Document:

exv10w38

Exhibit 10.38

AMENDMENT TO

RULES AND PROCEDURES

FOR

DIRECTORS’ DEFERRED COMPENSATION PROGRAM

     The following amendment to rules and procedures governing the deferral by a Non-Employee
Director pursuant to Section 7(b) of the AvalonBay Communities, Inc. 1994 Stock Option and
Incentive Plan, as amended and restated on December 8, 2004 and as subsequently amended (the
“Plan”) was adopted by the Company’s Board of Directors on December 11, 2008. All capitalized
terms used herein shall have the same meaning as used in the Plan unless otherwise specifically
provided herein.

     1. Section 6 of the Rules and Procedures is amended in its entirety to read as follows:

     Payment. All vested stock units credited to a Non-Employee Director’s Account shall
be paid in shares of Stock to the Non-Employee Director, or his designated beneficiary (or
beneficiaries) or estate, in a lump sum within 30 days after the Non-Employee Director ceases to
serve on the Board; provided, however, that fractional shares shall be paid in cash.
Notwithstanding the foregoing, in the event of a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the Company, within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, all Accounts under this deferred compensation arrangement shall become
immediately payable in a lump sum.

     2. Section 8 of the Rules and Procedures is amended in its entirety to read as follows:

      Nontransferability of Rights. During a Non-Employee Director’s lifetime, any payment
under this deferred compensation arrangement shall be made only to him. No sum or other interest
under this deferred compensation arrangement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a
Non-Employee Director or any beneficiary under this deferred compensation arrangement to do so
shall be void. No interest under this deferred compensation arrangement shall in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts of a Non-Employee
Director or beneficiary entitled thereto. Notwithstanding the foregoing, the Company may make
payments to an individual other than a Non-Employee Director to the extent required by a domestic
relations order.exv10w42

Exhibit 10.42

AVALONBAY COMMUNITIES, INC.

DEFERRED COMPENSATION PLAN

Amended and Restated Effective as of January 1, 2009

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	PURPOSE
	 	 	 	 	1	 
	ARTICLE 1 - DEFINITIONS	 	 	1	 
	1.1
	 	"Annual Bonus"	 	 	1	 
	1.2
	 	"Annual Deferral Amount"	 	 	1	 
	1.3
	 	"Base Annual Salary"	 	 	1	 
	1.4
	 	"Beneficiary"	 	 	1	 
	1.5
	 	"Beneficiary Designation Form"	 	 	2	 
	1.6
	 	"Claimant"	 	 	2	 
	1.7
	 	"Code"	 	 	2	 
	1.8
	 	"Compensation Committee"	 	 	2	 
	1.9
	 	"Deferral Account"	 	 	2	 
	1.10
	 	"Election Form"	 	 	2	 
	1.11
	 	"Employee"	 	 	2	 
	1.12
	 	"ERISA"	 	 	2	 
	1.13
	 	"Non-Qualified Predetermined Annuity Account"	 	 	2	 
	1.14
	 	"Participant"	 	 	2	 
	1.15
	 	"Plan"	 	 	2	 
	1.16
	 	"Plan Year"	 	 	2	 
	1.17
	 	"Retirement," "Retire(s)" or "Retired"	 	 	2	 
	1.18
	 	"Retirement Planning Committee"	 	 	3	 
	1.19
	 	"Separation from Service" or "Separates from Service"	 	 	3	 
	1.20
	 	"Sponsor"	 	 	3	 
	1.21
	 	"Trust"	 	 	3	 
	1.22
	 	"Unforeseeable Financial Emergency"	 	 	3	 
	1.23
	 	"Years of Service"	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE 2 - SELECTION, ENROLLMENT, ELIGIBILITY	 	 	3	 
	2.1
	 	Selection by Compensation Committee	 	 	3	 
	2.2
	 	Enrollment Requirements	 	 	3	 
	2.3
	 	Eligibility; Commencement of Participation	 	 	4	 
	2.4
	 	Termination of Participation and/or Deferrals	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE 3 - DEFERRAL COMMITMENTS/VESTING/CREDITING/TAXES	 	 	4	 
	3.1
	 	Minimum Deferrals -- Annual Deferral Amount	 	 	4	 
	3.2
	 	Maximum Deferral -- Base Annual Salary and Annual Bonus	 	 	4	 
	3.3
	 	Election to Defer; Effect of Election Form.	 	 	4	 
	3.4
	 	Withholding of Annual Deferral Amounts	 	 	5	 
	3.5
	 	Vesting	 	 	5	 
	3.6
	 	Crediting/Debiting of Deferral Accounts	 	 	5	 
	3.7
	 	FICA and Other Taxes.	 	 	6	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 4 - DEATH BENEFIT	 	 	6	 
	4.1
	 	Death Benefit	 	 	6	 
	4.2
	 	Payment of Death Benefit	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE 5 - TERMINATION BENEFIT	 	 	6	 
	5.1
	 	Termination Benefit	 	 	6	 
	5.2
	 	Payment of Termination Benefit	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 6 - SHORT-TERM PAYOUTS	 	 	7	 
	6.1
	 	Short-Term Payouts	 	 	7	 
	6.2
	 	Grandfathered Election	 	 	7	 
	6.3
	 	Withdrawal for Unforeseeable Financial Emergencies	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 7 - BENEFICIARY DESIGNATION	 	 	7	 
	7.1
	 	Beneficiary	 	 	7	 
	7.2
	 	Beneficiary Designation; Change; Spousal Consent	 	 	7	 
	7.3
	 	Acknowledgment	 	 	8	 
	7.4
	 	No Beneficiary Designation	 	 	8	 
	7.5
	 	Doubt as to Beneficiary	 	 	8	 
	7.6
	 	Discharge of Obligations	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE 8 - LEAVE OF ABSENCE	 	 	8	 
	8.1
	 	Leave of Absence	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE 9 - TERMINATION, AMENDMENT OR MODIFICATION	 	 	8	 
	9.1
	 	Termination	 	 	8	 
	9.2
	 	Amendment	 	 	9	 
	9.3
	 	Delegation to Retirement Planning Committee	 	 	9	 
	9.4
	 	Effect of Payment	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE 10 - ADMINISTRATION	 	 	9	 
	10.1
	 	Retirement Planning Committee Duties	 	 	9	 
	10.2
	 	Agents	 	 	9	 
	10.3
	 	Binding Effect of Decisions	 	 	9	 
	10.4
	 	Exculpation and Indemnity of Retirement Planning Committee	 	 	9	 
	10.5
	 	Sponsor Information	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE 11 - OTHER BENEFITS AND AGREEMENTS	 	 	10	 
	11.1
	 	Coordination with Other Benefits	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE 12 - CLAIMS PROCEDURES	 	 	10	 
	12.1
	 	Presentation of Claim	 	 	10	 
	12.2
	 	Notification of Decision	 	 	10	 
	12.3
	 	Review of a Denied Claim	 	 	11	 
	12.4
	 	Decision on Review	 	 	11	 
	12.5
	 	Legal Action	 	 	11	 

(ii) 

 

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

(iii) 

 

AVALONBAY COMMUNITIES, INC.

DEFERRED COMPENSATION PLAN

Amended and Restated Effective as of January 1, 2009

     The AvalonBay Communities, Inc. Deferred Compensation Plan, effective as of January 1, 1996,
as amended and restated as of January 1, 1999 and as of January 1, 2004, is hereby amended and
restated in its entirety as follows, effective as of January 1, 2009 to comply with Section 409A of
the Code.

PURPOSE

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

ARTICLE 1 — DEFINITIONS

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

     1.17 “Retirement,” “Retire(s)” or “Retired” shall mean, with respect to an Employee,
Separation from Service with the Sponsor (or any affiliate thereof) for any reason other than death
or a leave of absence, following the date on which the sum of the following equals or

2

 

exceeds 70 years: (i) the number of the Employee’s Years of Service and (ii) the Employee’s
age upon Separation from Service, provided that the Employee is at least age 50 and has completed
at least ten (10) Years of Service.

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

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

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

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

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

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

ARTICLE 2 — SELECTION, ENROLLMENT, ELIGIBILITY

     2.1 Selection by Compensation Committee. Participation in the Plan shall be limited to a
select group of management and highly compensated Employees of the Sponsor, as determined by the
Compensation Committee in its sole discretion.

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

3

 

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

     2.4 Termination of Participation and/or Deferrals. If the Retirement Planning Committee
determines in good faith that a Participant no longer qualifies as a member of a select group of
management or highly compensated employees, the Retirement Planning Committee shall have the right,
in its sole discretion, to prevent the Participant from making deferral elections in future Plan
Years.

ARTICLE 3 — DEFERRAL COMMITMENTS/VESTING/CREDITING/TAXES

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

     3.2 Maximum Deferral — Base Annual Salary and Annual Bonus. For each Plan Year, a
Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary and Annual
Bonus. The maximum percentage for Base Annual Salary shall be ten percent (10%), and the maximum
percentage for Annual Bonus shall be twenty-five percent (25%).

     3.3 Election to Defer; Effect of Election Form.

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

     (b) Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral
election for that Plan Year, and such other elections as the Retirement Planning Committee deems
necessary or desirable under the Plan, shall be made by timely delivering to the Retirement
Planning Committee, in accordance with its rules and procedures, before the end of the Plan Year
preceding the Plan Year for which the election is made, a new Election Form. If no such Election
Form is timely delivered for a Plan Year, the previously elected Annual Deferral Amount shall
remain in effect; provided, however, that the Retirement Planning Committee may require a
Participant to re-enroll in the Plan to continue participating in the Plan

4

 

in the subsequent Plan Year. Elections to defer a percentage of Annual Bonus must be made
before the end of the Plan Year preceding the Plan Year in which such Annual Bonus is earned.

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

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

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

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

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

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

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

5

 

Participant. A Participant’s Deferral Account may also be debited by its proportionate share
of the Plan’s administrative expense.

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

     3.7 FICA and Other Taxes. 

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

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

ARTICLE 4 — DEATH BENEFIT

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

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

ARTICLE 5 — TERMINATION BENEFIT

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

6

 

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

ARTICLE 6 — SHORT-TERM PAYOUTS

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

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

     6.3 Withdrawal for Unforeseeable Financial Emergencies. If a Participant experiences an
Unforeseeable Financial Emergency, the Participant may petition the Retirement Planning Committee
to receive a partial or full payout from the Plan. The Committee shall determine if the event
meets the criteria to be an Unforeseeable Financial Emergency. If approved, the amount of the
withdrawal shall not exceed the lesser of the Participant’s Deferral Account balance or the amount
reasonably needed to satisfy the Unforeseeable Financial Emergency and income taxes on the
withdrawn amount. If, subject to the sole discretion of the Retirement Planning Committee, the
petition for a withdrawal is approved, any distribution shall be made within 30 days of the date of
approval. The Participant will be eligible to again participate in the Plan effective the Plan
Year following the Unforeseeable Financial Emergency. The Retirement Planning Committee may permit
a Participant to suspend his or her Annual Deferral Amount in the event of an Unforeseeable
Financial Emergency.

ARTICLE 7 — BENEFICIARY DESIGNATION

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

     7.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall designate his or
her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the
Retirement Planning Committee or its designated agent. A Participant shall have the right to
change a Beneficiary by completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Retirement Planning Committee’s rules and

7

 

procedures, as in effect from time to time. If a married Participant names someone other than his
or her spouse as a Beneficiary, a spousal consent, in the form designated by the Retirement
Planning Committee, must be signed by that Participant’s spouse and returned to the Retirement
Planning Committee. Upon the acceptance by the Retirement Planning Committee of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be canceled. The Retirement
Planning Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Retirement Planning Committee prior to his or her death.

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

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

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

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

ARTICLE 8 — LEAVE OF ABSENCE

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

ARTICLE 9 — TERMINATION, AMENDMENT OR MODIFICATION

     9.1 Termination. Although the Sponsor anticipates that it will continue the Plan for an
indefinite period of time, there is no guarantee that the Sponsor will continue the Plan or will
not terminate the Plan at any time in the future. Accordingly, the Sponsor reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to
any or all of its participating Employees. Upon the termination of the Plan with respect to the
Sponsor, the affected Participants’ participation in the Plan shall terminate effective as of the
end

8

 

of the Plan Year in which the Plan termination occurs. Distributions shall be made to the
Participants in the normal course, but the Sponsor may accelerate the distributions to the extent
permitted by Section 409A of the Code and the regulations promulgated thereunder.

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

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

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

ARTICLE 10 — ADMINISTRATION

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

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

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

     10.4 Exculpation and Indemnity of Retirement Planning Committee. The Sponsor shall
indemnify and hold harmless the members of the Retirement Planning Committee and any Employee to
whom the duties of the Retirement Planning Committee may be delegated against any and all claims,
losses, damages, expenses or liabilities arising from any action or failure to act with respect to
this Plan, except in the case of willful misconduct or gross negligence by the

9

 

Retirement Planning Committee, any of its members, or any such Employee. By electing to enroll in
the Plan, each Participant shall acknowledge that except in the case of claims for benefits, he or
she shall have no right to file any claim against the Retirement Planning Committee or the Sponsor
unless such claim is attributed to the willful misconduct or gross negligence of the Retirement
Planning Committee, any of its members, or any Employee of the Sponsor.

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

ARTICLE 11 — OTHER BENEFITS AND AGREEMENTS

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

ARTICLE 12 — CLAIMS PROCEDURES

     12.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such
Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Retirement
Planning Committee a written claim for a determination with respect to the amounts distributable to
such Claimant from the Plan. If such a claim relates to the contents of a notice received by the
Claimant, the claim must be made within 60 days after such notice was received by the Claimant.
All other claims must be made within 180 days of the date on which the event that caused the claim
to arise occurred. The claim must state with particularity the determination desired by the
Claimant.

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

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

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

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

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

10

 

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

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

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

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

     (a) may review pertinent documents;

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

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

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

     (a) specific reasons for the decision;

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

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

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

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

11

 

ARTICLE 13 — TRUST

     13.1 Establishment of the Trust. In order to provide assets from which to fulfill the
obligations of the Participants and their beneficiaries under the Plan, the Sponsor may, but shall
not be required to, establish a Trust by a trust agreement with a third party, the trustee, to
which the Sponsor may, in its discretion, contribute cash or other property, including securities
issued by the Sponsor, to provide for the benefit payments under the Plan.

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

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

ARTICLE 14 — MISCELLANEOUS

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

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

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

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

12

 

or insolvency. Notwithstanding the foregoing, assets can be assigned to an individual other than a
Participant to the extent necessary to fulfill a domestic relations order.

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

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

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

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

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

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

AvalonBay Communities Retirement Planning Committee

c/o AvalonBay Communities, Inc.

2900 Eisenhower Avenue, Third Floor

Alexandria, VA 22314

Attention: Senior Director, Human Resources

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

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

13

 

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

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

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

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

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

     14.16 Distribution in the Event of Taxation.

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

14

 

     IN WITNESS WHEREOF, the Sponsor has caused this amended and restated Plan document to be duly
executed by a duly authorized officer this 18th day of November, 2008.

	 	 	 	 	 
	 	AVALONBAY COMMUNITIES, INC.

 	 
	 	By:  	/s/ Edward M. Schulman
 	 
	 	 	Title:  SVP, General Counsel & Secretary 	 
	 	 	 	 
	 

15

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