Document:

exv10w19w3

Exhibit 10.19.3

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

     This
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made as of May 28,
2010, by and between Citibank, N.A. (“Lender”) and Energy Recovery, Inc., a Delaware corporation
(“ERI”), and Pump Engineering, Inc., a Delaware
corporation (“Pump Engineering” and jointly and
severally with ERI, the “Borrower”), with respect to the Loan and Security Agreement between ERI
and Lender dated as of January 7, 2009 (as amended and modified through but excluding the date
hereof, the “Agreement”).

RECITALS

     A. ERI, Pump Engineering and Lender are parties to the Agreement.

     B. The parties have agreed to the changes in the Agreement and the other matters set
forth below.

     NOW THEREFORE, IT IS AGREED THAT:

     1. Definitions. Unless otherwise indicated, words and terms which are defined in
the Agreement have the same meaning where used herein.

     2. Amendments.

          (a) The definition of “Cash Secured Letters of Credit” in Section 1.1 of the
Agreement is amended and restated as follows:

     “Cash Secured Letters of Credit” means the aggregate face amount of the
Permitted Comerica Letters of Credit and the Permitted PNC Letters of Credit plus
the aggregate face amount of any other cash-secured letters of credit with Borrower
or any of its Subsidiaries as the applicant.

          (b) The definition of “Encumbered Cash” in Section 1.1 of the Agreement is
amended and restated as follows:

     “Encumbered
Cash” means (1) cash and Cash Equivalents, if any, that have
been pledged as collateral to Comerica Bank under the Comerica Control Agreement
and (2) cash and Cash Equivalents that have been pledged as collateral to PNC Bank
under the PNC Control Agreement.

          (c) The definition of “Letter of Credit” in Section 1.1 of the Agreement is
amended and restated as follows:

     “Letter of Credit” means a standby letter of credit issued by Lender or
another institution based upon an application, guarantee, indemnity, warranty or
similar agreement on the part of Lender as set forth in Section 2.1.2, which
definition specifically excludes the Permitted Comerica Letters of Credit and the
Permitted PNC Letters of Credit.

          (d) The definition of “Letter of Credit Availability Amount” in Section 1.1 of
the Agreement is amended and restated as follows:

 

 

     “Letter
of Credit Availability Amount” means (i) $15,850,000 minus (ii)
the outstanding principal amount of all Advances minus (iii) the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit).

          (e) Clause (a) of the definition of “Permitted Liens” in Section 1.1 of the
Agreement is amended and restated as follows:

     (a) the Lien arising from the pledge of cash pursuant to the Comerica
Control Agreement to secure the Permitted Comerica Letters of Credit and the Lien
arising from the pledge of cash pursuant to the PNC Control Agreement to secure the
Permitted PNC Letters of Credit;

          (f) Clause (a) of the definition of “Permitted Indebtedness” in Section 1.1 of
the Agreement is amended and restated as follows:

     (a) Permitted Comerica Letters of Credit and Permitted PNC
Letters of Credit;

          (g) A definition of “Permitted PNC Letters of Credit” is added to Section 1.1
of the Agreement as follows:

     “Permitted PNC Letters of Credit” means the standby letters of credit issued
by PNC Bank described on Exhibit H hereto.

          (h) A definition of “PNC Control Agreement” is added to Section 1.1 of the Agreement as
follows:

     “PNC
Control Agreement” means the agreement(s) or arrangement(s) made between
PNC Bank and Pump Engineering with respect to the pledge of cash in an account at
PNC Bank to secure the Permitted PNC Letters of Credit.

          (i) The definition of “Revolving Line Maturity Date” in Section 1.1 of the Agreement
is amended and restated as follows:

     “Revolving
Line Maturity Date” means May 31, 2012.

          (j) The definition of “Total Availability Amount” in Section 1.1 of the Agreement
is amended and restated as follows:

     “Total
Availability Amount” is $16,000,000.

          (k) Section 6.2(c) of the Agreement is amended and restated as follows:

     (c) Within forty-five (45) days after the last day of each of the first
three quarters of Borrower’s fiscal year, deliver to Lender its quarterly financial
statements together with a duly completed Compliance Certificate signed by a
Responsible Officer setting forth calculations showing compliance with the
financial covenants set forth in this Agreement.

          (l) The number “2.50” in Section 6.6(a) is changed to “2.25”.

          (m) Exhibit H is added to the Agreement in the form attached to this Amendment.

 

 

          (n) Lines B and G in Section I of Schedule 1 to the Compliance Certificate are amended
and restated as follows:

	 	 	 	 	 

	B.

	 	Cash and Cash Equivalents, if any, that have been pledged as collateral to Comerica
Bank under
the Comerica Control Agreement or to PNC Bank under the PNC Control Agreement
	 	$                    
	 
	 	 	 	 
	G.

	 	Aggregate face amount of the Permitted Comerica Letters of Credit and Permitted PNC
Letters of Credit plus the aggregate face amount of any other cash-secured letters
of credit with Borrower or any of its Subsidiaries as the applicant
	 	$                    

     3. Waiver and Agreement.

          (a) If and to the extent an Event of Default existed under the Agreement prior
to the effectiveness of this Amendment because of the letters of credit described in
Exhibit H
attached to this Amendment (such default, the “PNC-related Default”), upon
effectiveness of this
Amendment as set forth in Section 8 below, Lender waives that Event of Default. The foregoing
waiver is a limited waiver and may not be deemed to constitute a waiver of or consent to any
other existing or future departure from the terms of, or Event of Default under, any of the
Loan
Documents, or as a waiver, release or limitation upon the exercise by Lender of any of its
rights,
legal or equitable, under any of the Loan Documents, other than as specifically set forth in
this
Amendment.

          (b) Borrower agrees that, as each Permitted PNC Letter of Credit expires,
Pump Engineering and ERI will promptly cause PNC Bank to transfer the funds securing that
Permitted PNC Letter of Credit to ERI’s deposit account at Citibank, N.A. Borrower further
agrees that its failure to comply with the previous sentence is an Event of Default under the
Agreement.

     4. Payment of Fees and Expenses. Borrower must pay Lender, on demand, a
commitment fee of $72,000 (which fee of 45 bps on the Total Availability Amount includes the
amendment fee) plus all fees and expenses (including attorneys’ fees) incurred by Lender in
connection with the negotiation and preparation of this Amendment and all documents related
thereto.

     5. Continued Validity of Agreement. Except as modified by this Amendment, the
Agreement and all Loan Documents will continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each reference in the
Agreement
or the other Loan Documents to the Agreement means the Agreement, together with this
Amendment, unless the context otherwise requires. This Amendment and the Agreement must
be read as one document.

     6. Compliance with Loan Documents. Borrower represents and warrants to Lender
as follows: (a) as of the effective date of this Amendment, Borrower has complied, and is in
compliance with, all of the terms, covenants and conditions of the Agreement and the other
Loan
Documents; (b) as of the effective date of this Amendment, there exists no Event of Default
under the Agreement or any of the other Loan Documents or an event which would constitute an

 

 

Event of Default upon the lapse of time or upon the giving of notice and the lapse of time
specified therein; (c) the representations and warranties of Borrower in the Agreement and the
other Loan Documents are true and with the same effect as of the date hereof; and (d) Borrower will
continue to be in compliance with all of the terms, covenants and conditions of the Agreement and
the other Loan Documents, and all representation and warranties will continue to be true, upon this
Amendment becoming effective.

     7. Authorization. Each party represents to the others that the individual executing
this document on its behalf is the duly appointed signatory of such party to this document and
that such individual is authorized to execute this document by or on behalf of such party and
to
take all action required by the terms of this document.

     8. When Amendment is Effective. This Amendment will be deemed binding and
effective when:

          (a) this Amendment is executed by Pump Engineering, ERI and Lender, and
Lender has received a fully executed original of this Amendment;

          (b) the Consent of Guarantors attached hereto is executed by the parties
thereto and Lender has received a fully executed original thereof;

          (c) Lender receives payment of the commitment fee and Lender Expenses as
specified in Section 4 of this Amendment.

     9. No Novation. This Amendment is not intended to be, and may not be construed
to create, a novation or accord and satisfaction, and, except as otherwise provided herein,
the
Agreement will remain in full force and effect.

     10. Entire Agreement. This document constitutes the entire agreement by and
between Borrower and Lender with respect to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, communications, discussions and agreements concerning
such subject matter.

     11. Counterparts. This document may be executed in any number of counterparts,
each of which will be an original, but all of which together constitute one and the same
agreement.

[Balance of page intentionally left blank.]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this document as of the
date first set forth above.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LENDER:	 	 	 	 	 	BORROWER:
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Citibank, N.A.	 	 	 	Energy Recovery, Inc., a Delaware
corporation  
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Joan Considine	 	 	 	By	 	/s/ Thomas Willardson
	 	 	 	 	 	 	 	 	   	 	 
	 

	 	Name:
	 	Joan Considine
	 	 	 	 	 	Name:
	 	Thomas Willardson	 	 
	 

	 	Title:
	 	Vice President
	 	 	 	 	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Pump Engineering, Inc., a Delaware
corporation
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	By	 	/s/ Thomas Willardson
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Name:
	 	Thomas Willardson	 	 
	 

	 	 	 	 	 	 	 	 	 	Title:
	 	Chief Financial Officer	 	 

 

 

Exhibit H

[***]

 

 

CONSENT OF GUARANTORS

     The undersigned each executed a Guaranty dated as of January 7, 2009 in favor of Citibank,
N.A. with respect to the indebtedness and other obligations of the
Borrower (the “Guaranty”). The
undersigned acknowledge that Lender has no obligation to provide them with notice of, or to obtain
their consent to, this Third Amendment to Loan and Security Agreement. The undersigned nevertheless
have reviewed and consent to, the above Amendment, and acknowledge that the Guaranty remains fully
valid, binding and enforceable against them in accordance with its terms.

Dated: May 28, 2010

	 	 	 	 	 
	 	GUARANTOR(S):

Osmotic Power, Inc., a Delaware corporation

 	 
	 	By:  	/s/ Thomas Willardson
 	 
	 	 	Name:  	Thomas Willardson 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	Energy Recovery, Inc., International, a Delaware

corporation

 	 
	 	By:  	/s/ Thomas Willardson
 	 
	 	 	Name:  	Thomas Willardson 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

BORROWER:

Energy Recovery, Inc., a Delaware

corporation, jointly and severally with

Pump Engineering, Inc., a Delaware

corporationexv10w1

Exhibit 10.1

AVALONBAY COMMUNITIES, INC.

DEFERRED COMPENSATION PLAN

Amended and Restated Effective as of January 1, 2011

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	PURPOSE
	 	 	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE 1 - DEFINITIONS	 	 	1	 
	1.1
	 	“Annual Bonus”	 	 	1	 
	1.2
	 	“Annual Deferral Amount”	 	 	1	 
	1.3
	 	“Base Annual Salary”	 	 	1	 
	1.4
	 	“Beneficiary”	 	 	1	 
	1.5
	 	“Beneficiary Designation Form”	 	 	2	 
	1.6
	 	“Cause”	 	 	2	 
	1.7
	 	“Claimant”	 	 	2	 
	1.8
	 	“Code”	 	 	2	 
	1.9
	 	“Compensation Committee”	 	 	2	 
	1.10
	 	“Deferral Account”	 	 	2	 
	1.11
	 	“Election Form”	 	 	2	 
	1.12
	 	“Eligible Employee”	 	 	2	 
	1.13
	 	“Employee”	 	 	2	 
	1.14
	 	“ERISA”	 	 	2	 
	1.15
	 	“Newly Eligible Participant”	 	 	2	 
	1.16
	 	“Non-Qualified Predetermined Annuity Account”	 	 	2	 
	1.17
	 	“Participant”	 	 	3	 
	1.18
	 	“Plan”	 	 	3	 
	1.19
	 	“Plan Year”	 	 	3	 
	1.20
	 	“Retirement,” “Retire(s)” or “Retired”	 	 	3	 
	1.21
	 	“Retirement Planning Committee”	 	 	3	 
	1.22
	 	“Separation from Service” or “Separates from Service”	 	 	3	 
	1.23
	 	“Sponsor”	 	 	3	 
	1.24
	 	“Trust”	 	 	3	 
	1.25
	 	“Unforeseeable Financial Emergency”	 	 	3	 
	1.26
	 	“Years of Service”	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE 2 - SELECTION, ENROLLMENT, ELIGIBILITY	 	 	4	 
	2.1
	 	Selection by Compensation Committee	 	 	4	 
	2.2
	 	Enrollment Requirements	 	 	4	 
	2.3
	 	Eligibility; Commencement of Participation	 	 	4	 
	2.4
	 	Special Enrollment Rules for a Newly Eligible Participant	 	 	4	 
	2.5
	 	Termination of Participation and/or Deferrals	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE 3 - DEFERRAL COMMITMENTS/VESTING/CREDITING/TAXES	 	 	4	 
	3.1
	 	Minimum Deferrals — Annual Deferral Amount	 	 	4	 
	3.2
	 	Maximum Deferral — Base Annual Salary and Annual Bonus	 	 	4	 
	3.3
	 	Election to Defer; Effect of Election Form.	 	 	5	 
	3.4
	 	Withholding of Annual Deferral Amounts	 	 	5	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	3.5
	 	Vesting	 	 	5	 
	3.6
	 	Crediting/Debiting of Deferral Accounts	 	 	5	 
	3.7
	 	FICA and Other Taxes	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE 4 - DEATH BENEFIT	 	 	7	 
	4.1
	 	Death Benefit	 	 	7	 
	4.2
	 	Payment of Death Benefit	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 5 - TERMINATION BENEFIT	 	 	7	 
	5.1
	 	Termination Benefit	 	 	7	 
	5.2
	 	Payment of Termination Benefit	 	 	7	 
	5.3
	 	Forfeiture if Termination for Cause	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 6 - SHORT-TERM PAYOUTS	 	 	7	 
	6.1
	 	Short-Term Payouts	 	 	7	 
	6.2
	 	Grandfathered Election	 	 	7	 
	6.3
	 	Withdrawal for Unforeseeable Financial Emergencies	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 7 - BENEFICIARY DESIGNATION	 	 	8	 
	7.1
	 	Beneficiary	 	 	8	 
	7.2
	 	Beneficiary Designation; Change; Spousal Consent	 	 	8	 
	7.3
	 	Acknowledgment	 	 	8	 
	7.4
	 	No Beneficiary Designation	 	 	8	 
	7.5
	 	Doubt as to Beneficiary	 	 	8	 
	7.6
	 	Discharge of Obligations	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 8 - LEAVE OF ABSENCE	 	 	9	 
	8.1
	 	Leave of Absence	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 9 - TERMINATION, AMENDMENT OR MODIFICATION	 	 	9	 
	9.1
	 	Termination	 	 	9	 
	9.2
	 	Amendment	 	 	9	 
	9.3
	 	Delegation to Retirement Planning Committee	 	 	9	 
	9.4
	 	Effect of Payment	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 10 - ADMINISTRATION	 	 	9	 
	10.1
	 	Retirement Planning Committee Duties	 	 	9	 
	10.2
	 	Agents	 	 	10	 
	10.3
	 	Binding Effect of Decisions	 	 	10	 
	10.4
	 	Exculpation and Indemnity of Retirement Planning Committee	 	 	10	 
	10.5
	 	Sponsor Information	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE 11 - OTHER BENEFITS AND AGREEMENTS	 	 	10	 
	11.1
	 	Coordination with Other Benefits	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE 12 - CLAIMS PROCEDURES	 	 	10	 
	12.1
	 	Presentation of Claim	 	 	10	 
	12.2
	 	Notification of Decision	 	 	11	 

(ii)

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	12.3
	 	Review of a Denied Claim	 	 	11	 
	12.4
	 	Decision on Review	 	 	12	 
	12.5
	 	Legal Action	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 13 - TRUST	 	 	12	 
	13.1
	 	Establishment of the Trust	 	 	12	 
	13.2
	 	Interrelationship of the Plan and the Trust	 	 	12	 
	13.3
	 	Distributions From the Trust	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE 14 - MISCELLANEOUS	 	 	12	 
	14.1
	 	Status of Plan	 	 	12	 
	14.2
	 	Unsecured General Creditor	 	 	13	 
	14.3
	 	Sponsor’s Liability	 	 	13	 
	14.4
	 	Nonassignability	 	 	13	 
	14.5
	 	Not a Contract of Employment	 	 	13	 
	14.6
	 	Furnishing Information	 	 	13	 
	14.7
	 	Terms	 	 	13	 
	14.8
	 	Captions	 	 	14	 
	14.9
	 	Governing Law	 	 	14	 
	14.10
	 	Notice	 	 	14	 
	14.11
	 	Successors	 	 	14	 
	14.12
	 	Spouse’s Interest	 	 	14	 
	14.13
	 	Validity	 	 	14	 
	14.14
	 	Incompetent	 	 	14	 
	14.15
	 	Court Order	 	 	15	 
	14.16
	 	Distribution in the Event of Taxation	 	 	15	 

(iii)

 

AVALONBAY COMMUNITIES, INC.

DEFERRED COMPENSATION PLAN

Amended and Restated Effective as of January 1, 2011

     The AvalonBay Communities, Inc. Deferred Compensation Plan, effective as of January 1, 1996,
as amended and restated as of January 1, 1999, as of January 1, 2004 and as of January 1, 2009, is
hereby amended and restated in its entirety as follows, effective as of January 1, 2011 except as
specifically provided herein.

PURPOSE

     The purpose of this Plan is to provide specified benefits to a select group of management or
highly compensated Employees who contribute materially to the continued growth, development and
future business success of AvalonBay Communities, Inc. This Plan shall be unfunded for tax
purposes and for purposes of Title I of ERISA.

ARTICLE 1 — DEFINITIONS

     For the purposes of this Plan, unless otherwise clearly apparent from the context, the
following phrases or terms shall have the following indicated meanings:

1.1 “Annual Bonus” shall mean any compensation, in addition to Base Annual Salary, earned for
services performed during the Plan Year by a Participant as an Employee under the Sponsor’s annual
bonus (cash incentive) plan, but excluding stock options and stock grants.

1.2 “Annual Deferral Amount” shall mean that portion of a Participant’s Base Annual Salary and
Annual Bonus that a Participant defers in accordance with Article 3 for any one Plan Year. In the
event of a Participant’s termination of employment prior to the end of a Plan Year, such year’s
Annual Deferral Amount shall be the actual amount withheld prior to such event.

1.3 “Base Annual Salary” shall mean the annual cash compensation included on the Federal Income Tax
Form W-2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock
options, stock grants, relocation expenses, incentive payments, non-monetary awards, and automobile
and other allowances paid to a Participant for employment services rendered (whether or not such
allowances are included in the Employee’s gross income). Base Annual Salary shall be calculated
before reduction for compensation voluntarily deferred or contributed by the Participant pursuant
to all qualified or non-qualified plans of the Sponsor and shall be calculated to include amounts
not otherwise included in the Participant’s gross income under Code Sections 125, 132(f),
402(e)(3), or 402(h) pursuant to plans established by the Sponsor; provided, however, that all such
amounts will be included in compensation only to the extent that had there been no such plan, the
amount would have been payable in cash to the Employee.

1.4 “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in
accordance with Article 7, that are entitled to receive benefits under this Plan upon the death of
a Participant.

 

 

     1.5 “Beneficiary Designation Form” shall mean the form established from time to time by the
Retirement Planning Committee that a Participant completes, signs and returns to the Retirement
Planning Committee to designate one or more Beneficiaries.

     1.6 “Cause” shall mean that the Participant has been determined in good faith by the Board of
Directors of the Company to have engaged in any one or more acts of theft, larceny, embezzlement,
fraud or material intentional misappropriation from or with respect to the Company.

     1.7 “Claimant” shall have the meaning set forth in Section 12.1.

     1.8 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

     1.9 “Compensation Committee” shall mean the Compensation Committee of the Board of Directors of the
Sponsor.

     1.10 “Deferral Account” shall mean (i) the sum of all of a Participant’s Annual Deferral Amounts,
plus (ii) amounts credited in accordance with all the applicable crediting and debiting provisions
of this Plan that relate to the Participant’s Deferral Account, less (iii) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her
Deferral Account. The Deferral Account shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts to be paid to a
Participant, or his or her Beneficiary, pursuant to this Plan.

     1.11 “Election Form” shall mean the form established from time to time by the Retirement Planning
Committee that a Participant completes, signs and returns to the Retirement Planning Committee to
make an election under the Plan.

     1.12 “Eligible Employee” shall mean, effective as of July 1, 2010, an Employee with a position
of Senior Director and above and annualized Base Annual Salary of an amount equal to the then
current compensation limit imposed by Section 401(a)(17) of the Code.

     1.13 “Employee” shall mean a person who is an employee of the Sponsor or an affiliate of the
Sponsor.

     1.14 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended
from time to time.

     1.15 “Newly Eligible Participant” shall mean an Eligible Employee who is not, and has not
been, eligible to make any deferral elections under any nonqualified deferred compensation plan
that would be aggregated with this Plan under Section 409A of the Code and the guidance issued
thereunder.

     1.16 “Non-Qualified Predetermined Annuity Account” shall mean an account maintained pursuant to the
terms of the Plan in effect prior to January 1, 2004. Any such account shall continue to be
maintained after January 1, 2004 until such account has been distributed to a Participant pursuant
to the terms hereof.

2

 

     1.17 “Participant” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who
signs an Election Form, (iii) whose signed Election Form is accepted by the Retirement Planning
Committee, and (iv) whose participation in the Plan has not terminated.

     1.18 “Plan” shall mean the AvalonBay Communities, Inc. Deferred Compensation Plan, which shall be
evidenced by this instrument, as it may be amended from time to time.

     1.19 “Plan Year” shall mean a period beginning on January 1 of each calendar year and continuing
through December 31 of such calendar year.

     1.20 “Retirement,” “Retire(s)” or “Retired” shall mean, with respect to an Employee,
Separation from Service with the Sponsor (or any affiliate thereof) for any reason other than death
or a leave of absence, following the date on which the sum of the following equals or exceeds 70
years: (i) the number of the Employee’s Years of Service and (ii) the Employee’s age upon
Separation from Service, provided that the Employee is at least age 50 and has completed at least
ten (10) Years of Service.

     1.21 “Retirement Planning Committee” shall mean the committee described in Article 10.

     1.22 “Separation from Service” or “Separates from Service” shall mean when the Participant and
the Sponsor (or any affiliate thereof) reasonably anticipate that no further services would be
performed by the Employee for the Sponsor (or any affiliate thereof) after a certain date or that
the level of bona fide services the Participant would perform for the Sponsor (or any affiliate
thereof) would permanently decrease to no more than 20 percent of the average level of bona fide
services performed by the Participant for the Sponsor (or any affiliate thereof) over the
immediately preceding 36-month period (or period of employment, if less than 36 months).

     1.23 “Sponsor” shall mean AvalonBay Communities, Inc. and any successor to all or substantially all
of the Sponsor’s assets or business.

     1.24 “Trust” shall mean one or more trusts, if any, established by the Sponsor in its sole
discretion.

     1.25 “Unforeseeable Financial Emergency” shall mean a severe financial hardship to the Participant
resulting from an illness or accident of the Participant, the Participant’s spouse, the
Participant’s dependent (as defined in Section 152 of the Code without regard to Sections
152(b)(1), (b)(2) and (d)(1)(B)), loss of the Participant’s property due to casualty or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Participant.

     1.26 “Years of Service” shall mean the total number of full years in which a Participant has been
employed by the Sponsor (or any affiliate thereof). For purposes of this definition, a year of
employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the
first year of employment, commences on the Employee’s date of hiring and that, for any subsequent
year, commences on an anniversary of that hiring date. The Retirement Planning

3

 

Committee shall make a determination as to whether any partial year of employment shall be counted
as a Year of Service.

ARTICLE 2 — SELECTION, ENROLLMENT, ELIGIBILITY

     2.1 Selection by Compensation Committee. Participation in the Plan shall be limited to
Eligible Employees.

     2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall
complete, execute and return to the Company an Election Form and a Beneficiary Designation Form,
prior to the end of the Plan Year. In addition, the Retirement Planning Committee shall establish
from time to time such other enrollment requirements as it determines in its sole discretion are
necessary.

     2.3 Eligibility; Commencement of Participation. Provided an Eligible Employee has met all
enrollment requirements set forth in this Plan and required by the Retirement Planning Committee,
including returning all required documents to the Retirement Planning Committee within the
specified time period, that Eligible Employee shall commence participation in the Plan on the first
day of the Plan Year following the completion of all enrollment requirements. If an Eligible
Employee fails to meet all such requirements within the period required, in accordance with Section
2.2, that Eligible Employee shall not be eligible to participate in the Plan until the first day of
the Plan Year following the delivery to and acceptance by the Retirement Planning Committee of the
required documents.

     2.4 Special Enrollment Rules for a Newly Eligible Participant. Notwithstanding the
foregoing, effective as of July 1, 2010, a Newly Eligible Participant may enroll in the Plan by
returning all required documents to the Retirement Planning Committee not later than 30 days after
his or her date of hire; provided that the deferral for the first Plan Year of participation shall
apply only to base salary paid for services to be performed subsequent to the election.

     2.5 Termination of Participation and/or Deferrals. If the Retirement Planning Committee
determines in good faith that a Participant no longer qualifies as an Eligible Employee, the
Retirement Planning Committee shall have the right, in its sole discretion, to prevent the
Participant from making deferral elections in future Plan Years.

ARTICLE 3 — DEFERRAL COMMITMENTS/VESTING/CREDITING/TAXES

     3.1 Minimum Deferrals — Anpnual Deferral Amount. For each Plan Year, a Participant may
elect to defer, as his or her Annual Deferral Amount, an aggregate minimum of one percent (1%) of
his or her Base Annual Salary. If an election is made for less than stated minimum amounts, or if
no election is made, the amount deferred shall be zero.

     3.2 Maximum Deferral — Base Annual Salary and Annual Bonus. For each Plan Year beginning
on or after January 1, 2011, a Participant may elect to defer, as his or her Annual Deferral
Amount, Base Annual Salary and Annual Bonus. The maximum percentage for Base Annual Salary shall
be twenty-five percent (25%), and the maximum percentage for Annual Bonus shall be fifty percent
(50%).

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     3.3 Election to Defer; Effect of Election Form.

          (a) First Plan Year. In connection with a Participant’s commencement of participation
in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which
the Participant commences participation in the Plan, along with such other elections as the
Retirement Planning Committee deems necessary or desirable under the Plan. For these elections to
be valid, the Election Form must be completed and signed by the Participant, timely delivered to
the Retirement Planning Committee (in accordance with Section 2.2 or 2.4 above) and accepted by the
Retirement Planning Committee.

          (b) Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral
election for that Plan Year, and such other elections as the Retirement Planning Committee deems
necessary or desirable under the Plan, shall be made by timely delivering to the Retirement
Planning Committee, in accordance with its rules and procedures, before the end of the Plan Year
preceding the Plan Year for which the election is made, a new Election Form. Elections to defer a
percentage of Annual Bonus must be made before the end of the Plan Year preceding the Plan Year in
which such Annual Bonus is earned.

     3.4 Withholding of Annual Deferral Amounts. For each Plan Year, the Base Annual Salary
portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual
Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base
Annual Salary. The Annual Bonus portion of the Annual Deferral Amount shall be withheld at the
time the Annual Bonus is or otherwise would be paid to the Participant, whether or not this occurs
during the Plan Year itself.

     3.5 Vesting. A Participant shall at all times be 100% vested in his or her Deferral
Account.

     3.6 Crediting/Debiting of Deferral Accounts. In accordance with, and subject to, the rules
and procedures that are established from time to time by the Retirement Planning Committee, in its
sole discretion, amounts shall be credited or debited to a Participant’s Deferral Account balance
in accordance with the following rules:

          (a) Measurement Funds. The Participant may elect one or more of the measurement funds
(the “Measurement Funds”), based on certain mutual funds or other investment indices, for the
purpose of crediting or debiting additional amounts to his or her Deferral Account balance. At
least once each Plan Year, the Retirement Planning Committee or its delegate shall provide the
Participant with a list of Measurement Funds available. As necessary, the Retirement Planning
Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund.

          (b) Election of Measurement Funds. A Participant, in connection with his or her
initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election
Form, one or more Measurement Fund(s) (as described in Section 3.6(a) above) to be used to
determine the amounts to be credited or debited to his or her Deferral Account balance. The
Participant may (but is not required to) subsequently elect at any time, in accordance with
procedures established by the Retirement Planning Committee from time to time, to add or delete

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one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited
to his or her Deferral Account balance, or to change the portion of his or her Deferral Account
balance allocated to each previously or newly elected Measurement Fund.

          (c) Proportionate Allocation. In making any election described in Section 3.6(b)
above, the Participant shall specify on the Election Form (or such other form of communication
acceptable to the Committee), in increments of one percent (1%), the percentage of his or her
Deferral Account balance to be allocated to a Measurement Fund (as if the Participant was making an
investment in that Measurement Fund with that portion of his or her Deferral Account balance).

          (d) Crediting or Debiting Method. The performance of each elected Measurement Fund
(either positive or negative) will be based on the performance of the Measurement Funds themselves.
A Participant’s Deferral Account shall be credited or debited on a daily basis, if possible, based
on the performance of each Measurement Fund selected by the Participant. A Participant’s Deferral
Account may also be debited by its proportionate share of the Plan’s administrative expense.

          (e) No Actual Investment. Notwithstanding any other provision of this Plan that may
be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only,
and a Participant’s election of any such Measurement Fund, the allocation to his or her Deferral
Account thereto, the calculation of additional amounts and the crediting or debiting of such
amounts to a Participant’s Deferral Account shall not be considered or construed in
any manner as an actual investment of his or her Deferral Account in any such Measurement Fund. In
the event that the Sponsor, in its own discretion, decides to invest in any of the investments on
which the Measurement Funds are based, no Participant shall have any rights in or to such
investments themselves. Without limiting the foregoing, a Participant’s Deferral Account balance
shall at all times be a bookkeeping entry only and shall not represent any investment made on his
or her behalf by the Sponsor or the Trust; the Participant shall at all times remain an unsecured
creditor of the Sponsor.

     3.7 FICA and Other Taxes.

          (a) Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount is
being withheld from a Participant, the Sponsor shall withhold from that portion of the
Participant’s Base Annual Salary and Annual Bonus that is not being deferred, in a manner
determined by the Sponsor, the Participant’s share of FICA and other employment taxes on such
Annual Deferral Amount.

          (b) Distributions. The Sponsor, or the trustee of the Trust, shall withhold from any
payments made to a Participant under this Plan all federal, state and local income, employment and
other taxes required to be withheld by the Sponsor, or the trustee of the Trust, in connection with
such payments, in amounts and in a manner to be determined in the sole discretion of the Sponsor
and the trustee of the Trust.

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ARTICLE 4 — DEATH BENEFIT

     4.1 Death Benefit. If the Participant dies before he or she Separates from Service, the
Participant’s Beneficiary shall receive a death benefit equal to the Participant’s Deferral Account
balance calculated as of the close of business on or around the date the benefit distribution is
processed, as determined by the Retirement Planning Committee in its sole discretion.

     4.2 Payment of Death Benefit. The death benefit shall be paid to the Participant’s
Beneficiary in a lump sum payment no later than 90 days after the Participant’s death.

ARTICLE 5 — TERMINATION BENEFIT

     5.1 Termination Benefit. If a Participant Separates his Service with the Sponsor, the
Participant shall receive his or her Deferral Account balance calculated as of the close of
business on or around the date the benefit distribution is processed, as determined by the
Retirement Planning Committee in its sole discretion.

     5.2 Payment of Termination Benefit. The Participant shall receive his or her Deferral
Account balance in a lump sum payment in the seventh month following the Participant’s Separation
from Service. Notwithstanding the foregoing, if a Participant Retires and such Participant has
elected prior to November 22, 2008 to receive his or her Deferral Account in annual or monthly
installments over a period not exceeding ten (10) years, the Plan shall honor such election if the
Deferral Account balance is at least $25,000 and the Participant will be paid on an installment
basis rather than in a lump sum. If the Participant dies before completion of the installment
payments, the unpaid remaining Deferral Account balance shall be paid to his or her Beneficiary in
a lump sum no later than 90 days after the Participant’s death.

     5.3 Forfeiture if Termination for Cause. Notwithstanding anything contained herein to
the contrary, if a Participant’s employment with the Company is terminated for Cause, the portion
of his or her Deferral Account attributable to Annual Deferral Amounts made after 2010, as adjusted
pursuant to Section 3.6(d), shall be forfeited in its entirety.

ARTICLE 6 — SHORT-TERM PAYOUTS

     6.1 Short-Term Payouts. From and after January 1, 2004, the Plan shall no longer permit
any Participant to elect any short-term payouts during employment.

     6.2 Grandfathered Election. To the extent a Participant has previously filed an election
to receive his Non-Qualified Predetermined Annuity Account at a specified time, whether in a lump
sum or in annual, quarterly or monthly installments over a period not exceeding ten (10) years, the
Plan shall continue to honor such elections during the Participant’s employment.

     6.3 Withdrawal for Unforeseeable Financial Emergencies. If a Participant experiences an
Unforeseeable Financial Emergency, the Participant may petition the Retirement Planning Committee
to receive a partial or full payout from the Plan. The Committee shall determine if the event
meets the criteria to be an Unforeseeable Financial Emergency. If approved, the amount of the
withdrawal shall not exceed the lesser of the Participant’s Deferral

7

 

Account balance or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency
and income taxes on the withdrawn amount. If, subject to the sole discretion of the Retirement
Planning Committee, the petition for a withdrawal is approved, any distribution shall be made
within 30 days of the date of approval. The Participant will be eligible to again participate in
the Plan effective the Plan Year following the Unforeseeable Financial Emergency. The Retirement
Planning Committee may permit a Participant to suspend his or her Annual Deferral Amount in the
event of an Unforeseeable Financial Emergency.

ARTICLE 7 — BENEFICIARY DESIGNATION

     7.1 Beneficiary. Each Participant shall have the right, at any time, to designate his or
her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the
Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan
may be the same as or different from the Beneficiary designation under any other plan of the
Sponsor in which the Participant participates.

     7.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall designate his or
her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the
Retirement Planning Committee or its designated agent. A Participant shall have the right to
change a Beneficiary by completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Retirement Planning Committee’s rules and procedures, as in
effect from time to time. If a married Participant names someone other than his or her spouse as a
Beneficiary, a spousal consent, in the form designated by the Retirement Planning Committee, must
be signed by that Participant’s spouse and returned to the Retirement Planning Committee. Upon the
acceptance by the Retirement Planning Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled. The Retirement Planning Committee
shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and
accepted by the Retirement Planning Committee prior to his or her death.

     7.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be
effective until received by the Retirement Planning Committee or its designated agent.

     7.4 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as
provided in Sections 7.1, 7.2 and 7.3 above, if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the Participant’s benefits, or if a married
Participant fails to provide a written spousal consent form, then the Participant’s designated
Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving
spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the
executor or personal representative of the Participant’s estate.

     7.5 Doubt as to Beneficiary. If the Retirement Planning Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the Retirement Planning Committee
shall have the right, exercisable in its discretion, to cause the Sponsor to withhold such payments
until this matter is resolved to the Retirement Planning Committee’s satisfaction.

8

 

     7.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary
shall fully and completely discharge the Sponsor and the Retirement Planning Committee from all
further obligations under this Plan with respect to the Participant, and that Participant’s
participation in the Plan shall terminate upon such full payment of benefits.

ARTICLE 8 — LEAVE OF ABSENCE

     8.1 Leave of Absence. If a Participant is authorized by the Sponsor for any reason to take
an unpaid leave of absence from the employment of the Sponsor, the Participant shall continue to be
considered employed by the Sponsor but the Participant shall not be permitted to make deferrals
until the Participant returns to work. Upon such return, deferrals shall resume for the remaining
portion of the Plan Year in which the return occurs, based on the deferral election, if any, made
for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld.

ARTICLE 9 — TERMINATION, AMENDMENT OR MODIFICATION

     9.1 Termination. Although the Sponsor anticipates that it will continue the Plan for an
indefinite period of time, there is no guarantee that the Sponsor will continue the Plan or will
not terminate the Plan at any time in the future. Accordingly, the Sponsor reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to
any or all of its participating Employees. Upon the termination of the Plan with respect to the
Sponsor, the affected Participants’ participation in the Plan shall terminate effective as of the
end of the Plan Year in which the Plan termination occurs. Distributions shall be made to the
Participants in the normal course, but the Sponsor may accelerate the distributions to the extent
permitted by Section 409A of the Code and the regulations promulgated thereunder.

     9.2 Amendment. The Sponsor may, at any time, amend or modify the Plan in whole or in part;
provided, however, that no amendment or modification shall be effective to decrease or restrict the
value of a Participant’s Deferral Account balance in existence at the time the amendment or
modification is made. The amendment or modification of the Plan shall not affect the right of any
Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of
the date of the amendment or modification to receive such payment.

     9.3 Delegation to Retirement Planning Committee. The Sponsor has delegated its rights to
act under Sections 9.1 and 9.2 above to the Retirement Planning Committee and the Retirement
Planning Committee shall have the full power to take action under Sections 9.1 and 9.2.

     9.4 Effect of Payment. The full payment of the applicable benefit under Articles 4, 5, or
6 of the Plan shall completely discharge all obligations to a Participant and his or her designated
Beneficiaries under this Plan and the Participant’s participation in the Plan shall terminate.

ARTICLE 10 — ADMINISTRATION

     10.1 Retirement Planning Committee Duties. Except as otherwise provided in this Article
10, this Plan shall be administered by the Retirement Planning Committee of the Sponsor.

9

 

The Retirement Planning Committee shall also have the discretion and authority to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the administration of this Plan
and (ii) decide or resolve any and all questions including interpretations of this Plan, as may
arise in connection with the Plan. Any individual serving on the Retirement Planning Committee who
is a Participant shall not vote or act on any matter relating solely to himself or herself. When
making a determination or calculation, the Retirement Planning Committee shall be entitled to rely
on information furnished by a Participant or the Sponsor.

     10.2 Agents. In the administration of this Plan, the Retirement Planning Committee may,
from time to time, employ agents and delegate to them such administrative duties as it sees fit
(including acting through a duly appointed representative) and may from time to time consult with
counsel who may be counsel to, and paid by, the Sponsor.

     10.3 Binding Effect of Decisions. The decision or action of the Retirement Planning
Committee with respect to any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having any interest in the Plan.

     10.4 Exculpation and Indemnity of Retirement Planning Committee. The Sponsor shall
indemnify and hold harmless the members of the Retirement Planning Committee and any Employee to
whom the duties of the Retirement Planning Committee may be delegated against any and all claims,
losses, damages, expenses or liabilities arising from any action or failure to act with respect to
this Plan, except in the case of willful misconduct or gross negligence by the Retirement Planning
Committee, any of its members, or any such Employee. By electing to enroll in the Plan, each
Participant shall acknowledge that except in the case of claims for benefits, he or she shall have
no right to file any claim against the Retirement Planning Committee or the Sponsor unless such
claim is attributed to the willful misconduct or gross negligence of the Retirement Planning
Committee, any of its members, or any Employee of the Sponsor.

     10.5 Sponsor Information. To enable the Retirement Planning Committee to perform its
functions, the Sponsor shall supply full and timely information to the Retirement Planning
Committee, as the case may be, on all matters relating to the compensation of its Participants, the
date and circumstances of the death or Separation from Service of its Participants, and such other
pertinent information as the Retirement Planning Committee may reasonably require.

ARTICLE 11 — OTHER BENEFITS AND AGREEMENTS

     11.1 Coordination with Other Benefits. The benefits provided for a Participant and
Participant’s Beneficiary under the Plan are in addition to any other benefits available to such
Participant under any other plan or program for employees of the Sponsor. The Plan shall
supplement and shall not supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

ARTICLE 12 — CLAIMS PROCEDURES

     12.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such
Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the

10

 

Retirement Planning Committee a written claim for a determination with respect to the amounts
distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such notice was received by
the Claimant. All other claims must be made within 180 days of the date on which the event that
caused the claim to arise occurred. The claim must state with particularity the determination
desired by the Claimant.

     12.2 Notification of Decision. The Retirement Planning Committee shall consider a
Claimant’s claim within a reasonable time, and shall notify the Claimant in writing:

          (a) that the Claimant’s requested determination has been made, and that the claim has been
allowed in full; or

          (b) that the Retirement Planning Committee has reached a conclusion contrary, in whole or in
part, to the Claimant’s requested determination, and such notice must set forth in a manner
calculated to be understood by the Claimant:

          (i) the specific reason(s) for the denial of the claim, or any part of it;

          (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial
was based;

          (iii) a description of any additional material or information necessary for the
Claimant to perfect the claim, and an explanation of why such material or information is
necessary;

          (iv) an explanation of the claim review procedure set forth in Section 13.3 below; and

          (v) a statement of the Claimant’s right to bring a civil action under Section 502(a) of
ERISA if the claim is appealed to the Retirement Planning Committee and the Retirement
Planning Committee fully or partially denies the claim.

     12.3 Review of a Denied Claim. Within 60 days after receiving a notice from the Retirement
Planning Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s
duly authorized representative) may file with the Retirement Planning Committee a written request
for a review of the denial of the claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant’s duly authorized representative):

          (a) may review pertinent documents;

          (b) may submit written comments or other documents; and/or

          (c) may request a hearing, which the Retirement Planning Committee, in its sole discretion,
may grant.

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     12.4 Decision on Review. The Retirement Planning Committee shall render its decision on
review promptly, and not later than 60 days after the filing of a written request for review of the
denial, unless a hearing is held or other special circumstances require additional time, in which
case the Retirement Planning Committee’s decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood by the Claimant, and it must
contain:

          (a) specific reasons for the decision;

          (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

          (c) a statement of the Claimant’s right to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other information relevant to the
Claimant’s claim for benefits; and

          (d) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

     12.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this Article
12 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to
any claim for benefits under this Plan.

ARTICLE 13 — TRUST

     13.1 Establishment of the Trust. In order to provide assets from which to fulfill the
obligations of the Participants and their beneficiaries under the Plan, the Sponsor shall establish
a Trust by a trust agreement with a third party, the trustee, to which the Sponsor may, in its
discretion, contribute cash or other property, including securities issued by the Sponsor, to
provide for the benefit payments under the Plan.

     13.2 Interrelationship of the Plan and the Trust. The provisions of the Plan shall govern
the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the
Trust shall govern the rights of the Sponsor, Participants and the creditors of the Sponsor to the
assets transferred to the Trust. The Sponsor shall at all times remain liable to carry out its
obligations under the Plan, subject to any limitation imposed by bankruptcy laws.

     13.3 Distributions From the Trust. The Sponsor’s obligations under the Plan may be
satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such
distribution shall reduce the Sponsor’s obligations under this Plan.

ARTICLE 14 — MISCELLANEOUS

     14.1 Status of Plan. The Plan is intended to be a plan that is not qualified within the
meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for
the purpose of providing deferred compensation for a select group of management or highly
compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The
Plan is also intended to comply with the requirements of Section 409A of the

12

 

Code. The Plan shall be administered and interpreted to the extent possible in a manner consistent
with that intent.

     14.2 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors
and assigns shall have no legal or equitable rights, interests or claims in any property or assets
of the Sponsor. For purposes of the payment of benefits under this Plan, any and all of the
Sponsor’s assets shall be, and remain, the general, unpledged unrestricted assets of the Sponsor.
The Sponsor’s obligation under the Plan shall be merely that of an unfunded and unsecured promise
to pay money in the future.

     14.3 Sponsor’s Liability. The Sponsor’s liability for the payment of benefits shall be
defined only by the Plan. The Sponsor shall have no obligation to a Participant under the Plan
except as expressly provided in the Plan.

     14.4 Nonassignability. Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are expressly declared to be,
unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure, attachment, garnishment or sequestration for the payment of any debts,
judgments, separate maintenance owed by a Participant or any other person, be transferable by
operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.
Notwithstanding the foregoing, assets can be assigned to an individual other than a Participant to
the extent necessary to fulfill a domestic relations order.

     14.5 Not a Contract of Employment. The terms and conditions of this Plan shall not be
deemed to constitute a contract of employment between the Sponsor and the Participant. Such
employment is hereby acknowledged to be an “at will” employment relationship that can be terminated
at any time for any reason, or no reason, with or without cause, and with or without notice, unless
expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give
a Participant the right to be retained in the service of the Sponsor, as an Employee, or to
interfere with the right of the Sponsor to discipline or discharge the Participant at any time.

     14.6 Furnishing Information. A Participant or his or her Beneficiary will cooperate with
the Retirement Planning Committee by furnishing any and all information requested by the Retirement
Planning Committee and take such other actions as may be requested in order to facilitate the
administration of the Plan and the payments of benefits hereunder.

     14.7 Terms. Whenever any words are used herein in the masculine, they shall be construed
as though they were in the feminine in all cases where they would so apply; and whenever any words
are used herein in the singular or in the plural, they shall be construed as though they were used
in the plural or the singular, as the case may be, in all cases where they would so apply.

13

 

     14.8 Captions. The captions of the articles, sections and paragraphs of this Plan are for
convenience only and shall not control or affect the meaning or construction of any of its
provisions.

     14.9 Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and
interpreted according to the internal laws of the State of Maryland without regard to its conflicts
of laws principles.

     14.10 Notice. Any notice or filing required or permitted to be given to the Retirement
Planning Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by
registered or certified mail, to the address below:

AvalonBay Communities Retirement Planning Committee

c/o AvalonBay Communities, Inc.

Ballston Tower

671 N. Glebe Road, Suite 800

Arlington, VA 22203

Attention: Senior Director, Compensation & Benefits

     Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail,
as of the date shown on the postmark on the receipt for registration or certification.

     Any notice or filing required or permitted to be given to a Participant under this Plan shall
be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the
Participant.

     14.11 Successors. The provisions of this Plan shall bind and inure to the benefit of the
Sponsor and its successors and assigns and the Participant and the Participant’s designated
Beneficiaries.

     14.12 Spouse’s Interest. The interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass to the Participant and
shall not be transferable by such spouse in any manner, including but not limited to such spouse’s
will, nor shall such interest pass under the laws of intestate succession.

     14.13 Validity. In case any provision of this Plan shall be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan
shall be construed and enforced as if such illegal or invalid provision had never been inserted
herein.

     14.14 Incompetent. If the Retirement Planning Committee determines in its discretion that
a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person
incapable of handling the disposition of that person’s property, the Retirement Planning Committee
may direct payment of such benefit to the guardian, legal representative or person having the care
and custody of such minor, incompetent or incapable person. The Retirement Planning Committee may
require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate
prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.

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     14.15 Court Order. The Retirement Planning Committee is authorized to make any payments
directed by court order in any action in which the Plan or the Retirement Planning Committee has
been named as a party. In addition, if a court determines that a spouse or former spouse of a
Participant has an interest in the Participant’s benefits under the Plan in connection with a
property settlement or otherwise, the Retirement Planning Committee shall have the right,
notwithstanding any election made by a Participant, to distribute the spouse’s or former spouse’s
interest in the Participant’s benefits under the Plan to that spouse or former spouse pursuant to
the terms of the domestic relations order.

     14.16 Distribution in the Event of Taxation.

     If, for any reason, all or any portion of a Participant’s benefits under this Plan becomes
taxable to the Participant prior to receipt on account of failure to meet the requirements of
Section 409A of the Code, the Participant may petition the Retirement Planning Committee for a
distribution of that portion of his or her benefit that has become taxable. Upon the grant of such
a petition, which grant shall not be unreasonably withheld, the Sponsor shall distribute to the
Participant immediately available funds in an amount equal to the taxable portion of his or her
benefit (which amount shall not exceed a Participant’s unpaid Deferral Account balance under the
Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of
the date when the Participant’s petition is granted.

     IN WITNESS WHEREOF, the Sponsor has caused this amended and restated Plan document to be duly
executed by a duly authorized officer this 28th day of June, 2010.

	 	 	 	 	 
	 	AVALONBAY COMMUNITIES, INC.

 	 
	 	By:  	/s/ Keri A. Shea
 	 
	 	 	Keri A. Shea 	 
	 	 	VP, Finance & Treasurer 	 

15

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