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exv4w4

Exhibit 4.4

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BARCLAYS PLC

 

RULES OF THE

BARCLAYS LONG TERM INCENTIVE PLAN

 

Approved by shareholders of Barclays PLC on • 2011

Adopted by the Board Remuneration Committee of Barclays PLC on • 2011

The Plan is a discretionary benefit offered by Barclays Group for the benefit of its employees.
Its main purpose is to align the interest of the employees with Barclays long term business goals
and performance. The Plan is an incentive for the employees’ future performance and commitment to
the goals of the Barclays Group.

Securities purchased or received under the Plan, any cash received under the Plan and any gains
obtained under the Plan are not part of salary for any purpose (except to any extent required by
statute).

The Plan is being offered for the first time in 2011 and the Board Remuneration Committee of
Barclays PLC shall have the right to decide, in its sole discretion, whether or not awards will be
granted in 2011 or in the future. The detailed rules of the Plan are set out overleaf.

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CONTENTS

	 	 	 	 	 
	Rule	 	Page	 
	1. Definitions and Interpretation
	 	 	1	 
	 
	2. Grant of Awards
	 	 	4	 
	 
	3. Limits
	 	 	6	 
	 
	4. Vesting of Awards
	 	 	8	 
	 
	5. Consequences of Vesting
	 	 	10	 
	 
	6. Exercise of Options
	 	 	11	 
	 
	7. Cash Alternative
	 	 	12	 
	 
	8. Lapse of Awards
	 	 	13	 
	 
	9. Leavers and deceased participants
	 	 	13	 
	 
	10. Takeovers and Other Corporate Events
	 	 	14	 
	 
	11. Adjustment of Awards
	 	 	16	 
	 
	12. Alterations
	 	 	16	 
	 
	13. Miscellaneous
	 	 	17	 
	 
	SCHEDULE 1: FORFEITABLE AWARDS
	 	 	20	 
	 
	SCHEDULE 2: CASH AWARDS
	 	 	21	 
	 
	SCHEDULE 3: UNITED STATES ADDENDUM
	 	 	22	 

 

 

	1.	 	DEFINITIONS AND INTERPRETATION
	 
	1.1	 	In the Plan, unless the context otherwise requires:
	 
	 	 	“Award” means a Conditional Award, a Forfeitable Award, an Option, a Provisional Allocation
or such other form of award as determined by the Grantor on or before the Grant Date which
may relate to Shares or to Capital Instruments;
	 
	 	 	“Board” means the board of directors of the Company or a duly authorised committee of the
Board or a duly authorised person;
	 
	 	 	“Capital Instrument” means a capital instrument or security issued by a Member of the Group
from time to time;
	 
	 	 	“Cash Award” means an Award which relates to a cash sum granted under Schedule 2 to the
Plan;
	 
	 	 	“Committee” means the remuneration committee of the Board (or a duly authorised committee
thereof or a duly authorised person) or, on and after the occurrence of a corporate event
described in Rule 10 (Takeovers and other corporate events), the remuneration committee of
the Board as constituted immediately before such event occurs;
	 
	 	 	“Company” means Barclays PLC (registered in England and Wales with registered number 48839);
	 
	 	 	“Conditional Award” means a conditional right to acquire Securities granted under the Plan;
	 
	 	 	“Control” means control within the meaning of section 995 of the Income Tax Act 2007;
	 
	 	 	“Coupon” means an amount paid as interest or a similar payment in respect of a Capital
Instrument subject to an Award over all or part of the Vesting Period;
	 
	 	 	“Coupon Equivalent Amount” means an amount equal to the value of any Coupons paid on the
Capital Instruments subject to an Award which would have been paid to the Participant in
respect of the Capital Instruments acquired on the exercise of an Option or Vesting of a
Conditional Award or Provisional Allocation between the Grant Date and the date on which the
Option first became exercisable or the Conditional Award or Provisional Allocation Vested as
the case may be, had those Capital Instruments been beneficially owned by the Participant
during that period;
	 
	 	 	“Dividend Equivalent Amount” means an amount equal to the aggregate dividends (excluding any
related tax credits and any dividends of a special or exceptional nature unless the
Committee in its absolute discretion determines that they shall be included) which would
have been paid to the Participant in respect of the Shares acquired on the exercise of an
Option or Vesting of a Conditional Award or Provisional Allocation between the Grant Date
and the date on which the Option first became exercisable or the Conditional Award or
Provisional Allocation Vested, as the case may be, had those Shares been beneficially owned
by the Participant during that period;
	 
	 	 	“Early Vesting Date” means either:

	 	(a)	 	the date of cessation of employment of a Participant in the circumstances
referred to in Rule 9.1 (Deceased Participants) and Rule 9.2 (Good leavers); or
	 
	 	(b)	 	a date of notification referred to in Rule 10.1 (General offers), the date of
the relevant event referred to in Rule 10.2 (Schemes of arrangement and winding up) or
the date of Vesting referred to in Rule 10.3 (Demergers and similar events);

	 	 	“Exercise Period” means the period referred to in Rule 5.2 (Options) during which an Option
may be exercised;

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	 	 	“Eligible Employee” means any person who is an employee or former employee (including an
executive director) of a Participating Company and who is deemed eligible to participate by
the Grantor;
	 
	 	 	“Employer” means the current or former Member of the Group that employs the Participant at
the relevant time;
	 
	 	 	“Forfeitable Award” means the transfer of the beneficial interest in Forfeitable Securities
to a Participant and the subsequent holding of that interest in accordance with the Plan;
	 
	 	 	“Forfeitable Securities” means Securities comprised in a Forfeitable Award which are subject
to certain restrictions and forfeiture under the Plan;
	 
	 	 	“Grant Date” means the date on which an Award is granted;
	 
	 	 	“Grantor” means the Committee or the Trustees, as the case may be, and where the Trustees
grant the Award, the grant shall only be made following consultation with the Committee and
the Trustees may only exercise their discretions under Rules 2 (Grant), 4 (Vesting), 9
(Leavers) and 10 (Takeovers and other Corporate Events) of the Plan following consultation
with the Committee;
	 
	 	 	“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003;
	 
	 	 	“Listing Rules” means the Listing Rules published by the UKLA;
	 
	 	 	“London Stock Exchange” means London Stock Exchange plc or any successor to that company;
	 
	 	 	“Market Value” means, in relation to a Security and / or an Option on any date, such value
of a Security and/or Option as the Grantor reasonably determines;
	 
	 	 	“Member of the Group” means:

	 	(a)	 	a Participating Company or a body corporate which is the Company’s holding
company (within the meaning of section 1159 of the Companies Act 2006) or a Subsidiary
of the Company’s holding company; and
	 
	 	(b)	 	a body corporate which is a subsidiary undertaking (within the meaning of
section 1162 of that Act) of a body corporate within paragraph (a) above and has been
designated by the Board for this purpose

	 	 	and “Group” shall be construed accordingly;
	 
	 	 	“Normal Vesting Date” means the date on which an Award vests under Rule 4.1 (Timing of
Vesting: Normal Vesting Date);
	 
	 	 	“Option” means a right to acquire Securities granted under the Plan which is designated as
an option by the Grantor;
	 
	 	 	“Option Price” means the amount, if any, payable on the exercise of an Option;
	 
	 	 	“Participant” means a person who holds an Award including his personal representatives;
	 
	 	 	“Participating Company” means the Company or any Subsidiary of the Company;
	 
	 	 	“Performance Condition” means a condition related to performance which is specified by the
Grantor under Rule 2.1 (Terms of grant);
	 
	 	 	“Plan” means the Barclays Long Term Incentive Plan as amended from time to time;

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	 	 	“Provisional Allocation” means a provisional award of Securities awarded by the Trustees
which does not (i) constitute the acquisition by a Participant of an interest in the
Securities awarded to him or the acquisition of a right to acquire those Securities or (ii)
entitle a Participant to claim any interest in the trust fund of the Trust or to compel the
Trustees to pay or apply any of the capital or income comprised in the trust fund of the
Trust to or for the benefit of a Participant;
	 
	 	 	“Risk Committee” means the Barclays Group Risk Committee (or a duly authorised committee
thereof or a duly authorised person);
	 
	 	 	“Rules” means the rules of the Plan as set out in this document and “Rule” shall be
construed accordingly;
	 
	 	 	“Security” means a Capital Instrument or a Share as the context requires;
	 
	 	 	“Shares” means fully paid ordinary shares in the capital of the Company;
	 
	 	 	“Subsidiary” means a body corporate which is a subsidiary (within the meaning of section
1159 of the Companies Act 2006);
	 
	 	 	“Tax Liability” means any amount of tax or social security contributions for which a
Participant would or may be liable and for which any Member of the Group or former Member of
the Group or the Trustees would or may be obliged to (or would or may suffer a disadvantage
if it were not to) account to any relevant authority;
	 
	 	 	“Trust” means the Barclays Group (PSP) Employees’ Benefit Trust established by a trust deed
made between Barclays Bank PLC (1) and Mourant & Co Trustees Limited (2) on 5 August 1996 as
amended from time to time (and of which Appleby Trust (Jersey) Limited is the current
trustee);
	 
	 	 	“Trustees” means the trustee or trustees for the time being of the Trust;
	 
	 	 	“UKLA” means the United Kingdom Listing Authority;
	 
	 	 	“US Participant” means a Participant who (i) is resident in, or a citizen or green card
holder of, the United States of America on the Grant Date, (ii) is otherwise subject to US
taxation on the Grant Date or (iii) becomes subject to US taxation prior to exercise or
Vesting of an Award;
	 
	 	 	“Vest” means:

	 	(a)	 	in relation to a Conditional Award, a Participant becoming entitled to have
Securities transferred to him (or his nominee account ) subject to the Rules;
	 
	 	(b)	 	in relation to an Option, it becoming exercisable;
	 
	 	(c)	 	in relation to a Forfeitable Award, the restrictions imposed on the Forfeitable
Securities under the Plan ceasing to apply;
	 
	 	(d)	 	in relation to a Provisional Allocation, the Trustees determining in their
absolute discretion to release some or all of the Securities subject to the Provisional
Allocation

	 	 	and “Vesting” shall be construed accordingly;
	 
	 	 	“Vesting Period” means the period starting on the Grant Date and ending on the date on which
Securities subject to an Award actually Vest; and
	 
	 	 	“Vested Securities” means those Securities in respect of which an Award has Vested.

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	 	 	Any reference in the Plan to any enactment includes a reference to that enactment as from
time to time modified, extended or re-enacted. Where the context permits, the singular
shall include the plural and vice versa and the masculine gender shall include the feminine.
	 
	 	 	Expressions in italics and headings are for guidance only and do not form part of the Plan.
	 
	2.	 	GRANT OF AWARDS
	 
	2.1	 	Terms of grant
	 
	 	 	Subject to Rule 2.6 (Timing of grant), Rule 2.8 (Approvals and consents) and Rule 3
(Limits), the Grantor may from time to time, in its absolute discretion, grant Awards to
such Eligible Employees as it shall, in it absolute discretion, select in accordance with:

	 	(a)	 	the Rules; and
	 
	 	(b)	 	such additional terms (whether a Performance Condition and/or any other terms)
as the Grantor may specify, including (without limitation) the application of an
additional holding period applying to the Securities following Vesting as the Grantor
may decide at its absolute discretion.

	 	 	The Grantor may grant an Award subject to such Performance Condition as it, in its absolute
discretion, thinks fit which must (save as otherwise provided in the Rules) be fulfilled
before the Award may Vest. No such Performance Condition may subsequently be altered unless
circumstances occur which cause the Grantor to determine that such Performance Condition
shall have ceased to be appropriate, whereupon the Grantor may, in its absolute discretion,
alter the Performance Condition or replace it with a new Performance Condition which will,
in the reasonable opinion of the Grantor, be not materially less difficult to satisfy than
the unaltered Performance Condition would have been but for the event in question.
	 
	2.2	 	Grant of Award to US Participant
	 
	 	 	Where an Award is granted under Rule 2.1 (Terms of grant) to a US Participant, such Award
shall be subject to the provisions of Schedule 3 to the Plan (United States Addendum).
	 
	2.3	 	Method of grant
	 
	 	 	An Award shall be granted as follows:

	 	(a)	 	a Conditional Award or an Option shall be granted by deed executed by the
Company or the Trustees as the case may be;
	 
	 	(b)	 	if an Award is an Option, the Grantor shall determine the Option Price (if any)
on or before the Grant Date provided that the Grantor may reduce or waive such Option
Price on or prior to the exercise of the Option;
	 
	 	(c)	 	a Forfeitable Award shall be granted by the procedure set out in Schedule 1 to
the Plan (Grant of a Forfeitable Award);
	 
	 	(d)	 	an Award that is not a Conditional Award, an Option or a Forfeitable Award
shall be granted by the procedure set out by the Company from time to time.

	 	 	Each Participant shall, as soon as reasonably practicable after the Grant Date, be issued
with a certificate or notification evidencing his Award and setting out its terms and
conditions (including whether the Participant will be required to pay the nominal value of
any Securities that he receives under this Award) and any Performance Condition determined
under Rule 2.1 (Terms of grant).

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	2.4	 	Dividend Equivalent Amount and Coupon Equivalent Amount
	 
	 	 	The Grantor may in its absolute discretion determine to provide a Dividend Equivalent Amount
or Coupon Equivalent Amount, as applicable, to the Participant on the Vesting of an Award.
The Dividend Equivalent Amount or Coupon Equivalent Amount may be satisfied, at the absolute
discretion of the Grantor:

	 	(a)	 	in cash, subject to any deductions on account of any Tax Liability as may be
required by law or as the Grantor may consider necessary or desirable, as soon as
reasonably practicable after the exercise or Vesting of the Award; and/or
	 
	 	(b)	 	in whole or in part by the issue or transfer to the Participant (or his nominee
account ) of the number of Securities which could be subscribed or purchased using the
cash amount (or part thereof) of the Dividend Equivalent Amount or Coupon Equivalent
Amount at a price equal to the Market Value of the Securities on the date of payment.
Rule 4.3 (Restrictions on Vesting: regulatory and tax issues) and Rule 4.5 (Payment of
Tax Liability) shall apply as if the provision of Securities was the Vesting of an
Award.

	 	 	Any Dividend Equivalent Amount or Coupon Equivalent Amount does not form part of a
Participant’s Award. This Rule shall not apply in the case of any Forfeitable Award under
which a Participant is entitled to receive dividends or any Coupon from the Grant Date.
	 
	2.5	 	Method of satisfying Awards
	 
	 	 	Unless specified to the contrary by the Grantor on the Grant Date:

	 	(a)	 	an Award of Shares may be satisfied:

	 	(i)	 	by the issue of new Shares; and/or
	 
	 	(ii)	 	by the transfer of Shares out of treasury; and/or
	 
	 	(iii)	 	by the transfer of Shares (other than the transfer of Shares out of treasury);
and

	 	(b)	 	an Award of Capital Instruments may be satisfied by the issue of new Capital
Instruments and/or by the transfer of Capital Instruments.

	 	 	The Grantor may decide to change the way in which it is intended that an Award granted as a
Conditional Award, an Option or a Provisional Allocation may be satisfied after it has been
granted, having regard to the provisions of Rule 3 (Limits).
	 
	2.6	 	Timing of grant
	 
	 	 	Subject to Rule 2.8 (Approvals and consents), an Award may be granted:

	 	(a)	 	in the 6 weeks beginning with:

	 	(i)	 	the date on which the Plan is approved by the shareholders of
the Company; or
	 
	 	(ii)	 	the dealing day after the date on which the Company announces
its results for any period; or
	 
	 	(iii)	 	the removal of any restrictions imposed on the Grantor or the
Company which prevented an Award from being granted in the period mentioned in
(ii); or
	 
	 	(iv)	 	the date on which changes to any legislation or regulations
affecting the Plan are announced or made; or

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	 	(b)	 	at any other time when the Grantor so decides, provided that it is not
restricted from granting Awards at that time by law or regulation

	 	 	but an Award may not be granted after 27 April 2021 (being the expiry of the period of 10
years beginning with the date on which the Plan is approved by the shareholders of the
Company).
	 
	2.7	 	Non-transferability and bankruptcy
	 
	 	 	An Award granted to any person shall not be transferred, assigned, charged or otherwise
disposed of except on his death to his personal representatives and shall lapse immediately
on any attempt to do so and shall lapse immediately if he is declared bankrupt.
	 
	2.8	 	Approvals and consents
	 
	 	 	The grant of any Award shall be subject to obtaining any approval or consent required under
the Listing Rules, any relevant share dealing code of the Company, the City Code on
Takeovers and Mergers, or any other UK or overseas regulation or enactment.
	 
	3.	 	LIMITS
	 
	3.1	 	5 per cent. in 10 years limit
	 
	 	 	An Award shall not be granted in any calendar year if, at the time of its proposed Grant
Date, it would cause the number of Shares allocated in the period of 10 calendar years
ending with that calendar year under the Plan and under any other executive share plan
adopted by the Company to exceed such number as represents 5 per cent. of the ordinary share
capital of the Company in issue at that time.
	 
	3.2	 	10 per cent. in 10 years limit
	 
	 	 	An Award shall not be granted in any calendar year if, at the time of its proposed Grant
Date, it would cause the number of Shares allocated in the period of 10 calendar years
ending with that calendar year under the Plan and under any other employee share plan
adopted by the Company to exceed such number as represents 10 per cent. of the ordinary
share capital of the Company in issue at that time.
	 
	3.3	 	Meaning of “allocated”
	 
	 	 	For the purposes of Rules 3.1 (5 per cent. in 10 years limit) and 3.2 (10 per cent. in 10
years limit):

	 	(a)	 	Shares are allocated when an option, award or other contractual right to
acquire unissued Shares or Shares transferred out of treasury is granted and, where
Shares are issued or Shares transferred out of treasury are transferred otherwise than
pursuant to an option, award or other contractual right to acquire Shares, when those
Shares are issued or Shares transferred out of treasury;
	 
	 	(b)	 	any Shares which have been issued or which may be issued (or any Shares
transferred out of treasury or which may be transferred out of treasury) to any
trustees to satisfy the exercise of any option, award or other contractual right
granted under any employee share plan shall count as allocated unless they are already
treated as allocated under this Rule; and
	 
	 	(c)	 	for the avoidance of doubt, existing Shares other than Shares that are
transferred out of treasury or over which options, awards or other contractual rights
are granted shall not count as allocated.

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	3.4	 	Post-grant events affecting numbers of “allocated” Shares
	 
	 	 	For the purposes of Rule 3.3 (Meaning of “allocated“):

	 	(a)	 	where:

	 	(i)	 	any option, award or other contractual right to acquire
unissued Shares or treasury Shares is released or lapses (whether in whole or
in part); or
	 
	 	(ii)	 	after the grant of an option, award or other contractual right
the Grantor determines that:

	 	(A)	 	where an amount is normally payable on its exercise it shall be
satisfied without such payment but instead by the payment of cash equal
to the gain made on its exercise; or
	 
	 	(B)	 	it shall be satisfied by the transfer of existing Shares (other
than Shares transferred out of treasury)

	 	 	 	the unissued Shares or treasury Shares which consequently cease to be subject to the
option, award or other contractual right shall not count as allocated; and
	 
	 	(b)	 	the number of Shares allocated in respect of an option, award or other
contractual right shall be such number as the Board shall reasonably determine from
time to time.

	3.5	 	Changes to investor guidelines
	 
	 	 	Shares transferred out of treasury shall cease to count as allocated Shares for the purposes
of Rule 3.4 (Post-grant events affecting numbers of “allocated” Shares) if institutional
investor guidelines cease to require such Shares to be so counted.
	 
	3.6	 	Individual limits
	 
	 	 	The maximum total Market Value of Securities over which Awards may be granted (or where
relevant, in the case of an Option, the Market Value of any such Option that may be granted)
during any financial year of the Company is:

	 	(a)	 	in the case of an Eligible Employee who is an executive director of the Company, 500% of
his salary (as defined in this Rule) or where the individual in question commenced
employment with any Member of the Group within the previous 12 months or the Grantor in its
discretion decides that exceptional circumstances exist in relation to such executive
director, such percentage as the Grantor may determine; and
	 
	 	(b)	 	in the case of an Eligible Employee who is not an executive director of the Company,
such percentage of his salary (as defined in this Rule) as the Grantor decides is fair and
reasonable.

	 	 	For the purpose of this Rule 3.6, an Eligible Employee’s salary shall be taken to be his
base salary (excluding benefits in kind), expressed as an annual rate payable by the
Participating Companies to him on the Grant Date (or such earlier date as the Grantor shall
determine). Where a payment of salary is made in a currency other than sterling, the
payment shall be treated as equal to the equivalent amount of sterling determined by using
any rate of exchange which the Grantor may reasonably select.
	 
	3.7	 	Effect of limits
	 
	 	 	Any Award shall be limited and take effect so that the limits in this Rule 3 (Limits) are
complied with.

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	3.8	 	Restriction on use of unissued Shares and Shares transferred out of treasury
	 
	 	 	No Shares may be issued or Shares transferred out of treasury to satisfy the Vesting of any
Award or the exercise of any Option to the extent that such issue or transfer would cause
the number of Shares allocated (as defined in Rule 3.3 (Meaning of “allocated”) and adjusted
under Rule 3.4 (Post-grant events affecting numbers of “allocated” Shares)) to exceed the
limits in Rules 3.1 (5 per cent. in 10 years limit) and 3.2 (10 per cent. in 10 years limit)
except where there is a variation of share capital of the Company which results in the
number of Shares so allocated exceeding such limits solely by virtue of that variation.
	 
	4.	 	VESTING OF AWARDS
	 
	4.1	 	Timing of Vesting: Normal Vesting Date
	 
	 	 	Subject to Rule 4.3 (Restrictions on Vesting: regulatory and tax issues), an Award that is
not a Provisional Allocation shall Vest on the later of:

	 	(a)	 	the date on which the Committee determines whether or not any Performance
Condition and any other condition imposed on the Vesting of the Award has been
satisfied (in whole or part); and
	 
	 	(b)	 	the date or dates determined by the Grantor as the Normal Vesting Date(s)

	 	 	except where earlier Vesting occurs on an Early Vesting Date under Rule 9 (Leavers and
deceased Participants) or Rule 10 (Takeovers and other corporate events).
	 
	 	 	In the case of a Provisional Allocation, the Trustees shall, in their absolute discretion,
determine whether an Award may Vest on the later of the dates specified in (a) and (b)
above.
	 
	4.2	 	Extent of Vesting
	 
	 	 	An Award shall only Vest to the extent:

	 	(a)	 	that any Performance Condition is satisfied on the Normal Vesting Date or, if
appropriate, the Early Vesting Date;
	 
	 	(b)	 	as permitted by any other term imposed on the Vesting of the Award; and
	 
	 	(c)	 	in relation to Vesting before the Normal Vesting Date, as permitted by Rule 9
(Leavers and deceased Participants) or Rule 10 (Takeovers and other corporate events).

	 	 	Where, under Rule 9 (Leavers and deceased Participants) or Rule 10 (Takeovers and other
corporate events), an Award would (subject to the satisfaction of any Performance Condition)
Vest before the end of the full period over which performance would be measured under the
Performance Condition then, unless provided to the contrary by the Performance Condition,
the extent to which the Performance Condition has been satisfied in such circumstances shall
be determined by the Grantor on such reasonable basis as it decides.
	 
	4.3	 	Restrictions on Vesting: regulatory and tax issues
	 
	 	 	An Award shall not Vest unless and until the following conditions are satisfied:

	 	(a)	 	the Vesting of the Award, and the issue or transfer of Securities after such
Vesting would be lawful in all relevant jurisdictions and in compliance with the
Listing Rules, any relevant share dealing code of the Company, the City Code on
Takeovers and Mergers and any other relevant UK or overseas regulation or enactment;

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	 	(b)	 	if, on the Vesting of the Award, a Tax Liability would arise by virtue of such
Vesting and the Grantor decides that such Tax Liability shall not be satisfied by the
sale of Securities pursuant to Rule 4.5 (Payment of Tax Liability) then the Participant
must have entered into arrangements acceptable to the Grantor that the relevant Member
of the Group will receive the amount of such Tax Liability;
	 
	 	(c)	 	the Participant has entered into such arrangements as the Grantor requires (and
where permitted in the relevant jurisdiction) to satisfy a Member of the Group’s
liability to social security contributions in respect of the Vesting of the Award; and
	 
	 	(d)	 	where the Grantor requires, the Participant has entered into, or agreed to
enter into, a valid election under Part 7 of ITEPA (Employment income: election for
full or partial disapplication of Chapter 2 Part 7 of ITEPA) or any similar arrangement
in any overseas jurisdiction.

	 	 	For the purposes of this Rule 4.3, references to Member of the Group include any former
Member of the Group.
	 
	4.4	 	Tax liability before Vesting
	 
	 	 	If a Participant will, or is likely to, incur any Tax Liability before the Vesting of an
Award then that Participant must enter into arrangements acceptable to any relevant Member
of the Group to ensure that it receives the amount of such Tax Liability. If no such
arrangement is made then the Participant shall be deemed to have authorised the Company to
sell or procure the sale of sufficient of the Securities subject to his Award on his behalf
to ensure that the relevant Member of the Group receives the amount required to discharge
the Tax Liability and the number of Securities subject to his Award shall be reduced
accordingly.
	 
	 	 	For the purposes of this Rule 4.4, references to Member of the Group include any former
Member of the Group.
	 
	4.5	 	Payment of Tax Liability
	 
	 	 	The Participant authorises the Company to sell or procure the sale of sufficient Vested
Securities on or following the Vesting of his Award on his behalf to ensure that any
relevant Member of the Group or former Member of the Group receives the amount required to
discharge the Tax Liability which arises on Vesting except to the extent that the Grantor
decides that all or part of the Tax Liability shall be funded in a different manner in which
case Rule 4.3 (b) (Restrictions on Vesting: regulatory and tax issues) shall apply.
	 
	4.6	 	Prudent Financial Control
	 
	 	 	Notwithstanding any other provision of the Plan, and irrespective of whether any Performance
Condition attached to an Award has been satisfied, if the Grantor determines in its absolute
discretion that over the whole or any part of the Vesting Period the underlying financial
health of the Group has significantly deteriorated such that there are severe financial
constraints on the Group which preclude or limit the Group’s ability to facilitate funding
of Awards then:

	 	(a)	 	the Grantor may in its absolute discretion determine that the number of
Securities subject to an Award that may otherwise Vest may be limited, reduced and/or
made subject to any other condition as the Grantor considers in its absolute discretion
appropriate; and
	 
	 	(b)	 	in the absence of any determination under Rule 4.6(a), the Vesting of any
Securities that may otherwise Vest (including any Securities that have not Vested due
to the exercise of discretion under Rule 4.6 (a)) shall be suspended until such time as
the Grantor lifts such suspension or exercises discretion under Rule 4.6(a) PROVIDED
THAT to the extent that the Grantor has not lifted such suspension or exercised
discretion under Rule 4.6(a) within 3 years from the date specified at the Grant Date
as the final date on which such Securities

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	 	 	 	may Vest, any Award over such Securities shall lapse in its entirety, unless
otherwise determined by the Grantor in exceptional circumstances.

	4.7	 	Conduct conditions
	 
	 	 	Notwithstanding any other provision of the Plan, and irrespective of whether any Performance
Condition attached to an Award has been satisfied, the Grantor may determine in its absolute
discretion that the number of Securities subject to an Award that may otherwise Vest may be
reduced (to nil if appropriate) as a result of:

	 	(a)	 	the Group or any Subsidiary’s financial statements having been materially
restated at any time during the Vesting Period other than restatement due to a change
in accounting policy or to rectify a minor error;
	 
	 	(b)	 	the Participant having, in the reasonable opinion of the Committee, following
consultation with his Employer, deliberately misled the management of the Company, the
market and/or the Company’s shareholders regarding the financial performance of the
Group or of any Subsidiary at any time during the Vesting period;
	 
	 	(c)	 	the Participant’s actions at any time during the Vesting Period having, in the
reasonable opinion of the Committee, following consultation with his Employer, caused
harm to the reputation of the Group and/or the Participant’s business unit;
	 
	 	(d)	 	the Participant’s actions at any time during the Vesting Period having, in the
reasonable opinion of the Committee, following consultation with his Employer, amounted
to serious misconduct; or
	 
	 	(e)	 	the Group or the business in which the Participant works having, in the
reasonable opinion of the Committee, following consultation with the Risk Committee,
suffered a material failure of risk management.

	4.8	 	Change of jurisdiction
	 
	 	 	If a Participant relocates to another jurisdiction before his Award Vests and, as a result
of the relocation, the Participant or any Member of the Group would be subject to additional
tax or social security on the Vesting of the Award or the Vesting of the Award in that other
jurisdiction would be subject to any regulatory restriction, approval or consent, the
Grantor may determine that the Award may:

	 	(a)	 	Vest on such terms and during such period preceding the date on which the
Participant relocates as the Grantor may determine; or
	 
	 	(b)	 	be released by the Participant for a Cash Award.

	5.	 	CONSEQUENCES OF VESTING
	 
	5.1	 	Conditional Awards and Provisional Allocations
	 
	 	 	On or as soon as reasonably practicable after the Vesting of a Conditional Award or a
Provisional Allocation, the Grantor shall, subject to Rule 4.5 (Payment of Tax Liability)
and any arrangement made under Rules 4.3(b) and 4.3(c) (Restrictions on Vesting: regulatory
and tax issues), transfer or procure the transfer of the Vested Securities to the
Participant (or his nominee account).
	 
	5.2	 	Options
	 
	 	 	An Option shall, subject to Rule 6.1 (Restrictions on the exercise of an Option: regulatory
and tax issues), be exercisable in respect of Vested Securities for a period determined by
the Grantor at the

- 10 -

 

	 	 	Grant Date in its absolute discretion, but being a period of no longer than 10 years from
the Grant Date, beginning with the date on which the Option Vests unless it lapses earlier
under Rule 9.3 (Cessation of employment in other circumstances), Rule 10.1 (General offers),
Rule 10.2 (Schemes of arrangement and winding up) or Rule 10.3 (Demergers and similar
events).
	 
	 	 	If an Option is not exercised during the last 30 days of the Exercise Period because of any
regulatory restrictions referred to in Rule 6.1(a) (Restrictions on the exercise of an
Option: regulatory and tax issues), the Grantor may extend the period during which the
Option may be exercised so as to permit the Option to be exercised as soon as those
restrictions cease to apply.
	 
	5.3	 	Forfeitable Award
	 
	 	 	On the Vesting of a Forfeitable Award, the Vested Securities shall cease to be subject to
the restrictions imposed on the Forfeitable Securities under the Plan and the Grantor shall,
subject to Rule 4.5 (Payment of Tax Liability) and any arrangement made under Rules 4.3(b)
and 4.3(c) (Restrictions on Vesting: regulatory and tax issues), transfer or procure the
transfer of the legal title to the Vested Securities and/or any documents of title relating
to the Vested Securities to the Participant (or his nominee account ) on or as soon as
reasonably practicable after Vesting.
	 
	6.	 	EXERCISE OF OPTIONS
	 
	6.1	 	Restrictions on the exercise of an Option: regulatory and tax issues
	 
	 	 	An Option which has Vested may not be exercised unless the following conditions are
satisfied:

	 	(a)	 	the exercise of the Option and the issue or transfer of Securities after such
exercise would be lawful in all relevant jurisdictions and in compliance with the
Listing Rules, any relevant share dealing code of the Company, the City Code on
Takeovers and Mergers and any other relevant UK or overseas regulation or enactment;
	 
	 	(b)	 	if, on the exercise of the Option, a Tax Liability would arise by virtue of
such exercise and the Grantor decides that such Tax Liability shall not be satisfied by
the sale of Securities pursuant to Rule 6.4 (Payment of Tax Liability) then the
Participant must have entered into arrangements acceptable to the Grantor that the
relevant Member of the Group will receive the amount of such Tax Liability;
	 
	 	(c)	 	the Participant has entered into such arrangements as the Grantor requires (and
where permitted in the relevant jurisdiction) to satisfy a Member of the Group’s
liability to social security contributions in respect of the exercise of the Option;
and
	 
	 	(d)	 	where the Grantor requires, the Participant has entered into, or agreed to
enter into, a valid election under Part 7 of ITEPA (Employment income: elections to
disapply tax charge on restricted securities) or any similar arrangement in any
overseas jurisdiction.

	 	 	For the purposes of this Rule 6.1, references to Member of the Group include any former
Member of the Group.
	 
	6.2	 	Exercise in whole or part
	 
	 	 	An Option must be exercised to the maximum extent possible at the time of exercise unless
the Grantor decides that a Participant may exercise the Option in respect of such fewer
number of Securities as it decides.
	 
	6.3	 	Method of exercise
	 
	 	 	The exercise of any Option shall be effected in the form and manner prescribed by the
Grantor. Unless the Grantor acting fairly and reasonably determines otherwise, any notice
of exercise shall,

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	 	 	subject to Rule 6.1 (b) (Restrictions on the exercise of an Option: regulatory and tax
issues), take effect only when the Grantor receives it, together with payment of any
relevant Option Price (or, if the Grantor so permits, an undertaking to pay that amount).
	 
	6.4	 	Payment of Tax Liability
	 
	 	 	The Participant authorises the Company to sell or procure the sale of sufficient Vested
Securities on or following exercise of his Option on his behalf to ensure that any relevant
Member of the Group receives the amount required to discharge the Tax Liability which arises
on such exercise except to the extent that the Grantor decides that all or part of the Tax
Liability shall be funded in a different manner in which case Rule 6.1 (Restrictions on the
exercise of an Option: regulatory and tax issues) shall apply.
	 
	6.5	 	Transfer or allotment timetable
	 
	 	 	As soon as reasonably practicable after an Option has been exercised, the Company shall,
subject to Rule 6.4 (Payment of Tax Liability) and any arrangement made under Rules 6.1(b)
and 6.1(c) (Restrictions on exercise: regulatory and tax issues), transfer or procure the
transfer to him (or his nominee account) or, if appropriate, allot to him (or his nominee
account) the number of Securities in respect of which the Option has been exercised.
	 
	7.	 	CASH ALTERNATIVE
	 
	7.1	 	Grantor determination
	 
	 	 	Where a Conditional Award or Provisional Allocation Vests or where an Option has been
exercised and Vested Securities have not yet been allotted or transferred to the Participant
(or his nominee), the Grantor may determine that, in substitution for his right (if any) to
acquire such number of Vested Securities as the Grantor may decide (but in full and final
satisfaction of his right (if any) to acquire those Securities), he shall be paid by way of
additional employment income a sum equal to the cash equivalent (as defined in Rule 7.3
(Cash equivalent)) of that number of Securities in accordance with the following provisions
of this Rule 7.
	 
	7.2	 	Limitation on the application of Rule 7.1
	 
	 	 	Rule 7.1 (Grantor determination) shall not apply in relation to an Award made to a
Participant in any jurisdiction where the presence of Rule 7.1 (Grantor determination) would
cause the grant of the Award to be unlawful or for it to fall outside any applicable
securities law exclusion or exemption or adverse tax or social security contributions
consequences for the Participant or any Member of the Group as determined by the Committee,
provided that this Rule 7.2 shall apply only if its application would prevent the occurrence
of a consequence referred to in this Rule 7.2.
	 
	7.3	 	Cash equivalent
	 
	 	 	For the purpose of this Rule 7, the cash equivalent of a Security is:

	 	(a)	 	in the case of a Conditional Award or a Provisional Allocation, the Market
Value of a Security on the day when the Award Vests;
	 
	 	(b)	 	in the case of an Option, the Market Value of a Security on the day when the
Option is exercised reduced by the Option Price in respect of that Security.

	7.4	 	Payment of cash equivalent
	 
	 	 	Subject to Rule 7.5 (Deductions), as soon as reasonably practicable after the Grantor has
determined under Rule 7.1 (Grantor determination) that a Participant shall be paid a sum in
substitution for his right to acquire any number of Vested Securities:

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	 	(a)	 	the Company shall pay to him or procure the payment to him of that sum in cash;
and
	 
	 	(b)	 	if he has already paid the Company for those Securities, the Company shall
return to him the amount so paid by him.

	7.5	 	Deductions
	 
	 	 	There shall be deducted from any payment under this Rule 7 such amounts (on account of tax
or similar liabilities) as may be required by law or as the Grantor may reasonably consider
to be necessary or desirable.
	 
	8.	 	LAPSE OF AWARDS
	 
	 	 	An Award shall lapse in accordance with the Rules or to the extent it does not Vest under
these Rules. On the lapse of all or any part of a Forfeitable Award, the beneficial interest
(and, if appropriate, the legal interest) of the Forfeitable Securities in respect of which
such Award has lapsed shall be transferred for no (or nominal) consideration to any person
specified by the Grantor.
	 
	9.	 	LEAVERS AND DECEASED PARTICIPANTS
	 
	9.1	 	Deceased Participants
	 
	 	 	If a Participant dies at a time when he is a director or employee of a Member of the Group
before the Normal Vesting Date then, subject to Rule 4.3 (Restrictions on Vesting:
regulatory and tax issues) and the remainder of this Rule, his Award (provided it is not a
Provisional Allocation) shall Vest on the earlier of the Normal Vesting Date and the date on
which the Grantor is notified of the death. In the case of a Provisional Allocation, the
Trustees shall, in their absolute discretion, decide whether the Award should Vest.
	 
	9.2	 	Good leavers
	 
	 	 	If a Participant ceases to be a director or employee of a Member of the Group before the
Normal Vesting Date by reason of:

	 	(a)	 	retirement with the agreement of his Employer;
	 
	 	(b)	 	ill health, injury or disability;
	 
	 	(c)	 	redundancy (within the meaning of the Employment Rights Act 1996) or any
overseas equivalent;
	 
	 	(d)	 	his office or employment being with either a company which ceases to be a
Member of the Group or relating to a business or part of a business which is
transferred to a person who is not a Member of the Group; or
	 
	 	(e)	 	for any other reason, if the Grantor so decides at its discretion

	 	 	then subject to Rule 4.3 (Restrictions on Vesting: regulatory and tax issues), Rule 10
(Takeovers and other corporate events) and the remainder of this Rule, his Award (provided
it is not a Provisional Allocation) shall Vest on the Normal Vesting Date unless the Grantor
decides that his Award shall Vest on the date of cessation. In the case of a Provisional
Allocation, the Trustees shall, in their absolute discretion, decide whether the Award
should Vest.

- 13 -

 

	9.3	 	Cessation of employment in other circumstances
	 
	 	 	If a Participant ceases to be a director or employee of a Member of the Group for any reason
other than those specified in Rule 9.1 (Deceased Participants) or Rule 9.2 (Good leavers)
then any Award held by him shall lapse immediately on such cessation.
	 
	9.4	 	Meaning of ceasing employment
	 
	 	 	A Participant shall not be treated for the purposes of this Rule 9 as ceasing to be a
director or employee of a Member of the Group until such time as he is no longer a director
or employee of any Member of the Group. If any Participant ceases to be such a director or
employee before the Vesting of his Award in circumstances where he retains a statutory right
to return to work then he shall be treated as not having ceased to be such a director or
employee until such time (if at all) as he ceases to have such a right to return to work
while not acting as an employee or director.
	 
	9.5	 	Death following cessation of employment
	 
	 	 	If a Participant dies following cessation of employment in circumstances where his Award did
not lapse but it has not Vested by the time of his death, it shall Vest on the Normal
Vesting Date unless the Grantor decides that his Award shall Vest immediately on his death
to the extent determined by reference to the time of cessation of employment in accordance
with Rule 9.1 (Deceased Participants).
	 
	9.6	 	Calculating number of Securities which Vest
	 
	 	 	For the purposes of this Rule, the Grantor shall determine the number of Securities which
Vest by applying the Performance Condition and any condition imposed on the Vesting of
Awards and shall reduce the number of Securities pro rata to reflect any unexpired part of
the Vesting Period as at the time that the Participant ceases to be a director or employee,
unless the Grantor decides otherwise in its absolute discretion.
	 
	10.	 	TAKEOVERS AND OTHER CORPORATE EVENTS
	 
	10.1	 	General offers
	 
	 	 	If any person (or group of persons acting in concert):

	 	(a)	 	obtains Control of the Company as a result of making a general offer to acquire
Securities; or
	 
	 	(b)	 	having obtained Control of the Company makes such an offer and such offer
becomes unconditional in all respects

	 	 	the Grantor shall, subject to Rule 10.5 (Internal reorganisations), have absolute discretion
to determine whether Awards shall, subject to Rule 4.3 (Restrictions on Vesting: regulatory
and tax issues), Vest if they have not then Vested. In the case of any Option that the
Grantor allows to Vest, that Option may, subject to Rule 6.1 (Restrictions on exercise:
regulatory and tax issues) be exercised within one month of the date on which the Grantor
determines that Vesting is permitted, but to the extent that an Option is not exercised
within that period, that Option shall (regardless of any other provision of the Plan) lapse
at the end of that period.
	 
	10.2	 	Schemes of arrangement and winding up
	 
	 	 	In the event that:

- 14 -

 

	 	(a)	 	a compromise or arrangement is sanctioned by the Court under section 899 of the
Companies Act 2006 in connection with or for the purposes of a change in Control of the
Company; or
	 
	 	(b)	 	the Company passes a resolution for a voluntary winding up of the Company; or
	 
	 	(c)	 	an order is made for the compulsory winding up of the Company

	 	 	the Grantor shall, subject to Rule 10.5 (Internal reorganisations), have absolute discretion
to determine whether Awards shall, subject to Rule 4.3 (Restrictions on Vesting: regulatory
and tax issues), Vest if they have not then Vested. In the case of any Option that the
Grantor allows to Vest, that Option may, subject to Rule 6.1 (Restrictions on exercise:
regulatory and tax issues) be exercised within one month of the date on which the Grantor
determines that Vesting is permitted, but to the extent that an Option is not exercised
within that period, that Option shall (regardless of any other provision of the Plan) lapse
at the end of that period.
	 
	10.3	 	Demerger and similar events
	 
	 	 	If a demerger, special dividend or other similar event is proposed which, in the opinion of
the Grantor, would affect the market price of Shares to a material extent, then the Grantor
may, at its discretion, decide that Awards shall Vest on such terms as the Grantor may
decide.
	 
	10.4	 	Rollover
	 
	 	 	If any company (“Acquiring Company”) obtains Control of the Company as a result of making an
offer referred to in Rule 10.1 (General offers) or a compromise or arrangement referred to
in Rule 10.2(a) (Schemes of arrangement and winding up) any Participant may, by agreement
with the Acquiring Company, release any Award (“Old Award”) in consideration of the grant to
him of an Award (“New Award”) which is equivalent to the Old Award except that it will be
over securities in the Acquiring Company or some other company.
	 
	 	 	The Rules will apply to any New Award granted under this Rule 10.4 as if references to
Securities were references to securities over which the New Award is granted and references
to the Company were references to the company whose securities are subject to the New Award.
	 
	10.5	 	Internal reorganisations
	 
	 	 	In the event that:

	 	(a)	 	an Acquiring Company is expected to obtain Control of the Company as a result
of an offer referred to in Rule 10.1 (General offers) or a compromise or arrangement
referred to in Rule 10.2(a) (Schemes of arrangement and winding up); and
	 
	 	(b)	 	at least 75% of the securities in the Acquiring Company are expected to be held
by substantially the same persons who immediately before the obtaining of Control of
the Company were shareholders in the Company

	 	 	then the Grantor, with the consent of the Acquiring Company, may decide before the obtaining
of such Control that an Award shall not Vest under Rule 10.1 (General offers) or Rule 10.2
(Schemes of arrangement and winding up) but shall be automatically surrendered in
consideration for the grant of a New Award under Rule 10.4 (Rollover).
	 
	10.6	 	Corporate events: reduction in number of Vested Securities
	 
	 	 	If an Award Vests under any of Rules 10.1 (General offers) to 10.3 (Demerger and similar
events), the Grantor shall determine the number of Vested Securities of that Award by the
following steps:

- 15 -

 

	 	(a)	 	applying any Performance Condition and any other condition imposed on the
Vesting of the Award; and
	 
	 	(b)	 	if the Grantor so decides, by applying a pro rata reduction to the number of
Securities determined under Rule 10.6(a) to reflect the unexpired part of the Vesting
Period.

	 	 	If an Award Vests under any of Rules 10.1 (General offers) to 10.3 (Demerger and similar
events) after the holder of that Award has ceased to be a director or employee of a Member
of the Group then Rule 9.6 (Calculating number of Securities which Vest) shall take
precedence over this Rule 10.6.
	 
	11.	 	ADJUSTMENT OF AWARDS
	 
	11.1	 	General rule
	 
	 	 	In the event of any variation of the share capital of the Company or a demerger, special
dividend or other similar event which affects the market price of Securities to a material
extent the Grantor may make such adjustments as it considers appropriate under Rule 11.2
(Method of adjustment).
	 
	11.2	 	Method of adjustment
	 
	 	 	An adjustment made under this Rule shall be to one or more of the following:

	 	(a)	 	the number of Securities comprised in an Award;
	 
	 	(b)	 	subject to Rule 11.3 (Adjustment below nominal value), the Option Price; and
	 
	 	(c)	 	where any Award has Vested or Option has been exercised but no Securities have
been transferred or allotted after such Vesting or exercise, the number of Securities
which may be so transferred or allotted and (if relevant) the price at which they may
be acquired.

	11.3	 	Adjustment below nominal value
	 
	 	 	An adjustment under Rule 11.2 (Method of adjustment) may have the effect of reducing the
price at which Shares may be subscribed for on the exercise of an Option to less than their
nominal value, but only if and to the extent that the Board is authorised:

	 	(a)	 	to capitalise from the reserves of the Company a sum equal to the amount by
which the nominal value of the Shares in respect of which the Option is exercised and
which are to be allotted after such exercise exceeds the price at which the Shares may
be subscribed for; and
	 
	 	(b)	 	to apply that sum in paying up such amount on such Shares

	 	 	so that on exercise of any Option in respect of which such a reduction shall have been made
the Board shall capitalise that sum (if any) and apply it in paying up that amount.
	 
	12.	 	ALTERATIONS
	 
	12.1	 	General rule on alterations
	 
	 	 	Except as described in Rule 12.2 (Shareholder approval) and Rule 12.4 (Alterations to
disadvantage of Participants), the Grantor may at any time alter the Plan or the terms of
any Award.

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	12.2	 	Shareholder approval
	 
	 	 	Except as described in Rule 12.3 (Exceptions to shareholder approval), no alteration to the
advantage of an individual to whom an Award has been or may be granted shall be made under
Rule 12.1 (General rule on alterations) to the provisions concerning:

	 	(a)	 	eligibility;
	 
	 	(b)	 	the individual limits on participation;
	 
	 	(c)	 	the overall limits on the issue of Shares or the transfer of Shares out of
treasury;
	 
	 	(d)	 	the basis for determining a Participant’s entitlement to, and the terms of,
Securities or cash provided under the Plan;
	 
	 	(e)	 	the adjustments that may be made in the event of any variation of capital; and
	 
	 	(f)	 	the terms of this Rule 12.2

	 	 	without the prior approval by ordinary resolution of the members of the Company in general
meeting.
	 
	12.3	 	Exceptions to shareholder approval
	 
	 	 	Rule 12.2 (Shareholder approval) shall not apply to any minor alteration to benefit the
administration of the Plan, to take account of a change in legislation or to obtain or
maintain favourable tax, exchange control or regulatory treatment for Participants or any
Member of the Group.
	 
	12.4	 	Alterations to disadvantage of Participants
	 
	 	 	No alteration to the material disadvantage of Participants (other than to any Performance
Condition) shall be made under Rule 12.1 (General rule on alterations) unless the Grantor
shall have invited every relevant Participant to indicate whether or not he approves the
alteration and the alteration is approved by a majority of those Participants who have given
such an indication.
	 
	13.	 	MISCELLANEOUS
	 
	13.1	 	Administration
	 
	 	 	The Plan shall be administered by the Trustees or the Committee as appropriate, whose
decisions on any matter connected with the Plan shall be final and binding.
	 
	 	 	In respect of Provisional Allocations, the Committee may from time to time make
recommendations to the Trustees with regard to the grant of Awards, the selection of
Participants, Performance Conditions, Vesting and in respect of Participants who cease
employment. The Trustees shall consider the recommendations but shall not be bound to
follow such recommendations or be required to give reasons for any refusal to follow them.
	 
	13.2	 	Employment
	 
	 	 	The rights and obligations of any Participant under the terms of his office or employment
with any Member of the Group shall not be affected by his participation in the Plan or any
right which he may have to participate in it. Participants shall waive any and all rights
to compensation or damages in consequence of the termination of the office of employment for
any reason whatsoever (and regardless of whether such termination is lawful or unlawful)
insofar as such rights arise or may arise from his ceasing to have rights under the Plan as
a result of such termination. Participation in the Plan shall not confer a right to
continued employment upon any individual who participates in it. The

- 17 -

 

	 	 	grant of any Award under the Plan does not imply that any further Award will be granted nor
that a Participant has any right to receive any further Award. The terms of the Plan are
separate from and do not form a term of or any part of or create any obligations or rights
pursuant to an individual’s contract of employment
	 
	13.3	 	Disputes
	 
	 	 	In the event of any dispute or disagreement as to the interpretation of the Plan, or as to
any question or right arising from or relating to the Plan, the decision of the Grantor
shall be final and binding upon all persons. The exercise of any power or discretion by the
Grantor shall not be open to question by any person and a Participant or former Participant
shall have no rights in relation to the exercise of or omission to exercise any such power
or discretion.
	 
	13.4	 	Share rights
	 
	 	 	All Shares allotted under the Plan shall rank equally in all respects with Shares then in
issue except for any rights attaching to such Shares by reference to a record date before
the date of the allotment.
	 
	 	 	Where Vested Shares are transferred to Participants (or their nominee account ) or, in the
case of Forfeitable Securities, released from their restrictions under the Plan,
Participants will be entitled to all rights attaching to such Shares by reference to a
record date on or after the date of such transfer or release of such restrictions.
	 
	13.5	 	Notices
	 
	 	 	Any notice or other communication under or in connection with the Plan may be given in such
manner as the Board consider to be appropriate, which may include communication by email or
intranet or by personal delivery or by sending the same by post, in the case of a company to
its registered office, and in the case of an individual to his last known address, or, where
he is a director or employee of a Member of the Group, either to his last known address or
to the address of the place of business at which he performs the whole or substantially the
whole of the duties of his office or employment.
	 
	 	 	Where any such notice or other communication is given by a Participant to the Company, it
shall be effective only on receipt by the Company.
	 
	13.6	 	Third parties
	 
	 	 	No third party has any rights under the Contracts (Rights of Third Parties) Act 1999 to
enforce any term of the Plan.
	 
	 
	13.7	 	Benefits not pensionable
	 
	 	 	Benefits provided under the Plan shall not be pensionable.
	 
	13.8	 	Severability of Provisions
	 
	 	 	If any provision in this Plan is for any reason held by any Court or other competent
authority of any jurisdiction to be illegal, invalid or unenforceable in whole or in part,
the remaining provisions of this Plan shall continue to be valid and, if appropriate, the
affected provision and the legality, validity or enforceability of such provision in any
other jurisdiction shall be unaffected.
	 
	13.9	 	Data Protection

	 	(a)	 	The Company and the Trustees will store and process information about a
Participant on their computers and in other ways. By “information about a Participant”
the Company and the Trustees mean personal information they have obtained from the
Participant, the

- 18 -

 

	 	 	 	Employer and any other Group companies or other organisations in anticipation of a
Participant’s participation in the Plan and during the term of the Plan
	 
	 	(b)	 	The Company and the Trustees will use information about a Participant to manage
and administer the Plan, give the Participant information about the Plan and his Award,
to develop and improve their services to the Participant and others and to protect
their interests
	 
	 	(c)	 	The Company and the Trustees may give information about a Participant and his
participation in the Plan to the following:

	 	(i)	 	a Participant’s Employer and it agents or service providers
where disclosure is necessary to enable the Company or the Trustees to
discharge their duties and obligations in the management and administration of
the Plan (including any disclosure of information as may be necessary to enable
the Employer to comply with the requirements of any relevant tax, social
security or other governmental authority). (For the purposes of this Rule
“Employer” includes any company or other entity of the Group who may become the
Participant’s employer during the term of the Plan and any other company or
entity which has a duty to comply with any requirements imposed, any relevant
tax, social security or other governmental authority in connection with his
participation in the Plan);
	 
	 	(ii)	 	people who provide a service to the Company or the Trustees or
are acting as their agents on the understanding that they will keep the
information confidential;
	 
	 	(iii)	 	anyone to whom the Company or the Trustees transfer or may
transfer their rights and duties under the Plan;
	 
	 	(iv)	 	where the Company has a duty to do so or if the law allows the
Company to do so (including any relevant tax, social security or other
governmental authority).
	 
	 	Otherwise the Company and the Trustees will keep information about a Participant
confidential

	 	(d)	 	If the Company or the Trustees transfer information about a Participant to a
service provider or agent in another country, they will procure that the service
provider or agent agrees to apply the same levels of protection as the Company and the
Trustees are required to apply in the UK and other EU jurisdictions and to use
information about a Participant only for the purpose of providing the service to the
Company or the Trustees.

	13.10	 	Governing Law
	 
	 	 	This Plan shall be construed, administered and governed in all respects under and by the law
of England and Wales and the Courts of England and Wales have exclusive jurisdiction to hear
any dispute.

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SCHEDULE 1 — GRANT OF A FORFEITABLE AWARD

On or before the grant of a Forfeitable Award, each employee selected for such an Award must enter
into an agreement with the Company under the terms of which the employee agrees both in respect of
the Securities comprised in the Award at the Grant Date and any additional Securities that may
become subject to the Award under Rule 2.4 (Dividend Equivalent Amount and Coupon Equivalent
Amount):

	(a)	 	to have full beneficial ownership of the Securities;
	 
	(b)	 	unless the Grantor decides otherwise, to waive his right to all cash and scrip dividends on
his Forfeitable Securities until Vesting;
	 
	(c)	 	that he will not assign, transfer, charge or otherwise dispose of any Forfeitable Securities
or any interest in such Forfeitable Securities until Vesting save as otherwise required by the
Rules;
	 
	(d)	 	if required by the Grantor, to enter into any elections under Part 7 of ITEPA and any
election to transfer, or any agreement to pay, secondary Class 1 National Insurance
contributions (or their equivalents in any jurisdiction) in relation to his Forfeitable
Securities; and
	 
	(e)	 	to sign any documentation to give effect to the terms of the Forfeitable Award.

On (or as soon as practicable after) the Grant Date (or as soon as practicable after the payment
date of the relevant dividend in the case of additional Shares that are to become subject to the
Forfeitable Award under Rule 2.4 (Dividend Equivalent Amount and Coupon Equivalent Amount)) either
the legal ownership of the Forfeitable Securities shall be held on the Participant’s behalf by a
nominee as chosen from time to time by the Grantor or the Participant shall deposit the share
certificate (or any other document of title) relating to the Forfeitable Securities together with a
signed but otherwise uncompleted instrument of transfer with such person as the Grantor may from
time to time decide.

- 20 -

 

SCHEDULE 2 — CASH AWARDS

The Rules of the Plan shall apply to a Cash Award granted or to be granted under this Schedule as
if it was a Conditional Award, an Option or a Provisional Allocation over Securities as determined
by the Grantor, except as set out in this Schedule. References in the Rules of the Plan to
Securities shall be read as references to a cash sum where the context so requires. Where there is
any conflict between the Rules and this Schedule, the terms of this Schedule shall prevail.

	(a)	 	The Grantor may grant or procure the grant of a Cash Award.
	 
	(b)	 	The Grantor shall determine the form of a Cash Award (Conditional Award, Option or
Provisional Allocation) on or before the Grant Date of that Cash Award.
	 
	(c)	 	Each Cash Award shall relate to a given number of notional Securities.
	 
	(d)	 	On or as soon as reasonably practicable after the Vesting of a Cash Award structured as a
Conditional Award or a Provisional Allocation, the holder of that Award shall be entitled to a
cash sum which shall be equal to the “Cash Value” of the notional Vested Securities.
	 
	(e)	 	A Cash Award structured as an Option shall be exercisable in respect of notional Vested
Securities for a period determined by the Grantor at the Grant Date in its absolute discretion
(being a period of no longer than 10 years from the Grant Date) beginning with the date on
which the Cash Award Vests (unless it lapses earlier under Rule 9.3 (Cessation of employment
in other circumstances) or Rule 10 (Takeovers and other corporate events)). Following the
exercise of a Cash Award structured as an Option, the holder of that Award shall be entitled
to a cash sum which shall be equal to the “Cash Value” of the notional Vested Securities less
the Option Price (if any).
	 
	(f)	 	For the purposes of this Schedule:

	 	(i)	 	the Cash Value of a notional Security is the Market Value of a Security on the date of
Vesting of a Cash Award structured as a Conditional Award or a Provisional Allocation and on
the date of exercise of a Cash Award structured as an Option; and
	 
	 	(ii)	 	the Market Value of a Security on any day shall be determined in accordance with
Rule 7.3 (Cash equivalent).

	(g)	 	Any cash sum payable under paragraphs (d) or (e) above shall be paid by the Employer as soon
as practicable after the Vesting of the Cash Award under paragraph (d) or its exercise under
paragraph (e), net of any deductions (on account of any Tax Liabilities) as may be required by
law.
	 
	(h)	 	For the avoidance of doubt, a Cash Award shall not confer any right on the holder of such an
Award to receive Securities or any interest in Securities.

- 21 -

 

SCHEDULE 3 — UNITED STATES ADDENDUM1

This Schedule shall apply for all US Participants who are Eligible Employees. Where a Participant
becomes a US Participant after the grant of an Award, such Award is modified in a manner consistent
with this Schedule. Where there is any conflict between the Rules and this Schedule, the terms of
this Schedule shall prevail.

Except as noted in this Schedule, the Rules described in the Plan apply to Awards granted under
this Schedule.

Notwithstanding anything in the Plan to the contrary, Awards granted to a US Participant shall be
subject to the following provisions, as applicable:

	(a)	 	The award documentation provided for Conditional Awards and Awards otherwise subject to
section 409A of the United States Internal Revenue Code of 1988, as amended (“Section 409A”)
shall include the scheduled payment/settlement date(s) for such Award.
	 
	(b)	 	The grant of Dividend Equivalent Amounts and Coupon Payment Amounts under Rule 2.4 (Dividend
Equivalent Amount and Coupon Equivalent Amount) shall not apply to Options.
	 
	(c)	 	Rule 4.6 (Prudent Financial Control) shall not apply to a Conditional Award or any other
Award that is subject to Section 409A, unless any delay in payment/settlement of the Award
described in Rule 4.6 (Prudent Financial Control) is legally required under applicable law
(within the meaning of US Treasury Regulation Section 1.409A-2(b)(7)(ii)) or the payment would
otherwise jeopardise the Company’s ability to continue as a “going concern” (within the
meaning of US Treasury Regulation Section 1.409A-3(d)).
	 
	(d)	 	Notwithstanding Rule 5.1 (Conditional Awards and Provisional Allocations), payment/settlement
with respect to any:

	 	(i)	 	Provisional Allocation or another Award that is exempt from Section 409A or any Dividend
Equivalent Amount or Coupon Payment Amount shall be made no later than 21/2 months following
the end of the calendar year in which such Award or amount Vests; and
	 
	 	(ii)	 	Conditional Award or any other Award that is subject to Section 409A shall be made as
soon as practicable following the scheduled payment/settlement date but in no event more
than 30 days thereafter, except as otherwise permitted under Section 409A; provided,
however, that to the extent a Participant dies before the Normal Vesting Date, such
Participant’s Awards shall be paid/settled as soon as practicable following the date of
death, but only to the extent then Vested.

	(e)	 	Any determination described in Rule 7.1 (Grantor determination) shall not be permitted to the
extent that such determination or payment of cash would cause a delay in the payment or
taxability of the applicable Award, unless such deferral is in compliance with Section 409A.
	 
	(f)	 	Notwithstanding anything in Rule 9.2 (Good leavers) or Rule 10 (Takeovers and other corporate
events) to the contrary, in the case of a Conditional Award or other Award that is subject to
Section 409A, the provisions of Rule 9.2 (Good leavers) or Rule 10 (Takeovers and other
corporate events) as the case may be, may be invoked to accelerate the Vesting of such Award
but not the payment or settlement of such Award. Such Award shall be paid or settled on the
originally-scheduled payment/settlement date, unless otherwise permitted under Section 409A.
	 
	(g)	 	Adjustments made pursuant to Rule 11 (Adjustment of Awards) with respect to any Award granted
to a US Participant shall be made in accordance with US Treasury Regulation Section
1.409A-1(b)(5).

 

			
	1	 	No Awards in the form of nil-cost Options over Securities or other Options over Capital Instruments shall be granted to US Participants.

- 22 -

 

	(h)	 	To the extent that a Participant who has been granted an Option becomes subject to US
taxation and his Option is determined to have been granted with an option price less than
“fair market value” on the Grant Date as defined in US Treasury Regulation Section
1.409A-1(b)(5), his Option shall be exercisable only as follows: (i) if the Option is Vested
in the year that the Participant becomes subject to US taxation, the Option shall be
exercisable only in the first calendar year after the year in which the Participant becomes
subject to US taxation; and (ii) if the Option is not Vested in the year that the Participant
becomes subject to US taxation, the Option shall be exercisable only in the first calendar
year after the year in which the substantial risk of forfeiture (within the meaning of Section
409A) lapses.
	 
	(i)	 	The provisions of this Schedule shall also apply to Cash Awards granted under Schedule 2 to
the Plan (Cash Awards) to the same extent that this Schedule applies to other Conditional
Awards, Provisional Allocations or Options.
	 
	(j)	 	In the event that a Participant is a “specified employee” (within the meaning of US Treasury
Regulation Section 1.409A-1(i)) as of the date of the Participant’s “separation from service”
(within the meaning of US Treasury Regulation Section 1.409A-1(h)) and if any Award both (i)
constitutes a “deferral of compensation” within the meaning of Section 409A and (ii) cannot be
paid or provided in the manner otherwise provided without subjecting the Participant to
“additional tax”, interest or penalties under Section 409A, then, to the extent necessary to
avoid penalties under Section 409A, no Award that is a deferral of compensation shall be paid
or settled prior to the first day of the seventh month following the Participant’s separation
from service.

- 23 -exv4w1

Exhibit 4.1

FIRST SUPPLEMENTAL INDENTURE

dated as of May 3, 2011

among

UDR, INC. (successor by merger to United Dominion Realty Trust, Inc.)

as the Issuer

and

UNITED DOMINION REALTY, L.P.

as the Guarantor

and

U.S. BANK NATIONAL ASSOCIATION, successor trustee to Wachovia Bank, National

Association (formerly known as First Union National Bank of Virginia)

as the Trustee

 

Senior Debt Securities

 

 

THIS FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), entered into as of May 3, 2011
among UDR, Inc., a Maryland corporation (successor by merger to United Dominion Realty Trust, Inc.,
a Virginia corporation) (the “Company” or the “Issuer”), United Dominion Realty, L.P., a Delaware
limited partnership (the “Guarantor”) and U.S. Bank National Association, successor
trustee to Wachovia Bank, National Association (formerly known as First Union National Bank of
Virginia), as trustee (the “Trustee”).

RECITALS

     WHEREAS, the Issuer and the Trustee entered into the Indenture, dated as of November 1, 1995
(the “Indenture”), relating to the Issuer’s Senior Debt Securities (the “Notes”).

     WHEREAS, the Guarantor executed and delivered a Guaranty, dated as of September 30, 2010 (the
“Guaranty”), in favor of the Trustee and the holders of the Securities (as defined in the
Indenture) issued from time to time under the Indenture whether issued prior to, on or subsequent
to September 30, 2010 (the “Holders” and each a “Holder”).

     WHEREAS, the parties hereto desire to establish certain additional terms with respect to the
Securities by adding Sections 4 through 15 of this Supplemental Indenture as a new Article Sixteen
to the Indenture.

     WHEREAS, Section 901(3) of the Indenture permits the Issuer and the Trustee to enter into an
indenture supplemental to the Indenture to establish the forms or terms of Securities of any series
and any related coupons as permitted under Section 201 or 301 of the Indenture without the consent
of Holders.

     WHEREAS, the Board of Directors of the Issuer has authorized the entry into this Supplemental
Indenture, as required by Section 901 of the Indenture.

     WHEREAS, the Issuer and the Guarantor have requested that the Trustee execute and deliver this
Supplemental Indenture and all actions required by it to be taken in order to make this
Supplemental Indenture a valid, binding and enforceable instrument in accordance with its terms,
have been taken and performed, and the execution and delivery of this Supplemental Indenture has
been duly authorized in all respects.

AGREEMENT

     NOW, THEREFORE, the Issuer, the Guarantor and the Trustee mutually covenant and agree as
follows:

     Section 1. Capitalized terms used herein and not otherwise defined herein are used as defined
in the Indenture.

     Section 2. The Guarantor, by its execution of this Supplemental Indenture, agrees to be bound
by all of the terms of the Indenture applicable to it.

     Section 3. The guarantee (the “Guarantee”) pursuant to this Supplemental Indenture is
intended to duplicate the scope of the Guaranty; and future holders of the Securities subsequent to
the date hereof may only rely on this Supplemental Indenture with respect to the guarantee of the
Securities, while existing holders of the Securities may rely on either the Guaranty or this
Supplemental Indenture with respect to the guarantee of the Securities.

1

 

     Section 4.

          (a) The Guarantor, as primary obligor and not merely as surety, hereby irrevocably and
unconditionally guarantees to each Holder and to the Trustee and their successors and assigns (a)
the full and punctual payment when due, whether at Maturity, by acceleration or otherwise, of all
obligations of the Issuer now or hereafter existing under the Indenture whether for principal of or
interest on the Securities (and premium and Make-Whole Amount, if any) and all other monetary
obligations of the Issuer under the Indenture and the Securities and (b) the full and punctual
performance within the applicable grace periods of all other obligations of the Issuer under the
Indenture and the Securities (all such obligations guaranteed hereby by the Guarantor being the
“Guaranteed Obligations”).

          (b) The Guarantor agrees to pay any and all fees and expenses (including reasonable attorney’s
fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the
Guarantee with respect to the Guarantor.

          (c) Without limiting the generality of the foregoing, the Guarantee guarantees, to the extent
provided herein, the payment of all amounts which constitute part of the Guaranteed Obligations and
would be owed by the Issuer under the Indenture or the Securities but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Issuer.

          Section 5. The Guarantee is irrevocable, absolute and unconditional. The Guarantor guarantees
that the Guaranteed Obligations will be performed strictly in accordance with the terms of the
Indenture, regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Trustee or the Holders with respect
thereto. The obligations of the Guarantor under the Guarantee are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor
to enforce the Guarantee by the Trustee on behalf of the Holders, irrespective of whether there is
and without any action first being brought against the Issuer or any other guarantor of the
Guaranteed Obligations or whether the Issuer or any other guarantor of the Guaranteed Obligations
is joined in any such action or actions. The liability of the Guarantor under the Guarantee shall
be absolute and unconditional irrespective of:

	 	(a)	 	any lack of validity or enforceability of the Indenture or the Securities with
respect to the Issuer or any agreement or instrument relating thereto;
	 
	 	(b)	 	any change in the time, manner or place of payment of, or in any other term of any
of the Guaranteed Obligations, or any other amendment or waiver of or any consent to
departure from the Indenture;
	 
	 	(c)	 	the failure to give notice to the Guarantor of the occurrence of an Event of
Default under the provisions of the Indenture or the Securities;
	 
	 	(d)	 	any taking, release or amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Guaranteed Obligations;
	 
	 	(e)	 	any failure, omission, delay by or inability on the part of the Trustee or the
Holders to assert or exercise any right, power or remedy conferred on the Trustee or the
Holders in the Indenture or the Securities;
	 
	 	(f)	 	any change in the corporate or other structure, or termination, dissolution,
consolidation or merger of the Issuer or the Guarantor with or into any other entity, the
voluntary or involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets of the Issuer or the Guarantor, the marshaling of the assets
and liabilities of

2

 

	 	 	 	the Issuer or the Guarantor, the receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition with creditors, or
readjustments of, or other similar proceedings affecting the Issuer or the Guarantor,
or any of the assets of any of them;
	 	(g)	 	the assignment of any right, title or interest of the Trustee or any Holder in the
Indenture or the Securities to any other Person; or
	 
	 	(h)	 	any other event or circumstance (including any statute of limitations), whether
foreseen or unforeseen and whether similar or dissimilar to any of the foregoing, that
might otherwise constitute a defense available to, or a discharge of, the Issuer or the
Guarantor, other than performance in full of the Guaranteed Obligations for the payment
of money; it being the intent of the Guarantor that its obligations hereunder shall not
be discharged except by payment of all amounts owing pursuant to the Indenture or the
Securities.

	 	 	The Guarantee shall continue to be effective or be reinstated, as the case may be, if at any
time any payment or performance with respect to any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Trustee, any Holder or any other Person upon the
insolvency, bankruptcy or reorganization of the Issuer or otherwise, all as though such
payment or performance had not been made or occurred. The obligations of the Guarantor under
the Guarantee shall not be subject to reduction, termination or other impairment by any
set-off, recoupment, counterclaim or defense or for any other reason.

     Section 6. The Guarantor hereby irrevocably waives, to the extent permitted by applicable
law:

	 	(a)	 	promptness, diligence, presentment, notice of acceptance and any other notice with
respect to any of the Guaranteed Obligations and the Guarantee;
	 
	 	(b)	 	any requirement that the Trustee, any Holder or any other Person first take or
exhaust any right or any action against the Issuer or any other Person, or obtain any
relief pursuant to the Indenture or pursue any other available remedy before taking any
action against the Guarantor with respect to the Guaranteed Obligations;
	 
	 	(c)	 	any defense arising by reason of any claim or defense based upon an election of
remedies by the Trustee or any Holder which in any manner impairs, reduces, releases or
otherwise adversely affects its subrogation, contribution or reimbursement rights or
other rights to proceed against the Issuer or any other Person; and
	 
	 	(d)	 	any duty on the part of the Trustee or any Holder to disclose to the Guarantor any
matter, fact or thing relating to the business, operation or condition of the Issuer and
its assets now known or hereafter known by the Trustee or such Holder.

     Section 7. Until the Indenture has been discharged, the Guarantor hereby irrevocably waives
any claim or other right which it may now or hereafter acquire against the Issuer or any other
guarantor of the Guaranteed Obligations that arise from the existence, payment, performance or
enforcement of the Guarantor’s obligations under the Guarantee, including any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or
remedy of the Trustee or any Holder against the Issuer or any other guarantor of the Guaranteed
Obligations which the Trustee or any Holder now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common law, including the
right to take or receive from the Issuer, directly or indirectly, in cash or other property or by
setoff or in any other manner, payment or security on account of such claim or other rights. If any
amount shall be paid to the Guarantor in violation of the preceding sentence and the Guaranteed
Obligations shall not have

3

 

been paid in full, such amount shall be deemed to have been paid to the Guarantor for the
benefit of, and held in trust for the benefit of, the Trustee, and the Holders, and shall forthwith
be paid to the Trustee for the benefit of the Holders to be credited and applied to the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms of the Indenture. The
Guarantor acknowledges that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Indenture and that the waivers set forth in this section are
knowingly made in contemplation of such benefits.

	(a)	 	The Guarantor agrees that it shall not be entitled to any right of subrogation in relation to
the Holders in respect of any obligations guaranteed hereby until payment in full of all
Guaranteed Obligations. The Guarantor further agrees that, as between itself, on the one hand,
and the Holders and the Trustee, on the other hand, (a) the maturity of the Guaranteed
Obligations may be accelerated for the purposes of the Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (b) in the event of any declaration of acceleration of such obligations, such
obligations (whether or not due and payable) shall forthwith become due and payable by the
Guarantor for the purpose of the Guarantee.

     Section 8. The Guarantor covenants and agrees that, as a condition to the acceptability of
the Guarantee to the Trustee and the Holders, the Guarantor will:

	(a)	 	comply in all material respects with all applicable laws, rules, regulations and orders, such
compliance to include paying when due all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent contested in good faith;
	 
	(b)	 	preserve and maintain its existence, rights (contractual and statutory) and franchises;
provided, however, that the Guarantor shall not be required to preserve any right or franchise
if the general partner of the Guarantor shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Guarantor; and
	 
	(c)	 	not consolidate with or merge with or into (whether or not such Guarantor is the surviving
Person) another Person whether or not affiliated with such Guarantor unless:

	 	i.	 	the Person formed by or surviving any such consolidation or merger (if other than
a Guarantor or the Issuer) unconditionally assumes all the obligations of the Guarantor
under the Securities, the Indenture and the Guarantee on the terms set forth herein or
therein; and
	 
	 	ii.	 	immediately after giving effect to such transaction, no Event of Default exists.

     In case of any such consolidation, merger, sale or conveyance and upon the assumption by the
successor Person as set forth above of the Guarantee, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.

     Except as set forth herein, and notwithstanding clauses (a) and (b) above, nothing contained
in this Supplemental Indenture, the Indenture or in any of the Securities shall prevent any
consolidation or merger of the Guarantor with or into the Issuer, or shall prevent any sale or
conveyance of the property of the Guarantor as an entirety or substantially as an entirety to the
Issuer.

     Section 9. No failure on the part of the Trustee or any Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive of any remedies
provided by law. The Trustee and the Holders shall have all of the rights and remedies granted in
the Indenture

4

 

and available at law or in equity, and these same rights and remedies may be pursued
separately, successively or concurrently against the Issuer or the Guarantor.

     Section 10. The Guarantee is a continuing guaranty and, except as otherwise provided herein,
shall (a) remain in full force and effect until the satisfaction of the Guaranteed Obligations, (b)
be binding upon the Guarantor and (c) enure to the benefit of and be enforceable by the Trustee,
the Holders and their successors, transferees and assigns.

     Section 11. Any provision of the Guarantee which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or non-authorization, without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of such provision in any other
jurisdiction.

     Section 12. The Guarantor, and by their acceptance of the benefits hereof, the Trustee and
the Holders, hereby confirms that it is the intention of all such parties that the guarantee of the
Guaranteed Obligations pursuant to the Guarantee not constitute a fraudulent transfer or conveyance
for purposes of any Bankruptcy Law, any fraudulent conveyance statute, or any similar federal or
state law. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantor hereby
irrevocably agree that the obligations of Guarantor under the Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed liabilities of
Guarantor that are relevant under such laws and after giving effect to any collections from or
payments made by or on behalf of Guarantor in respect of the obligations of such other Guarantor
under the Guarantee, if any, result in the obligations of the Guarantor under the Guarantee not
constituting a fraudulent transfer or conveyance.

     Section 13. The Guarantee shall remain in full force and effect until indefeasible payment in
full of the Guaranteed Obligations.

     Section 14. The Guarantee may not be amended except in writing signed by the Trustee and the
Guarantor.

     Section 15. All notices, requests and other communications hereunder shall be in writing
(including facsimile transmission or similar writing) and shall be given in the manner set forth in
the Indenture (a) if to the Guarantor, to UDR, Inc., 1745 Shea Center Drive, Suite 200, Highlands
Ranch, Colorado 80219, Attention: Warren L. Troupe, Senior Executive Vice President, (b) if to the
Trustee, at its address for notices provided for in the Indenture, or (c) as to each such party, at
such other address as such party shall designate in a written notice to the other party.

     Section 16. The Indenture shall be amended to include Sections 4 through 15 hereto as a new
Article Sixteen to the Indenture.

     Section 17. This Supplemental Indenture shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia.

     Section 18. This Supplemental Indenture may be signed in various counterparts which together
will constitute one and the same instrument.

     Section 19. Except as hereby expressly amended, the Indenture is in all respects ratified and
confirmed and all the terms, provisions and conditions thereof shall be and remain in full force
and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes.

5

 

     Section 20. The recitals in this Supplemental Indenture shall be taken as the statements of
the Issuer and the Trustee assumes no responsibility for their correctness. The Trustee shall not
be responsible or accountable in any manner whatsoever for or with respect to the validity or
sufficiency of this Supplemental Indenture.

     Section 21. The section headings herein are for convenience only and shall not affect the
construction hereof.

     Section 22. This Supplemental Indenture constitutes the entire agreement of the parties hereto
with respect to the amendments to the Indenture set forth herein.

     Section 23. All covenants and agreements in this Supplemental Indenture by the parties hereto
shall bind their respective successors.

[Signature Page Follows]

6

 

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be executed
as of the date first above written.

	 	 	 	 	 
	 	ISSUER:

UDR, Inc.

 	 
	 	By:  	/s/
David L. Messenger	 
	 	 	Name:  	David L. Messenger 	 
	 	 	Title:  	Senior Vice President and 
Chief Financial Officer 	 
	 
	 	TRUSTEE:

U.S. Bank National Association

 	 
	 	By:  	/s/
K. Wendy Kumar	 
	 	 	Name:  	K. Wendy Kumar 	 
	 	 	Title:  	Vice President 	 
	 
	 	GUARANTOR:

United Dominion Realty, L.P.

 	 
	 	By:  	UDR, Inc., as General Partner
 	 
	 	 	 
	 	By:  	/s/
 David L. Messenger
 	 
	 	 	Name:  	David L. Messenger 	 
	 	 	Title:  	Senior Vice President and

Chief Financial Officer

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