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**ASSOCIATED ESTATES REALTY CORPORATION**

**SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN**

**(Restated)**

AssociatedEstates Realty Corporation established, effective as of January 1, 1997, thisSupplemental Executive Retirement Plan, for the purpose of providing retirementbenefits on an unfunded basis for a select group of management or highlycompensated employees eligible to participate in accordance with the termshereof, as contemplated by Section 201(2) of the Employee Retirement IncomeSecurity Act of 1974, as amended (“ERISA”).  This Supplemental ExecutiveRetirement Plan has subsequently been amended on several occasions, includingto close participation and to discontinue accruals with respect to Participantswho were not vested in their interests under the Supplemental ExecutiveRetirement Plan on December 31, 2006.  It is now desired to amend and restatethe Supplemental Executive Retirement Plan, effective as of January 1, 2005 andsuch other dates as are expressly set forth herein, to reflect compliance withthe American Jobs Creation Act of 2004 and Section 409A of the Internal RevenueCode of 1986, as amended (the “Code”).  The amended provisions of therestatement shall not be applicable to the portion of a Participant’s accountbalance that was earned and vested under the Supplemental Executive RetirementPlan as of December 31, 2004, which shall continue to be governed by theprovisions in effect on October 3, 2004, and no material modification shall bemade to those provisions.  Moreover, for the period prior to January 1, 2009,the Supplemental Executive Retirement Plan shall operate based upon IRS Notice2005-1, additional notices published by the Treasury Department and theInternal Revenue Service providing transition guidance, and a good faith,reasonable interpretation of Section 409A of the Code.

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**DEFINITIONS**

For purposes hereof, the following words and phrases shall have themeanings indicated, unless a different meaning is plainly required by thecontext:

1.1             “Beneficiary” shall mean the person or persons designated by or withrespect to a Participant in accordance with Section 2.10 to receive any paymentunder the Plan in the event of the Participant’s death.

1.2             “Committee” shall mean the Executive Compensation Committee of the Boardof Directors of the Company.

1.3             “Company” shall mean Associated Estates Realty Corporation, an Ohiocorporation, its corporate successors, and the surviving corporation resultingfrom any merger of Associated Estates Realty Corporation with any othercorporation or corporations.

1.4             “Compensation” shall mean with respect to a Participant for a Plan Yearthe amount of his annual base pay for such Plan Year from his Employer and anyamounts paid or payable to him for such Plan Year under the Company’s AnnualExecutive Income Plan (including any discretionary portion).

1.5             “Employer” shall mean the Company and any entity which has adopted thePlan as provided in Section 5.5.

1.6             “Grandfathered Benefit” shall mean that portion of a Participant’s SERPAccount that was earned and vested under the Plan as of December 31, 2004,based on the terms of the Plan as in effect on October 3, 2004, includingearnings attributable to such portion.

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1.7             “Interest Rate” shall mean the rate to be used for crediting interest toeach SERP Account, as provided for under paragraph (c) of Section 2.2, whichrate for any period year shall be the rate which is determined by the Committeefor such period to reasonably approximate the Company’s average cost of capitalfor such period (but not to exceed a reasonable rate of interest determined inaccordance with Treasury Reg. §31.3121(v)(2)-1(d)(2)(i)(C)), whichdetermination shall be final and conclusive.

1.8             “Participant” shall mean an employee of an Employer who is one of aselect group of management or highly compensated employees who becomes eligibleto participate in accordance with Section 2.1.  No employee shall become aParticipant after December 31, 2006.

1.9             “Plan” shall mean the Supplemental Executive Retirement Plan set forthherein, together with all amendments thereto, which shall be called theAssociated Estates Realty Corporation Supplemental Executive Retirement Plan.

1.10         “Plan Year” shall mean the calendar year.

1.11         “Related Company” shall mean any corporation or business which would beaggregated with Company under Section 414 of the Code.

1.12         "Separation from Service" shall mean a termination of employment with theCompany and all Related Companies in such a manner as to constitute a"separation from service" as defined under Section 409A of the Code.  Forthis purpose, the employment relationship is treated as continuing intact whilea Participant is on military leave, sick leave, or other bona fide leave ofabsence if the period of such leave does not exceed six months, or if longer, solong as the individual retains a right to reemployment with the Company or aRelated Company under an applicable statute or by contract.  For purposesof this definition, a leave of absence 

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constitutes a bona fide leave of absenceonly if there is a reasonable expectation that the Participant will return toperform services for the Company or a Related Company.  If the period of leaveexceeds six months and the Participant does not retain a right to reemploymentunder an applicable statute or by contract, the employment relationship isdeemed to terminate on the first date immediately following such six-monthperiod.  Notwithstanding the foregoing, where a leave of absence is due to 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 six months, where such impairment causes the Participant to be unable toperform the duties of his or her position of employment or any substantiallysimilar position of employment, a 29-month period of absence may be substitutedfor such six-month period.

1.13         “SERP Account” shall mean a separate account maintained for aParticipant as provided in Section 2.2.

1.14         “Specified Employee” shall mean a key employee (as defined in Section416(i) of the Code without regard to Section 416(i)(5) of the Code) of theCompany (or any entity which would be considered to be a single employer withthe Company under Section 414(b) or Section 414(c) of the Code) at any timeduring the 12 month period ending on December 31.  Notwithstanding theforegoing, a Participant who is a key employee determined under the precedingsentence will be deemed a Specified Employee solely for the period of April 1through March 31 following such December 31.  Such term shall be interpreted ina manner consistent with Section 409A of the Code.

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**ARTICLE II**

**PARTICIPATION AND BENEFITS**

2.1         Eligibility.  An executive employee of an Employer is eligible toparticipate in the Plan if he is nominated for participation in the Plan by theChief Executive Officer of the Company and if his participation is approved bythe Committee.  An employee who is eligible to participate shall become aParticipant on the first day of the first Plan Year next following the dateapproval of his participation is given by the Committee.

2.2         Supplemental Executive Retirement Plan (“SERP”) Accounts.  TheCompany shall maintain a SERP Account on its books for each Participant, inaccordance with the provisions set forth in this Section 2.2

(a)               Following the close of each Plan Year, the Committee, in its discretion, maydetermine to credit an amount to the SERP Account of each Participant whoremains employed by the Company or a Related Company as of the last day of thePlan Year, which amount shall be a uniform percentage of each Participant’sCompensation for the Plan Year.  If the Committee takes no action with respectto Participant’s SERP Accounts with respect to a particular Plan Year, then theamount to be credited to the SERP Account of each Participant who remainsemployed by the Company or a Related Company as of the last day of the PlanYear shall be the same percentage of such Participant’s Compensation as wascredited to the SERP Accounts of Participants for the most recent Plan Yearwith respect to which the Committee made a determination concerning the amountto be credited.  Notwithstanding the foregoing, no amount shall be credited tothe SERP Account of a Participant under this paragraph (a) for any Plan Yearbeginning on or after January 1, 2007, unless the Participant had attained age55 prior to that date.

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                            (b)              As of the first day of the Plan Year in which a Participant firstcommences participation in the Plan, the Committee, in its discretion, maydetermine to credit an amount to the SERP Account of such Participant as anaward in recognition of prior service rendered in connection with the businessof the Company (hereinafter referred to as a “Past Service Credit”); provided,however, that the Committee may determine that an award of Past Service Creditis to be credited to the Participant’s SERP Account in equal annualinstallments, not to exceed five, beginning on the first day of the Plan Yearin which he commences participation and on the first day of such subsequentPlan Year so long as he remains an employee and a Participant, until all suchinstallments are credited.  Past Service Credits need not be a uniformpercentage of Compensation with respect to all Participants.  If the Committeetakes no action to award a Past Service Credit with respect to a Participant,then no amount shall be credited under this paragraph (b) to such Participant’sSERP Account as a Past Service Credit.

(c)               Until paid as a benefit or forfeited as provided under the terms of the Plan,the balance of each Participant's SERP Account shall be credited withinterest at the Interest Rate, as follows:  interest shall be compounded on anannual basis for each Plan Year through the date of the Participant’sretirement or death, and thereafter for each 12-month period commencing withsuch retirement or death, on the average balance in the SERP Account during theperiod for which the interest is being computed, and shall be credited to theSERP Account as of the end of such period.

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(d)              Each SERP Account shall be debited to reflect the forfeiture of all orany portion of the balance of the SERP Account and any benefit payment made tothe Participant or his Beneficiary, in each case as of the date of suchforfeiture or payment.

(e)               Separate sub-accounts may be maintained to reflect the GrandfatheredBenefit with respect to each Participant.

2.3         Eligibility for Retirement Benefit.  A Participant who retiresfrom employment (and Separates from Service, with respect to any amount otherthan a Grandfathered Benefit) with the Company and all Related Companies afterhaving attained the age of 55 shall be eligible for a benefit under the Plan.

2.4         Eligibility for Benefit on Disability.  In the event aParticipant retires from employment with the Company and all Related Companieson account of total disability which shall have continued for a period of atleast three months, the Participant shall be eligible for a benefit under thePlan on account of such total disability.  For purposes of the Plan, “totaldisability” shall mean 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 12 months, as determined bythe Committee.  Notwithstanding the foregoing, the provisions of Section 2.4 ofthe Plan as in effect on October 3, 2004, shall continue to apply with respectto any Grandfathered Benefit in the event of total disability.

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2.5         Eligibility for Pre-Retirement Death Benefit.  If a Participantdies while employed by the Company or a Related Company, the Participant’sBeneficiary shall be eligible for a death benefit under the Plan.

2.6         Amount of Benefit.  The amount of any benefit payable under thePlan to a Participant or his Beneficiary, as the case may be, shall be thebalance then credited to the Participant’s SERP Account in accordance with theterms of the Plan.

2.7         Time of Payment.  Subject to the provisions of Section 2.9, thepayment of any benefit under the Plan to a Participant or his Beneficiary, asthe case may be, shall be made or commenced within 30 days following the eventgiving rise to eligibility for receipt of such payment.

2.8         Form of Payment.  The following provisions shall apply:

(a)               With respect to a Grandfathered Benefit, a Participant may elect, on anelection form provided by the Committee, to receive payment of the benefitpayable to him under the Plan either in the form of a single-sum payment or ina series of installments over a period not to exceed five years; provided,however, that no such election shall be effective unless made in writing anddelivered to the Committee at least one year prior to the Participant’sretirement date.  In the event that a Participant has not made an effectiveelection concerning the form of benefit payment with respect to such amount, theCommittee shall, in its discretion, determine the form in which payment of thebenefit shall be made.

(b)              With respect to amounts not described in paragraph (a) of this Section2.8, prior to January 1, 2005, or the first day of the Plan Year in which he firstbecomes a Participant, if later, a Participant may elect, on an election formprovided by the Committee, to receive payment of the benefit payable to himunder the Plan either in the form of a single-sum payment or in a series ofinstallments over a period not to exceed five years.  In the even that aParticipant has not made an effective election concerning the form of benefitpayment with respect to such amount, the benefit shall be paid as a [singlesum].

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(c)               Notwithstanding the foregoing provisions, payment of any amount to theBeneficiary of a Participant shall be made in a single sum payment as soon aspracticable following the death of the Participant, unless the Participant hason file with the Committee at the time of his death an effective election ofsome other form of payment, provided that any such election shall be effective(i) with respect to amounts described in paragraph (a) of this Section 2.8 onlyif made in accordance with such paragraph (a), and (ii) with respect to amountsdescribed in paragraph (b) of this Section 2.8 only if made in accordance withsuch paragraph (b).

(d)              In the event that a SERP Account is paid in installments (i) the amountof each installment shall equal the quotient obtained by dividing theParticipant’s SERP Account balance as of the end of the month immediatelypreceding the month of such installment payment by the number of installmentpayments remaining to be paid at the time of the calculation, and (ii) theamount of such SERP Account remaining unpaid shall continue to be credited withInterest as provided in Section 2.2

2.9         Mandatory Six-Month Delay.  Except as otherwise provided inSection 2.4 and 2.5, in the case of a Specified Employee in no event maypayments from a SERP Account (other than a Grandfathered Benefit) commenceprior to the first business day of the seventh month following theParticipant’s Separation from Service (or if earlier, upon the Participant’sdeath).

2.10         Designation of Beneficiary.  A Participant may designate aBeneficiary or Beneficiaries of his SERP Account to receive payment of anyvested amount credited to the Participant’s SERP Account upon the death of theParticipant.  If there is no designated Beneficiary, or no designatedBeneficiary surviving at the Participant’s death, payment of the Participant’sSERP Account shall be made to his estate.  Beneficiary designations shall bemade in writing and placed on file with the Committee.  A Participant maydesignate a new Beneficiary or Beneficiaries at any time by written noticefiled with the Committee.

 

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2.11         Vesting of SERP Accounts.  Subject to the provisions of Section5.6, each Participant’s SERP Account shall become vested upon his retirementfrom the Company and all Related Companies after attaining age 55, hisretirement from the Company and all Related Companies under conditions ofeligibility for a benefit on account of total disability as determined underSection 2.4, or his death while employed by the Company or a Related Company. In the event a Participant retires or otherwise terminates from employment withthe Company and all Related Companies under circumstances which do not resultin vesting of his SERP Account, or if the provisions of Section 5.6 becomeapplicable, the Participant’s SERP Account shall be forfeited and the Companyshall have no further obligation with respect to the Participant or hisBeneficiary under the Plan.  Notwithstanding theforegoing, but subject to the provisions of Section 5.6, in the event aParticipant has a Separation from Service with the Company and all RelatedCompanies prior to attainment of age 55, the Committee may in its discretiondetermine to accelerate the vesting of the Participant's SERP Account, in whichevent the Participant shall then be eligible for a benefit as if he had met therequirements of Section 2.3.

**ARTICLE III **

**ADMINISTRATION**

3.1             Plan Administrator.  The Company shall be the “planadministrator” of the Plan, and the Company and the Committee shall each be a“named fiduciary” with respect to the Plan, each within the meaning of ERISA. The Company shall be responsible for the administration of the Plan, forcarrying out the provisions of the Plan, and for making any required benefitpayments under the Plan, and shall have all power as may be necessary orappropriate for this purpose.  Notwithstanding the foregoing, the Committeeshall have the discretionary power and authority to determine all questionsrelating to eligibility for an the amount of any benefit hereunder, allquestions pertaining to claims for benefits and procedures for claims review, andall other questions arising under the Plan, including any questions ofconstruction, and to take such further action as it shall deem advisable in theadministration of the Plan.

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3.2             Claims Procedure.  The action taken and the decisions made by theCommittee under the Plan shall be final and binding upon all interestedparties.  In accordance with the provisions of Section 503 of ERISA, theCompany shall provide a procedure for handling claims of Participants or theirBeneficiaries 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.

**ARTICLE IV**

**AMENDMENT AND TERMINATION**

The Company reserves the right in its sole andabsolute discretion to amend or terminate the Plan at any time by action of itsBoard of Directors, without the consent of any Participant or Beneficiary;provided, however, that no such action shall adversely affect any Participant orBeneficiary with respect to amounts credited to the Participant's SERP Accountin accordance with Article II prior to the later of the date of adoption oreffective date of such amendment or termination, unless an equivalent benefit isprovided under another plan sponsored by the Company.

Any such amendment or termination shall expressed in a written instrumentexecuted by the Company upon the order of its Board of Directors and shallbecome effective as of the date designated in such instrument or, if no suchdate is specified, on the date of its execution.

The Board of Directors may delegate to the Committee its authority toamend or terminate the Plan, in which event the Committee may act in the Board'splace.

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**ARTICLE V **

**MISCELLANEOUS**

5.1             Non-Alienation of Rights or Benefits.  No Participant orBeneficiary shall encumber or dispose of his right to receive any paymentshereunder, which payments and the right thereto are expressly declared to benon-assignable and non-transferable.  If a Participant or Beneficiary attemptsto assign, transfer, alienate, or encumber his right to receive any paymenthereunder or permits the same to be subject to alienation, garnishment, attachment,execution, or levy of any kind, then thereafter during the life of suchParticipant or Beneficiary, and also during any period in which any Participantor Beneficiary is incapable in the judgment of the Company attending to hisfinancial affairs, any payments which the Company is required to make under thePlan may be made, in the sole and absolute discretion of the Company, directlyto such Participant or Beneficiary or to any other person for his use orbenefit or that of his dependents, if any, including any person furnishinggoods or services to or for his use or benefit or the use or benefit of hisdependents, if any.  Each such payment may be made without the intervention ofa guardian, the receipt of the payee shall constitute a complete acquittance tothe Company with respect thereto, and the Company shall have no responsibilityfor the proper application thereof.

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5.2             Plan Non-Contractual.  Nothing herein contained shall beconstrued as a commitment or agreement on the part of any person employed by anyEmployer to continue his employment with such Employer.  Nothing hereincontained shall be construed as a commitment on the part of any Employer tocontinue the employment, the compensation, or any term or condition ofemployment of any such person for any period, and all Participants shall remainsubject to discharge to the same extent as if the Plan has never been put intoeffect.

5.3             Unfunded, Unsecured Promise.  The provisions of this Section 5.3shall apply notwithstanding any other provision of the Plan to the contrary. All benefits payable under the Plan are payable solely from the Company’sgeneral assets.  The obligation of the Company under the Plan to provide aParticipant or his Beneficiary a benefit is solely the unfunded unsecuredpromise of the Company to make payments as provided herein.  No person shallhave any interest in, or a lien or prior claim upon, any property of theCompany with respect to such benefits or any priority or status with respect tosuch benefits greater than that of a general creditor of the Company. Notwithstanding the foregoing, the Company may determine to established a“rabbi trust” through which benefit payments may be made.

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5.4             Claims of Other Persons.  The provisions of the Plan shall in noevent be construed as giving any person, firm, or corporation any legal orequitable right as against the Company, its officers, employees, or directors,except any such rights as are specifically provided for in the Plan or arehereafter created in accordance with the terms and provisions of the Plan.

5.5             Adoption by Other Employers.  A Related Company that is not anEmployer may, with the consent of the Board of Directors of the Company, adoptthe Plan and become an Employer hereunder by causing an appropriate writteninstrument evidencing such adoption to be executed pursuant to action by itsBoard of Directors.  Any such instrument shall specify the effective date ofthe adoption.  An Employer who adopts the Plan shall be bound by the provisionsof the Plan as in effect at the time of adoption and as subsequently in effectby reason of any amendment to the Plan.

5.6             Nondisclosure, Noncompetition, Noninterference, and Forfeiture forCause.  Notwithstanding any provision of the Plan to the contrary, as acondition for receipt of any benefit under the Plan by a Participant or hisBeneficiary, the Participant shall:

(a)               At all times hold in strictest confidence and not disclose to anyperson, firm, corporation, partnership, proprietorship, or other entity, or usefor his own benefit or on his own behalf, confidential data, marketingstrategies (including customer lists), trade secrets, and other confidentialinformation of the Company or the Related Company of any kind, including,without limitation, any and all manuals, designs, technical information,reports, customer information, sales records, contracts, books of accounts,financial information, business plans, pricing information, computer programs,information relating to the current or future operation of the business of theCompany or any Related Company, acquisition and divestiture plans, analysis orstrategies, research of any kind, and any information material to the presentor future competitive, operating, financial, legal, or regulatory position ofthe Company and any Related Company or concerning the business or affairs ofthe Company or any Related Company.

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(b)              Not, during the person of his employment with the Company and allRelated Companies and for two years thereafter, without the prior writtenconsent of the Company, either directly or indirectly, perform any advisory orconsulting services for, operate or invest in (other than not more than onepercent of the stock in a publicly-held corporation which is traded on arecognized securities exchange or over-the-counter), be employed by or anindependent contractor of, or be a director, partner, or officer of, orotherwise become associated with in any capacity, any person, firm,corporation, partnership, proprietorship, or other entity which develops,sells, distributes, or performs products or services in competition with anyproducts or services developed, sold, distributed, or performed by the Companyor any Related Company.

(c)               Not, during the period of his employment with the Company and allRelated Companies and for two years thereafter, without the prior writtenconsent of the Company, directly or indirectly, induce or attempt to induce anyemployee, agent, or other representative or associate of the Company or anyRelated Company to terminate its relationship with the Company or Related Companyor interfere with the relationship between the Company or a Related Company andany of their employees, agents, representatives, suppliers, customers, ordistributors.

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(d)              Not, at any time, make any statements, whether written, oral, orotherwise, which are negative or disparaging of the Company or any RelatedCompany, or of the officers, directors, or shareholders of the Company or anyRelated Company; provided, however, that this paragraph (d) shall not prohibitthe Participant from pursuing in good faith any non-frivolous, bona fide causeof action the Participant has against the Company or any Related Company.

Paragraph (a) of this Section 5.6shall not:  (i) apply to any data, trade secret, or information which is orbecomes generally available to or known by the public order than as a result ofdisclosure by a Participant, (ii) restrict the Participant during the period ofhis employment with the Company or a Related Company from disclosing any date,trade secret, or information in the furtherance of the business and affairs ofthe Company or a Related Company when such disclosure is authorized by thePresident of the Company, or (iii) restrict the Participant from disclosing anydata, trade secret, or information which he is required to disclose underapplicable law or regulation or by an order of a governmental agency or court. In the event a Participant shall engage in any action prohibited by thisSection 5.6, shall breach any provision of an employment agreement then ineffective between the Participant and the Company or a Related Company, orshall be terminated from employment by the Company or a Related Company forcause, including on account of any violation of the Company’s standards ofconduct as set forth in the Company’s Employee Handbook, all as determined bythe Committee, the Participant shall, notwithstanding any provision of the Planto the contrary, forfeit any amount then credited to his SERP Account, andneither the Participant nor his Beneficiary shall be entitled to any subsequentbenefit or payments under the Plan.

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5.7             Severability.  The invalidity or unenforceability of anyparticular provision of the Plan shall not affect any other provision hereof,and the Plan shall not affect any other provision hereof, and the Plan shall beconstrued in all respects as if such invalid or unenforceable provision wereomitted herefrom.

5.8             Governing Law.  The provisions of the Plan shall be governed bythe construed in accordance with applicable federal law, and to the extent notpreempted thereby, the laws of the State of Ohio.

5.9             Change of Control.  Notwithstanding any provision of the Plan tothe contrary, upon a Change of Control (i) any portion of any Past ServiceCredit that has been awarded to a Participant pursuant to paragraph (b) ofSection 2.2 but that has not yet been credited to his SERP Account by reason ofinstallment crediting as described in such paragraph (b) shall immediately becredited to his SERP Account in full, (ii) all SERP Accounts shall immediatelybecome fully vested, and (iii) the Company shall, as soon as possible, but inno event later than 30 days following the Change of Control, make a cashcontribution to a irrevocable “rabbi” trust in the amount necessary to fullyfund the balance of the SERP Account of each Participant, subject only toclaims of creditors of the Company and each of the Employers, provided thatsuch contribution is not in connection with a change in the Company’s or anEmployer’s financial health within the meaning of Section 409A of the Code. For purposes of this Section 5.9, a Change in Control shall mean the first tooccur of the following events after 1998:

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(a)               any person or group of commonly controlled persons owns or controls,directly or indirectly, fifty percent (50%) or more of the voting control or valueof the capital stock of the Company following completion of the initial publicoffering of the Company’s Common Shares, without par value (the “IPO”);

(b)              any person or group of commonly controlled persons owning less than fivepercent (5%) of the voting control or value of the capital stock of the Companywithin 30 days following the consummation of the IPO owns or controls, directlyor indirectly, more than twenty percent (20%) of the voting control or value ofthe capital stock of the Company; or

(c)               the shareholders of the Company approve an agreement to merge orconsolidate with another corporation or other entity resulting (whetherseparately or in connection with a series of transactions) in a change inownership of twenty percent (20%) or more of the voting control or value of thecapital stock of the Company, or an agreement to sell or otherwise dispose ofall or substantially all of the Company’s assets (including, withoutlimitation, a plan of liquidation or dissolution), or otherwise approve of a fundamentalalteration in the nature of the Company’s business.

5.10         Withholding of Taxes.  To the extent required by the law ineffect at the time payments are made, the Company may withhold or cause to bewithheld from any amounts deferred or payable under the Plan all federal,state, local and other taxes as shall be legally required.  The Company shallhave the right in its sole discretion to (i) require a Participant to pay orprovide for payment of the amount of any taxes that the Company may be requiredto withhold with respect to amounts that the Company credits to a Participant'sSERP Account or (ii) deduct from any amount of salary, bonus, incentivecompensation or other payment otherwise payable in cash to the Participant theamount of any taxes that the Company may be required to withhold with respectto amounts that the Company credits to a Participant's SERP Account.

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5.11         Compliance with Section 409A of the Code.

(a)               Except in the case of any Grandfathered Benefit, it is intended that thePlan comply with the provisions of Section 409A of the Code, so as to preventthe inclusion in gross income of any amounts deferred hereunder in a taxableyear that is prior to the taxable year or years in which such amounts wouldotherwise actually be paid or made available to Participants or Beneficiaries.This Plan shall be construed, administered, and governed in a manner thateffects such intent, and the Committee shall not take any action that would beinconsistent with such intent.

(b)              In the case of any Grandfathered Benefit, the terms of the Plan as ineffect on October 3, 2004, shall continue to govern such amounts and shall notbe materially modified with respect thereto.

(c)               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 Related Companies, the Board of Directors of theCompany, nor the Committee (nor its designee) shall be held liable for anytaxes, interest, penalties or other monetary amounts owed by any Participant,Beneficiary or other taxpayer as a result of the Plan.

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(d)              Any reference in this Plan to Section 409A of the Code will also include anyproposed, temporary or final regulations, or any other guidance, promulgatedwith respect to such Section 409A by the U.S. Department of Treasury or theInternal Revenue Service.  For purposes of the Plan, the phrase "permittedby Section 409A of the Code," or words or phrases of similar import, shall meanthat the event or circumstance shall only be permitted to the extent it wouldnot cause an amount deferred or payable under the Plan to be includible in thegross income of a Participant or Beneficiary under Section 409A(a)(1) of theCode.

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Executed this 23rd day ofDecember, 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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