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                              THIRD AMENDMENT TO
                    FIRST AMENDED AND RESTATED 1994 EMPLOYEE
                         STOCK AND UNIT OPTION PLAN OF
                   CHARLES E. SMITH RESIDENTIAL REALTY, INC.



     THIS THIRD AMENDMENT TO FIRST AMENDED AND RESTATED 1994 EMPLOYEE STOCK AND
UNIT OPTION PLAN, dated as of October 25, 1999, is entered into by and among
Charles E. Smith Residential Realty, Inc., a Maryland corporation, for itself
and as general partner of Charles E. Smith Residential Realty L.P. (together the
"Company"), and Smith Realty Company, Consolidated Engineering Services, Inc.,
and Smith Management Construction, Inc. (collectively, the "Operating
Subsidiaries").

     WHEREAS, the 1994 Employee Stock and Unit Option Plan (the "Plan") was
approved by the Board of Directors of Charles E. Smith Residential Realty, Inc.,
for itself and as a general partner of the Charles E. Smith Residential Realty
L.P., by unanimous written consents dated May 25, 1994, June 13, 1994, June 22,
1994, and June 23, 1994, and at a meeting held on July 26, 1994, by the
shareholders of Charles E. Smith Residential Realty, Inc., by unanimous written
consents dated June 17, 1994, June 22, 1994, and June 23, 1994, and by the
partners of Charles E. Smith Residential Realty L.P. by unanimous written
consents dated June 17, 1994, and June 23, 1994, and the Plan, together with the
1994 Employee Restricted Stock and Restricted Unit Plan and Directors Stock
Option Plan, was incorporated in a filing on Form S-8 with the Securities and
Exchange Commission (the "SEC"), which became effective on August 8, 1994;

     WHEREAS, the Board of Directors of the Company duly adopted and approved
(i) the First Amended and Restated 1994 Employee Stock and Unit Option Plan on
November 8, 1994, which was incorporated in a filing on Form 10-K for the year
ended December 31, 1994 and filed with the SEC on March 31, 1995, (ii) the First
Amendment thereto dated as of May 7, 1998, which was incorporated in a filing on
Form S-8 and filed with the SEC on November 17, 1998, and (iii) the Second
Amendment thereto dated as of March 1, 1999;

     WHEREAS, the Company and its stockholders did adopt the Plan for the
benefit of their employees and the employees of Smith Realty Company (formerly
Smith Property Management, Inc.), Consolidated Engineering Services, Inc., and
Smith Management Construction, Inc.;

     WHEREAS, the Board of Directors believes that it would be in the best
interests of the Company to amend Sections 2.13, 3.1, 3.2, 13 and 15.2 of the
Plan to revise the method by which the value of each share of Stock (as defined
in the Plan) subject to the Plan is determined, to facilitate the administration
of the Plan and to provide certain transfer rights with respect to Options (as
defined in the Plan); and

     WHEREAS, the Board of Directors of the Company did approve such amendments
at a meeting of the Board of Directors held on October 25, 1999.


     NOW, THEREFORE, in consideration of the premises herein set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby amend the Plan, as follows:


                                      E-2

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     1.  Section 2.13 of the Plan is hereby amended so that the first sentence
of Section 2.13 shall read as follows:

          "2.13  'Fair Market Value' means the value of each share of Stock
     subject to the Plan determined as follows: if on the Grant Date or other
     determination date the shares of Stock are listed on an established
     national or regional stock exchange, are admitted to quotation on the
     National Association of Securities Dealers Automated Quotation System, or
     are publicly traded on an established securities market, the Fair Market
     Value of the shares of Stock shall be the closing price of the shares of
     Stock on such exchange or in such market (the highest such closing price if
     there is more than one exchange or market) on the Grant Date (or, if the
     Grant Date is not a trading day, the trading day immediately preceding the
     Grant Date) or such other determination date (or if there is no such
     reported closing price, the Fair Market Value shall be the mean between the
     highest bid and lowest asked prices or between the high and low sales
     prices on the Grant Date or such preceding trading day) or, if no sale of
     the shares of Stock is reported for the Grant Date or such preceding
     trading day, on the next preceding day on which any sale shall have been
     reported."

     2.  Section 3.1 of the Plan is hereby amended by deleting the second
sentence of Section 3.1 in its entirety, so that such Section 3.1 now reads as
follows:

          "3.1  Company Plan.  The Company Plan shall be administered by the
                ------------
     Company Committee.  The Company Committee shall have such powers and
     authorities related to the administration of the Company Plan as are
     consistent with the Company's articles of incorporation and by-laws and
     with applicable law.  The Company Committee shall have the full power and
     authority (subject to any restrictions imposed by the Board of Directors of
     the Company, the Company's articles of incorporation or by-laws or
     applicable law) to take all actions and to make all determinations required
     or provided for under the Company Plan, any Incentive Award granted by the
     Company Committee under the Company Plan and any Agreement entered into in
     connection therewith and shall have the full power and authority to take
     all such other actions and determinations not inconsistent with the
     specific terms and provisions of the Company Plan that the Company
     Committee deems to be necessary or appropriate to the administration of the
     Company Plan, any Incentive Award granted by the Company Committee under
     the Company Plan and any Agreement entered into in connection therewith.
     The interpretation and construction by the Company Committee of any
     provision of the Company Plan, any Incentive Award granted by the Company
     Committee under the Company Plan and any Agreement entered into in
     connection therewith shall be final and conclusive with respect to the
     Optionee."


     3.  Section 3.2 of the Plan is hereby amended by deleting the second
sentence of Section 3.2 in its entirety, so that such Section 3.2 now reads as
follows:

          "3.2  Operating Partnership Plan.  The Operating Partnership Plan
                --------------------------
     shall be administered by the Company Committee.  The Company Committee
     shall have the full power and authority (subject to any restrictions
     imposed on such Committee by Section 3.1 hereof) to take all actions and to
     make all determinations required or provided for under the Operating
     Partnership Plan, any Incentive Award granted by the Company Committee
     under the Operating Partnership Plan and any Agreement entered into in
     connection therewith and shall have the full power and authority to take
     all such other
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     actions and determinations not inconsistent with the specific terms and
     provisions of the Operating Partnership Plan that the Company Committee
     deems to be necessary or appropriate to the administration of the Operating
     Partnership Plan, any Incentive Award granted by the Company Committee
     under the Operating Partnership Plan and any Agreement entered into in
     connection therewith. The interpretation and construction by the Company
     Committee of any provision of the Operating Partnership Plan, any Incentive
     Award granted by the Company Committee under the Operating Partnership Plan
     and any Agreement entered into in connection therewith shall be final and
     conclusive with respect to the Optionee."

     4.  Section 13 of the Plan is deleted in its entirety and a new Section 13
is inserted so that Section 13 shall read as follows:

     "13.  TRANSFERABILITY OF OPTIONS

           1.1  Transferability of Options.  Except as provided in Section 13.2,
                --------------------------
     during the lifetime of an Optionee, only the Optionee (or, in the event of
     legal incapacity or incompetency, the Grantee's guardian or legal
     representative) may exercise an Option.  Except as provided in Section
     13.2, no Option shall be assignable or transferable by the Grantee to whom
     it is granted, other than by will or the laws of descent and distribution.

           13.2  Family Transfers. If authorized in the applicable Option
                ----------------
     Agreem ent, an Optionee may transfer, not for value, all or part of an
     Option which is not an Incentive Option to any Family Member.  For the
     purpose of this Section 13.2, a "not for value" transfer is a transfer
     which is (i) a gift, (ii) a transfer under a domestic relations order in
     settlement of marital property rights, or (iii) a transfer to an entity in
     which more than fifty percent of the voting interests are owned by Family
     Members (or the Optionee) in exchange for an interest in that entity.
     Following a transfer under this Section 13.2, any such Option shall be
     exercisable by the transferee to the extent that the Option would have been
     exercisable by the Optionee, and the Option shall continue to be subject to
     the same terms and conditions as were applicable immediately prior to
     transfer.  Subsequent transfers of transferred Options are prohibited
     except to Family Members of the original Optionee in accordance with this
     Section 13.2 or by will or the laws of descent and distribution.  The event
     of termination of employment of Section 12.3 hereof 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 permitted under,
     and for the periods specified in, Sections 12.3, 12.4, or 12.5.

          For purposes of this Section 13.2, 'Family Member' shall mean a person
     who is a spouse, child, stepchild, grandchild, parent, stepparent,
     grandparent, 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, of the Optionee, any person sharing the Optionee's household
     (other than a tenant or employee), a trust in which these persons have more
     than fifty percent of the beneficial interest, a foundation in which these
     persons (or the Optionee) control the management of assets, and any other
     entity in which these persons (or the Optionee) own more than fifty percent
     of the voting interests."

     5.  Section 15.2 of the Plan is hereby amended by amending Section 15.2 to
read as follows:
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     "15.2  Rule 16b-3.  To the extent any action by the Plan administrators
            ----------
     does not comply with the requirements of Rule 16b-3, it shall be deemed
     inoperative, to the extent permitted by law and deemed advisable by the
     Plan administrators, and shall not affect the validity of the Plan.  In the
     event Rule 16b-3 is revised or replaced, the Board of Directors of the
     Company may exercise discretion to modify this Plan in any respect
     necessary to satisfy the requirements of the revised exemption or its
     replacement."

     6.   All capitalized terms used in this Third Amendment and not otherwise
defined shall have the meanings assigned to them in the Plan. Except as modified
herein, all terms and conditions of the Plan shall remain in full force and
effect, which terms and conditions the parties hereto ratify and affirm.

                      [Page Break Intentionally Inserted]
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IN WITNESS WHEREOF, the undersigned have executed this THIRD AMENDMENT TO FIRST
AMENDED AND RESTATED 1994 EMPLOYEE STOCK AND UNIT OPTION PLAN as of the date
first above written.


CHARLES E. SMITH RESIDENTIAL REALTY, INC., for itself and as general partner of
Charles E. Smith Residential Realty L.P.


BY:  /s/ Ernest A. Gerardi, Jr.
    ---------------------------------------
Ernest A. Gerardi, Jr., President


This Third Amendment to the Plan was duly adopted and approved by the Board of
Directors of the Company at a meeting of the Board of Directors held on October
25, 1999.


 /s/ Robert D. Zimet
------------------------------------
Robert D. Zimet
Secretary of the Company