EX-10.6 FORM OF SHARE OPTION AGREEMENT (20% PER YEAR VESTING)

EXHIBIT 10.6

20% vest

COLONIAL PROPERTIES TRUST
SECOND AMENDED AND RESTATED
EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN
NON-INCENTIVE SHARE OPTION AGREEMENT

          This Share Option Agreement (the “Share Option Agreement”) is made as of the            day of                     , 200  , by and between Colonial Properties Trust (the “Company”) and                          , an employee of the Company, its subsidiaries or its affiliates (the “Optionee”).

          WHEREAS, the Colonial Properties Trust Second Amended and Restated Employee Share Option and Restricted Share Plan (the “Plan”) authorizes the Company to grant to eligible individuals options for the purchase of common shares of beneficial interest of the Company, $.01 par value (the “Shares”); and

          WHEREAS, the Company has determined that it is desirable and in its best interests to grant to the Optionee, pursuant to the Plan, an option to purchase a certain number of Shares in order to provide the Optionee with an incentive to advance the interests of the Company, all according to the terms and conditions set forth herein;

          NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties hereto do hereby agree as follows:

          1. Grant of Option.

          Subject to the terms of the Plan (the terms of which are incorporated by reference herein), the Company hereby grants to the Optionee the right and option (the “Option”) to purchase from the Company, on the terms and subject to the conditions hereinafter set forth,            Shares. This Option shall not constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The date of grant of this Option (the “Date of Grant”) is                , the date on which the grant of the Option was approved by the Compensation Committee of the Board of Trustees of the Company (the “Committee”).

          2. Price.

          The purchase price (the “Option Price”) for the Shares subject to the Option granted by this Option Agreement is $           per Share, which price is not less than 100 percent of the Fair Market Value of the Shares, as determined by the Company, on the Date of Grant of this Option.

          3. Exercise of Option.

          Except as otherwise provided herein, the Option granted pursuant to this Option Agreement shall be subject to exercise as follows:

               3.1 Time of Exercise of Option. The Optionee may exercise the Option (subject to the limitations on exercise set forth in this Agreement and in the Plan), in installments as follows: on the first anniversary of the Date of Grant of the Option, as set forth in Section 1 above, the Option shall be exercisable in respect of twenty percent (20%) of the number of Shares specified in Section 1 above, and the Option shall be exercisable in respect of an additional twenty percent (20%) of the number of Shares specified in Section 1 above on each of the second, third, fourth and fifth anniversaries of the Date of Grant, as set forth in Section 1 above. The foregoing installments, to the extent not exercised, shall accumulate and be exercisable, in whole or in part, at any time and from time to time, after becoming exercisable and prior to the termination of the Option; provided, that no single exercise of the Option shall be for less than 100 Shares, unless the number of Shares purchased is the total number at the time available for purchase under this Option.

EMPLOYEE SHARE OPTION

               3.2 Exercise by Optionee. During the lifetime of the Optionee, only the Optionee (or, in the event of the Optionee’s legal incapacity or incompetency, the Optionee’s guardian or legal representative) may exercise the Option.

               3.3 Termination of Employment. Except as provided in Sections 3.4, 3.5 and 3.6:

                    (a) The Optionee may exercise the Option only while the Optionee is employed by the Company, by any “subsidiary corporation” thereof within the meaning of Section 424(f) of the Code (a “Subsidiary”) or by any Affiliate (as defined in the Plan) or for three months thereafter, after which the Option shall terminate; and

                    (b) Upon the Optionee’s termination of employment, the Optionee may (subject to the limitations on exercise set forth in Section 3.8 below) exercise all or any part of the Option but only to the extent the Option was exercisable at the time of termination of employment, at any time within three months after termination of employment and prior to termination of the Option as set forth in Section 3.7.

               3.4 Death. In the event of the Optionee’s death either while employed by the Company, a Subsidiary or an Affiliate or within the period following the termination of employment with the Company, a Subsidiary or an Affiliate during which the Option was exercisable pursuant to Section 3.3 or 3.5, the personal representative or legatees or distributees of the Optionee’s estate, as the case may be, shall have the right (subject to the limitations on exercise set forth in Section 3.8 below) to exercise all or any part of the Option, whether or not the Option was exercisable on the date of the Optionee’s death, at any time within one (1) year after the date of the Optionee’s death and prior to termination of the Option as set forth in Section 3.7.

               3.5 Disability. If the Optionee’s termination of employment is by reason of “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code), the Optionee or the guardian or legal representative shall have the right (subject to the limitations on exercise set forth in Section 3.8 below) to exercise all or any part of the Option, whether or not the Option was exercisable at the time of termination of employment, at any time within one (1) year after termination of employment and prior to termination of the Option as set forth in Section 3.7.

               3.6 Retirement. For the purpose of this Share Option Agreement, “Retirement” means termination of the Optionee’s employment with the Company, a Subsidiary or an Affiliate at or after: (i) the date the Optionee attains age 55 or (ii) such time as the Optionee’s age in whole years plus the Optionee’s number of full years of service with the Company equals 70. If the Optionee’s termination of employment is by reason of Retirement, the Option shall continue to vest in accordance with the schedule set forth in Section 3.1, and the Optionee shall have the right (subject to the limitations on exercise set forth in Section 3.8 below) to exercise the Option to the extent the Option is exercisable, at any time prior to the termination of the Option as set forth in Section 3.7.

               3.7 Termination of Option. The Option shall terminate upon the earlier of (i) the expiration of a period of ten years from the date of grant of the Option, as set forth in Section 1 above or (ii) three months after the Optionee’s termination of employment with the Company, a Subsidiary or an Affiliate, unless such termination falls within the scope of Section 3.4 ,3.5 or 3.6.

               3.8 Limitations on Exercise of Option. Notwithstanding the foregoing Subsections of this Section, in no event may the Option be exercised, in whole or in part, prior to the date the Plan is approved by the shareholders of the Company as provided therein, or after ten years following the date upon which the Option is granted, as set forth in Section 1 above, or after the occurrence of an event referred to in Section 8 below which results in termination of the Option. In no event may the Option be exercised for a fractional Share.

          4. Method of Exercise of Option.

          Subject to the terms and conditions of this Share Option Agreement, the Option may be exercised by delivering written notice of exercise to the Company, at its principal office, addressed to the attention of the President, which notice shall specify the number of Shares for which the Option is being exercised, and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. Payment

- 2 -

EMPLOYEE SHARE OPTION

of the Option Price for the Shares purchased pursuant to the exercise of the Option shall be made either (i) in cash or in cash equivalents; (ii) through the tender to the Company of Shares, which Shares, if acquired by from the Company, shall have been held for at least six months at the time of tender and shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value (as determined by the Committee in accordance with the Plan) on the date of exercise; or (iii) by a combination of the methods described in (i) and (ii). Payment in full of the Option Price need not accompany the written notice of exercise provided the notice of exercise directs that the Share certificate or certificates for the Shares for which the Option is exercised be delivered to a licensed broker acceptable to the Company as the agent for individual exercising the Option and, at the time such Share certificate or certificates are delivered, the broker tenders to the Company cash (or cash equivalents acceptable to the Company) equal to the Option Price for the Shares purchased pursuant to the exercise of the Option plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to the exercise of the Option. If the person exercising the Option is not the Optionee, such person shall also deliver with the notice of exercise appropriate proof of his or her right to exercise the Option. An attempt to exercise the Option granted hereunder other than as set forth above shall be invalid and of no force and effect. Promptly after exercise of the Option as provided for above, the Company shall deliver to the person exercising the Option a certificate or certificates for the Shares being purchased.

          5. Parachute Limitations.

          Notwithstanding any other provision of this Share Option Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered into by the Optionee with the Company, except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes application of this paragraph (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Optionee (including groups or classes of participants or beneficiaries of which the Optionee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Optionee (a “Benefit Arrangement”), if the Optionee is a “disqualified individual,” as defined in Section 280G(c) of the Code, this Option and any right to receive any payment or other benefit under this Option shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Optionee under this Option, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Optionee under this Option to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Internal Revenue Code as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Optionee from the Company under this Option, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by him without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Option, in conjunction with all other rights, payments, or benefits to or for the Optionee under any Other Agreement or any Benefit Arrangement would cause the Optionee to be considered to have received a Parachute Payment under this Option that would have the effect of decreasing the after-tax amount received by the Optionee as described in clause (ii) of the preceding sentence, then the Optionee shall have the right, in the Optionee’s sole discretion, to designate those rights, payments, or benefits under this Option, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Optionee under this Option be deemed to be a Parachute Payment.

          6. Limitations on Transfer.

          During the lifetime of the Optionee, only the Optionee (or, in the event of legal incapacity or incompetency, the guardian or legal representative of the Optionee), may exercise the Option, except that, all or a portion of the Option may be transferred by the Optionee during his or her lifetime to (i) Immediate Family Members, (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members or (iii) a partnership in which such Immediate Family Members are the only partners, in which case such transferees may exercise the Option. Except as noted in the preceding sentence, transfer of the Option is prohibited except by will or the laws of descent and distribution. Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Section 3 hereof (excluding Sections 3.3, 3.4 and 3.5), the term “Optionee” shall be deemed to refer to the transferee. The events of

- 3 -

EMPLOYEE SHARE OPTION

termination of employment, death and disability set forth in Sections 3.3, 3.4 and 3.5 hereof, respectively, shall continue to be applied with respect to the original Optionee, following which the Option shall be exercisable by the transferee only to the extent and for the periods specified in Section 3. The Option may not be pledged or hypothecated (by law or otherwise) or subject to execution, attachment or similar processes.

          7. Rights as Shareholder.

          Neither the Optionee nor any executor, administrator, distributee or legatee of the Optionee’s estate shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any Shares transferable hereunder unless and until such Shares have been fully paid and certificates representing such Shares have been endorsed, transferred and delivered, and the name of the Optionee (or of such personal representative, administrator, distributee or legatee of the Optionee’s estate) has been entered as the shareholder of record on the books of the Company.

          8. Effect of Changes in Capitalization.

               8.1 Changes in Shares. If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of Shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of Shares, exchange of Shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such Shares effected without receipt of consideration by the Company occurring after the date the Option is granted, a proportionate and appropriate adjustment shall be made by the Company in the number and kind of Shares subject to the Option, so that the proportionate interest of the Optionee immediately following such event shall, to the extent practicable, be the same as immediately prior to such event. Any such adjustment in the Option shall not change the aggregate Option Price payable with respect to Shares subject to the unexercised portion of the Option but shall include a corresponding proportionate adjustment in the Option Price per Share.

               8.2 Reorganization in Which the Company Is the Surviving Entity. Subject to Section 8.3, if the Company shall be the surviving entity in any reorganization, merger or consolidation of the Company with one or more other entities, the Option shall pertain to and apply to the securities to which a holder of the number of Shares subject to the Option would have been entitled immediately following such reorganization, merger or consolidation, with a corresponding proportionate adjustment of the Option Price per Share so that the aggregate Option Price thereafter shall be the same as the aggregate Option Price of the Shares remaining subject to the Option immediately prior to such reorganization, merger or consolidation.

               8.3 Reorganization in Which the Company Is Not the Surviving Entity or Sale of Assets or Shares. Upon the dissolution or liquidation of the Company, or upon a merger, consolidation or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, or upon a sale of substantially all of the assets of the Company to another entity, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving entity) approved by the Board which results in any person or entity (or persons or entities acting as a group or otherwise in concert) owning 80 percent or more of the combined voting power of all classes of securities of the Company, the Option hereunder shall terminate, except to the extent provision is made in connection with such transaction for the continuation and/or the assumption of the Option, or for the substitution for the Option of new options covering the stock of a successor employer entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and exercise prices, in which event the Option shall continue in the manner and under the terms so provided. In the event of any such termination of the Option, the Optionee shall have the right (subject to the limitations on exercise set forth in Section 3.7 above), for 30 days immediately prior to the occurrence of such termination, to exercise the Option in whole or in part, whether or not the Optionee was otherwise entitled to exercise such Option at the time such termination occurs. The Company shall send written notice of an event that will result in such a termination to the Optionee not later than the time at which the Company gives notice thereof to its shareholders.

               8.4 Adjustments. Adjustments specified in this Section relating to Shares or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional Shares or units of other securities shall be issued pursuant to any such

- 4 -

EMPLOYEE SHARE OPTION

adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share or unit.

          9. Requirements of Law.

          The Company shall not be required to sell or issue any Shares under the Option if the sale or issuance of such Shares would constitute a violation by the individual exercising the Option or by the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any Shares subject to the Option upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Shares hereunder, the Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Option. Specifically in connection with the Securities Act of 1933 (as now in effect or as hereafter amended), unless a registration statement under such Act is in effect with respect to the Shares covered by the Option, the Company shall not be required to sell or issue such Shares unless the Company has received evidence satisfactory to it that the holder of the Option may acquire such Shares pursuant to an exemption from registration under such Act. Any determination in this connection by the Company shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended). The Company shall not be obligated to take any affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that the Option shall not be exercisable unless and until the Shares covered by the Option are registered or are subject to an available exemption from registration, the exercise of the Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

          10. Withholding of Taxes.

          The parties hereto recognize that the Company or a Subsidiary may be obligated to withhold federal and local income taxes and Social Security and Medicare taxes to the extent that the Optionee realizes ordinary income in connection with the exercise of the Option. The Optionee agrees that the Company or a Subsidiary may withhold amounts needed to cover such taxes from payments otherwise due and owing to the Optionee, and also agrees that upon demand the Optionee will promptly pay to the Company or a Subsidiary having such obligation any additional amounts as may be necessary to satisfy such withholding tax obligation. Such payment shall be made in cash or cash equivalent.

          11. Disclaimer of Rights.

          No provision in this Share Option Agreement shall be construed to confer upon the Optionee the right to be employed by the Company, any Subsidiary or any Affiliate, or to interfere in any way with the right and authority of the Company, any Subsidiary or any Affiliate either to increase or decrease the compensation of the Optionee at any time, or to terminate any employment or other relationship between the Optionee and the Company, any Subsidiary or any Affiliate.

          12. Interpretation of this Share Option Agreement.

          All decisions and interpretations made by the Committee or the Board of Trustees of the Company with regard to any question arising under the Plan or this Share Option Agreement shall be binding and conclusive on the Company and the Optionee and any other person entitled to exercise the Option as provided for herein. In the event that there is any inconsistency between the provisions of this Share Option Agreement and of the Plan, the provisions of the Plan shall govern.

- 5 -

EMPLOYEE SHARE OPTION

          13. Governing Law.

          This Share Option Agreement is executed pursuant to and shall be governed by the laws of the State of Maryland (but not including the choice of law rules thereof).

          14. Arbitration.

          Any disputes between the Company and the Holder in any way concerning this Share Option Agreement shall be submitted at the initiative of either party to mandatory arbitration before a single arbitrator in Birmingham, Alabama pursuant to the Commercial Arbitration Rules of the American Arbitration Association, or its successor, then in effect. The decision of the arbitrator shall be rendered in writing, shall be final and may be entered as a judgment in any court in the State of Alabama. The parties irrevocably consent to the jurisdiction of the federal and state courts located in Alabama for this purpose. Each party shall be responsible for its or his own costs incurred in such arbitration and in enforcing any arbitration award, including attorney’s fees.

          15. Binding Effect.

          Subject to all restrictions provided for in this Share Option Agreement and by applicable law relating to assignment and transfer of this Share Option Agreement and the option provided for herein, this Share Option Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and assigns.

          16. Notice.

          Any notice hereunder by the Optionee to the Company shall be in writing and shall be deemed duly given if mailed or delivered to the Company at its principal office, addressed to the attention of the Committee, or if so mailed or delivered to such other address as the Company may hereafter designate by notice to the Optionee. Any notice hereunder by the Company to the Optionee shall be in writing and shall be deemed duly given if mailed or delivered to the Optionee at the address specified below by the Optionee for such purpose, or if so mailed or delivered to such other address as the Optionee may hereafter designate by written notice given to the Company.

          17. Entire Agreement.

          This Share Option Agreement constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Share Option Agreement nor any term hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Company and the Optionee; provided, however, that the Company unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Optionee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

          IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Share Option Agreement, or caused this Share Option Agreement to be duly executed and delivered on their behalf, as of the day and year first above written.

- 6 -

EMPLOYEE SHARE OPTION

- 7 -