**ASSOCIATED ESTATESREALTY CORPORATION**

**DIRECTORS’DEFERRED COMPENSATION PLAN**

**(January 1, 2005Restatement)**

AssociatedEstates Realty Corporation (the “Company”) maintains in effect a Directors’Deferred Compensation Plan (the “Plan”) to assist it in attracting andretaining persons of competence and stature to serve as Independent Directorsby giving those directors the option of deferring receipt of the fees payableand awards granted to them by the Company for their services as directors andcreating an opportunity for appreciation of fees and awards deferred based onappreciation of the Company’s Common Shares.  The Plan was establishedeffective October 1, 1996, and  amended in September 2003.  It is now desiredto 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 andSection 409A of the Internal Revenue Code (the “Code”). 

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

1.**         Effectof Restatement**.  The Plan originally became effective for alldirector’s fees and awards payable with respect to periods commencing with theCompany’s fiscal quarter that began October 1, 1996.  The January 1, 2005Restatement of the Plan is effective with respect only to amounts deferredunder the Plan on and after January 1, 2005, and no modification relating toamounts earned and vested under the Plan as of December 31, 2004, based on provisionsin effect on October 3, 2004, shall be made hereby.  The foregoingnotwithstanding, for the period prior to January 1, 2009, the Plan shalloperate based on IRS Notice 2005-1, additional notices published by theTreasury Department and the Internal Revenue Service providing transitionguidance, and a good faith, reasonable interpretation of Section 409A of theCode.

2.**         Participation**. Each director of the Company who (a) is duly elected to the Company’s Board ofDirectors and (b) receives fees and awards for services as a director (an“Eligible Director”), may elect to defer receipt of fees or awards otherwisepayable to that director, as provided for in the Plan; provided, however, thatno director who is a common law employee of the Company or an affiliate shallbe an Eligible Director.  Each Eligible Director who elects to defer fees orawards will be a Participant in the Plan.

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

4.**         Deferrals**.

(a)**        DeferralElection**.  Prior to January 1 of each year, any Eligible Director mayfile with the Administrators of the Plan an election in writing to participatein 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 andsucceeding years (a “Deferral Election”).   In the first year a directorbecomes eligible to participate in this Plan, such director may file an initialDeferral Election with the Administrators within 30 days after the date hebecomes eligible to participate in the Plan, with respect to awards to begranted or fees paid for services to be performed after the date of  theelection. When a Deferral Election is filed, an amount equal to all or aportion (as designated in the Deferral Election) of the fees or awardsotherwise payable to a Participant for the year (or portion thereof) or forthat 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 DistributionCommencement Date (defined in paragraph 5) and method of distribution (lump sumor four equal annual installments), provided that if no form of payment isspecified, the distribution shall be made in a lump sum.  If a DeferralElection has been filed to participate in the Plan for succeeding years and aParticipant wishes to discontinue deferral, an election in writing to terminateparticipation in the Plan for any succeeding year must be filed with theAdministrators 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 andreflect each Participant’s credits and valuations.  The Company will provideeach Participant an annual statement of the balance in that Participant’sDeferral Account.  The Company will credit to each Participant’s DeferralAccount an amount equivalent to the fees or award that would have been paid tothe 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 beenpaid absent a Deferral Election.  No funds will be segregated into the DeferralAccount of Participants; the Deferral Accounts represent a general unsecuredobligation of the Company.  Any amount credited to the Deferral Account basedon an award which is subject to a vesting schedule shall be subject to the samevesting schedule under the Plan as the award would have been.

(c)**        Valuation**. Until the first distribution to a Participant, amounts credited to a DeferralAccount of that Participant will be increased or decreased as measured by themarket value of the Company’s Common Shares plus the value of dividends orother distributions on the Company’s Common Shares.  Each amount credited to aDeferral Account will be assigned a number of Share Units (including fractionsof 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 thedirector or as a dividend or other distribution attributable to those ShareUnits, by the Fair Market Value of the Company’s Common Shares (as definedbelow) on the date of credit.  Fair Market Value of the Company’s Common Sharesmeans:  (i) the closing price of the Company’s Common Shares on the principalexchange on which the Company’s Common Shares are then trading, if any, on thedate of credit, or, if shares were not traded on the date of credit, then onthe next preceding trading day during which a sale occurred; or (ii) if theCommon Shares are not traded on an exchange but are quoted on NASDAQ or asuccessor quotation system, (1) the last sales price (if the Common Shares arethen 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 allother cases) for the Common Shares on the date of credit as reported by NASDAQor a successor quotation system, or (iii) if the Common Shares are not publiclytraded 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 thedate 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 marketvalue established by the Chief Financial Officer acting in good faith.  EachShare Unit will have the value of a Common Share of the Company.  The number ofShare Units will be adjusted to reflect stock splits, stock dividends or othercapital adjustments effected without receipt of consideration by the Company.

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(d)        **SubsequentDeferral Elections. **Each Participant who has filed a Deferral Electionwith respect to fees or awards for service as a director may file a SubsequentDeferral Election thereby electing a later Distribution Commencement Date (asdefined in paragraph 5) with respect to the Participant’s Deferral Accountrelating to such Deferral Election; provided,however, that noSubsequent Deferral Election shall be valid unless (i) such SubsequentDeferral Election is made at least twelve months before the otherwiseapplicable Distribution Commencement Date, (ii) such further deferral is for aperiod of not less than five years after the otherwise applicable DistributionCommencement Date, and (iii) such Subsequent Deferral Election has beenmade at least twelve months prior to the date payment of his Deferral Accountwould otherwise have been made. A valid Subsequent Deferral Election, if made,will defer the payment date of the Deferral Account subject thereto until theDistribution Commencement Date, as amended by such Subsequent Deferral Election. A valid Subsequent Deferral Election may also include an election to change themethod of distribution (lump sum or four equal annual installments) applicableto the Distribution Commencement Date resulting from the Subsequent DeferralElection.  A Subsequent Deferral Election must be filed with the Administratorsat the time and in the form prescribed by the Administrators. Once made, aParticipant’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 nototherwise be payable in 2008 and may not cause an amount to be paid in 2008that 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 madeunder subparagraph 4(a), the date on which distribution of the vested amountscredited to the Participant’s Deferral Account to which that Deferral Electionrelates will commence (the “Distribution Commencement Date”) and the method ofdistribution, as permitted hereunder.  Payment may be made in one lump sum orfour equal annual installments based on the number of Share Units attributableto the applicable Deferral Election determined as of the December 31immediately preceding commencement of distribution [and the market value of theCompany's Common Shares on that date].  The Distribution Commencement Date andmethod of distribution of benefits may vary with each separate DeferralElection, but each Deferral Election will be irrevocable.  If the DistributionCommencement Date is the date the director ceases to serve as a Director,payment will commence within 45 days following such date.  If the DistributionCommencement Date is another date elected by the director, payment willcommence on such date with any subsequent installment payments to be made onthe next following anniversaries of such date until distribution is complete. The Deferral Accounts do not represent rights to acquire the Company’s CommonShares; payment will only be made in cash.

6.**         Deathor Disability**.

(a)        Inthe event a Participant’s service is terminated by reason of death orDisability (as hereinafter defined) prior to the distribution of any portion ofthat Participant’s Deferral Account, the Company will, within ninety days ofthe date of service termination, commence distribution of amounts credited tothe Deferral Account to the Participant (or to the beneficiary or beneficiariesin the event of death), unless, in the case of Disability, the Participant hasearlier elected that payment not commence on account of Disability.  Suchdistribution will be made in accordance with the method of distribution electedby the Participant pursuant to paragraph 5 hereof.  In the event aParticipant’s death or disability occurs after distribution of amounts creditedto the Deferral Account hereunder has begun, the Company will continue to makedistributions to the Participant (or to the beneficiary or beneficiaries in theevent of death) in accordance with the methods of distribution elected by theParticipant pursuant to paragraph 5 hereof.  For purposes of this subparagraph6(a), “Disability” means the condition of being unable to engage in anysubstantial gainful activity by reason of any medically determinable physicalor mental impairment that can be expected to result in death or can be expectedto last for a continuous period of not less than twelve months, as determinedby the Administrators.

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

7.**         Assignmentand Alienation of Benefits**.  The right of each Participant to anyaccount, 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 ofthat Participant; and no account, benefit or payment will be subject toanticipation, alienation, sale, transfer, assignment or encumbrance.

8.**         Amendmentor Termination**.  The Board of Directors of the Company may amend orterminate this Plan at any time and from time to time.  Any amendment ortermination of this Plan will not affect the rights of a Participant accrued priorthereto without that Participant’s written consent.

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9.**         Taxes**. The Company is not be responsible for the tax consequences under federal, stateor local law of any election made by any Participant under the Plan.  Allpayments under the Plan are subject to withholding and reporting requirementsto the extent permitted by applicable law.

10.**        NoRight to Continued Membership on the Board**.  Nothing in this Planconfers upon any director any right to continue as a director of the Company orinterferes with the rights of the Company and its shareholders, which arehereby expressly reserved, to remove any director at any time for any reasonwhatsoever, with or without cause.

11.**        ApplicableLaw**.  This Plan is governed under the laws of the State of Ohio.

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Executed this23rd day of December, 2008

ASSOCIATED ESTATES REALTY CORPORATION

By: /s/ Jeffrey I. Friedman________________________       Title: President, Chief ExecutiveOfficer

And:/s/  Martin A. Fishman_______________________       Title: Vice President, General Counsel

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