ASSOCIATED ESTATES
REALTY CORPORATION


DIRECTORS’
DEFERRED COMPENSATION PLAN


(January 1, 2005
Restatement)






Associated
Estates Realty Corporation (the “Company”) maintains in effect a Directors’
Deferred Compensation Plan (the “Plan”) to assist it in attracting and
retaining persons of competence and stature to serve as Independent Directors
by giving those directors the option of deferring receipt of the fees payable
and awards granted to them by the Company for their services as directors and
creating an opportunity for appreciation of fees and awards deferred based on
appreciation of the Company’s Common Shares.  The Plan was established
effective October 1, 1996, and  amended in September 2003.  It is now desired
to further amend and restate the provisions of the Plan effective January 1, 2005, to reflect the requirements of the American Jobs Creation Act of 2004 and
Section 409A of the Internal Revenue Code (the “Code”).  


Therefore, the
Company hereby adopts amended and restated provisions of the  Plan effective as
described below, as hereinafter set forth:


1.         Effect
of Restatement.  The Plan originally became effective for all
director’s fees and awards payable with respect to periods commencing with the
Company’s fiscal quarter that began October 1, 1996.  The January 1, 2005
Restatement of the Plan is effective with respect only to amounts deferred
under the Plan on and after January 1, 2005, and no modification relating to
amounts earned and vested under the Plan as of December 31, 2004, based on provisions
in effect on October 3, 2004, shall be made hereby.  The foregoing
notwithstanding, for the period prior to January 1, 2009, the Plan shall
operate based on IRS Notice 2005-1, additional notices published by the
Treasury Department and the Internal Revenue Service providing transition
guidance, and a good faith, reasonable interpretation of Section 409A of the
Code.











2.         Participation. 
Each director of the Company who (a) is duly elected to the Company’s Board of
Directors and (b) receives fees and awards for services as a director (an
“Eligible Director”), may elect to defer receipt of fees or awards otherwise
payable to that director, as provided for in the Plan; provided, however, that
no director who is a common law employee of the Company or an affiliate shall
be an Eligible Director.  Each Eligible Director who elects to defer fees or
awards will be a Participant in the Plan.









































3.         Administration. 
The Company’s Board of Directors appoints the individuals holding the positions
of Chief Executive Officer, Chief Financial Officer, and Vice President of
Human Resources, officers of the Company who are not eligible to become
Participants, to act as the Administrators of the Plan (the “Administrators”). 
The Administrators will serve at the pleasure of the Board of Directors and
will administer, construe and interpret the Plan.  The Administrators will not
be liable for any act done or determination made in good faith.  The Board of
Directors has the power to designate additional or replacement Administrators
at its discretion.


4.         Deferrals.



(a)        Deferral
Election.  Prior to January 1 of each year, any Eligible Director may
file with the Administrators of the Plan an election in writing to participate
in the Plan and to defer all or a portion of the fees or awards, or both,
otherwise payable to that director for that year or for that year and
succeeding years (a “Deferral Election”).   In the first year a director
becomes eligible to participate in this Plan, such director may file an initial
Deferral Election with the Administrators within 30 days after the date he
becomes eligible to participate in the Plan, with respect to awards to be
granted or fees paid for services to be performed after the date of  the
election. When a Deferral Election is filed, an amount equal to all or a
portion (as designated in the Deferral Election) of the fees or awards
otherwise payable to a Participant for the year (or portion thereof) or for
that year and for succeeding years (as designated in the Deferral Election)
will be credited to a deferral account maintained on behalf of that Participant
(a “Deferral Account”).  A Deferral Election must also state the Distribution
Commencement Date (defined in paragraph 5) and method of distribution (lump sum
or four equal annual installments), provided that if no form of payment is
specified, the distribution shall be made in a lump sum.  If a Deferral
Election has been filed to participate in the Plan for succeeding years and a
Participant wishes to discontinue deferral, an election in writing to terminate
participation in the Plan for any succeeding year must be filed with the
Administrators prior to January 1 of that year.


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(b)        Accounting. 
The Deferral Accounts will be maintained by the Company and will list and
reflect each Participant’s credits and valuations.  The Company will provide
each Participant an annual statement of the balance in that Participant’s
Deferral Account.  The Company will credit to each Participant’s Deferral
Account an amount equivalent to the fees or award that would have been paid to
the Participant if the Participant had not elected to participate in the Plan. 
The credit will be made on the date on which the fee or award would have been
paid absent a Deferral Election.  No funds will be segregated into the Deferral
Account of Participants; the Deferral Accounts represent a general unsecured
obligation of the Company.  Any amount credited to the Deferral Account based
on an award which is subject to a vesting schedule shall be subject to the same
vesting schedule under the Plan as the award would have been.












(c)        Valuation. 
Until the first distribution to a Participant, amounts credited to a Deferral
Account of that Participant will be increased or decreased as measured by the
market value of the Company’s Common Shares plus the value of dividends or
other distributions on the Company’s Common Shares.  Each amount credited to a
Deferral Account will be assigned a number of Share Units (including fractions
of a Share) determined by dividing the amount credited to the Deferral Account,
whether in lieu of payment of fees for service as a director, an award to the
director or as a dividend or other distribution attributable to those Share
Units, by the Fair Market Value of the Company’s Common Shares (as defined
below) on the date of credit.  Fair Market Value of the Company’s Common Shares
means:  (i) the closing price of the Company’s Common Shares on the principal
exchange on which the Company’s Common Shares are then trading, if any, on the
date of credit, or, if shares were not traded on the date of credit, then on
the next preceding trading day during which a sale occurred; or (ii) if the
Common Shares are not traded on an exchange but are quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the Common Shares are
then listed as a National Market Issue under the NASD National Market System)
or (2) the mean between the closing representative bid and asked prices (in all
other cases) for the Common Shares on the date of credit as reported by NASDAQ
or a successor quotation system, or (iii) if the Common Shares are not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for the Common Shares, on the
date of credit, as determined in good faith by the Chief Financial Officer; or
(iv) if the Company’s Common Shares are not publicly traded, the fair market
value established by the Chief Financial Officer acting in good faith.  Each
Share Unit will have the value of a Common Share of the Company.  The number of
Share Units will be adjusted to reflect stock splits, stock dividends or other
capital adjustments effected without receipt of consideration by the Company.


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(d)        Subsequent
Deferral Elections.  Each Participant who has filed a Deferral Election
with respect to fees or awards for service as a director may file a Subsequent
Deferral Election thereby electing a later Distribution Commencement Date (as
defined in paragraph 5) with respect to the Participant’s Deferral Account
relating to such Deferral Election; provided, however, that no
Subsequent Deferral Election shall be valid unless (i) such Subsequent
Deferral Election is made at least twelve months before the otherwise
applicable Distribution Commencement Date, (ii) such further deferral is for a
period of not less than five years after the otherwise applicable Distribution
Commencement Date, and (iii) such Subsequent Deferral Election has been
made at least twelve months prior to the date payment of his Deferral Account
would otherwise have been made. A valid Subsequent Deferral Election, if made,
will defer the payment date of the Deferral Account subject thereto until the
Distribution Commencement Date, as amended by such Subsequent Deferral Election. 
A valid Subsequent Deferral Election may also include an election to change the
method of distribution (lump sum or four equal annual installments) applicable
to the Distribution Commencement Date resulting from the Subsequent Deferral
Election.  A Subsequent Deferral Election must be filed with the Administrators
at the time and in the form prescribed by the Administrators. Once made, a
Participant’s Subsequent Deferral Election shall be irrevocable.


(e)        Transition Elections.  After January 1, 2008,
and on or before December 31, 2008, and to the extent permitted by the Company,
a Participant may make a change in an election as described in IRS Notice 2007-86, provided that the election may apply only to amounts that would not
otherwise be payable in 2008 and may not cause an amount to be paid in 2008
that would not otherwise be payable in 2008.



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5.         Distribution. 
A Participant must elect in writing, at the time each Deferral Election is made
under subparagraph 4(a), the date on which distribution of the vested amounts
credited to the Participant’s Deferral Account to which that Deferral Election
relates will commence (the “Distribution Commencement Date”) and the method of
distribution, as permitted hereunder.  Payment may be made in one lump sum or
four equal annual installments based on the number of Share Units attributable
to the applicable Deferral Election determined as of the December 31
immediately preceding commencement of distribution [and the market value of the
Company's Common Shares on that date].  The Distribution Commencement Date and
method of distribution of benefits may vary with each separate Deferral
Election, but each Deferral Election will be irrevocable.  If the Distribution
Commencement Date is the date the director ceases to serve as a Director,
payment will commence within 45 days following such date.  If the Distribution
Commencement Date is another date elected by the director, payment will
commence on such date with any subsequent installment payments to be made on
the next following anniversaries of such date until distribution is complete. 
The Deferral Accounts do not represent rights to acquire the Company’s Common
Shares; payment will only be made in cash.


6.         Death
or Disability.












(a)        In
the event a Participant’s service is terminated by reason of death or
Disability (as hereinafter defined) prior to the distribution of any portion of
that Participant’s Deferral Account, the Company will, within ninety days of
the date of service termination, commence distribution of amounts credited to
the Deferral Account to the Participant (or to the beneficiary or beneficiaries
in the event of death), unless, in the case of Disability, the Participant has
earlier elected that payment not commence on account of Disability.  Such
distribution will be made in accordance with the method of distribution elected
by the Participant pursuant to paragraph 5 hereof.  In the event a
Participant’s death or disability occurs after distribution of amounts credited
to the Deferral Account hereunder has begun, the Company will continue to make
distributions to the Participant (or to the beneficiary or beneficiaries in the
event of death) in accordance with the methods of distribution elected by the
Participant pursuant to paragraph 5 hereof.  For purposes of this subparagraph
6(a), “Disability” means the condition of being unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected
to last for a continuous period of not less than twelve months, as determined
by the Administrators.


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(b)        Each Participant
has the right to designate one or more beneficiaries to receive distributions in
the event of Participant’s death by filing with the Company a Beneficiary
Designation Form.  The designated beneficiary or beneficiaries may be
changed by a Participant at any time prior to that Participant’s death by the
delivery to the Company of a new Beneficiary Designation Form.  If no
beneficiary has been designated, or if no designated beneficiary survives the
Participant, distributions pursuant to this provision will be made to the
Participant’s estate.


7.         Assignment
and Alienation of Benefits.  The right of each Participant to any
account, benefit or payment hereunder will not, to the extent permitted by law,
be subject in any manner to attachment or other legal process for the debts of
that Participant; and no account, benefit or payment will be subject to
anticipation, alienation, sale, transfer, assignment or encumbrance.


8.         Amendment
or Termination.  The Board of Directors of the Company may amend or
terminate this Plan at any time and from time to time.  Any amendment or
termination of this Plan will not affect the rights of a Participant accrued prior
thereto without that Participant’s written consent.


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9.         Taxes. 
The Company is not be responsible for the tax consequences under federal, state
or local law of any election made by any Participant under the Plan.  All
payments under the Plan are subject to withholding and reporting requirements
to the extent permitted by applicable law.


10.        No
Right to Continued Membership on the Board.  Nothing in this Plan
confers upon any director any right to continue as a director of the Company or
interferes with the rights of the Company and its shareholders, which are
hereby expressly reserved, to remove any director at any time for any reason
whatsoever, with or without cause.


11.        Applicable
Law.  This Plan is governed under the laws of the State of Ohio.





*          *          *




Executed this
23rd day of December, 2008


ASSOCIATED ESTATES REALTY CORPORATION




By: 
/s/ Jeffrey I. Friedman________________________

       Title: President, Chief Executive
Officer




And:
/s/  Martin A. Fishman_______________________

       Title: Vice President, General Counsel




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