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:
(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.
“Absolute Baseline” means, as of the Valuation Date, an amount representing (without double-counting) the sum of:
“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:
(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:
“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:
(1) June 1, 2009 in the case of award agreements for Messrs. Blair, Naughton, Sargeant or Horey.
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:
(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.
“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.
(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.
(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:
(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.
(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.
(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.
(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.
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AVALONBAY COMMUNITIES, INC. |
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GRANTEE |
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Name: |