Document:

Exhibit 10.3

FORM OF AVALONBAY COMMUNITIES, INC. 

EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT

(1994 STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED)

Pursuant to the AvalonBay Communities, Inc. 1994 Stock Incentive Plan,
as amended and restated (the “Plan”), AvalonBay Communities, Inc. (the
“Company”) hereby grants to the Optionee named below an Option to purchase up
to  the number of shares of the Company’s
Common Stock, par value $.01 per share (“Common Stock”) set forth below.  This option is subject to all of the terms
and conditions as set forth herein, in the Non-Qualified Stock Option Agreement
Terms (the “Terms”) which are attached hereto and incorporated herein in their
entirety, and in the Plan.  Capitalized terms
used but not defined herein or in the Terms shall have the respective meanings
ascribed thereto in the Plan.

                

	
  Optionee:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option (“Option Shares”):

  	
   

  	
   

  
	
  Exercise Price (Per
  Share):

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  

 

Non-Qualified
Stock

Option:                                                                               This Option
does not qualify as an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), and consequently shall be
treated as a non-qualified stock option for tax purposes.

Vesting Schedule:                   Subject to the provisions of Section 4
and 6 of the Terms and the discretion of the Company to accelerate the vesting
schedule, this option shall become vested and exercisable with respect to the
following number of Option Shares at the expiration of the following periods
from the Date of Grant set out above:

 

	
  Vesting Event

  	
   

  	
  Option Shares Vested

  
	
  [First Anniversary of Grant Date]

  	
   

  	
  [One-Third]

  
	
  [Second Anniversary of Grant Date] 

  	
   

  	
  [One-Third]

  
	
  [Third Anniversary of Grant Date]

  	
   

  	
  [One-Third]

  
	
   

  	
   

  	
   

  
	
  [General Vesting Schedule provided
  above]

  	
   

  	
   

  

 

                                                                                                                        In any event this Option shall become
fully vested and exercisable with respect to all of the Option Shares three
years after the date hereof.

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

	
  AVALONBAY COMMUNITIES, INC.

  	
   

  	
  OPTIONHOLDER:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name (Print):

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
							

 

ATTACHMENT:  Non-qualified Stock Option Agreement Terms

 

1

 

AVALONBAY COMMUNITIES, INC.

1994
STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED

 

NON-QUALIFIED STOCK OPTION
AGREEMENT TERMS

 

 

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

 

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

 

Payment of the purchase
price for the Option Shares to be purchased may be made by one or more of the
following methods:  (a) in cash, by
certified bank check or other instrument acceptable to the Company; (b) through
the delivery (or attestation to the ownership) of shares of Common Stock that
have been beneficially owned by the Optionee for at least six (6) months and
are not then subject to restrictions under any Company plan and were not used
in a “stock swap” within the six (6) months preceding the option exercise, such
surrendered shares to be valued at the closing price of the Common Stock on the
principal exchange on which the Common Stock is listed on the date the Company
receives the exercise notice; (c) by the Optionee delivering to the Company a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and
acceptable to the Company to pay the purchase price; provided that in the event
the Optionee chooses to pay the purchase price as provided in this subsection
(c), the Optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the Company shall
prescribe as a condition of such payment procedure; or (d) with the consent of
the Company, a combination of (a), (b) and (c) above.  Payment instruments will be received subject
to collection.

 

The delivery of
certificates representing the Option Shares will be contingent upon (i) the
Company’s receipt from the Optionee of full payment for the Option Shares, (ii)
the satisfaction of section 10 hereof, and (iii) any agreement, statement or
other evidence that the Company may require to satisfy itself that the issuance
of Option Shares to be purchased pursuant to the exercise of Options under the
Plan and any subsequent resale of the shares will be in compliance with
applicable laws and regulations.

 

If requested upon the
exercise of this Option, certificates for Option Shares may be issued in the
name of the Optionee jointly with another person or in the name of the executor
or administrator of the Optionee’s estate. 
The Optionee shall not have the rights of a stockholder with respect to
any Option Shares prior to his acquisition of such Option Shares upon the
exercise of this Option.

 

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

 

3.             Non-transferability of Option.  This Option shall not be transferable by the
Optionee otherwise than by will or by the laws of descent and distribution and
this Option shall be exercisable, during the Optionee’s lifetime, only by the
Optionee.

 

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

 

(a)           Termination Due to Death.  If the Optionee’s employment (or other
business relationship) terminates by reason of death, any Option held by the
Optionee may be exercised, to the extent exercisable at the date of death, by
the Optionee’s legal representative or legatee for a period of six (6) months
from the date of death, or until the Expiration Date, if earlier.  For clarification, it is noted that this
means that the remaining unvested portion of the Option shall terminate
immediately and be of no further force or effect.

 

2

 

(b)           Termination Due to Disability.  If the Optionee’s employment (or other
business relationship) terminates by reason of Disability (as defined in the
Plan), any Option held by the Optionee may be exercised, to the extent
exercisable on the date of termination, for a period of twelve (12) months from
the date of termination, or until the Expiration Date, if earlier.  The death of the Optionee during the twelve
(12) month period provided in this Section 4(b) shall extend such period for
six (6) months from the date of death or until the Expiration Date, if
earlier.  For clarification, it is noted
that this means that the remaining unvested portion of the Option shall
terminate immediately and be of no further force or effect.

 

(c)           Termination by Reason of Retirement.  If the Optionee’s employment terminates by
reason of Retirement (as defined in the Plan), any Option held by the Optionee
shall be automatically vested on the date of termination, and shall be
exercisable for a period of twelve (12) months from the date of termination, or
until the Expiration Date, if earlier. 
The death of the Optionee during the twelve (12) month period provided
in this Section 4(c) shall extend such period for six (6) months from the date
of death, or until the Expiration Date, if earlier.

 

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

 

(e)           Other Termination.  If the Optionee’s employment (or other
business relationship) terminates for any reason other than death, Disability,
Retirement or Cause, and unless otherwise determined by the Company, any Option
held by the Optionee may be exercised, to the extent exercisable on the date of
termination, for a period of three (3) months from the date of termination, or
until the Expiration Date, if earlier. 
For clarification, it is noted that this means that the remaining
unvested portion of the Option shall terminate immediately and be of no further
force or effect.

 

For this purpose, neither a transfer of employment
from the Company to a Subsidiary (or from a Subsidiary to the Company) nor an
approved leave of absence shall be deemed a “termination of employment.”

 

5.             Option Shares. 
The Option Shares are shares of the Common Stock of the Company as
constituted on the date of this Option, subject to adjustment as provided in
the Plan.

 

6.             Effect of Change of Control.  Upon the occurrence of a Change of Control,
as defined in the Plan, this Option shall automatically become fully
exercisable.

 

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

 

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

 

9.             The Plan. 
In the event of any discrepancy or inconsistency between this Agreement
and the Plan, the terms and conditions of the Plan shall control.

 

                10.           Withholding
Taxes.  The Optionee shall, not later
than the date as of which the exercise of this Option becomes a taxable event
for federal income tax purposes, pay to the Company (or make arrangements
satisfactory to the Company for payment of) any federal, state and local taxes
required by law to be withheld on account of such taxable event.  The Optionee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to the
Optionee, or from the Option Shares to be issued in respect of an 

 

3

 

exercise of this Option, any federal, state or local taxes of any kind
required by law to be withheld with respect to the issuance of shares of Stock
to the Optionee.

 

11.           Miscellaneous.  Notices hereunder shall be mailed or
delivered to the Company at its principal place of business, 2900 Eisenhower
Avenue, Suite 300, Alexandria, Virginia 22314, Attention:  Jenny Bercik, and shall be mailed or
delivered to Optionee at his address set forth in the Company’s records, or in
either case at such other address as one party may subsequently furnish to the
other party in writing.  This Option
shall be governed by the laws of the State of Maryland, except to the extent
such law is preempted by federal law.

 

[End of Text]

 

 

4

 

[IN
ACCORDANCE WITH THE EMPLOYMENT AGREEMENTS OF MESSRS. BLAIR, NAUGHTON, SARGEANT,
FULLER AND HOREY, THE COMPANY ENTERS INTO THE FOLLOWING ADDENDUM TO ALL
NON-QUALIFIED STOCK OPTION AGREEMENTS WITH SUCH INDIVIDUALS.]

 

FORM
OF ADDENDUM TO NQSO STOCK OPTION AGREEMENT

FOR
CERTAIN EXECUTIVE OFFICERS WITH EMPLOYMENT AGREEMENTS

                          

 

 

This Addendum to Stock Option Agreement is dated as of
                    .

 

Reference is made to the following agreement (the “Unmodified
Stock Option Agreement”):

 

Non-Qualified Stock Option
Agreement between               
(“Employee”) and AvalonBay Communities, Inc. (“AvalonBay”), dated                 ,
with respect to               
stock options (the “Options”) having an exercise price of $          .

 

Capitalized terms used herein and not defined herein have the meanings
set forth in the Unmodified Stock Option Agreement.

 

                For the
convenience of AvalonBay, the Unmodified Stock Option Agreement is in a
standard format commonly used by AvalonBay. 
However, this Addendum to Stock Option Agreement (the “Addendum”)
contains one or more provisions (the “Modifications”) approved by the Board of
Directors of AvalonBay (the “Board”) that are inconsistent with the terms of
the Unmodified Stock Option Agreement. 
The Board approved the Modifications at the time it approved the grant
of the Options to Employee, and for ease of administration the Company is
documenting the grant of the Options with the Modifications by entering into
the Unmodified Stock Option Agreement and this Addendum.

 

                NOW, THEREFORE,
intending to be legally bound and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, AvalonBay and
Employee agree as follows:

 

If, pursuant to the terms of
the Employment Agreement between the Company and Employee dated                 ,
as amended, or pursuant to the terms of a successor agreement or arrangement
(other than the Unmodified Stock Option Agreement), the vesting of Employee’s
stock options is accelerated upon the termination of his employment, then the
following shall apply:   any Option then
held by Employee may be exercised, to the extent exercisable on the date of termination
(after giving effect to accelerated vesting), for a period of one (1) year from
the date of termination, or until the Expiration Date, if earlier.

 

5

 

For clarification it is
noted that the terms of the preceding paragraph will not apply if vesting of
Employee’s stock options is not accelerated upon a termination of employment
(e.g., if he voluntarily resigns without a Constructive Termination without
Cause, as defined in the Employment Agreement).  In such cases, the period of time following
termination in which the Options must be exercised will be determined by the
Unmodified Stock Option Agreement, which generally provides that the Options
will terminate earlier than one year from the date of termination.

 

 

 

                Except as stated
above, the terms of the Unmodified Stock Option Agreement apply in full to the
Options.

 

 

	
   

  	
  AVALONBAY COMMUNITIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

                Receipt is hereby
acknowledged of a copy of the Company’s Plan, the Unmodified Stock Option
Agreement and this Addendum.  The
undersigned agrees to be bound by the terms and conditions of the Plan, the
Unmodified Stock Option Agreement and this Addendum.

 

 

	
   

  	
   

  
	
   

  	
  Optionee:

  
	
   

  	
   

  
	
   

  	
  Address:

  

 

 

6Exhibit 10.4

 

FORM OF
AVALONBAY COMMUNITIES, INC. 

EMPLOYEE STOCK GRANT AND RESTRICTED STOCK AGREEMENT

 

Pursuant to the terms of
the AvalonBay Communities, Inc. Amended and Restated 1994 Stock Incentive Plan
)(as amended from time to time, the “Plan”), in consideration for services
rendered and to be rendered to AvalonBay Communities, Inc. (the “Company”) and
for other good and valuable consideration, which the Company has determined to
be equal to the fair market value of the Shares, as defined below, the Company
is issuing to the Employee 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 Terms.

	
  Employee:

  	
   

  	
   

  
	
  Award Date:

  	
   

  	
   

  
	
  Vesting Commencement
  Date:

  	
   

  	
   

  
	
  Number of Shares
  Granted (“Shares”):

  	
   

  	
   

  

 

Vesting Schedule:                   Subject to the provisions of the Terms
and the discretion of the Company to accelerate the vesting schedule, the
Employee’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:

 

	
  Vesting Event

  	
   

  	
  Shares Vested

  
	
   

  	
   

  	
   

  
	
  March 1, 200 [year of award]

  	
   

  	
  [20%]

  
	
  March 1, 200 [1st anniversary]

  	
   

  	
  [20%]

  
	
  March 1, 200 [2nd anniversary]

  	
   

  	
  [20%]

  
	
  March 1, 200 [3rd anniversary]

  	
   

  	
  [20%]

  
	
  March 1, 200
  [4th anniversary]

  	
   

  	
  [20%]

  
	
   

  	
   

  	
   

  
	
  Termination of the Employee’s Employment by the
  Company, other than for Cause

  	
   

  	
  [Total
  RSA]*

  
	
   

  	
   

  	
   

  
	
  The death or disability of the Employee

  	
   

  	
  [Total RSA]*

  
	
   

  	
   

  	
   

  
	
  The Employee’s Retirement (as defined in the Plan)

  	
   

  	
  [Total RSA]*

  
	
   

  	
   

  	
   

  
	
  If earlier than any of the above events, a Change of
  Control

  	
   

  	
  [Total RSA]*

  

	
  *or, if fewer, all Restricted Shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [General Vesting Schedule provided
  above]

  	
   

  	
   

  

 

Additional
Terms/Acknowledgements: The undersigned Employee acknowledges receipt of, and understands and
agrees to, this Stock Grant and Restricted Stock Agreement, including, without
limitation, the Terms.  Employee 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 Employee and the Company regarding the stock grant
described herein and supersedes all prior oral and written agreements on that
subject.

 

1

 

	
  AVALONBAY COMMUNITIES, INC.

  	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name (Print):

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
							

 

ATTACHMENT:  Restricted Stock Agreement Terms

 

2

 

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 vote of the
Board of Directors resolving that the Employee should be dismissed as a result
of (i) any material breach by the Employee of any agreement to which the
Employee and the Company are parties, (ii) any act (other than retirement) or
omission to act by the Employee which may have a material and adverse effect on
the business of the Company or any Subsidiary (as hereinafter defined) or on
the Employee’s ability to perform services for the Company or any Subsidiary,
including, without limitation, the Employee being convicted of any crime (other
than ordinary traffic violations) or (iii) any material misconduct or neglect
of duties by the Employee in connection with the business or affairs of the
Company or any Subsidiary.

 

Section 1.2 – Change of Control

 

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

 

                                                                (i)            any “person,” as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Act”) (other than the Company, any of its Subsidiaries, 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 Act) of such person, shall become the “beneficial owner” (as such
term is defined in Rule 13d–3 under the Act), directly or indirectly, of
securities of the Company representing 30% or more of either (A) the combined
voting power of the Company’s then outstanding securities having the right to
vote in an election of the Company’s Board of Directors (“Voting Securities”)
or (B) the then outstanding shares of Common Stock (as hereinafter
defined), in either such case other than as a result of an acquisition of
securities directly from the Company; or

 

                                                                (ii)           persons who, as of the Award Date,
constitute the Company’s Board of Directors (the “Incumbent Directors”) cease
for any reason, including, without limitation, as a result of a tender offer,
proxy contest, merger, acquisition of Voting Securities or similar transaction,
to constitute at least a majority of the Board of Directors, provided that any
person becoming a director of the Company subsequent to the Award Date whose
election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of this Agreement, be
considered an Incumbent Director; or

 

                                                                (iii)          the stockholders of the Company shall
approve (A) any consolidation or merger of the Company or any Subsidiary
where the stockholders of the Company, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d–3 under the Act),
directly or indirectly, shares representing in the aggregate 30% of the voting
shares of the corporation or other entity issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation or other entity,
if any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party
as a single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the
Company.

 

3

 

                Notwithstanding the foregoing, a “Change of Control”
shall not be deemed to have occurred for purposes of the foregoing clause
(i) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Common Stock or other Voting
Securities outstanding, increases (x) the proportionate number of shares
of Common Stock beneficially owned by any person to 30% or more of the shares
of Common Stock then outstanding or (y) 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 clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Common 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 the foregoing clause (i).

 

Section 1.3 – Common Stock

 

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

 

Section 1.4 – Fair Market Value

 

                “Fair Market Value” on any given date means the last
reported sale price at which the Common Stock is traded on such date or, if no
Common Stock is traded on such date, the most recent date on which Common Stock
was traded, as reflected on the New York Stock Exchange or, if applicable, any
other national stock exchange on which the Common Stock is traded.

 

Section 1.5 – 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 1.6 – Restrictions

 

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

 

Section 1.7 – Secretary

 

                “Secretary” shall mean the secretary of the Company.

 

Section 1.8 – Subsidiary

 

                “Subsidiary” means any corporation or other entity
(other than the Company) in any unbroken chain of corporations or other
entities, beginning with the Company if each of the corporations or entities
(other than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.

 

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
Employee’s ownership interest in Shares vests in accordance with the Vesting
Schedule set forth on the first page of this Agreement.

 

Section 2.2 – Escrow

 

4

 

                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, including shares of Restricted
Stock issued pursuant to Section 3.5, until all of the Restrictions expire
or shall have been removed; provided, however, that in no event shall the
Employee retain physical custody of any certificates representing Restricted Stock
issued to him.

 

Section 2.3 – Rights as Stockholder

 

                From
and after the Award Date, the Employee 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 Employee’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
Employee’s employment by the Company terminates for any reason other than (a)
death, (b) disability or (c) termination of the Employee’s employment by the
Company other than for Cause, any interest of the Employee 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 Employee 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
Employee 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
Employee may designate one or more trusts or other similar arrangements for the
benefit of the Employee or members of his immediate family as the registered
holders of Restricted Stock if and as long as the Employee 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 Employee 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

 

                (a)           Certificates
representing 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 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 

 

5

 

REFERENCED
AGREEMENT ARE ON FILE AT AND MAY BE OBTAINED ON REQUEST AND WITHOUT CHARGE FROM
THE OFFICES OF THE COMPANY AT 2900 EISENHOWER AVENUE, SUITE 300, ALEXANDRIA, VA
22314.”

 

                (b)           Certificates representing any shares of Common Stock
issued pursuant to this Agreement shall bear the following or substantially
similar legend:

 

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). 
NO SALE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THESE
SECURITIES MAY BE MADE UNLESS EITHER (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.”

 

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, the Company shall cause new certificates to be issued with
respect to such vested Shares and delivered to the Employee or his legal
representative, free from the legend provided for in Section 3.3(a).

 

Section 3.5 – Restrictions on New Shares

 

                In the event that the
outstanding shares of the Company’s Common Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Company, or
a stock split–up or stock dividend, such new, additional or different shares or
securities which are held or received by the Employee (or his designee) in his
capacity as a holder of Restricted Stock shall be considered to be Restricted
Stock and shall be subject to all of the terms and conditions of this
Agreement, including but not limited to the Restrictions.

 

ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1 – Conditions to Issuance of Stock
Certificates

 

                The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock 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 Employee 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; and

 

Section 4.2 – Notices

 

6

 

                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 Employee shall be
addressed to him at his address as set forth 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 Employee shall, if the Employee is
then deceased, be given to the Employee’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.

 

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 – Tax Withholding

 

                The Company’s obligation (i) to
issue or deliver to the Employee any certificate or certificates for
unrestricted shares of stock or (ii) to pay to the Employee any dividends or
make any distributions with respect to the Common Stock issued under this
Agreement is expressly conditioned on the Company’s satisfaction of its
obligation, if any, to withhold taxes. 
The Company may, if the employee so elects in writing, withhold from any
distribution made to the Employee under this Agreement shares of Common Stock
valued at Fair Market Value on the date of such withholding to cover any
applicable withholding and employment taxes.  In lieu of withholding shares of Common Stock,
the Employee may elect to pay to the Company any amounts required to be
withheld in cash.

 

Section 4.6 – 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 4.7 – 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 4.8 – No Special Employment Rights

 

                This Agreement does not, and
shall not be interpreted to, create any right on the part of the Employee to
continue in the employ 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 employment.

 

[End of Text]

 

7

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