred compensationplan subject to Section 409A may permit a payment of benefits upon a"Change in Control Event."  There are generally three types of eventsthat may constitute a Change in Control Event for purposes of the Section 409Arules: (i) a change in the ownership of a corporation; (ii) a change in theeffective control of a corporation; and (iii) a change in the ownership of asubstantial portion of the assets of a corporation.

The definition of aChange in Control Event will apply to the payment of amounts deferred (andrelated earnings) on or after January 1, 2005.  Amounts deferred prior toJanuary 1, 2005 (and related earnings) will continue to be subject to theexisting change in control definition (unless the plan is materiallymodified).  The existing change in control definition can also continue toapply to determine vesting (as opposed to distributions) and to trigger thefunding of a rabbi trust.   

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| **TYPE OF EVENT**                                                                  | **DEFINITION**                                                                                                                                                                                                                                                                                                                                                                                                                                        | **COMMENT**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| A change in the  ownership of a corporation                                        | A person (or group)  acquires stock that, together with stock already owned by such person or  group, constitutes **more than 50 percent** of the total fair market  value*or* total voting power of the stock of the  corporation.                                                                                                                                                                                                              | If a person (or group)  already owns more than 50 percent of the stock, the acquisition of additional  stock will not trigger a Change in Control Event.  

A Change in Ownership  Event occurs only if there is a transfer or issuance of stock and the stock  remains outstanding after the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| A change in effective  control of a corporation                                    | •    A person (or group) acquires,  during a 12-month period, stock possessing **30 percent or more** of the  total voting power; or 

•    A **majority** of the members  of the board of directors is replaced during any 12-month period by directors  whose appointment or election is not endorsed by a majority of the  corporation's board of directors prior to the date of the appointment or  election.  | If a person (or group)  already owns at least 30 percent of the voting power, the acquisition of  additional voting power does not trigger a Change in Control Event  (but the acquisition of additional value might trigger the 50 percent  prong above).  

The change in board  membership prong triggers only with respect to a corporation for which no  other corporation is a majority shareholder (*i.e.,*the parent  corporation).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| A change in the  ownership of a substantial portion of the assets of a corporation | A person (or group)  acquires, during a 12-month period, assets that have a total gross fair  market value (*i.e.,* without regard to liabilities) of **40 percent****or more** of the total gross fair market value of all of the assets of  the corporation immediately prior to such acquisition.                                                                                                                                                  | An exception applies  if the transfer is to an entity that is controlled by the shareholders of the  transferring corporation, such as:   

•       a shareholder of the  transferring corporation (immediately before the transfer) in exchange for or  with respect to the receiving corporation's stock;

•       an entity in which the  transferring corporation owns 50 percent or more of the total value*or*voting power;

•       a person (or group) that owns  directly or indirectly 50 percent or more of the total value OR voting power  of all of the outstanding stock of the transferring corporation; or 

•       an entity in which at least 50  percent of the total value*or*  voting power is owned  directly or indirectly by a person that owns directly or indirectly 50  percent or more of the total value*or*voting power of  all of the outstanding stock of the transferring corporation. |
| Miscellaneous                                                                      | The occurrence of the  event must be objectively determinable and any requirement that any other  person or group, such as a plan administrator or compensation committee,  certify the occurrence of a change in control event must be strictly   ministerial and not involve any discretionary authority.

Certain attribution  rules apply for purposes of determining stock ownership.                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

                                                                      25

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**WHEN DOES ASEPARATION FROM SERVICE OCCUR UNDER SECTION 409A?**

Payments may commence upon a termination of employmentunder arrangements affected by Section 409A of the tax code only if thetermination constitutes a "separation from service."   Thismemorandum provides a summary of the definition of "separation fromservice" and identifies design decisions that the company must make in2007 concerning the application of the definition.   

**General definition of "separation fromservice"**

A separation from service occurs when the employeedies, retires, or otherwise has a termination of employment.  The employee mustterminate employment with the employer and all members of the employer's"controlled group" (generally based on a 50% ownership level), whichincludes foreign and noncorporate entities.     

 **Issues with reducedschedules or consulting arrangements**

In some cases it is not clear whether a separation fromservice has occurred.  For example, what if an employee is permitted to remainon the payroll for a period of time to "bridge the gap" toretirement, but no further meaningful services are required?  Or what if anemployee purportedly terminates employment but continues to provide significantservices as a consultant?  

In these cases, a separation from service will occuronly if the parties "reasonably anticipate" that the level ofservices will permanently decrease to 20% or less of the average level ofservices during the previous 36 months (or if shorter, the actual period ofservice).  In this regard, there are a few presumptions that apply:

**.**     A separation from service is presumed if the level of servicesfalls to 20% or less

**.**     A separation from service is presumed not to have occurredif the level of services continues at a level of 50% or more  

**.**     These presumptions can be rebutted based on the facts andcircumstances  

The final regulations confirm that a separation fromservice cannot be defined by reference to when an employee leaves the payroll. 

**Bona fide leave ofabsence **

The employment relationship is deemed to continue whilethe employee is on military leave, sick leave, or other bona fide leave ofabsence (provided there is a reasonable expectation that the employee willreturn) if: 

**.**     The leave does not exceed six months

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**.**     The leave extends beyond six months, but the employee retains aright to reemployment under an applicable statute (*e.g.,*Family MedicalLeave Act; USERRA) or by contract.  

**.**     The leave does not extend beyond 29 months in the case of acertain disabilities

The final regulations confirm that "terminalleave" programs will not delay a separation from service.   

**Re-Employment**

If an employeeterminates employment but is later re-employed by the same controlled group,then the parties will need to carefully review the facts and circumstances todetermine whether a true separation from service has occurred.  Thepresumptions outlined above will apply to this situation.

If the facts and circumstances indicate that, at thetime of termination, the parties reasonably anticipated that no future serviceswould be provided, then it is likely that the original separation from servicewill be respected.  On the other hand, if the facts and circumstances indicatethat the parties anticipated that the individual would be re-employed after ashort period of time, then the separation from service might not be respected. 

If the original termination of employment is respected,any payments of deferred compensation that commenced upon the originalseparation from service cannot be suspended upon the subsequent re-employment. 

**Employee-Directors**

Special rules apply when an individual serves as bothan employee and as a member of the board of directors.  Where an individualterminates employment but continues as a director, the termination willconstitute a separation from service only under the employee deferral plans,but not any separate director plans (and vice versa).

**Asset Sales**

Under a modified "same desk" rule, theparties to an asset purchase agreement may specify in writing, prior toclosing, whether the employees of the selling company who continue with thepurchaser have experienced a separation from service under the various deferredcompensation plans of the seller.  The parties must treat all affectedemployees consistently (*i.e.,* they cannot pick and choose).  

The benefits under the seller's deferred compensation plansgenerally will be payable when the employees separate from service with thebuyer.  Therefore, the parties should establish a procedure for notifying theseller if and when the transferred employees later separate from service.  Asimilar rule applies in the context of spin-off transactions.        27

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**A GUIDE TOTRACKING SPECIFIED EMPLOYEES UNDER SECTION 409A**

Section 409A of the tax code imposes a mandatory6-month delay on payments of deferred compensation to "specifiedemployees" of a public company following separation from service. Therefore, as part of its Section 409A Compliance Program, the company willneed to establish a method to identify and track its specified employees.  Thismemorandum provides a general overview of the design decisions related toestablishing this tracking system.  

**GENERAL OVERVIEW**

A "specified employee" of a public companygenerally means an individual who is either:

.     **Top Officer**:  An "officer" having annual"compensation" greater than a specified amount ($145,000 in 2007),not to exceed the top 50 paid officers (or, if fewer, the greater of 3 or 10%of the employees).

**.**     **5-Percent Owner**:  A 5-percent owner of the public company.

**.**    **1-Percent Owner**:  A 1-percent owner of the public companyhaving annual "compensation" of more than $150,000. 

**REGULATORYMETHODOR ALTERNATIVE METHOD**

The company may identify its specified employees usingthe approach outlined in the regulations (*i.e.*, the "regulatorymethod") or by reference to a customized "alternative method."  

 [x]        Default - Regulatory Method. Follow the approach outlined in the regulations. 

**.**     *Pros*.  The approach is specifically sanctioned by thefinal regulations and results in the minimum number of employees being subjectto the 6-month delay.

**.**     *Cons*.  The approach does not leave room for error.  Forexample, an error in calculating compensation could result in anunder-inclusive list.      

□          AlternativeMethod.  In lieu of following the regulatory method for identifyingspecified employees, the Company could create an "alternativemethod," for example based on payroll code or salary grade.  Thealternative method must be an objectively determinable standard that isdesigned to include all specified employees (determined based on all of the"default" rules set forth below).  The alternative method must resultin either all service providers or no more than 200 service providers beingidentified in the class as of any date.  If this box is checked, pleasedescribe the method:  _______________________________________.

**.**     *Pros*.  The approach is flexible and could reduce theadministrative burden of tracking specified employees. 

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**.**     *Cons*.  The approach generally will result in anover-inclusive list of individuals subject to the 6-month delay.  Moreover, itmight be difficult to establish a method that will always include: (i)no more than 200 employees and directors; (ii) the top 50 officers; and(iii) the 5-percent and 1-percent owners.     

**REGULATORYMETHOD FOR IDENTIFYING SPECIFIED EMPLOYEES**

If the company decides to use the regulatory method toidentify specified employees, then it will need to take the following steps toestablish its tracking system.

**Step One:  Identify the pool of "officers"**

No more than 50 employees (or, if fewer, the greater of3 or 10% of the employees) will be treated as "officers."  

**.**     For this purpose, all members of the affiliated group are treatedas one employer (using the 80% ownership test under Section 414(b) and 414(c)of the tax code).  Therefore, an affiliated group with 500 or more employeeswill have a maximum of 50 officers.  

**.**     If more employees qualify as officers than permitted under theselimits, then those qualifying individuals receiving the highest one-yearcompensation while officers are considered the company's officers.  

**.**     An employee who is an officer must be counted as an officer forthis purpose even if he or she also is a specified employee under the 5-percentowner or 1-percent owner tests.    

**.**     A non-employee director will not be considered an officerfor this purpose.

Unfortunately, the final regulations under Section 409Ado not provide guidance on how to identify the "officers" of acompany.   Instead, the determination is based on guidance under Section 416 ofthe tax code.  

**.**     Whether an individual is an "officer" is determinedbased of all the facts, including, for example, the source of his authority,the term for which elected or appointed, and the nature and extent of hisduties. 

**.**     An employee who merely has the title of an officer but not theauthority of an officer is not considered an officer for purposes of thistest.  Similarly, an employee who does not have the title of an officer but hasthe authority of an officer is an officer for purposes of this test.  

**.**     An individual may be considered an "officer" underSection 409A even though he is not a board-appointed officer.  For example, insome cases non-board-appointed officers have certain authority to bind thecompany (*e.g.,* authority over budgets, etc.).  Depending on thespecific  facts and circumstances, there is a risk that these employees couldbe considered "officers" for purposes of Section 409A.  

                                                                      29

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**.**     Based on the above, a conservative approach is to include allboard-appointed officers, plus the most highly compensated other employees, upto a total of 50 individuals.  

Conclusion: Method to identify "officers." preceding method

**Step Two:  Identifythe 5-percent and 1-percent owners**

An individual is a5-percent owner if he owns more than 5 percent of (i) the outstandingstock or (ii) the total voting power of all stock.   An individual is a1-percent owner if he owns more than 1 percent of (i) the outstandingstock or (ii) the total voting power of all stock, *and* his annualcompensation exceeds $150,000.  

**.**     Unlike the "top officer prong", these two prongs canapply to non-employee directors and consultants.  

**.**     For purposes of applying this test, the general stock attributionrules of Section 318 of the tax code apply, with certain modifications.

Conclusion:  

**Step Three:  Select the appropriate definition ofcompensation**

The application of each of the "top officer"prong and the "1-percent owner" prong of the specified employeedefinition depends on the individual's "compensation."   For example:

**.**     For purposes of the "top officer" prong, the officer's"compensation" must exceed $145,000 for 2007; if there are more than50 officers, then those individuals receiving the highest one-year"compensation" while officers are included on this list.  

**.**      An individual who owns more than 1 percent of the vote or valueof outstanding stock only if his or her annual "compensation" exceeds$150,000.    

For these purposes, the company may use any availabledefinition of "compensation" under Section 415 of the tax code,including any available safe harbor, timing or other special rules.  Thedefinition must be used consistently and cannot be changed retroactively. Although the definition is not required to match the one used in the company'squalified plans, it might make sense from an administrative standpoint to haveconsistent definitions.  The company, however, may have business reasons todeviate from the definition of compensation included in its qualified plan.  

□          Sameas Qualified Plan.  The ____________________ plan.

[x]         Customize the Definition.

            *Definitionof Compensation*

                                                                      30

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[x]         Default Definition. Generally includes all compensation paid for personal services that is includedin gross income, including salary, commissions, bonuses and fringe benefits,plus elective deferrals to a 401(k) plan and elective benefits under acafeteria plan or qualified transportation fringe benefit plan.  The definitionalso includes certain "special items", such as amounts resulting froma Section 83(b) election, amounts that are includible under the rules ofsection 409A, and certain taxable reimbursements.  The definition does notinclude elective deferrals under a nonqualified deferred compensation plan,distributions from a qualified or nonqualified plan (unless otherwise providedby the employee), amounts realized from the exercise of a non-statutory optionor the vesting of restricted shares, amounts realized from the sale of sharesacquired under an incentive stock option, or other similar items. 

□          Simplifiedcompensation. Same as above, but does not include the "specialitems", such as income attributable to a Section 83(b) election, Section409A or taxable reimbursements.

□          Section3401(a) wages.   Includes amounts in Box 1 on the Form W-2, plus electivedeferrals to a 401(k) plan and elective benefits under a cafeteria plan orqualified transportation fringe benefit plan.  Unlike the default or simplifieddefinitions, this definition does include income recognized uponexercise of stock options or the vesting of restricted shares.  The definitionalso does not add back elective deferrals under a nonqualified deferredcompensation plan.  

*Other Special Rules*

□          NonresidentAliens.  Include compensation paid to nonresident aliens even if the amountis excluded from gross income.

□          Useof Special Timing Rules.  Describe _____________________________.  

**Step Four:  Select the specified employeeidentification date**

An employee is a specified employee if he satisfies thedefinition at any time during the 12-month period ending on thespecified employee "identification date".  The company hasflexibility in selecting the "identification date" (although anysubsequent change will not be effective for at least 12 months):  

[x]         Default Date.  Unlessanother date is designated, the specified employee identification date isDecember 31.  In other words, if the individual is a specified employee atany time during the period commencing January 1 and ending December 31 of acalendar year, then he or she is a specified employee on the identificationdate. 

                                                                      31

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□          OtherDate.  The company may designate any other date as the specified employeeidentification date, provided that it uses the same identification date withrespect to all nonqualified deferred compensation plans. If this box ischecked, please insert the date ______________.

**Step Five:  Select the specified employee effectivedate**

If an individual is a specified employee as of an"identification date", then he or she is treated as a specified employeefor the entire 12-month period beginning on the specified employee"effective date."  The company has flexibility in selecting the"effective date" (although any subsequent change will not beeffective for at least 12 months): 

[x]         Default Date.  Unlessanother date is designated, the specified employee effective date is the firstday of the fourth month following the specified employee identification date (*e.g.,*April 1 for a December 31 identification date).     

□          OtherDate.  The company may designate any earlier date as the specified employeeeffective date.   If this box is checked, please insert the date ______________(not later than the first day of the fourth month following the specifiedemployee identification date). 

**TIMING RULES**

The elections described above (including the electionto use the alternative method) are subject to the following rules:

**.**     The elections must be effective for all nonqualified deferredcompensation plans and must apply consistently to all employees.  

**.**     The elections must be in place no later than December 31, 2007.  

**.**     The elections are effective when the company has taken allnecessary corporate action to make the elections binding for purposes of allnonqualified deferred compensation plans.

As a practical matter, the company might want to retain thediscretion in the deferred compensation plans to make the elections (ratherthan stating the elections in the plan document).  The company could thenestablish or change the elections in a resolution that applies to allnonqualified deferred compensation arrangements.                    32

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[1] Please refer to theattached change in control memorandum for a summary of these terms. 

[2] Please refer to the attached memorandum for a summary of the separation fromservice definition.    

[3]Please refer to the attached memorandum regarding specified employees for moreinformation.