Document:

Exhibit 10.4

 

AMENDED AND RESTATED RULES AND PROCEDURES
 FOR
 DIRECTORS’ DEFERRED COMPENSATION PROGRAM

 

These amended and restated rules and procedures have been adopted on January 31, 2018 by the Compensation Committee (the “Committee”) of the Board of Directors of AvalonBay Communities, Inc. (the “Company”) to govern the deferral by a Non-Employee Director pursuant to Section 7(b) of the AvalonBay Communities, Inc. 1994 Stock Option Plan (the 1994 Plan) and Section 8(b) of the AvalonBay Communities, Inc. Second Amended and Restated Equity Incentive Plan (the 2009 Plan), each as may heretofore have been, or hereafter may be, amended (collectively, the “Plan”).  All capitalized terms used herein shall have the same meaning as used in the 2009 Plan unless otherwise specifically provided herein.

 

1.             Election to Defer.  A Non-Employee Director may elect in advance to receive all or a portion of the cash compensation or Restricted Stock Award otherwise due him in the form of a Deferred Stock Award/Restricted Stock Unit (referred to herein as a “Deferred Stock Award”).  To make such an election, the Non-Employee Director must execute and deliver to the Company an election form specifying the percentage of his cash compensation he wishes to defer and whether or not he wishes to receive his Restricted Stock Award in the form of a Deferred Stock Award.  Except with respect to a newly elected or appointed Non-Employee Director, any election under this paragraph shall apply only to cash fees that are earned with respect to services to be performed beginning on or after the start of the next calendar year after such receipt and to stock awards to be granted after the start of the next calendar year.  A newly elected or appointed Non-Employee Director, may, no later than his or her start date as a Non-Employee Director, file a deferral election which shall apply only to cash fees that are earned with respect to services to be performed subsequent to the election and to stock awards to be granted subsequent to the election.  An election shall remain in effect from year to year, until a new election becomes effective with respect to cash fees payable, and a stock award to be granted, in the next calendar year.  A Non-Employee Director may revoke or modify his deferral election with respect to cash fees that are payable, and a stock award to be granted, in the calendar year beginning after receipt by the Company of his written revocation (for clarification, this means that in the absence of a revocation or modification, an election will remain in effect for subsequent calendar years)..

 

2.             Deferred Account.  On the day following the day cash fees would otherwise have been paid to a Non-Employee Director but for his or her deferral election, the Non-Employee Director’s deferred account (“Account”) shall be credited with a number of whole and fractional stock units determined by dividing his aggregate deferred cash fees by the Fair Market Value of a share of Stock as of the day such cash payment would otherwise have been made.  If a Non-Employee Director has elected to receive his Restricted Stock Award in the form of a Deferred Stock Award, at such time as would have otherwise been provided for issuance of Restricted Stock, his Account shall also be credited with a number of stock units equal to the number of shares that otherwise would have been issued pursuant to a Restricted Stock Award.  Except as otherwise provided in the award agreement or by vote of the Board of Directors, the stock units credited in lieu of a Restricted Stock Award shall:

 

(1) vest on the same dates as such Restricted Stock Award would have vested, namely (as of January 31, 2018)in four installments on the following dates: September 1, December 1, March 1, and the day prior to the anniversary of the prior year’s Annual Meeting (or, if earlier, the day prior to the Annual Meeting), and

 

 

(2) the director will have been deemed to have accepted the Deferred Stock Award pursuant to the terms of the most recently adopted form of Restricted Unit Agreement approved by the Compensation Committee.

 

3.             Dividend Equivalent Amounts.  Whenever dividends (other than dividends payable only in shares of Stock) are paid with respect to Stock, each Account shall be credited with a number of whole and fractional stock units determined by multiplying the dividend value per share by the stock unit balance of the Account on the record date and dividing the result by the Fair Market Value of a share of Stock on the dividend payment date.

 

4.             Period of Deferral.  The period of deferral shall cease when a Non-Employee Director ceases to serve as a member of the Board of Directors of the Company.

 

5.             Designation of Beneficiary.  A Non-Employee Director may designate one or more beneficiaries to receive payments from his Account in the event of his death.  A designation of beneficiary shall apply to a specified percentage of a Non-Employee Director’s entire interest in his Account.  Such designation, or any change therein, must be in writing and shall be effective upon receipt by the Company.  If there is no effective designation of beneficiary, or if no beneficiary survives the Non-Employee Director, the estate of the Non-Employee Director shall be deemed to be the beneficiary.  All payments to a beneficiary or estate shall be made in a lump sum in shares of Stock, with any fractional share paid in cash.

 

6.             Payment.  All vested stock units credited to a Non-Employee Director’s Account shall be paid in shares of Stock to the Non-Employee Director, or his designated beneficiary (or beneficiaries) or estate, in a lump sum within 30 days after the Non-Employee Director incurs a Separation from Service (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the ‘Code’) and in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h)) with the Company; provided, however, that fractional shares shall be paid in cash, and provided, further, that in the event the Non-Employee Director is a ‘specified employee’ within the meaning of Section 409A of the Code and the regulations promulgated thereunder, such distribution shall be made upon the earlier of the Non-Employee Director’s death, or six months and a day after his Separation from Service.  Notwithstanding the foregoing, in the event of a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code and the regulations promulgated thereunder, all Accounts under this deferred compensation arrangement shall become immediately payable in a lump sum.  In addition to the foregoing, this Directors’ Deferred Compensation Program shall be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Directors’ Deferred Compensation Program is ambiguous as to its compliance with Section 409A of the Code, such provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.

 

7.             Adjustments.  In the event of a stock dividend, stock split or similar change in capitalization affecting the Stock, or other event contemplated by Section 3d) of the 2009 Plan or the Committee shall make appropriate adjustments in the number of stock units credited to Non-Employee Directors’ Accounts.

 

8.             Nontransferability of Rights.  During a Non-Employee Director’s lifetime, any payment under this deferred compensation arrangement shall be made only to him.  No sum or other interest under this deferred compensation arrangement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any

 

 

attempt by a Non-Employee Director or any beneficiary under this deferred compensation arrangement to do so shall be void.  No interest under this deferred compensation arrangement shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a Non-Employee Director or beneficiary entitled thereto.  Notwithstanding the foregoing, the Company may make payments to an individual other than a Non-Employee Director to the extent required by a domestic relations order.

 

9.             Company’s Obligations to Be Unfunded and Unsecured.  The Accounts maintained under this deferred compensation arrangement shall at all times be entirely unfunded, and no provision shall at any time be made with respect to segregating assets of the Company (including Stock) for payment of any amounts hereunder.  No Non-Employee Director or other person shall have any interest in any particular assets of the Company (including Stock) by reason of the right to receive payment under this deferred compensation arrangement, and any Non-Employee Director or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under this deferred compensation arrangement.

 

10.          Administration.  This Director Deferred Compensation Program shall be administered by the Compensation Committee of the Board of Directors of AvalonBay Communities, Inc.  The 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 program and (ii) decide or resolve any and all questions including interpretations of this program, as may arise in connection with this programExhibit 10.5

 

[Director Restricted Stock Agreement]

 

AVALONBAY COMMUNITIES, INC. 
 STOCK GRANT AND RESTRICTED STOCK AGREEMENT

 

Pursuant to the terms of the AvalonBay Communities, Inc. Second Amended and Restated Equity Incentive Plan, as the same may hereafter be amended (the “Plan”), in consideration for services rendered and to be rendered to AvalonBay Communities, Inc. (the “Company”) and for other good and valuable consideration, the Company is issuing to the Director named below contemporaneously herewith the Shares, upon the terms and conditions set forth herein and in the Restricted Stock Agreement Terms (the “Terms”) which are attached hereto and incorporated herein in their entirety.  Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Plan or in the Terms, as applicable.

 

Director Name:                        

Award Date:                            

Number of Shares Granted (“Shares”):                           

 

Vesting Schedule:                     Subject to the provisions of the Terms, the Director’s ownership interest in the Shares shall vest, and the status of the Shares as Restricted Stock and all Restrictions with respect to the Shares shall terminate, in accordance with the following schedule of events:

 

	
 
    	
 
    	
Incremental
    	
 
    	
Total Shares Vested
    	
 
    
	
Vesting Event
    	
 
    	
Shares   Vested
    	
 
    	
After   Vesting Event
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
September 1   after the Award Date
    	
 
    	
25
    	
%
    	
25
    	
%
    
	
December 1   after the Award Date
    	
 
    	
25
    	
%
    	
50
    	
%
    
	
March 1   after the Award Date (following year)
    	
 
    	
25
    	
%
    	
75
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
The day prior to   the first anniversary of the Annual Meeting that was held in the year of the   Award Date (or, if earlier, the day prior to the Annual Meeting held in the   year after the Award Date)
    	
 
    	
25
    	
%
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Termination of   the Director’s service as a director by vote of the Company’s stockholders for   any reason other than Cause
    	
 
    	
100
    	
%*
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Failure by the   Board of Directors or any authorized committee thereof to nominate the Director   for re-election for any reason other than for Cause
    	
 
    	
100
    	
%*
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Failure of the   Company’s stockholders to re-elect the Director
    	
 
    	
100
    	
%*
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Death or   Disability of the Director
    	
 
    	
100
    	
%*
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
If earlier than   any of the above events, a Sale Event
    	
 
    	
100
    	
%*
    	
 
    	
 
    

 

*or, if fewer, all Restricted Shares

 

Additional Terms/Acknowledgements: The undersigned Director acknowledges receipt of, and understands and agrees to, this Stock Grant and Restricted Stock Agreement, including, without limitation, the Terms.  The Director further acknowledges that as of the Award Date, this Stock Grant and Restricted Stock Agreement, including, without limitation, the Terms, sets forth the entire understanding between Director and the Company regarding the stock grant described herein and supersedes all prior oral and written agreements on that subject.

 

ATTACHMENT:  Restricted Stock Agreement Terms

 

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AVALONBAY COMMUNITIES, INC.

 

RESTRICTED STOCK AGREEMENT TERMS

 

ARTICLE I

 

DEFINITIONS

 

The following terms used below in this Agreement shall have the meaning specified below unless the context clearly indicates to the contrary.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan.

 

Section 1.1 — Cause

 

“Cause” means and shall be limited to (a) an affirmative vote of the holders of at least 75 percent of the shares entitled to vote at a meeting of stockholders called for the purpose, resolving that the Director should be removed from office or (b) a vote of the Board, the Nominating Committee, if any, or any other authorized committee of the Board resolving that the Director should not be nominated for re-election as a director, in either case, as a result of (i) conviction of a felony, (ii) declaration of unsound mind by order of a court, (iii) gross dereliction of duty, (iv) commission of any act involving moral turpitude or (v) commission of an act that constitutes intentional misconduct or a knowing violation of law if such action in either event results in both an improper substantial personal benefit to such Director and a material injury to the Company.

 

Section 1.2 — Common Stock

 

“Common Stock” shall mean the common stock of the Company, $.01 par value.

 

Section 1.3 — Disability

 

“Disability” shall mean the Director’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 Administrator in good faith in its sole discretion.

 

Section 1.4  - Restricted Stock

 

“Restricted Stock” shall mean the Shares issued under this Agreement for as long as such shares are subject to the Restrictions (as hereinafter defined) imposed by this Agreement.

 

Section 1.5 - Restrictions

 

“Restrictions” shall mean the restrictions set forth in Article III of this Agreement.

 

Section 1.6 - Secretary

 

“Secretary” shall mean the secretary of the Company.

 

ARTICLE II

 

RESTRICTED STOCK

 

Section 2.1 - Restricted Stock

 

Any shares of Common Stock granted pursuant to this Agreement which vest on a date other than the Award Date shall be considered Restricted Stock for purposes of this Agreement and shall be subject to the Restrictions until such time or times and except to the extent that the Director’s ownership interest in Shares vests in accordance with the Vesting Schedule set forth on the first page of this Agreement.

 

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Section 2.2 - Escrow

 

If the Restricted Stock is certificated, the Secretary or such other escrow holder as the Company may from time to time appoint shall retain physical custody of the certificates representing Restricted Stock, until all of the Restrictions expire or shall have been removed; provided, however, that in no event shall the Director retain physical custody of any certificates representing Restricted Stock issued to him.  The Company may cause a book entry deposit of Restricted Stock at the Company’s transfer agent in lieu of physical custody.

 

Section 2.3 - Rights as Stockholder

 

From and after the Award Date, the Director shall have all the rights of a stockholder with respect to the Shares, subject to the Restrictions herein (including the provisions of Article IV), including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares unless and to the extent that the Director’s interest in Restricted Stock shall have terminated and the Restricted Stock reverts to the Company as provided in Section 3.1 of this Agreement.

 

ARTICLE III

 

RESTRICTIONS

 

Section 3.1 - Reversion of Restricted Stock

 

Except as provided in Section 2.3, this Section 3.1, and the Vesting Schedule set forth on the first page of this Agreement, the Restricted Stock shall be the property of the Company for as long as and to the extent that the Shares are Restricted Stock pursuant to Section 2.1.  In the event that the Director’s service as a director of the Company terminates for any reason other than (a) death of the Director, (b) Disability of the Director, (c) removal of the Director from office by vote of the Company’s stockholders for any reason other than for Cause, (d) failure by the Board of Directors or any authorized committee thereof to nominate the Director for re-election for any reason other than for Cause or (e) failure of the Company’s stockholders to re-elect the Director, any interest of the Director in Shares that are Restricted Stock shall thereupon immediately terminate and all rights with respect to the Restricted Stock shall immediately revert to and unconditionally be the property of the Company; provided, however, that the Director shall be entitled to retain any cash dividends paid before the date of such event on the Restricted Stock.

 

Section 3.2 - Restricted Stock Not Transferable

 

No Restricted Stock or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Director or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law or judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that the Director may designate one or more trusts or other similar arrangements for the benefit of the Director or members of his immediate family as the registered holders of Restricted Stock if and as long as the Director acts as trustee or in a similar capacity with respect to such trust or arrangement.  Any Restricted Stock so registered shall for all purposes hereunder be deemed to be held of record by the Director and shall be subject to all of the terms and conditions of this Agreement, including but not limited to the Restrictions and the provisions of Article III of this Agreement.

 

Section 3.3 - Legend

 

Certificates representing shares of Restricted Stock or book entries for shares of Restricted Stock issued pursuant to this Agreement shall, until all Restrictions lapse and new certificates are issued pursuant to Section 3.4, bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO FORFEITURE TO AVALONBAY COMMUNITIES, INC. (THE “COMPANY”) UNDER THE TERMS OF THAT CERTAIN

 

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RESTRICTED STOCK AGREEMENT BY AND BETWEEN THE COMPANY AND THE HOLDER OF THE SECURITIES.  PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES.  COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT AND MAY BE OBTAINED ON REQUEST AND WITHOUT CHARGE FROM THE OFFICES OF THE COMPANY AT 671 N. Glebe Road, Suite 800, Arlington, VA  22203.”

 

Section 3.4 - Lapse of Restrictions

 

Upon the vesting of some or all of the Restricted Stock as provided in the Vesting Schedule set forth on the first page of this Agreement, and subject to the conditions to issuance set forth in Article IV, if such Shares are certificated, the Company shall cause new certificates to be issued with respect to such vested Shares and delivered to the Director or his legal representative, free from the legend provided for in Section 3.3.

 

ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1 - Conditions to Issuance of Stock

 

The Company shall not be required to issue or deliver any certificate or certificates for shares of stock or enter the Director’s name as the stockholder of record on the books of the Company pursuant to this Agreement prior to fulfillment of all of the following conditions:

 

(a)           The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and

 

(b)           The completion of any registration or other qualification of such shares under any state or Federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Company shall deem necessary or advisable; and

 

(c)           The obtaining of any approval or other clearance from any state or Federal governmental agency which the Company shall, in its absolute discretion, determine to be necessary or advisable; and

 

(d)           The payment by the Director of all amounts required to be withheld under federal, state and local tax laws, with respect to the issuance of Restricted Stock and/or the lapse or removal of any of the Restrictions.

 

Section 4.2 - Notices

 

Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Director shall be addressed to him at the address maintained in the Company’s records.  By a notice given pursuant to this Section 4.2, either party may hereafter designate a different address for notices to be given to it or him.  Any notice which is required to be given to the Director shall, if the Director is then deceased, be given to the Director’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 4.2.  Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

 

Section 4.3 - Titles

 

Titles and captions are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

 

4

 

Section 4.4 - Amendment

 

This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement.

 

Section 4.5 — Governing Law

 

The laws of the State of Maryland shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

Section 4.6 - Counterparts

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

Section 4.7 - No Special Rights

 

This Agreement does not, and shall not be interpreted to, create any right on the part of the Director to nomination, election or continued service as a director of the Company or any subsidiary or affiliate thereof, nor to any continued compensation, prerequisites or other current or future benefits or other incidents of such service nor shall it interfere with or restrict in any way any right or power, which is hereby expressly reserved, to remove or not to renominate the Director at any time for any reason whatsoever, with or without cause.

 

[End of Text]

 

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