Document:

EXHIBIT 10.1

 

[FORM OF]

AVALONBAY COMMUNITIES, INC.

2008 PERFORMANCE PLAN

DEFERRED STOCK AWARD AGREEMENT

 

2008
PERFORMANCE PLAN DEFERRED STOCK AWARD AGREEMENT made as of the date set forth
on Schedule A hereto between AvalonBay Communities, Inc., a Maryland
corporation (the “Company”), and the party listed on Schedule A
(the “Grantee”).

 

RECITALS

 

A.            The Grantee is an officer  of
the Company.

 

B.            The Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”) approved this and
other 2008 Performance Plan (“2008 PP”) awards pursuant to the Amended
and Restated 1994 Stock Incentive Plan (as further amended, restated or
supplemented from time to time, the “1994
Plan”), to provide selected officers of the Company or its Affiliates,
including the Grantee, in connection with their employment or other service
relationship, with the incentive compensation described in this Award Agreement
(this “Agreement”), and thereby provide additional incentive for them to
promote the progress and success of the business of the Company and its
Affiliates.  2008 PP awards
were approved by the Committee pursuant to authority delegated to it by the
Board, including authority to grant Deferred
Stock Awards under the 1994 Plan and were further ratified and approved by a
majority of the independent directors of the Board who qualify for service on
the Committee.  This Agreement evidences one award
(this “Award”) in a series of substantially identical 2008 PP awards and
is subject to the terms and conditions set forth herein and in the 1994 Plan.

 

C.            The Grantee was selected to receive an award,
effective as of the grant date specified in Schedule A hereto, of the
participation percentage in the Total Performance Pool (as defined herein) set
forth in Schedule A attached hereto and of the Award Deferred Shares set
forth in Schedule A attached hereto all subject to the terms and
conditions, vesting and forfeiture provisions of this Agreement.

 

NOW, THEREFORE, the Company and the Grantee agree as
follows:

 

1.             Purpose
and Administration.

 

(a)           The purpose of the 2008 PP is:

 

(i)            to
measure, during a three year period (or such lesser period as provided in this
Agreement), for each share of Common Stock outstanding during such period, but
only for so long as outstanding, the total return to the holder of such share
from stock price appreciation plus cumulative dividends (uncompounded) (the sum
of the total return on all shares so measured, the “Actual Return”), and

 

(ii)           to
measure, with respect to the same shares outstanding during such period, but
only for so long as outstanding, the total return that would have been earned
had the rate of return been thirty-two percent (32%) (adjusted in the event the
measurement period for a share is less than three years) (the sum of the total
return on all shares so measured, the “Hypothetical Absolute Return”),
and

 

 

(iii)          to
measure, with respect to the same shares outstanding during such period, but
only for so long as outstanding, the total return that would have been earned
had the rate of return been equal to the return of the NAREIT Apartment Index
(stock price appreciation plus cumulative dividends (uncompounded)) (the sum of
the total return on all shares so measured, the “Hypothetical Relative
Return”), and

 

(iv)          to award
to each participant in the 2008 PP shares of Common Stock (unrestricted shares
and or restricted shares, as provided in this Agreement) having a value equal
to such participant’s Participation Percentage multiplied by the lesser of (A) $60,000,000
or (B) ten percent (10%) multiplied by the simple average of (i) the
difference between the Actual Return less the Hypothetical Absolute Return and (ii) the
difference between the Actual Return less the Hypothetical Relative Return, provided
that the participant shall not earn any portion of this Award unless the Actual
Return exceeds both the Hypothetical Absolute Return and the Hypothetical
Relative Return.

 

In performing all of these measurements, the 2008 PP provides for some
simplifying assumptions and adjustments, particularly with respect to shares
issued or redeemed during the measurement period, but it is not expected that
any of such assumptions or adjustments will change the intent or the result of
the 2008 PP meaningfully.  The Committee
may authorize modifications to the calculations provided in this Agreement to
the extent that the Committee believes that such modifications are necessary or
desirable to better fulfill the purpose of the 2008 PP as described in this Section 1(a).  The Committee retains full authority to
approve the final calculation of the Actual Return, the Hypothetical Absolute
Return and the Hypothetical Relative Return, after giving effect to any
modifications to the calculations provided herein that are approved by the
Committee, and the decision of the Committee is final and binding on all
participants.

 

(b)           This
Award and all other 2008 PP awards
shall be administered by the Committee, which in the administration of
2008 PP awards in general and this Award in particular shall have all the
powers and authority it has in the administration of the 1994 Plan as set forth
in the 1994 Plan; provided that all powers of the Committee hereunder
can be exercised by the full Board if the Board so elects.  The Committee, in its sole and absolute
discretion, may make at any time any provision for lapse of forfeiture
restrictions and/or accelerated vesting under this Agreement of some or all of
the Grantee’s unvested Award Deferred Shares or Award Restricted Shares that
have not previously been forfeited.

 

2.             Definitions. 
Capitalized terms used herein without definitions shall have the
meanings given to those terms in the 1994
Plan. In addition, as used herein:

 

“Absolute
Baseline” means, as of the Valuation Date, an amount representing (without
double-counting) the sum of:

 

(A)          the Baseline Value multiplied by:

 

(i)    the difference between:

 

(x) the
Initial Shares and

 

(y) all
Buyback Shares repurchased, redeemed or forfeited between the Effective Date
and the Valuation Date,

 

and then multiplied by:

 

(ii)   the sum of one hundred percent (100%) plus the Target Absolute Return
Percentage; plus

 

 

(B)           with respect to each Additional Share issued
after the Effective Date, the product of:

 

(i)    the Additional Share Baseline Value of such
Additional Share, multiplied by:

 

(ii)   the sum of:

 

(x)    one hundred percent (100%) plus

 

(y)   the product of the Target Absolute Return
Percentage multiplied by a fraction the numerator of which is the number
of days from the issuance of such Additional Share to and including the
Valuation Date and the denominator of which is the number of days from but
excluding June 1, 2008 to
and including the Valuation Date;
plus

 

(C)           with respect to each Buyback Share
repurchased, redeemed or forfeited after the Effective Date, the product of:

 

(i)    the Baseline Value multiplied by

 

(ii)   the sum of:

 

(x)    one hundred percent (100%) plus

 

(y)   the product of the Target Absolute Return
Percentage multiplied by a fraction the numerator of which is the number
of days from the Effective Date to and including the date such Buyback Share
was repurchased, redeemed or forfeited and the denominator of which is the
number of days from but excluding June 1,
2008 to and including the
Valuation Date;

 

provided that
if the Valuation Date occurs prior to May 31,
2011 as a result of a Change of Control, then for purposes of this
definition in connection with the calculation of the Absolute Performance Pool
as of the Valuation Date, then the Target Absolute Return Percentage to be used
in such calculation shall be reduced to thirty-two percent (32%) multiplied by
the CoC Fraction.  If the Company
consummates an individual issuance involving 10,000 or more Additional Shares
and/or an individual repurchase, redemption or forfeiture involving 10,000 or
more Buyback Shares during any calendar quarter, the Company will track the
precise issuance date and value of each such individual Additional Share and/or
repurchase, redemption or forfeiture date and value of each such individual
Buyback Share.  If the Company
consummates one or more issuances each involving less than 10,000 Additional
Shares and/or repurchases, redemptions or forfeitures each involving less that
10,000 Buyback Shares during any calendar quarter, it would be impractical to
track the precise issuance date and value of each such Additional Share and/or
repurchase, redemption or forfeiture date and value of each such Buyback Share,
and in such event (A) the Company will consider all such issuances and/or
repurchases, redemptions or forfeitures (on a net basis if both issuances and
repurchases, redemptions or forfeitures occur in the same quarter) to have
taken place on the last day of the quarter during which such transaction or
transactions occurred and (B) the Additional Share Baseline Value (if the
netting of all such transactions results in a net issuance of Additional
Shares) or the Buyback Value (if the netting of all such transactions results
in a net repurchase, redemption or forfeiture of Buyback Shares) of the shares
of Common Stock involved shall be calculated using the weighted average price
at which such shares were issued and/or repurchased, redeemed or forfeited.

 

“Absolute Performance Pool” means, as of the
Valuation Date, a dollar amount calculated as follows (or, if the resulting amount
is a negative number, zero): (A) subtract the Absolute Baseline
from the Total Return, in each case as of
the Valuation Date, and (B) multiply the resulting amount by
ten percent (10%).

 

 

“Additional
Share Baseline Value” means, with respect to each Additional Share, the
gross proceeds received by the Company upon the issuance of such Additional
Share, which amount shall be deemed to equal, as applicable:

 

(A)          if such Additional Share is issued for cash in a public offering or
private placement, the gross price to the public or to the purchaser(s);

 

(B)           if such Additional Share is issued in exchange for assets or securities
of another Person or upon the acquisition of another Person, the cash value
imputed to such Additional Share for purposes of such transaction by the
parties thereto, as determined by the Committee, or, if no such value was
imputed, the Common Stock Price as of the date of issuance of such Additional
Share;

 

(C)           if such Additional Share is issued upon conversion or exchange of
equity or debt securities of the Company or any other Subsidiary, which
securities were not previously counted as either Initial Shares or Additional
Shares, the conversion or exchange price in effect as of the date of conversion
or exchange pursuant to the terms of the security being exchanged or converted;

 

(D)          if such Additional Share is issued in connection with a Full Value Plan
Award granted after the Effective Date to employees, non-employee directors,
consultants, advisors or other persons or entities as incentive or other
compensation for services provided or to be provided to the Company or any of
its Affiliates, the Fair Market Value of the Common Stock underlying such Full
Value Plan Award as of the grant date of the award; and

 

(E)           if
the Additional Share is issued in lieu of cash dividends in a transaction where
the shareholder made an election between receipt of cash dividends or Common
Stock in lieu thereof, the value of the dividends that would otherwise have
been paid.

 

“Additional
Shares” means (without double-counting), as of a particular date of
determination, the sum of:

 

(A)          shares of Common Stock issued after the Effective Date and on or before
such date of determination in a capital raising transaction, in exchange for
assets or securities, upon the acquisition of another entity, upon conversion
or exchange of equity or debt securities of the Company, which securities were
not previously counted as either Initial Shares or Additional Shares, or
through the reinvestment of dividends; plus

 

(B)           the REIT Shares Amount for all Units not held by the Company (assuming
that such Units were converted, exercised, exchanged or redeemed for shares of
Common Stock as of such date of determination at the applicable conversion,
exercise, exchange or redemption rate (or rate deemed applicable by the
Committee if there is no such stated rate) pursuant to the applicable
instrument governing such Units as of such date), issued after the Effective
Date and on or before such date of determination in a capital raising
transaction, in exchange for assets or securities, or upon the acquisition of
another entity; plus

 

(C)           shares of Common Stock underlying Full Value Plan Awards granted after
the Effective Date and on or before such date of determination to employees, non-employee
directors, consultants, advisors or other persons or entities as incentive or
other compensation for services provided or to be provided to the Company or
any of its Affiliates.

 

For the avoidance of doubt, the definition of “Additional Shares” shall
exclude (i) shares of Common Stock issued after the Effective Date upon
exercise of stock options granted to employees, non-employee directors, 

 

 

consultants, advisors or other persons or entities as incentive or
other compensation for services provided or to be provided to the Company or
any of its Affiliates, whether such stock options are outstanding on the
Effective Date or are awarded thereafter and (ii) all Initial Shares.

 

“Affiliate”
means, with respect to the Company, any company or other trade or business that
controls, is controlled by or is under common control with the Company within
the meaning of Rule 405 of Regulation C under the Securities Act,
including, without limitation, any Subsidiary.

 

“Award
Deferred Shares” has the meaning set forth in Section 3 hereof.

 

“Award
Restricted Shares” has the meaning set forth in Section 3
hereof.

 

“Award
Securities” means, collectively, Award Deferred Shares, Award Restricted
Shares and Award Settlement Shares.

 

“Award
Settlement Shares” has the meaning set forth in Section 3
hereof.

 

“Baseline
Value” means the average of the Fair Market Value of one share of Common
Stock over the twenty (20) consecutive trading days immediately preceding the
Effective Date.

 

“Buyback
Shares” means (without double-counting), as of a particular date of
determination, (A) shares of Common Stock repurchased or redeemed for cash
by the Company after the Effective Date and on or before such date of
determination in a stock buyback or other similar transaction; (B) the
REIT Shares Amount for all Units not held by the Company (assuming that such
Units were converted, exercised, exchanged or redeemed for shares of Common
Stock as of such date of determination at the applicable conversion, exercise,
exchange or redemption rate (or rate deemed applicable by the Committee if
there is no such stated rate) pursuant to the applicable instrument governing
such Units as of such date) repurchased or redeemed for cash by the Company
after the Effective Date and on or before such date of determination; and (C) shares
of Common Stock underlying previously granted Full Value Plan Awards to
employees, non-employee directors, consultants, advisors or other persons or
entities as incentive or other compensation for services provided or to be
provided to the Company or any of its Affiliates to the extent they are
forfeited for failure to become vested or are repurchased for cash (including
in respect of tax withholding) by the Company after the Effective Date and on
or before such date of determination, if such shares were included in either
Initial Shares or Additional Shares.

 

“Buyback
Value” the cash amount paid to repurchase or redeem a Buyback Share, or in
the case of a Buyback Share forfeited without any expenditure of cash by the
Company, the Fair Market Value of a share of Common Stock on the date of
forfeiture.

 

“Cause”
has the meaning set forth in the 1994 Plan.

 

                “Change
of Control” means the occurrence of one of the following events:

 

(A)          Any Person (other than the Company, any corporation,
partnership, trust or other entity controlled by the Company, or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries), together with
all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such Person, shall become the “beneficial owner” (as
such term is defined in Rule 13d-3 under the Exchange Act) of securities
of the Company representing 30% or more of the combined voting power of the
Company’s then outstanding securities having the right to vote generally in an
election of the Company’s Board (“Voting Securities”), other than as a
result of (i) an acquisition of securities directly from the 

 

 

Company or any Subsidiary or (ii) an acquisition by any
corporation pursuant to a reorganization, consolidation or merger if, following
such reorganization, consolidation or merger the conditions described in
clauses (i), (ii) and (iii) of subparagraph (C) below are
satisfied; or

 

(B)           Individuals who, as of the Effective Date,
constitute the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided, however, that any
individual becoming a director of the Company subsequent to the date hereof
(excluding, for this purpose, (i) any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of members of the Board or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board, including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, and (ii) any individual
whose initial assumption of office is in connection with a reorganization,
merger or consolidation, involving an unrelated entity), whose election or
nomination for election by the Company’s shareholders was approved by a vote of
at least a majority of the persons then comprising Incumbent Directors shall
for purposes of this Agreement be considered an Incumbent Director; or

 

(C)           Consummation of a reorganization, merger or
consolidation of the Company, unless, following such reorganization, merger or
consolidation, (i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, (ii) no
Person (excluding the Company, any employee benefit plan (or related trust) of
the Company, a Subsidiary or the corporation resulting from such
reorganization, merger or consolidation or any subsidiary thereof, and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 30% or more of the outstanding Voting
Securities), beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (iii) at
least a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation;

 

(D)          Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company; or

 

(E)           The sale, lease, exchange or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale, lease,
exchange or other disposition (i) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners of the outstanding Voting Securities
immediately prior to such sale, lease, exchange or other disposition, (ii) no
Person (excluding the Company and any employee benefit plan (or related trust)
of the Company or a Subsidiary or such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such sale, lease, exchange
or other disposition, directly or indirectly, 30% or more of 

 

 

the outstanding Voting Securities), beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale, lease, exchange or other disposition of assets of the
Company.

 

Notwithstanding the
foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of this Agreement solely as the result of any acquisition of
securities by the Company which, by reducing the number of shares of Voting
Securities outstanding, increases the proportionate voting power represented by
the Voting Securities beneficially owned by any Person to 30% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any Person referred to in this sentence shall thereafter
become the beneficial owner of any additional shares of Stock or other voting
Securities (other than pursuant to a stock split; stock dividend, or similar
transaction), then a “Change of Control” shall be deemed to have occurred for
purposes of this Agreement.

 

 “CoC Fraction”  means the number of calendar days that have
elapsed since the Effective Date to and including the date as of which a Change
of Control is consummated (or with respect to a Transactional Change of
Control, the date of the Public Announcement of such Transactional Change of
Control), divided by 1,095.

 

“Code”
means the Internal Revenue Code of 1986, as amended.

 

“Common
Stock” means the Company’s common stock, par value $0.01 per share.

 

“Common
Stock Price” means, as of a particular date, the average of the Fair Market
Value of one share of Common Stock over the twenty (20) consecutive trading
days immediately preceding such date; provided, however, that if
such date is the date of the Public Announcement of a Transactional Change of
Control, the Common Stock Price as of such date shall be equal to the fair
market value, as determined by the Committee, of the total consideration
payable in the transaction that ultimately results in the Transactional Change
of Control for one share of Common Stock, or if such transaction is an asset
disposition the fair market value of a share of Common Stock after giving
affect to receipt of the total consideration payable for the asset so disposed
of, in each case as determined by the Committee.

 

 “Continuous Service” means the
continuous service to the Company or any Subsidiary or Affiliate, without
interruption or termination, in any capacity as an employee, or, with the
written consent of the Committee, as a non-employee director or
consultant.  Continuous Service shall not
be considered interrupted in the case of: (A) any approved leave of
absence; (B) transfers among the Company and any Subsidiary or Affiliate,
or any successor, in any capacity as an employee, or with the written consent
of the Committee, as a non-employee director or consultant; or (C) any
change in status as long as the individual remains in the service of the
Company and any Subsidiary or Affiliate in any capacity as an employee or (with
the written consent of the Committee so long as Continuous Service is not
uninterrupted) as a non-employee director or consultant.  An approved leave of absence shall include
sick leave, military leave, or any other authorized personal leave.  Subject to the preceding sentence, whether a
termination of Continuous Service shall have occurred for purposes of this
Agreement shall be determined by the Committee, which determination shall be
final, binding and conclusive.

 

“Deferred
Stock Award” has the meaning set forth in the 1994 Plan.

 

“Disability” has the meaning set forth in the 1994 Plan.

 

“Effective
Date” means the close of business on June 1, 2008.

 

 

“Exchange
Act” means the Securities Exchange Act
of 1934, as amended.

 

“Fair Market Value” means, as of any given date, the fair market
value of a security determined by the Committee using any reasonable method and
in good faith (such determination will be made in a manner that satisfies Section 409A
of the Code); provided that with respect to a share of Common Stock “Fair
Market Value” means the value of such share determined as follows: (A) if
on the determination date the Common Stock is listed on the New York Stock
Exchange, The NASDAQ Stock Market, Inc. or another national securities
exchange or is publicly traded on an established securities market, the Fair
Market Value of a share of Common Stock shall be the last reported sale price
at which Common Stock is traded on such exchange or in such market (if there is
more than one such exchange or market, the Committee shall determine the
appropriate exchange or market) on the determination date (or if there is no
such reported price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low sale prices on
such trading day) or, if no sale of Common Stock is reported for such trading
day, on the next preceding day on which any sale shall have been reported; or (B) if
the Common Stock is not listed on such an exchange, quoted on such system or traded
on such a market, Fair Market Value of a share of Common Stock shall be the
value determined by the Committee in good faith in a manner consistent with
Code Section 409A.

 

“Family
Member” means the Grantee’s child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the Grantee’s household
(other than a tenant of the Grantee), a trust in which these persons (or the
Grantee) own more than 50 percent of the beneficial interest, and a partnership
or limited liability company in which these persons (or the Grantee) own more
than 50 percent of the voting interests.

 

“Full
Value Plan Awards” means any deferred stock award, restricted stock award,
unrestricted stock award and performance share award granted under the 1994
Plan, but excluding all Award Securities issued as part of 2008 PP awards.

 

 “Index
Return Percentage” means, for any period, the total percentage return for
the NAREIT Apartment Index from the start of such period to the end of such
period (assuming the cumulation of dividends paid and not the reinvestment of
dividends), as approved by the Committee in its reasonable discretion for
purposes of calculating the Relative Baseline.

 

“Initial Shares”
means a number of shares of Common Stock equal to the sum of: (A) the
number of shares of Common Stock outstanding as of the Effective Date
(including all shares underlying Full Value Plan Awards granted prior to the
Effective Date, regardless of whether they were vested or unvested as of the
Effective Date), plus (B) the number of shares of Common Stock
representing the REIT Shares Amount for all of the Units (other than those held
by the Company) outstanding as of the Effective Date, assuming that all such
Units were exchanged, converted or redeemed for shares of Common Stock as of
such date.  For the avoidance of doubt,
Initial Shares exclude all shares of Common Stock issuable upon exercise of
currently outstanding stock options.

 

“Maximum
Total Performance Pool Amount” means $60,000,000.

 

“NAREIT
Apartment Index” means the FTSE NAREIT Apartment REIT Index as published
from time to time (or a successor index including a comparable universe of
publicly traded U.S. apartment real estate investment trusts), provided that if
(A) the NAREIT Apartment Index ceases to exist or be published prior to
the Valuation Date and the Committee determines that there is no successor to
such index or (B) the Committee reasonably determines that the NAREIT
Apartment Index is no longer suitable for the purposes of this Agreement, then
the Committee in its good faith reasonable discretion shall select for
subsequent periods, or if the Committee in its reasonable good faith discretion
so determines, for any portion of or the entire period from the Effective Date
to the Valuation Date, a substitute comparable index for purposes of
calculating the Relative Baseline.

 

 

“Partial
Service Factor” means a factor carried out to the sixth decimal to be used
in calculating the Phantom Stock Unit Equivalent pursuant to Section 4
hereof in the event of a Qualified Termination of the Grantee after June 1,
2010(1) but prior to the Valuation Date, determined by dividing the number
of calendar days that have elapsed since the Effective Date to and including
the date of the Grantee’s Qualified Termination  by
1,095; provided, however, if, after the date of such Qualified
Termination and before May 31, 2011, a Change of Control occurs, then
there shall be subtracted from the foregoing denominator (1,095) a number of
days equal to the days that would elapse between the date as of which the
Change of Control is consummated (or, with respect to a Transactional Change of
Control, the date of the Public Announcement of the Transactional Change of
Control) and May 31, 2011.

 

“Participation
Percentage” means the Grantee’s “Maximum Performance Reward” as set forth
on Schedule A hereto expressed as a percentage of the Maximum Total
Performance Pool Amount.

 

“Person”
means an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization, other entity or “group”
(as defined in the Exchange Act).

 

“Phantom
Stock Unit Equivalent” has the meaning set forth in Section 3(c) hereof.

 

“Public
Announcement” means, with respect to a Transactional Change of Control, the
earliest press release, filing with the SEC or other publicly available or
widely disseminated communication issued by the Company or another Person who
is a party to such transaction which discloses the consideration payable in and
other material terms of the transaction that ultimately results in the
Transactional Change of Control; provided, however, that if such
consideration is subsequently increased or decreased, then the term “Public
Announcement” shall be deemed to refer to the most recent such press release,
filing or communication disclosing a change in consideration whereby the final
consideration and material terms of the transaction that ultimately results in
the Transactional Change of Control are announced.  For the avoidance of doubt, the foregoing
definition is intended to provide the Committee in the application of the proviso clause in the definition of “Common Stock Price”
with the information required to determine the fair market value of the
consideration payable in the transaction that ultimately results in the
Transactional Change of Control as of the earliest time when such information
is publicly disseminated, particularly if the transaction consists of an
unsolicited tender offer or a contested business combination where the terms of
the transaction change over time.

 

“Qualified
Termination” has the meaning set forth in Section 4(b) hereof.

 

“REIT Shares Amount” means the per Unit
number of shares of Common Stock into which a Unit is convertible, for which a
Unit is exchangeable for or in consideration of which a Unit is redeemable
pursuant to the applicable instrument governing such Unit.

 

“Relative
Baseline” means, as of the Valuation Date, an amount representing (without
double-counting) the sum of:

 

(A)          the Baseline Value multiplied by:

 

(i)    the difference between:

 

(x)    the Initial Shares and

 

 (1)          June 1,
2009 in the case of award agreements for Messrs. Blair, Naughton, Sargeant
or Horey.

 

 

(y)   all Buyback Shares repurchased, redeemed or forfeited between the
Effective Date and the Valuation Date,

 

and then multiplied by:

 

(ii)   the sum of one hundred percent (100%) plus
the Index Return Percentage for the period beginning on the Effective Date and
ending on the Valuation Date; plus

 

(B)           with respect to each Additional Share issued after the Effective Date,
the product  of:

 

(i)    the Additional Share Baseline Value of such
Additional Share, multiplied by

 

(ii)   the sum of one hundred percent (100%) plus
the Index Return Percentage for the period beginning on the date of issuance of
such Additional Share and ending on the
Valuation Date; plus

 

(C)           with respect to each Buyback Share repurchased, redeemed or forfeited
after the Effective Date, the product of:

 

(i)    the Baseline Value multiplied by

 

(ii)   the sum of one hundred percent (100%) plus
the Index Return Percentage for the period beginning on the Effective Date and
ending on the date such Buyback Share was repurchased, redeemed or forfeited.

 

If
the Company consummates an individual issuance involving 10,000 or more
Additional Shares and/or an individual repurchase, redemption or forfeiture
involving 10,000 or more Buyback Shares during any calendar quarter, the
Company will track the precise issuance date and value of each such individual
Additional Share and/or repurchase, redemption or forfeiture date and value of
each such individual Buyback Share.  If
the Company consummates one or more issuances each involving less than 10,000
Additional Shares and/or repurchases, redemptions or forfeitures each involving
less that 10,000 Buyback Shares during any calendar quarter, it would be
impractical to track the precise issuance date and value of each such
Additional Share and/or repurchase, redemption or forfeiture date and value of
each such Buyback Share, and in such event (A) the Company will consider
all such issuances and/or repurchases, redemptions or forfeitures (on a net
basis if both issuances and repurchases, redemptions or forfeitures occur in
the same quarter) to have taken place on the last day of the quarter during
which such transaction or transactions occurred and (B) the Additional
Share Baseline Value (if the netting of all such transactions results in a net
issuance of Additional Shares) or the Buyback Value (if the netting of all such
transactions results in a net repurchase, redemption or forfeiture of Buyback
Shares) of the shares of Common Stock involved shall be calculated using the
weighted average price at which such shares were issued and/or repurchased,
redeemed or forfeited.

 

“Relative
Performance Pool” means, as of the Valuation Date, a dollar amount
calculated as follows (or, if the resulting amount is a negative number, zero):
(A) subtract the Relative Baseline from the Total Return, in each case as of the Valuation Date, and (B) multiply
the resulting amount by ten percent (10%).

 

“Retirement”
has the meaning set forth in the 1994 Plan.

 

“SEC” means the U.S. Securities and Exchange
Commission.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Subsidiary”
has the meaning set forth in the 1994 Plan.

 

 

“Target
Absolute Return Percentage” means thirty-two percent (32%), except as otherwise defined for purposes of the
definition of Absolute Baseline in certain circumstances, as described in the proviso  clause of such definition.

 

“Total
Performance Pool” means, as of the Valuation Date, a dollar amount
calculated as follows: (A) add the Absolute Performance Pool and
the Relative Performance Pool, and (B) divide the resulting sum by
two (2); provided that in no event shall the Total Performance Pool
exceed the Maximum Total Performance Pool Amount.

 

“Total
Return” means (without double-counting), as of the Valuation Date, a dollar
amount equal to the sum of:

 

(A)          the Total Shares as of the Valuation Date multiplied by the
Common Stock Price as of the Valuation Date, plus

 

(B)           the
Buyback Value for all Buyback Shares, plus

 

(C)           an
amount equal to the sum of the total dividends and other distributions actually
declared between the Effective Date and the Valuation Date so long as the “ex-dividend”
date with respect thereto falls prior to the Valuation Date (excluding
dividends and distributions paid in the form of additional shares of Common
Stock, unless the shareholder made an election to receive shares of Common
Stock in lieu of cash dividends), in respect of shares of Common Stock (it
being understood, for the avoidance of doubt, that such total dividends and
distributions shall be calculated by multiplying the amount of each per share
dividend or distribution declared by the actual number of shares outstanding as
of each record date, whether such shares were Initial Shares, Additional Shares
or Buyback Shares, with respect to each applicable dividend or distribution
payment date, and not by multiplying the aggregate amount of dividends or
distributions declared per share of Common Stock that was outstanding as of the
Effective Date between the Effective Date and such date of determination by the
number of Total Shares as of the date of determination).

 

“Total
Shares” means (without double-counting), as of the Valuation Date, the algebraic
sum of: (A) the Initial Shares, plus (B) all Additional Shares
issued between the Effective Date and the Valuation Date, minus (C) all
Buyback Shares repurchased, redeemed or forfeited  between
the Effective Date and the Valuation Date.

 

“Transactional Change of Control” means (i) a
Change of Control described in clause (A) of the definition thereof, (ii) a
Change of Control described in clause (C) of the definition thereof, or (iii) a
Change of Control described in clause (E) of the definition thereof.

 

 “Units”
means interests in limited partnerships, limited liability companies or other
similar entities which are convertible into, exchangeable for or redeemable in
consideration of shares of Common Stock or the value thereof in cash pursuant
to the applicable instrument governing such interests.

 

“Valuation
Date” means the earliest of: (A) May 31, 2011; or (B) in the
event of a Change of Control that is not a Transactional Change of Control, the
date on which such Change of Control shall occur; or (C) in the
event of a Transactional Change of Control, and subject to the consummation of
such Transactional Change of Control, the date of the Public Announcement of
such Transactional Change of Control.

 

 

3.             2008
PP Award; Vesting; Change of Control.

 

(a)           The Grantee is hereby granted this Award,
consisting of a Deferred Stock Award under the 1994 Plan of the number of
phantom stock units set forth on Schedule A hereto (the “Award
Deferred Shares”), which (i) will be subject to forfeiture to the
extent provided in this Section 3 and (ii) will be subject to
vesting as provided in Section 3(d) and Section 4
hereof.  At any time prior to the
Valuation Date, the Committee may grant additional 2008 PP awards to the extent
that the sum of all the 2008 PP grantees’ Participation Percentages is less
than one hundred percent (100%) as a result of either reservation of a portion
of the full 2008 PP Participation Percentage for future awards or forfeiture of
granted 2008 PP awards.

 

(b)           The Award Deferred Shares shall be eligible
for performance-based vesting over the three-year period beginning on the
Effective Date, except as otherwise provided in Section 4 hereof,
based on the Company’s performance over such three-year period (or a shorter
period in certain circumstances as provided herein), as indicated by the
calculations required to establish the Absolute Performance Pool and the
Relative Performance Pool.  Award
Deferred Shares that become vested based on performance on the Valuation Date
shall be settled as follows: (i) fifty percent (50%) through the issuance
of shares of Common Stock under the 1994 Plan that will not be subject to
further vesting or risk of forfeiture after the Valuation Date (the “Award
Settlement Shares”) and (ii) fifty percent (50%) through the issuance
of shares of restricted stock (as defined in the 1994 Plan) under the 1994 Plan
(the “Award Restricted Shares”) that will be subject to time-based
vesting as provided in Section 3(e).  Vesting of Award Securities will occur at the
times, in the amounts and upon the conditions set forth in this Section 3
and in Section 4, provided that, except as otherwise
expressly set forth in this Agreement, the Continuous Service of the Grantee
continues through and on each applicable performance-based or time-based
vesting date.

 

(c)           Except as otherwise provided for in Section 3(i) hereof,
as soon as practicable following the Valuation Date, but as of the Valuation
Date, the Committee will:

 

(i)            determine the Absolute Performance Pool; if
the Absolute Performance Pool is not a positive number, no further calculations
will be made pursuant to this Section 3(c) and the Phantom
Stock Unit Equivalent (as defined below) shall be zero (0);

 

(ii)           determine
the Relative Performance Pool; if the Relative Performance Pool is not a
positive number, no further calculations will be made pursuant to this Section 3(c) and
the Phantom Stock Unit Equivalent (as defined below) shall be zero (0);

 

(iii)          if
both the Absolute Performance Pool and the Relative Performance Pool are
positive numbers, determine the Total Performance Pool;

 

(iv)          multiply
the Total Performance Pool by the Grantee’s Participation Percentage; and

 

(v)           divide
the resulting dollar amount by the Fair Market Value of a share of Common Stock
on the Valuation Date; the resulting number is hereafter referred to as the “Phantom
Stock Unit Equivalent.”

 

If
the Phantom Stock Unit Equivalent is smaller than the number of Award Deferred
Shares previously issued to the Grantee, then the Grantee, as of the Valuation
Date, shall forfeit a number of Award Deferred Shares equal to the difference
without payment of any consideration by the Company; thereafter the term Award
Deferred Shares will refer only to the Award Deferred Shares that were not so
forfeited (which may be zero) and neither the Grantee nor any of his or her
successors, heirs, assigns, or personal representatives will thereafter have
any further rights or interests in the Award Deferred Shares that were so forfeited.  If the Phantom Stock Unit Equivalent is
greater than the number of Award Deferred Shares previously issued to the
Grantee or if the Phantom 

 

 

Stock
Unit Equivalent is the same as the number of Award Deferred Shares previously
issued to the Grantee, then there will be no change to the number of Award
Deferred Shares under this Award pursuant to this Section 3.

 

(d)           If any of the Award Deferred Shares have been
earned based on performance as provided in Section 3(c), the
Company shall settle such Award Deferred Shares as of the Valuation Date by
issuing Award Settlement Shares and Award Restricted Shares as provided in Section 3(b) hereof.  The Grantee shall automatically become
subject to the terms of a restricted stock award agreement under the 1994 Plan
covering the Award Restricted Shares (in customary form as of the date of this
Agreement but with one year vesting on all shares covered thereby without the
need for execution of such agreement by the Company or the Grantee), and such
agreement shall govern that portion of the Award Securities, it being
understood that no further performance-based vesting shall apply to Award
Restricted Shares.

 

(e)           Award Restricted Shares issued pursuant to Section 3(d) hereof
shall become vested on June 1, 2012, except as otherwise provided in Section 3(i) and
Section 4 hereof subject to earlier forfeiture or vesting as
provided in the restricted stock award agreement with respect thereto.

 

(f)            Any Award Restricted Shares that do not
become vested pursuant to Section 3(e) or Section 4
hereof shall, without payment of any consideration by the Company automatically
and without notice be forfeited and be and become null and void, and neither
the Grantee nor any of his or her successors, heirs, assigns, or personal representatives
will thereafter have any further rights or interests in such unvested Award
Restricted Shares.

 

(g)           If the calculations provided in Section 3(c) hereof
are triggered by a Change of Control, then as of the Valuation Date one hundred
percent (100%) of the Grantee’s Phantom Stock Unit Equivalent shall be settled
for Award Settlement Shares that are immediately and automatically vested.

 

(h)           In the event of a Change of Control, the
Committee will make any determinations and certifications required by this
Agreement and any provisions necessary with respect to the lapse of forfeiture
restrictions and/or acceleration of vesting of this Award within a period of
time that enables the Company to settle the Award Deferred Shares for Award
Settlement Shares not later than the date of consummation of the Change of
Control.  For avoidance of doubt, in the
event of a Change of Control, the performance of all calculations and actions
pursuant to Section 3(c) hereof and the settlement of Award
Deferred Shares through the issuance of Award Settlement Shares shall be
conditioned upon the final consummation of such Change of Control.

 

(i)            In the event of a Transactional Change of
Control, if May 31, 2011 falls between the date of the Public Announcement
thereof and the projected date of consummation of such Transactional Change of
Control, then:

 

(i)            if
the calculations set forth in Section 3(c) hereof, if done as
of May 31, 2011 without giving effect to the Transactional Change of
Control, would cause the Total Performance Pool to equal the Maximum Total
Performance Pool Amount, then the Valuation Date shall be May 31, 2011
regardless of clauses (B) and (C) of the definition of Valuation
Date, or

 

(ii)           otherwise:

 

(x)                                   the calculations set forth in Section 3(c) hereof
shall be done a first time as of May 31, 2011 without giving effect to the
Transactional 

 

 

Change
of Control, and the Phantom Stock Unit Equivalent so calculated shall be
settled as provided in Section 3(d) hereof;

 

(y)                                 if the Transactional Change of Control is
consummated on or before September 30, 2011, then the calculation set
forth in Section 3(c) hereof shall be done a second time as of
the date of the Public Announcement of such Transactional Change of Control
after giving effect thereto and disregarding the calculations done pursuant to
clause (x) above and any dividends paid after May 31, 2011.  If the Phantom Stock Unit Equivalent
calculated pursuant to this clause (y) is greater than the Phantom Stock
Unit Equivalent calculated pursuant to clause (x) above, then a number of
Award Settlement Shares equal to the difference shall be issued to the Grantee
as of the date of consummation of the Transactional Change of Control, and all
Award Restricted Shares previously issued pursuant to Section 3(d) hereof
shall immediately and automatically vest; and

 

(z)                                   if the Transactional Change of Control is not
consummated on or before September 30, 2011, then no further calculations
in addition those done pursuant to clause (x) above shall be performed.

 

4.             Termination
of Grantee’s Continuous Service; Death and Disability.

 

(a)           Except as otherwise provided in Section 8(o) hereof,
if the Grantee’s Continuous Service terminates, the provisions of this Section 4
shall govern the treatment of the Grantee’s Award Securities exclusively,
regardless of the provision of any employment or other agreement to which the
Grantee is a party or any termination or severance policies of the Company then
in effect, which shall be superseded by this Agreement such that, by way of illustration,
any provisions thereof with respect to accelerated vesting or payout or the
lapse of forfeiture restrictions relating to the Grantee’s incentive or other
compensation awards in the event of certain types of termination of the Grantee’s
Continuous Service with the Company (such as, for example, termination at the
end of the term, termination without Cause by the employer) shall not be
interpreted as requiring that any calculations set forth in Section 3
hereof be performed or vesting occur with respect to this Award other than as
specifically provided in this Section 4.

 

(b)           In the event of termination of the Grantee’s
Continuous Service by (A) the Company without Cause, (B) the Grantee
upon Retirement or (C) by reason of the Grantee’s death or Disability
(each a “Qualified Termination”) after June 1, 2010(2), but
prior to the Valuation Date, then the Grantee will not forfeit the Award
Deferred Shares upon such termination, but the following provisions of this Section 4(b) shall
modify the calculations required to determine the Phantom Stock Unit Equivalent
and/or the vesting of Award Restricted Shares, as applicable, with respect to
the Grantee only:

 

(i)            the calculations provided in Section 3(c) hereof
shall be performed as of the Valuation Date as if the Qualified Termination had
not occurred;

 

(ii)           the Phantom Stock Unit Equivalent
calculated pursuant to Section 3(c) shall be multiplied
by the Partial Service Factor (with the resulting number being rounded to the
nearest whole Award Deferred Share or, in the case of 0.5 of a share, up to the

 

(2)           June 1, 2009 in the case of award agreements for
Messrs. Blair, Naughton, Sargeant or Horey.

 

 

next whole share), and such adjusted number of Award Deferred Shares
shall be deemed the Grantee’s Phantom Stock Unit Equivalent for all purposes
under this Agreement; and

 

(iii)          the Grantee’s Phantom Stock Unit Equivalent as adjusted pursuant to Section 4(c)(ii)
above shall be settled 100% for Award Settlement Shares that shall be
automatically and immediately vested as of
the Valuation Date.

 

(c)           In the event of Qualified Termination after
the Valuation Date, all unvested
Award Restricted Shares issued in settlement of Award Deferred Shares not
previously forfeited pursuant to the calculations set forth in Section 3(c) hereof shall vest or be forfeited as
provided in the restricted stock award agreement contemplated pursuant to Section 3(d) hereof.

 

(d)           In  the  event  of  a  termination  of  the  Grantee’s  Continuous  Service  (A)  for  any  reason  prior  to  June 1, 2010(3), or (B) after June 1, 2010(4) other than a
Qualified Termination, all Award Securities that are not fully vested based on
both performance and the passage of time shall, without payment of any
consideration by the Company, automatically and without notice terminate, be
forfeited and be and become null and void, and neither the Grantee nor any of
his or her successors, heirs, assigns, or personal representatives will
thereafter have any further rights or interests in such Award Securities.

 

5.             Acceptance
by Award Recipients.  The Grantee shall have no rights with respect
to this Agreement (and the Award evidenced hereby) unless he or she shall have
accepted this Agreement.  Award Deferred
Shares constitute and shall be treated for all purposes as awards under the
1994 Plan, subject to the terms of this Agreement.  In the event of the forfeiture of the Grantee’s
Award Deferred Shares of Award Restricted Shares pursuant to this Agreement,
the Company will not be obligated to make any payment to the Grantee.

 

6.             Distributions.

 

(a)           The holder of the Award Deferred Shares shall
be not entitled to receive dividends or other distributions from the Company
until the Award Deferred Shares are settled for Award Restricted Shares or
Award Settlement Shares pursuant to this Agreement.

 

(b)           All dividends or other distributions paid
with respect to Award Restricted Shares shall be fully vested and
non-forfeitable when paid, whether or not they have become vested based on the
passage of time as provided in Section 3 or Section 4
hereof.

 

7.             Changes
in Capital Structure.  If (i) the Company shall at any time
prior to the Valuation Date be involved in a merger, consolidation,
dissolution, liquidation, reorganization, exchange of shares, sale of all or
substantially all of the assets or stock of the Company or other transaction
similar thereto, (ii) any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, significant
repurchases of stock, or other similar change in the capital stock of the
Company or any other event that constitutes a change in stock under the terms
of the 1994 Plan shall occur, (iii) any cash dividend or other
distribution to holders of share of Common Stock shall be declared and paid
other than in the ordinary course, or (iv) any other extraordinary
corporate event shall occur that in each case in the good faith judgment of the
Committee necessitates action by way of equitable or proportionate adjustment
in the terms of this Agreement or the Award Deferred Shares to avoid distortion
in the value of this Award, then the Committee shall make 

 

(3)           June 1,
2009 in the case of award agreements Messrs. Blair, Naughton, Sargeant or
Horey.

 

(4)           June 1,
2009 in the case of award agreements Messrs. Blair, Naughton, Sargeant or
Horey.

 

 

equitable or proportionate adjustment and take such
other action as it deems necessary to maintain the Grantee’s rights hereunder
so that they are substantially proportionate to the rights existing under this
Award and the terms of the Award Deferred Shares prior to such event,
including, without limitation: (A) interpretations of or modifications to
any defined term in this Agreement; (B) adjustments in any calculations
provided for in this Agreement, and (C) grant of additional Award Deferred
Shares under the 1994 Plan or otherwise.

 

8.             Miscellaneous.

 

(a)           Amendments.  This Agreement may be amended
or modified only with the consent of the Company acting through the Committee; provided
that any such amendment or modification materially and adversely affecting the
rights of the Grantee hereunder must be consented to by the Grantee to be
effective as against the Grantee. 
Notwithstanding the foregoing, this Agreement may be amended in writing
signed only by the Company to correct any errors or ambiguities in this
Agreement and/or to make such changes that do not materially adversely affect
the Grantee’s rights hereunder.  This
grant shall in no way affect the Grantee’s participation or benefits under any
other plan or benefit program maintained or provided by the Company.

 

(b)           Incorporation of 1994 Plan; Committee
Determinations.  The provisions of the 1994 Plan are hereby
incorporated by reference as if set forth herein.  In the event of a conflict between this
Agreement and the 1994 Plan, the 1994 Plan shall govern.  The Committee will make the determinations
and certifications required by this Award as promptly as reasonably practicable
following the occurrence of the event or events necessitating such
determinations or certifications.

 

(c)           Status of Award Deferred Shares and Award
Restricted Shares; 1994 Plan Matters.  This Award and the other 2008
PP awards constitute incentive compensation awards by the Company under the
1994 Plan.  The number of shares of
Common Stock reserved for issuance under the 1994 Plan underlying outstanding
2008 PP awards will be determined by the Committee in light of all applicable
circumstances, including calculations made or to be made under Section 3
hereof and vesting.

 

(d)           Legend.  Award Restricted Shares shall
bear an appropriate legend, as determined by the Company in its sole
discretion, to the effect that they are subject to restrictions as set forth
herein and in the 1994 Plan.

 

(e)           Grantee Representations; Registration.

 

(i)            The Grantee hereby represents and warrants
that (A) he or she understands that he or she is responsible for
consulting his or her own tax advisor with respect to the application of the
U.S. federal income tax laws, and the tax laws of any state, local or other
taxing jurisdiction to which the Grantee is or by reason of this Award may
become subject, to his or her particular situation; (B) the Grantee has
not received or relied upon business or tax advice from the Company or any of
their respective employees, agents, consultants or advisors, in their capacity
as such.

 

(ii)           The Grantee hereby acknowledges that: (A) Award Deferred Shares
and Award Restricted Shares are subject to restrictions on transfer or
assignment set forth in this Agreement; (B) Award Restricted Shares issued
under the 1994 Plan in settlement of Award Deferred Shares, if any, are
expected to be covered by a Registration Statement on Form S-8 (or a
successor form under applicable rules and regulations of the SEC) under
the Securities Act, to the extent that the Grantee is eligible to receive such
shares under the 1994 Plan at the time of such issuance and such registration
Statement is then effective under the Securities Act and resales of such Award
Restricted Shares shall only be made in compliance 

 

 

with  all  applicable  restrictions  (including  in  certain  cases “blackout periods” forbidding sales of Company securities) set
forth in the Company’s Code of Conduct or insider trading policy and in
compliance with the registration requirements of the Securities Act or pursuant
to an applicable exemption therefrom.

 

(f)            Severability.  If,
for any reason, any provision of this Agreement is held invalid, such
invalidity shall not affect any other provision of this Agreement not so held
invalid, and each such other provision shall to the full extent consistent with
law continue in full force and effect. 
If any provision of this Agreement shall be held invalid in part, such
invalidity shall in no way affect the rest of such provision not held so
invalid, and the rest of such provision, together with all other provisions of
this Agreement, shall to the full extent consistent with law continue in full
force and effect.

 

(g)           FAS 123R.  The 2008 PP was designed so as
to permit estimation of the value of awards as of the grant date thereof in
accordance with the Statement of Financial Accounting Standards No. 123
(revised 2004) (“FAS 123R”) so that the related fixed amount of
compensation expense could be amortized over the applicable vesting
period.  This Agreement shall be construed,
administered and interpreted in accordance with such intent such that, should
subsequent events or changes in the application or interpretation of FAS 123R
cause the accounting treatment to be different (for example so called “variable”
accounting treatment based on a fluctuating value of the 2008 PP awards), any
provision of this Agreement that is inconsistent with such intent shall be
amended subject to the consents required in Section 8(a) hereof,
with the reasonable cooperation of the Grantee and the Company, to the extent
necessary to avoid a change in accounting treatment.

 

(h)           Governing Law.  This
Agreement is made under, and will be construed in accordance with, the laws of
State of Maryland, without giving effect to the principles of conflict of laws
of such state.

 

(i)            No Obligation to Continue Position as an
Employee, Consultant or Advisor.  Neither the Company nor any Affiliate is
obligated by or as a result of this Agreement to continue to have the Grantee
as an employee, consultant or advisor and this Agreement shall not interfere in
any way with the right of the Company or any Affiliate to terminate the Grantee’s
Continuous Service at any time.

 

(j)            Notices.  Any notice to be given to the
Company shall be addressed to the Secretary of the Company at 2900 Eisenhower
Avenue, Suite 300, Alexandria, Virginia 22314, Attention: Edward M.
Schulman, and any notice to be given the Grantee shall be addressed to the
Grantee at the Grantee’s address as it appears on the employment records of the
Company, or at such other address as the Company or the Grantee may hereafter
designate in writing to the other.

 

(k)           Withholding and Taxes.  The
Company’s obligation to issue or deliver to the Grantee any certificate or
certificates for Award Settlement Shares is expressly conditioned on the
Company’s satisfaction of its obligation, if any, to withhold taxes.  The Company may, if the Grantee so elects in
writing, withhold from any Award Settlement Shares to be issued to the Grantee
under this Agreement shares of Common Stock valued at Fair Market Value on the
date of such withholding to cover any applicable required minimum withholding
and employment taxes.  In lieu of
withholding shares of Common Stock, the Grantee may elect to pay to the Company
any amounts required to be withheld in cash.

 

(l)            Headings.  The headings of paragraphs
hereof are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.

 

 

(m)          Counterparts.  This
Agreement may be executed in multiple counterparts with the same effect as if
each of the signing parties had signed the same document.  All counterparts shall be construed together
and constitute the same instrument.

 

(n)           Successors and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and any successors to the Company, on the one hand, and any successors to the
Grantee, on the other hand, by will or the laws of descent and distribution,
but this Agreement shall not otherwise be assignable or otherwise subject to
hypothecation by the Grantee.

 

(o)           Employment Agreement.  [Omitted](5)

 

(p)           Section 409A.

 

(i)            Anything in this Agreement to the contrary
notwithstanding, if at the time of the Grantee’s separation from service within
the meaning of Section 409A of the Code the Company determines that the
Grantee 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 Grantee becomes
entitled to under this Agreement would be considered deferred compensation
subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of
the Code as a result of the application of Section 409A(a)(2)(B)(i) of
the Code, such payment shall not be payable and such benefit shall not be
provided until the date that is the later of (A) six months and one day
after the Grantee’s separation from service, or (B) the settlement dates
provided in Section 4 hereof. 
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 1.409A-1(h).

 

(ii)           The parties intend that this Agreement will be administered in
accordance with Section 409A of the Code. 
To the extent that any provision of this Agreement is ambiguous as to
its compliance with Section 409A of the Code, the provision shall be read
in such a manner so that all payments hereunder comply with Section 409A
of the Code.  The parties agree that this
Agreement may be amended, as reasonably requested by either party, and as may
be necessary to fully comply with Section 409A of the Code and all related
rules and regulations in order to preserve the payments and benefits
provided hereunder without additional cost to either party.  This Agreement shall be construed,
administered and interpreted in accordance with a good faith interpretation of Section 409A
of the Code.  Any provision of this
Agreement that is inconsistent with Section 409A of the Code, or that may
result in penalties under Section 409A of the Code, shall be amended, with
the reasonable cooperation of the Grantee and the Company, to the extent
necessary to exempt it from, or bring it into compliance with, Section 409A
of the Code.

 

(q)           Section 280G.  In
the event the Award granted hereunder is earned as a result of a Change in
Control, the following provision shall apply. 
The purpose of this provision is to ensure that the Grantee would have
the benefit of the more advantageous tax treatment.  This Section 8(q) will only
apply if the Grantee is not a party to another agreement that provides for of a
so-called “gross up” of the Grantee’s Change of Control Payments (as defined
below) to compensate for the application of Section 280G of the Code.
Anything in this Agreement to the contrary notwithstanding, in the event that
any compensation, payment or distribution by the Company to or for the benefit
of the Grantee, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or 

 

(5)                                  Reference is made to the employment agreement
of Grantee dated
                      ,
and specifically to the second amendment thereto dated                         
(the “Second Amendment”).  Section 3
of the Second Amendment is incorporated into this Agreement by reference.

 

 

otherwise
(the “Change in Control Payments”), would be subject to the excise tax
imposed by Section 4999 of the Code, the following provisions shall apply:

 

(i)            If the Change in Control Payments, reduced by
the sum of (A) the Excise Tax (as defined below) and (B) the total of
the federal, state, and local income and employment taxes payable by the
Grantee on the amount of the Change in Control Payments which are in excess of
the Threshold Amount (as defined below), are greater than or equal to the
Threshold Amount, the Grantee shall be entitled to the full benefits payable
under this Agreement.

 

(ii)           If the Threshold Amount is less than (A) the Change in Control
Payments, but greater than (B) the Change in Control 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 Change in
Control Payments which are in excess of the Threshold Amount, then the benefits
payable under this Agreement shall be reduced (but not below zero) to the
extent necessary so that the sum of all Change in Control Payments shall not
exceed the Threshold Amount.

 

(iii)          For the purposes of this Section 8(q), “Threshold Amount”
shall mean three times the Grantee’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, and any interest or penalties incurred by the Grantee with respect
to such excise tax.

 

(iv)          The determination as to which of the alternative provisions of this Section 8(q) shall
apply to the Grantee shall be made by a nationally recognized accounting firm
selected by the Company (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and the Grantee within 15
business days of the effective date of termination or at such earlier time as
is reasonably requested by the Company or the Grantee.  For purposes of determining which of the
alternative provisions of this Section 8(q) shall apply, the
Grantee 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 Grantee’s residence on the effective date of termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. 
Any determination by the Accounting Firm shall be binding upon the
Company and the Grantee.

 

IN WITNESS WHEREOF, the undersigned have
caused this Award Agreement to be executed as of the     
day of
                    ,
2008.

 

 

	
   

  	
  AVALONBAY COMMUNITIES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:Exhibit 10.2

 

Name:                             

 

[Form of]

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

 

The
Employment Agreement made as of the        day of
                  ,
         by and between AvalonBay
Communities, Inc., a Maryland corporation (the “Company”), and                                                 
(“Executive”), as previously amended on                     
    ,          (the
“Employment Agreement”), is hereby further amended by this instrument
(this “Amendment”) as follows:

 

1.  The Executive is entering into, on or about
the date hereof, with the Company, an “AvalonBay Communities, Inc. 2008
Performance Plan Deferred Stock Award Agreement” (the “Performance Plan
Agreement”).  The execution of this
Amendment by Executive is a condition to the Company entering into the
Performance Plan Agreement with Executive and is one of the considerations
therefor.  Defined terms used herein but
not defined herein have the meanings given thereto in the Employment Agreement
unless otherwise provided herein.

 

2.  The definition of “Covered Compensation” in
the Employment Agreement is as follows:

 

“‘Covered Compensation,’ for any calendar year,
shall mean an amount equal to the sum of (i) Executive’s Base Salary for
the calendar year, (ii) the cash bonus actually earned by Executive with
respect to such calendar year, and (iii) the value of all stock and other
equity-based compensation awards made to Executive during such calendar
year.  In the event that the Company has
or hereafter makes any special, mid-year or other non-routine grant of equity
outside of the Company’s recurring annual equity compensation programs, the
value of any such mid-year, special, or additional equity based compensation
shall not be included in clause (iii) of the preceding sentence and
therefore shall not be included in the calculation of Covered Compensation or
Covered Average Compensation, and the value of such equity shall have no impact
on any cash payments made under Section 7(c) of the Agreement.”

 

Executive
agrees, for the purpose of eliminating any doubt, that the award of a Deferred
Stock Award under the Performance Plan Agreement, and the vesting thereof or
conversion thereof into unrestricted common stock of the Company or restricted
common stock of the Company, and any other consideration received by Executive
under the Performance Plan Agreement, is in all cases a “mid-year, special, or
additional equity based compensation” that is not included in the definition of
Covered Compensation under the Employment Agreement.

 

3.  The Company agrees, notwithstanding the
provisions of the Performance Plan Agreement, that if (i) a termination
without Cause or a Constructive Termination Without Cause, or (ii) a
termination due to Disability, of Executive’s employment occurs as defined in
the Employment Agreement, such event shall in all circumstances constitute (i) a
termination without Cause  or (ii) a
termination for Disability, respectively, as defined in the Performance Plan
Agreement, regardless of whether the definitions in the Performance Plan
Agreement would have reached a contrary result in the absence of this
Amendment.

 

4.  The vesting, measurement and payment form,
value and timing of settlement that occur under the Performance Plan Agreement
in the event of the Executive’s death, Disability, termination without Cause,
Retirement or other departure for any other reason, as set forth in the
Performance Plan Agreement, shall in all events control the treatment of
Executive’s Deferred Stock Awards under the Performance Plan, regardless of
whether the provisions of the Employment Agreement (including without
limitation, Sections 7(c)(i), (ii), (iii), (iv) or (v)) would have reached
a contrary result.  It is noted that the
previous sentence does not modify the Company’s obligation under Section 7(d) of
the Employment Agreement (relating to the Partial Gross-Up Payment) to include
the value received by Executive under the Performance Plan Agreement in any
determination of the Partial Gross-Up Payment.

 

1

 

Except as amended herein, the
Employment Agreement is hereby confirmed in all other respects.

 

IN
WITNESS WHEREOF, this Amendment is entered into this         
day of                         ,
2008.

 

	
   

  	
  AVALONBAY COMMUNITIES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Charlene Rothkopf

  
	
   

  	
  EVP – Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Edward M. Schulman,

  
	
   

  	
  SVP, General Counsel & Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive

  

 

2

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