exv10w06



 






EXHIBIT
10.06




FIRST AMENDMENT TO THE

AMENDED AND RESTATED AGREEMENT OF

LIMITED PARTNERSHIP OF UNITED DOMINION REALTY, L.P.




     This First Amendment to the Amended and Restated Agreement of Limited Partnership of United
Dominion Realty, L.P., dated as of June 24, 2005 (this “Amendment”), is being executed by United
Dominion Realty Trust, Inc., a Maryland corporation (the “Company”), as the general partner of
United Dominion Realty, L.P., a Delaware limited partnership (the “Partnership”), pursuant to the
authority conferred upon the Company by Section 11.01 of the Amended and Restated Agreement of
Limited Partnership of United Dominion Realty, L.P., dated as of February 23, 2004, as amended
and/or supplemented from time to time (the “Agreement”). Capitalized terms used, but not otherwise
defined herein, shall have the respective meanings ascribed thereto in the Agreement.



     WHEREAS, pursuant to Section 4.02(a) of the Agreement, the Company is authorized to determine
the designations, preferences and relative, participating, optional or other special rights, powers
and duties of Partnership Units.



     NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:



     (1) The Agreement is hereby amended by the addition of a new exhibit, titled “Exhibit E,” in
the form attached hereto, which shall be attached and made a part of the Agreement.



     (2) Except as specifically amended hereby, the terms, covenants, provisions and conditions of
the Agreement shall remain unmodified and continue in full force and effect and, except as amended
hereby, all of the terms, covenants, provisions and conditions of the Agreement are hereby ratified
and confirmed in all respects.



     IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.



	 	 	 	 	 
	 	UNITED DOMINION REALTY TRUST, INC.

 	 
	 	By:  	/s/ Mary Ellen Norwood
 	 
	 	 	Mary Ellen Norwood 	 
	 	 	Vice President - Legal Administration 	 
	 




 









 








EXHIBIT E




PARTNERSHIP UNIT DESIGNATION

OF THE

CLASS III OUT-PERFORMANCE PARTNERSHIP SHARES

OF UNITED DOMINION REALTY, L.P.





     1. NUMBER OF UNITS AND DESIGNATION.



     A class of Partnership Units is hereby designated as “Class III Out-Performance Partnership
Shares,” and the number of Partnership Units initially constituting such class shall be seven
hundred fifty thousand (750,000).



     2. DEFINITIONS.



     For purposes of this Partnership Unit Designation, the following terms shall have the meanings
indicated in this Section 2. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Agreement.



     “Change of Control” shall mean the occurrence of any of the following events:



     (i) an acquisition of any voting securities of the Company (the “Voting Securities”) by any
“person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) immediately after which such
person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) (“Beneficial Ownership,” “Beneficial Owner” or “Beneficially Owned,” as the specific context
requires) of 30% or more of the combined voting power of the Company’s then-outstanding Voting
Securities; provided, however, in determining whether a Change in Control has occurred, Voting
Securities that are acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition that would cause a Change in Control. “Non-Control Acquisition” shall
mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained
by (1) the Company or (2) any corporation, partnership or other person of which a majority of its
voting power or its equity securities or equity interest is owned directly or indirectly by the
Company or in which the Company serves as a general partner or manager (a “Subsidiary”), (B) the
Company or any Subsidiary, or (C) any person in connection with a Non-Control Transaction (as
hereinafter defined);



     (ii) the individuals who constitute the Board of Directors of the Company as of June 24, 2005
(the “Incumbent Board”) cease for any reason to constitute at least two-thirds (2/3) of the members
of the Board of Directors of the Company; provided, however, that if the election, or nomination
for election by the Company’s stockholders, of any new director was approved by a vote of at least
two-thirds (2/3) of the Incumbent Board, such new director shall be considered as a member of the
Incumbent Board; provided, further, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of either an actual or



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threatened “election contest” (as described in Rule 14a-11 promulgated under the Exchange Act)
(an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board of Directors of the Company (a “Proxy Contest”) including
by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or



     (iii) approval by stockholders of the Company of: (A) a merger, consolidation, share exchange
or reorganization involving the Company, unless (1) the stockholders of the Company immediately
before such merger, consolidation, share exchange or reorganization, own, directly or indirectly
immediately following such merger, consolidation, share exchange or reorganization, at least 60% of
the combined voting power of the outstanding voting securities of the corporation that is the
successor in such merger, consolidation, share exchange or reorganization (the “Surviving Company”)
in substantially the same proportion as their ownership of the Voting Securities immediately before
such merger, consolidation, share exchange or reorganization, (2) the individuals who were members
of the Incumbent Board immediately prior to the execution of the agreement providing for such
merger, consolidation, share exchange or reorganization constitute at least two-thirds (2/3) of the
members of the board of directors of the Surviving Company, and (3) no persons (other than the
Company or any Subsidiary of the Company, any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Company or any Subsidiary of the Company), or any
person who, immediately prior to such merger, consolidation, share exchange or reorganization had
Beneficial Ownership of 30% or more of the then-outstanding Voting Securities has Beneficial
Ownership of 30% or more of the combined voting power of the Surviving Company’s then-outstanding
voting securities (a transaction described in clauses (1) through (3) is referred to herein as a
“Non-Control Transaction”); (B) a complete liquidation or dissolution of the Company; or (C) an
agreement for the sale or other disposition of all or substantially all of the assets of the
Company to any person (other than a transfer to a Subsidiary of the Company).



     Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because
any person (a “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of
the outstanding Voting Securities as a result of the acquisition of Voting Securities by the
Company that, by reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Subject Person, provided that if a Change of Control
would occur (but for the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company, such Subject Person
becomes the Beneficial Owner of any additional Voting Securities that increases the percentage of
the then-outstanding Voting Securities Beneficially Owned by such Subject Person, then a Change of
Control shall occur.



     “Class III Out-Performance Partnership Share” shall mean a Partnership Unit with the
designations, preferences and relative, participating, optional or other special rights, powers and
duties as are set forth in this Exhibit E.



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     “Class III Out-Performance Valuation Date” shall mean the earlier to occur of (i) May 30,
2008, or (ii) the date on which a Change of Control occurs.



     “Conversion Factor” shall mean the quotient obtained by dividing (i) the product of 2% of the
Excess Return and the UDR Market Capitalization (provided, however, that the product obtained by
this clause (i) shall not exceed 1% of the UDR Market Capitalization) by (ii) the market value of
one REIT Share on the Class III Out-Performance Valuation Date, computed as the weighted average
price per day of the REIT Shares for the 20 trading days immediately preceding the Class III
Out-Performance Valuation Date.



     “Determination Date” shall mean (i) when used with respect to any dividend or other
distribution, the date fixed for the determination of the holders of the securities entitled to
receive such dividend or distribution, or, if a dividend or distribution is paid or made without
fixing such a date, the date of such dividend or distribution, and (ii) when used with respect to
any split, subdivision, reverse stock split, combination or reclassification of securities, the
date upon which such split, subdivision, reverse stock split, combination or reclassification
becomes effective.



     “Excess Return” shall mean the amount, if any, by which the cumulative Total Return of REIT
Shares over the Measurement Period exceeds the Minimum Return.



     “Ex-Date” shall mean (i) when used with respect to any dividend or distribution, the first
date on which the securities on which the dividend or distribution is payable trade regular way on
the relevant exchange or in the relevant market without the right to receive such dividend or
distribution, and (ii) when used with respect to any split, subdivision, reverse stock split,
combination or reclassification of securities, the first date on which the securities trade regular
way on such exchange or in such market to reflect such split, subdivision, reverse stock split,
combination or reclassification becoming effective.



     “Extraordinary Distribution” shall mean the distribution by the Company, by dividend or
otherwise, to all holders of its REIT Shares of evidences of its indebtedness or assets (including
securities) other than cash.



     “Family Controlled Entity” means, as to any holder of Class III Out-Performance Shares, (a)
any corporation more than 50% of the outstanding voting stock of which is owned by such holder and
such holder’s Family Members, (b) any trust, whether or not revocable, of which such holder and
such holder’s Family Members are the sole beneficiaries, (c) any partnership of which such holder
and such holder’s Family Members hold partnership interests representing at least 25% of such
partnership’s capital and profits and (d) any limited liability company of which such holder is the
manager and in which such holder and such holder’s Family Members hold membership interests
representing at least 25% of such limited liability company’s capital and profits.



     “Family Members” means, as to a Person that is an individual, such Person’s spouse, ancestors,
descendants (whether by blood or by adoption), brothers, sisters and



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inter vivos or testamentary trusts of which only such Person and his spouse, ancestors,
descendants (whether by blood or by adoption), brothers and sisters are beneficiaries.



     “Initial Holder” shall mean UDR Out-Performance III, LLC, a Delaware limited liability
company.



     “Measurement Period” shall mean the 36-month period beginning June 1, 2005 and ending on May
30, 2008.



     “Minimum Return” shall mean the cumulative Total Return of the REIT Shares during the
Measurement Period is at least the equivalent of a 36% Total Return or 12% annualized.



     “Partnership” shall mean United Dominion Realty, L.P., a Delaware limited partnership.



     “Total Return” shall mean, for any security and for any period, the cumulative total return
for such security over such period, assuming that all cash dividends are reinvested in such
security as of the payment date for such dividend based on the security price on the dividend
payment date, computed by taking the market value of the accumulated shares at the end of the
period (including fractional shares acquired with dividend proceeds) and dividing by the market
value of a share at the beginning of the period.



     “UDR Market Capitalization” shall mean the average number of REIT Shares outstanding over the
Measurement Period (including, for this purpose, REIT Shares, Partnership Units and common stock
equivalents, but not including Class III Out-Performance Partnership Shares) multiplied by the
daily closing price of the REIT Shares.



     “UDR Total Return” shall mean the Total Return of the REIT Shares for the Measurement Period.



     3. FORFEITURE.



     If, on the Class III Out-Performance Valuation Date, there is no Excess Return, then, from and
after such date, each Class III Out-Performance Partnership Share shall, without any action on the
part of the Partnership, the Company or the holder thereof, be automatically forfeited and be no
longer outstanding.



     4. DISTRIBUTIONS.



     Subject to Section 5.06 of the Agreement, on and after the Class III Out-Performance Valuation
Date, the holders of Class III Out-Performance Partnership Shares not forfeited under Section 3
shall be entitled to receive distributions at the same time and in the same amount that would be
received on the number of Partnership Units held by Outside Partners (assuming such Partnership
Units were originally issued on the



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Class III Out-Performance Valuation Date) that is obtained by multiplying the number of Class
III Out-Performance Partnership Shares by the Conversion Factor.



     5. ALLOCATIONS.



          (a) From and after the Class III Out-Performance Valuation Date, Profits and Losses shall be
allocated to each of the holders of Class III Out-Performance Partnership Shares not forfeited
under Section 3 at the same time and in the same amount that would be allocated on the number of
Partnership Units held by Outside Partners (assuming such Partnership Units were originally issued
on the Class III Out-Performance Valuation Date) that is obtained by multiplying the number of
Class III Out-Performance Partnership Shares by the Conversion Factor.



          (b) In the event that the Partnership disposes of all or substantially all of its assets in a
transaction that will lead to a liquidation of the Partnership pursuant to Article II of the
Agreement, then, notwithstanding Section 5.06 of the Agreement, each holder of Class III
Out-Performance Partnership Shares not forfeited under Section 3 shall be, to the extent possible,
specially allocated items of Partnership income and gain in an amount sufficient to cause the
Capital Account of such holder to be equal to that of an Outside Partner that holds Partnership
Units equal to the number of Class III Out-Performance Partnership Shares held by such holder
multiplied by the Conversion Factor. Amounts allocated pursuant to this Section 5(b) shall be
excluded from “Profits” and “Losses” otherwise determined under the Agreement.



     6. EXCHANGE.



     If the Class III Out-Performance Partnership Shares have not been forfeited under Section 3
and the Class III Out-Performance Partnership Shares have been transferred by the Initial Holder in
accordance with Section 8, the transferee and subsequent transferees of the Class III
Out-Performance Partnership Shares may exchange from time to time some or all of the Class III
Out-Performance Partnership Shares for a number Partnership Units equal to the Class III
Out-Performance Partnership Shares multiplied by the Conversion Factor.



     7. REDEMPTION UPON CHANGE OF CONTROL.



     Upon the occurrence of a Change of Control, and subject to the applicable requirements of
Federal securities laws and any securities exchange or quotation system rules or regulations, each
holder of Class III Out-Performance Partnership Shares shall have the redemption rights of Limited
Partners set forth in Section 8.05 of the Agreement with respect to a number of Partnership Units
equal to the number of Class III Out-Performance Partnership Shares multiplied by the Conversion
Factor and the thirty-six (36) month transfer limitation period applicable to the Class III
Out-Performance Partnership Shares shall be deemed to have passed.



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     8. RESTRICTIONS ON OWNERSHIP AND TRANSFER.



     The restrictions on Transfer set forth in Article IX of the Agreement shall not apply to
Transfers of Class III Out-Performance Partnership Shares. Prior to the Class III Out-Performance
Valuation Date, the Class III Out-Performance Partnership Shares shall be owned and held solely by
the Initial Holder. On or after the later of the Class III Out-Performance Valuation Date and the
thirty-six (36) month period from the date the Class III Out-Performance Partnership Shares are
issued the Class III Out-Performance Partnership Shares may be Transferred (i) by the Initial
Holder to (a) any Person who is a member (a “Member”) of the Initial Holder immediately prior to
such transfer, (b) a Family Member of a Member, (c) a Family Controlled Entity of a Member, (d) any
Person with respect to whom the Member constitutes a Family Controlled Entity, (e) upon the death
of a Member, by will or by the laws of descent and distribution to any Family Member or Family
Controlled Entity, and (ii) by any other Person to (a) a Family Member of a such Person, (b) a
Family Controlled Entity of such Person, (c) any other Person with respect to whom such Person
constitutes a Family Controlled Entity, (d) upon the death of such Person, by will or by the laws
of descent and distribution to any Family Member or Family Controlled Entity; provided, however,
that, until May 30, 2008, the Class III Out-Performance Partnership Shares may not be Transferred
by the Initial Holder without the approval of the managers of the Initial Holder.



     9. ADJUSTMENTS.



          (a) In the event of any Extraordinary Distribution occurring on or after May 3, 2005, for
purposes of determining the Value of a REIT Share or the UDR Total Return, each price of a REIT
Share determined as of a date on or after the Ex-Date for such Extraordinary Distribution shall be
adjusted by multiplying such price by a fraction (i) the numerator of which shall be the price of a
REIT Share on the date immediately prior to such Ex-Date, and (ii) the denominator of which shall
be (A) the price of a REIT Share on the date immediately prior to such Ex-Date, minus (B) the fair
market value on the date fixed for such determination of the portion of the evidences of
indebtedness or assets so distributed applicable to one REIT Share (as determined by the Company,
whose determination shall be conclusive); provided further, that such amount shall be so adjusted
for each such Extraordinary Distribution occurring on or after May 3, 2005.



          (b) In the event that, on or after May 3, 2005, the Company (i) declares or pays a dividend on
its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its
outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares,
(iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a
smaller number of REIT Shares, or (iv) otherwise reclassifies its outstanding REIT Shares, then,
for purposes of determining the Value of a REIT Share or the UDR Total Return, each price of a REIT
Share determined as of a date on or after the Ex-Date for such transaction shall be adjusted by
multiplying such price by a fraction (x) the numerator of which shall be the number of REIT Shares
issued and outstanding on the Determination Date for such dividend, distribution, split,
subdivision, reverse stock split, combination or reclassification (assuming for such purposes that
such dividend, distribution, split, subdivision, reverse



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split or combination has occurred as of such time) and (y) the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption) issued and outstanding
on the Determination Date for such dividend, distribution, split, subdivision, reverse stock split,
combination or reclassification.




          (c) The Company shall have authority to appropriately adjust the UDR Market Capitalization,
the UDR Total Return or the Value of a REIT Share if any other transaction or circumstance occurs
or arises that without such adjustment would have an inequitable result.



     10. GENERAL.



     The ownership of Class III Out-Performance Partnership Shares may (but need not, in the sole
and absolute discretion of the Company) be evidenced by one or more certificates. The Company
shall amend Exhibit A to the Agreement from time to time to the extent necessary to reflect
accurately the issuance of, and subsequent conversion, redemption, or any other event having an
effect on the ownership of Class III Out-Performance Partnership Shares.




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