Document:

Document

Exhibit 10.2
AVALONBAY COMMUNITIES, INC.

Officer Severance Plan

(As adopted September 9, 1999 and amended and restated November 18, 2008
and further amended and restated on November 9, 2011,
February 11, 2016 and February 25, 2021)

1.    Purpose.  AvalonBay Communities, Inc. (the “Company”) considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel.  The Board of Directors of the Company (the “Board”) recognizes, however, that, as is the case with many publicly held corporations, the possibility of a Sale Event (as defined in Section 2 hereof) exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.  Therefore, the Board has determined that the AvalonBay Communities, Inc. Officer Severance Plan (the “Plan”) should be adopted to reinforce and encourage the continued attention and dedication of the Covered Employees (as defined below) to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Sale Event.  The term “Covered Employee” means any officer of the Company holding the position of Vice President or a more senior title (each, a “Covered Employee”).  Nothing in this Plan shall be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Covered Employee and the Company or any of its subsidiaries or affiliates (together with the Company, the “Employers”), the Covered Employee shall not have any right to be retained in the employ of the Employers.

2.    Sale Event.  For purposes of this Plan, a “Sale Event” shall mean the occurrence of any one of the following events:

(a)    the sale of all or substantially all of the assets of the Company on a consolidated basis to one or more unrelated persons or entities, or 

(b)    the sale or other transfer of all or substantially all of the shares of common stock of the Company to one or more unrelated persons or entities (including by way of a merger, reorganization or consolidation in which the outstanding shares of common stock of the Company are converted into or exchanged for securities of the successor entity) where the stockholders of the Company, immediately prior to such sale or other transfer, would not, immediately after such sale or transfer, beneficially own shares representing in the aggregate more than fifty percent (50%) of the voting shares of the acquirer or surviving entity (or its ultimate parent corporation, if any).  For this purpose, only voting shares of the acquirer or surviving entity (or its ultimate parent, if any) received by stockholders of the Company in exchange for the common stock of the Company shall be counted, and any voting shares of the acquirer or surviving entity (or its ultimate parent, if any) already owned by stockholders of the Company prior to the transaction shall be disregarded.

3.    Terminating Event.  A “Terminating Event” shall mean the termination of employment of a Covered Employee by reason of any of the events provided in this Section 3 occurring in connection with or within twenty-four (24) months following a Sale Event: 

(a)    termination by the Employers of the employment of the Covered Employee with the Employers for any reason other than (i) for Cause or (ii) as a result of the death or disability (as determined under the Employers’ then existing long-term disability coverage) of such Covered Employee.  “Cause” shall have the meaning set forth in the Company’s Amended and Restated 2009 Stock Option and Incentive Plan, as the same may be amended from time to time (the “Stock Plan”), or any successor plan to the Stock Plan.
A Terminating Event shall not be deemed to have occurred pursuant to this Section 3(a) solely as a result of the Covered Employee becoming an employee of any direct or indirect successor to the business or assets of any of the Employers, rather than continuing as an employee of the Employers following a Sale Event; or

(b)    termination by the Covered Employee of the Covered Employee’s employment with the Employers for Good Reason.  “Good Reason” shall have the meaning set forth in the Stock Plan or any successor to the Stock Plan.

4.    Special Termination Benefits.  In the event a Terminating Event occurs with respect to a Covered Employee and subject to the provisions of Section 14,

(a)    the Employers shall pay to the Covered Employee an amount equal to all accrued but unpaid annual base salary earned through such Covered Employee’s Date of Termination.  In addition, if as of the Date of Termination the Covered Employee has not yet been paid or awarded the annual cash bonus and annual long term incentive award (e.g., restricted stock in respect of the prior year’s performance) he or she earned for the prior year (e.g., if the termination occurs in January so that bonuses in respect of the prior year have not yet been paid), such compensation shall also be paid.  Said amounts shall be paid in cash in one lump sum payment no later than sixty (60) days following the Date of Termination; and

(b)     the Employers shall pay to the Covered Employee an amount equal to the sum of the following:

(i)     a cash payment representing the product of (A) the sum of the Covered Employee’s annual cash bonus at target plus the dollar value of the Covered Employee’s annual long-term incentive award at target (i.e., any new equity award such as restricted stock that would in the ordinary course have first been awarded promptly following the end of the current year based on an evaluation of the current year’s performance, and not including any multi-year performance awards), multiplied by (B) a fraction, the numerator of which is the number of days from the beginning of the calendar year through the Covered Employee’s Date of Termination and the denominator of which is 365; and 

(ii)    a multiple of the Covered Employee’s Covered Compensation.  The multiple depends on the Covered Employee’s position:

If the Covered Employee is the Chief Executive Officer or President, the multiple is three (3); 

If the Covered Employee is (A) an Executive Vice President or the Chief Financial Officer, Chief Investment Officer, or Chief Operating Officer, or (B) an officer who is recognized by the Company’s Board of Directors as an “officer” within the meaning of Section 16 of the Securities Exchange Act of 1934 and who reports to the Chief Executive Officer or President, the multiple is two (2); 

In all other instances the multiple is one (1) (except that if such Terminating Event is as a result of the Covered Employee being required to relocate his or her office, and the Covered Employee is a Vice President, the multiple of Covered Compensation referred to in this Section 4(b)(ii) is reduced to one-half (0.5) times).  

For this purpose, “Covered Compensation” shall mean the sum of (A) the Covered Employee’s annual base salary on the Date of Termination plus (B) the Covered Employee’s target annual bonus immediately prior to the Terminating Event.

Said amount shall be paid in one lump sum payment no later than sixty (60) days following the Date of Termination; and

(c)    if the Employee makes a timely election to continue benefits under COBRA, the Employers shall pay the full premium for such insurance for eighteen (18) months after the Terminating Event or until such earlier date as COBRA benefits cease to be available; and

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(d)    all outstanding equity awards held by the Covered Employee shall become fully vested and nonforfeitable.  For clarification, it is noted that, in the case of multi-year performance awards whose terms address their treatment in the case of a Sale Event, such terms in the multi-year performance award shall be followed and take precedence over the terms that would otherwise apply, if any, under this Officer Severance Plan.

Notwithstanding the foregoing, cash severance termination benefits required by Section 4 shall be reduced by any amount of cash severance paid or payable to the Covered Employee by the Employers under the terms of any employment agreement or other plan or arrangement providing for cash compensation upon such Covered Employee’s termination of employment (other than payment of accrued vacation benefits and payments under any deferred compensation plan or payment for the value of any equity award).  Other benefits under this Plan shall also be reduced or eliminated to the extent the same benefits are provided to the Covered Employee under other agreements or arrangements.  Therefore, a Covered Employee with an employment agreement or arrangement that provides the same or greater scope and amount of  severance benefits than those provided in this Officer Severance Program will receive no payments or benefits under this Officer Severance Program.

5.    Limitation. 

(a)    Anything in this Plan to the contrary notwithstanding, in the event that any compensation, payment or distribution by the Employers to or for the benefit of a Covered Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, (the “Severance Payments”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the following provisions shall apply to such Covered Employee:

(i)    If the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes payable by the Covered Employee on the amount of the Severance Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, the Covered Employee shall be entitled to the full benefits payable under this Plan.

(ii)     If the Threshold Amount is less than (x) the Severance Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the benefits payable under this Plan shall be reduced (but not below zero) to the extent necessary so that the maximum Severance Payments shall not exceed the Threshold Amount.  In such event, the payments shall be reduced in the following order: (A) cash payments not subject to Section 409A of the Code; (B) cash payments subject to Section 409A of the Code; and (D) non-cash form of benefits.  To the extent any payment is to be made over time, then the payment shall be reduced in reverse chronological order.

For the purposes of this Section 5, “Threshold Amount” shall mean three (3) times the Covered Employee’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, or any interest or penalties incurred by the Covered Employee with respect to such excise tax.

(b)    The determination as to which of the alternative provisions of Section 5(a) shall apply to the Covered Employee shall be made by such nationally recognized accounting firm as may at that time be the Company’s independent public accountants immediately prior to the Sale Event (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Employers and the Covered Employee within fifteen (15) business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Employers or the Covered Employee.  For purposes of determining which of the alternative provisions of Section 5(a) shall apply, the Covered Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Covered Employee’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from 
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deduction of such state and local taxes.  Any determination by the Accounting Firm shall be binding upon the Employers and the Covered Employee.

6.    Withholding.  All payments made by the Employers under this Plan shall be net of any tax or other amounts required to be withheld by the Employers under applicable law.

7.    Notice and Date of Termination; Etc.

(a)    Notice of Termination.  Any purported termination by the Employer of a Covered Employee’s employment (other than by reason of death) in connection with or within twenty-four (24) months following a Sale Event shall be communicated by written Notice of Termination from the Employers to the Covered Employee in accordance with this Section 7.  For purposes of this Plan, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Plan relied upon and the Date of Termination.  Further, a Notice of Termination for Cause is required to include a written explanation as to the basis for such termination.

(b)    Date of Termination.  “Date of Termination,” with respect to any purported termination of a Covered Employee’s employment by the Employers in connection with or within twenty-four (24) months after a Sale Event, shall mean the date specified in the Notice of Termination which, in the case of a termination by the Employers other than a termination for Cause (which may be effective immediately), shall not be less than thirty (30) days after the Notice of Termination is given.  Notwithstanding Section 3(a) of this Plan, in the event that a Covered Employee gives a Notice of Termination to the Employers, the Employers may unilaterally accelerate the date of termination of such Covered Employee and such acceleration shall not constitute an independent Terminating Event for purposes of Section 3(a) of this Plan or a violation of the preceding sentence (i.e., the Covered Employee will be entitled to severance payments and benefits hereunder only if such Covered Employee’s Notice of Termination was with respect to a termination for Good Reason).

(c)    No Mitigation.  The Covered Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Covered Employee by the Employers under this Plan.  Further, the amount of any payment provided for in this Plan shall not be reduced by any compensation earned by the Covered Employee as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Covered Employee to the Employers, or otherwise.

8.    Resolution of Disputes; Procedures and Scope of Arbitration.

(a)    All controversies and claims arising under or in connection with this Plan or relating to the interpretation, breach or enforcement thereof and all other disputes between a Covered Employee and the Company, shall be resolved by expedited, binding arbitration, to be held in California or Virginia, as selected by the Covered Employee, in accordance with the applicable rules of the American Arbitration Association governing employment disputes.  In any proceeding relating to the amount owed to a Covered Employee in connection with his or her termination of employment, it is the contemplation under this Plan that the only remedy that the arbitrator may award in such a proceeding is an amount equal to the termination payments and benefits required to be provided under the applicable provisions of Section 4 and, if applicable, Section 5 hereof, to the extent not previously paid, plus the costs of arbitration and the Covered Employee’s reasonable attorneys fees and expenses as provided below.  Any award made by such arbitrator shall be final, binding and conclusive on the Company and the Covered Employee for all purposes, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(b)    Except as otherwise provided in this paragraph, each party shall pay the cost of his or her or its own legal fees and expenses incurred in connection with an arbitration proceeding.  Provided an award is made in favor of the Covered Employee in such proceeding, all of his or her reasonable attorneys fees and expenses incurred in pursuing or defending such proceeding shall be promptly reimbursed to the Covered Employee by the Company within five (5) days of the entry of the award. Any award of 

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reasonable attorneys’ fees shall take into account any offer of the Company, such that an award of     
attorneys’ fees to the Covered Employee may be limited or eliminated to the extent that the final decision in 
    favor of the Covered Employee does not represent a material increase in value over the offer that was made 
by the Company during the course of such proceeding.  However, any elimination or limitation on 
attorneys’ fees shall only apply to those attorneys’ fees incurred after the offer by the Company.

(c)    In any case where the Company or any other person seeks to stay or enjoin the commencement or continuation of an arbitration proceeding, whether before or after an award has been made, or where a Covered Employee seeks recovery of amounts due after an award has been made, or where the Company brings any proceeding challenging or contesting the award, all of a Covered Employee’s reasonable attorney’s fees and expenses incurred in connection therewith shall be promptly reimbursed by the Company to the Covered Employee, within five (5) days of presentation of an itemized request for reimbursement, regardless of whether the Covered Employee prevails and regardless of the forum in which such proceeding is brought.

9.    Benefits and Burdens.  This Plan shall inure to the benefit of and be binding upon the Employers and the Covered Employees, their respective successors, executors, administrators, heirs and permitted assigns.  In the event of a Covered Employee’s death after a Terminating Event but prior to the completion by the Employers of all payments due him under this Plan, the Employers shall continue such payments to the Covered Employee’s beneficiary designated in writing to the Employers prior to his or her death (or to his or her estate, if the Covered Employee fails to make such designation).

10.    Enforceability.  If any portion or provision of this Plan shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Plan, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Plan shall be valid and enforceable to the fullest extent permitted by law.

11.    Waiver.  No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party.  The failure of any party to require the performance of any term or obligation of this Plan, or the waiver by any party of any breach of this Plan, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

12.    Notices.  Any notices, requests, demands, and other communications provided for by this Plan shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to a Covered Employee at the last address the Covered Employee has filed in writing with the Employers, or to the Employers at their main office, attention of the Board of Directors.

13.    Effect on Other Plans.  Nothing in this Plan shall be construed to limit the rights of the Covered Employees under the Employers’ benefit plans, programs or policies.

14.    Nature of Payments; Requirement for Release, Confidentiality and Non-Solicitation Agreement.  The amounts due pursuant to this Plan, except for payment of accrued base salary through the Date of Termination, are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty.  As a condition to making the payments and providing the benefits required hereby, a Covered Employee is required to execute and deliver to the Company a Release and a Non-Solicitation Agreement (as such terms are defined below), and the Covered Employee is required to acknowledge in writing that he or she is resigning as an officer from the Company and as a director and officer of any subsidiary of the Company for which the Covered Employee serves in such capacity, before any amounts or benefits under this Plan are paid or provided.  A “Release” shall mean a written release of all employment-related claims by Covered Employee of the Company in a form and manner reasonably satisfactory to the Company.  Such Release shall in all events preserve Covered Employee’s continuing rights under this Plan except with respect to any amount paid prior to or simultaneously with the execution of such Release, in which event Covered Employee shall acknowledge receipt of such amount and (if such is the case) that such amount was properly calculated and is in full satisfaction of the Company’s obligation to pay such amount. “Non-Solicitation Agreement” means an agreement of Covered Employee with the Company that Covered Employee shall not, without the prior written consent of the Company for a period of one year following 
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the Covered Employee’s date of termination, solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any employee of the Company or any of its affiliates or any person who was formerly employed by the Company or any of its affiliates within the preceding six (6) months, unless such person’s employment was terminated by the Company or any of such affiliates.  Subject to the foregoing, payments will be made as soon as reasonably practicable (as determined by the Company) after the Covered Employee’s execution of the Release and Non-Solicitation Agreement and the lapse of any required revocation period but in all events such payments shall be made on or before the sixtieth (60th) day after the Covered Employee’s Date of Termination (or Sale Event if the Terminating Event occurs before the Sale Event), except that if such 60-day period begins in one calendar year and ends in a second calendar year, such payment in all events will occur during the second calendar year and within such 60-day period.

15.    Amendment or Termination of Plan.  The Company may at any time or from time to time amend or terminate this Plan, but no such amendment or termination that has an adverse impact on a Covered Employee will be effective with respect to that Covered Employee (i) if a Sale Event occurs within the six months following such amendment or termination of the Plan, or (ii) during the twenty-four (24) month period following a Sale Event.

16.    Governing Law.  This Plan shall be construed under and be governed in all respects by the laws of the State of Maryland.

17.    Obligations of Successors.  In addition to any obligations imposed by law upon any successor to the Employers, the Employers will use their best efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Employers to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Employers would be required to perform if no such succession had taken place.

18.    Section 409A.  Anything in this Plan to the contrary notwithstanding, if at the time of the Covered Employee’s “separation from service” within the meaning of Section 409A of the Code, the Company determines that the Covered Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Covered Employee becomes entitled to under this Plan would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided prior to the date that is the earlier of (a) six (6) months and one (1) day after the Covered Employee’s separation from service, or (b) the Covered Employee’s death.  Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which separation from service occurs, from the date of separation from service until the payment date.  The parties intend that this Plan will be administered in accordance with Section 409A of the Code. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409(A)-1(h).

Adopted by the Compensation Committee of the Board of Directors:  as of September 9, 1999 and amended and restated on November 18, 2008, effective as of January 1, 2009, and further amended and restated on November 9, 2011, effective as of November 9, 2011, and further amended and restated on February 11, 2016 and on February 25, 2021.
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Exhibit 10.3
AvalonBay Communities, Inc. 
[Incentive] [Non-Qualified] Stock Option Agreement
(2009 Equity Incentive Plan)
Pursuant to the AvalonBay Communities, Inc. Second Amended and Restated 2009 Equity Incentive Plan (the “Plan”), AvalonBay Communities, Inc. (the “Company”) hereby grants to the Optionee named below an Option to purchase on or prior to the tenth anniversary of the grant date of this option award as set forth below (the “Expiration Date”) up to the number of shares of the Company’s Common Stock, par value $.01 per share (“Common Stock”), set forth below at the Exercise Price set forth below:

						
	Optionee:	ParticipantName
	Grant Date:	GrantDate
	Vesting Date:	March 1, 2023
	Number of Shares Underlying Option (the “Option Shares”):	AwardsGranted

This option is subject to all of the terms and conditions as set forth herein, in the [Incentive][Non-Qualified] Stock Option Agreement Terms (the “Terms”) which are attached hereto and incorporated herein in their entirety, and in the Plan.  Capitalized terms used but not defined herein or in the Terms shall have the respective meanings ascribed thereto in the Plan.

Incentive Stock 
Option:    This Option [shall be construed in a manner to qualify it] [does not qualify] as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  
Vesting Schedule:     Subject to the provisions of Section 4 and 6 of the Terms and the discretion of the Company to accelerate the vesting schedule, this Option shall vest as to exercisability to purchase the Option Shares as follows:

     100.0% on the Vesting Date,
     
Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt of, and understands and agrees to, this [Incentive][Non-Qualified] Stock Option Agreement, including, without limitation, the Terms.  Optionee further acknowledges receipt of a copy of the Plan.  Optionee further acknowledges that as of the Date of Grant, this [Incentive][Non-Qualified] Stock Option Agreement, including, without limitation, the Terms, and the Plan set forth the entire understanding between Optionee and the Company regarding the Option described herein and supersede all prior oral and written agreements on that subject.  

Attachment:  [Incentive][Non-Qualified] Stock Option Agreement Terms

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AVALONBAY COMMUNITIES, INC.
2009 EQUITY INCENTIVE PLAN

[INCENTIVE][NON-QUALIFIED] STOCK OPTION AGREEMENT TERMS

    1.    Vested Option Shares.  Subject to Section 4, when this Option is vested with respect to any of the Option Shares, this Option shall continue to be exercisable with respect to such Option Shares (“Vested Option Shares”) at any time or times prior to the Expiration Date.

    2.    Manner of Exercise.  The Optionee may exercise this Stock Option only in the following manner:  from time to time on or prior to the Expiration Date of this Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice.  This notice shall specify the number of Option Shares to be purchased.

    Payment of the purchase price for the Option Shares may be made by one or more of the following methods:  (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Common Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; [for ISO’s: or (iv) a combination of (i), (ii) and (ii) above] [for NQSO’s: (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above].  Payment instruments will be received subject to collection. 

    The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Common Stock to be purchased pursuant to the exercise of Options under the Plan and any subsequent resale of the shares of Common Stock will be in compliance with applicable laws and regulations.  In the event the Optionee chooses to pay the purchase price by previously-owned shares of Common Stock through the attestation method, the number of shares of Common Stock transferred to the Optionee upon the exercise of the Option shall be net of the shares attested to.

    The shares of Common Stock purchased upon exercise of this Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan.  The determination of the Administrator as to such compliance shall be final and binding on the Optionee.  The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to this Option unless and until this Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company.  Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Common Stock.
    
    The minimum number of shares with respect to which this Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Option is being exercised is the total number of shares subject to exercise under this Option at the time.

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    Notwithstanding any other provision hereof or of the Plan, no portion of this Option shall be exercisable after the Expiration Date hereof.

    3.    Non-transferability of Option.  This Option is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.  This Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

    4.    Termination of Employment (or Other Business Relationship).  If the Optionee’s employment by (or other business relationship with) the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Option may be subject to earlier termination as set forth below.

    (a)    Termination Due to Death.  If the Optionee’s employment (or other business relationship) terminates by reason of death, this Option shall be automatically vested on the date of termination and shall be exercisable by the Optionee’s legal representative or legatee (i) for a period of twelve (12) months from the date of termination  or (ii) until the Expiration Date, if earlier.  

    (b)    Termination Due to Disability.  If the Optionee’s employment (or other business relationship) terminates by reason of Disability (as defined below), this Option shall be automatically vested on the date of termination, and shall be exercisable (i) for a period of twelve (12) months from the date of termination or (ii) until the Expiration Date, if earlier.  The death of the Optionee during the period provided in this Section 4(b) shall extend such period (if it would otherwise expire) for six (6) months from the date of death or until the Expiration Date, if earlier.  

    (c)    Termination by Reason of Retirement.  

    (i)    If the Optionee’s employment (or other business relationship) terminates on or after the Vesting Date by reason of Retirement (as defined below), this Option shall be exercisable until the Expiration Date, provided that if the Optionee, during the first 24 months following his or her Retirement, engages in any Restricted Activities with any Competing Enterprise (both as defined below), then the Option shall expire and terminate on the three-month anniversary of the first day that Optionee engages in such activities (such three month anniversary, the “Early Retirement Expiration Date”), whether or not the Company is aware of such activities or gives notice, written or otherwise, to Optionee to such effect.  Upon the death of the Optionee during the period provided in this Section 4(c), the Optionee’s estate may exercise, until the Expiration Date or, if earlier and applicable, the Early Retirement Expiration Date, this Option.  During the two years after the Optionee’s employment terminates by reason of Retirement, the Company may require, before allowing  an Optionee to exercise this Option, that the Optionee certify in writing that he or she has not engaged in Restricted Activities with a Competing Enterprise.  Notwithstanding the foregoing the Company may require, as a condition to the period of exercisability of the Option after Retirement being more than three months, that the Optionee sign and deliver a Separation Agreement (as defined below) and that such Separation Agreement become effective (including through the passage without revocation of any revocation period provided therein) within 30 days of the Optionee’s Retirement.

    (ii)    If the Optionee’s employment (or other business relationship) terminates before the Vesting Date by reason of Retirement, this Option shall terminate and be of no further force or effect, and Optionee shall have no right at any time thereafter to exercise the Option granted hereby.  

(d)    Termination for Cause.  If the Optionee’s employment (or other business relationship) terminates for Cause (as defined below), any Option held by the Optionee shall immediately terminate and be of no further force and effect. 

(e)    Termination Without Cause or for Good Reason within 24 Months of Sale Event.  If the Optionee’s employment (or other business relationship) is terminated by the Company without 

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Cause (whether before or after a Sale Event) or, as provided in the Plan, is terminated by the     
Optionee for Good Reason within 24 months following a Sale Event, this Option shall be 
automatically vested on the date of termination, and shall be exercisable (i) for a period of twelve     
(12) months from the date of termination, or (ii) until the Expiration Date, if earlier.  The death of 
the Optionee during the period provided in this Section 4(e) shall extend such period (if it would 
otherwise expire) for six (6) months from the date of death, or until the Expiration Date, if earlier.  

(f)    Termination at the Election of the Optionee.  If the Optionee’s employment (or other business relationship) is voluntarily terminated at the election of the Optionee (other than for Good Reason in connection with or within 24 months following a Sale Event, death, Disability, Retirement, or a termination at the Company’s election whether for Cause or without Cause), then (i) if such voluntary termination is on or after the Vesting Date, this Option may be exercised for a period of three (3) months from the date of termination, or until the Expiration Date, if earlier, or (ii) if such voluntary termination is before the Vesting Date this Option shall terminate and be of no further force or effect, and Optionee shall have no right at any time thereafter to exercise the Option granted hereby.  

For purposes hereof, a business relationship shall include (i) serving on the Company’s Board of Directors, which service preceded or began immediately following a termination of employment, or (ii) a consulting arrangement between Optionee and the Company that immediately follows termination of employment or termination from the Board of Directors, but only if so stated in a written consulting agreement executed by the Company and Optionee, and in such case as described in the preceding clauses (i) or (ii) Optionee shall not be considered to have suffered a termination of employment or other business relationship until the termination of such service on the Board of Directors and/or consulting arrangement.  

Notwithstanding the foregoing, the Company may require, as a condition to vesting of the unvested portion of the Option, that the Optionee sign and deliver a Separation Agreement (as hereinafter defined), and such Separation Agreement becomes effective (including through the passage without revocation of any revocation period provided therein) within 30 days of his or her termination of employment, provided that no Separation Agreement shall be required as a condition to accelerated vesting for (x) a termination of employment within 24 months after a Sale Event either without Cause or for Good Reason or (y) a termination of Optionee by reason of death, or death during the thirty days following a termination of employment).

For this purpose, neither a transfer of employment from the Company to a Subsidiary (or from a Subsidiary to the Company) nor an approved leave of absence shall be deemed a “termination of employment.”  The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or her representatives or legatees except during the 24 months after a Sale Event.

For purposes of this Option, following terms shall have the meaning specified below:

    “Cause” and “Good Reason” and “Sale Event” shall have the meanings set forth for such terms in the Plan.

    “Disability” shall mean the Employee’s inability to perform his normal required services for the Company and its Subsidiaries for a period of six consecutive months by reason of the individual’s mental or physical disability, as determined by the Company in good faith in its sole discretion, except that the Administrator’s approval will also be required in the event the participant is an officer as defined by Section 16 of the Securities Exchange Act or is at the level of executive vice president or above or is on the Company’s Board of Directors.

    “Retirement” shall mean the termination of the Optionee’s employment (and other business relationship) with the Company and its Subsidiaries, other than for Cause, following the date on which the sum of the following equals or exceeds 70 years: (i) the number of full months of the Optionee’s employment and 

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other business relationships with the Company and any predecessor Company and (ii) the Optionee’s age on the date of termination (i.e., a person whose age is 55 years, 6 months and who has worked at the Company for 14 years, 6 months meets the 70 years requirement); provided that: 

(x)    the Optionee’s employment by (or other business relationships with) the Company and any predecessor company of the Company have continued for a period of at least 120 continuous full months at the time of termination and, on the date of termination, the Optionee is at least 50 years old; and

(y)    in the case of termination of employment, the Optionee gives at least six months’ prior written notice to the Company of his or her intention to retire.

    ”Separation Agreement” means a written agreement between the Optionee and the Company, in such form as the Company may reasonably require, providing as follows:

•the Optionee provides a full release of any actual or potential claim against the Company and its current and former directors, officers, associates, agents and affiliates, under any applicable law and theory of claim, to the maximum extent permitted by law;
•the Optionee agrees to provide reasonable cooperation with respect to investigation and litigation matters; 
•the Optionee acknowledges and agrees to return all Company property and not use any Company property or proprietary information;
•the Optionee agrees not to disparage the Company or its officer, directors, agents or management, subject to reasonable exceptions set forth in the agreement; and
•for a period of at least 24 months following the Optionee’s termination of employment with the Company the Optionee shall not, without the prior written consent of the Company, solicit or attempt to solicit for employment with or on behalf of any Competing Enterprise any employee of the Company or any of its affiliates or any person who was formerly employed by the Company or any of its affiliates within the preceding six months, unless such person’s employment was terminated by the Company or any of such affiliates.
In addition, in connection with a termination of employment due to Retirement, a Separation Agreement shall, to the extent permitted by applicable law, provide that, for a period of at least 24 months following the Optionee’s termination of employment with the Company, the Optionee shall not, without the prior written consent of the Company, engage in any “Restricted Activities” with respect to any “Competing Enterprise,” as such terms are hereinafter defined, whether such activities are engaged in as an officer, employee, principal, partner, agent, consultant, independent contractor, advisor, director, or shareholder.  “Restricted Activities,” for purposes of this section and Section 4(c), shall mean executive, managerial, directorial, administrative, advisory, strategic, business development or supervisory responsibilities and activities relating to any aspect of multifamily rental real estate development, investment, ownership, marketing, design or management; multifamily rental real estate franchising; or multifamily rental real estate joint-venturing.  “Competing Enterprise,” for purposes of this section and Section 4(c), means an entity for whom both:
A.either (i) 50% or more of the assets that it has an interest in, in the United States, either directly or indirectly and in whole or in part, and valued at gross fair market value without any reduction for debt or for the equity interests of third parties, are attributable to “multifamily residential rental real estate” or (ii) 50% or more of the net operating income (calculated in the manner that the Company calculates net operating income) of the assets that it has an interest in, in the United States, either directly or indirectly and in whole or in part, is attributable to “multifamily residential rental real estate”, and
B.either (i) such entity (or its ultimate parent entity) is publicly traded or (ii) such entity (and its ultimate parent entity) are private (not publicly traded) and such entity’s total assets (valued at 

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gross fair market value without any reduction for debt or for the equity interests of third parties) are valued     
at $350 million or more.

 As used in the definition of “Competing Enterprise,” “multifamily residential rental real estate” means a real property asset for which at least 70% of the net operating income is on account of residential units.
It should be noted that no provision in any required Separation Agreement shall (i) preclude an Optionee from communicating with federal, state or local governmental or regulatory agencies, (ii) require an Optionee to inform the Company about any such communication, or (iii) preclude an Optionee from collecting a government program bounty to which the Optionee may be entitled.
    5.    Option Shares.  The Option Shares are shares of the Common Stock of the Company as constituted on the date of this Option, subject to adjustment as provided in the Plan.

    6.    Acknowledgment and Acceptance of Grant.  Optionee agrees that he or she may be required to evidence his or her acknowledgement of this award and agreement to the terms hereof by accepting this award in the Company’s stock plan administrator’s system, which acceptance may be required within a certain number of days from the grant date hereof in accordance with instructions and/or announcements provided by the Company to the Optionee and, failing to accept this award within the Company’s stock plan administrator’s system within such number of days may constitute grounds for forfeiture of this award in the Company’s sole and absolute discretion.

    7.    No Special Employment Rights.  This Option will not confer upon the Optionee any right with respect to continuance of employment by (or other business relationship with) the Company or a Subsidiary, nor will it interfere in any way with any right of the Optionee’s employer to terminate the Optionee’s employment (or other business relationship) at any time.

    8.    Rights as a Shareholder.  The Optionee shall have no rights as a shareholder with respect to any shares of Common Stock that may be purchased upon exercise of this Option unless and until a certificate or certificates representing such shares are duly issued and delivered to the Optionee.  Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

    9.    Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan.  In the event of any discrepancy or inconsistency between this Agreement and the Plan, the terms and conditions of the Plan shall control.

    10.      Withholding Taxes.  The Optionee shall, not later than the date as of which the exercise of this Option becomes a taxable event for federal income tax purposes, pay to the Company (or make arrangements satisfactory to the Company for payment of) any Federal, state and local taxes required by law to be withheld on account of such taxable event.  The Optionee may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

    11.    Non-Solicitation.  Optionee hereby agrees that, for a period of at least 12 months following Optionee’s termination of employment with the Company for any reason, Optionee shall not, without the prior written consent of the Company, solicit or attempt to solicit for employment with or on behalf of any other person, firm or entity any employee of the Company or any of its affiliates or any person who was formerly employed by the Company or any of its affiliates within the preceding six months, unless such person’s employment was terminated by the Company or any of such affiliates.  

    12.    Recoupment Policy.  To the extent Optionee is a “Covered Officer”, as defined in the Policy for Recoupment of Incentive Compensation adopted by the Company’s Board of Directors, as amended from time to time (the “Recoupment Policy”), the Option, and shares of Common Stock received pursuant to exercise of the Option, and any proceeds received in connection with any sale of shares of Common Stock shall be subject to the Recoupment Policy.

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    [For ISO’s: 13.    Qualification under Section 422.  It is understood and intended that the Option granted hereunder shall qualify as an “incentive stock option” as defined in Section 422 of the Code, but the Company does not represent or warrant that this Stock Option qualifies as such.  The Optionee should consult with his or her own tax advisors regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements.  To the extent any portion of this Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option.  If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Option, he or she will so notify the Company within 30 days after such disposition.][For NQSO’s: Omitted.]

    14.    Miscellaneous.  Notices hereunder shall be mailed or delivered to the Company at its principal place of business, 4040 Wilson Blvd, Suite 1000, Arlington, Virginia 22203, Attention:  Senior Director of Compensation, and shall be mailed or delivered to Optionee at his address set forth in the Company’s records, or in either case at such other address as one party may subsequently furnish to the other party in writing.  This Option shall be governed by the laws of the State of Maryland, except to the extent such law is preempted by federal law.

[End of Text] 
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