8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 3, 2005

UNITED DOMINION REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland	1-10524	54-0857512
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation)		Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado	80129
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (720) 283-6120

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 1.01. Entry into a Material Definitive Agreement
	ITEM 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
	ITEM 9.01. Financial Statements and Exhibits
Signatures
Exhibit Index
Articles Supplementary Filed with the State Department of Assessments and Taxation
Description of New Out-Performance Program
Description of Series C Out-Performance Program
Description of Amendment to Series A Out-Performance Program

ITEM 1.01. Entry into a Material Definitive Agreement

     At the Annual Meeting of Stockholders of United Dominion Realty Trust, Inc. (the “Company”) held on May 3, 2005 (the “Meeting”), the Company’s stockholders approved the Company’s New Out-Performance Program, including the Series C Out-Performance Program, pursuant to which certain of our executive officers and other key employees may be given the opportunity to invest in performance shares of United Dominion Realty, L.P., a Delaware limited partnership in which we are the general partner. A description of the New Out-Performance Program is attached hereto as Exhibit 10.01 and is incorporated herein by reference. A description of the Series C Out-Performance Program is attached hereto as Exhibit 10.02 and is incorporated herein by reference.

     At the Meeting, the Company’s stockholders also approved an amendment to the Company’s Series A Out-Performance Program to allow participants to sell interests in the Series A Out-Performance Program to the Company or to exchange interests in the Series A Out-Performance Program for interests in subsequent out-performance programs. A description of the amendment to the Series A Out-Performance Program is attached hereto as Exhibit 10.03 and is incorporated herein by reference.

ITEM 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

     At the Meeting, the Company’s stockholders approved the creation and issuance of our new Series F Preferred Stock. On May 4, 2005, the Company filed with the State Department of Assessments and Taxation of the State of Maryland Articles Supplementary relating to the Series F Preferred Stock. A copy of the Articles Supplementary, which became effective on May 4, 2005, is attached hereto as Exhibit 3.05 and is incorporated herein by reference.

2

ITEM 9.01. Financial Statements and Exhibits

     (c) Exhibits

Exhibit
No.	Description
3.01	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit A to Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed with the Commission on June 11, 2003, Commission File No. 1-10524).
3.02	Articles Supplementary filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 3.02 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.03	Articles of Amendment to the Amended and Restated Articles of Incorporation filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 3.03 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.04	Certificate of Correction to Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 2.02 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.05	Articles Supplementary filed with the State Department of Assessments and Taxation of the State of Maryland on May 4, 2005.
10.01	Description of the Company’s New Out-Performance Program.
10.02	Description of the Series C Out-Performance Program.
10.03	Description of the Amendment to the Series A Out-Performance Program.
10.04	Description of the Series A Out-Performance Program (incorporated by reference to Exhibit 10(xviii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, Commission File No. 1-10524).

3

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	UNITED DOMINION REALTY TRUST, INC.
Date: May 9, 2005		/s/ Scott A. Shanaberger
		Scott A. Shanaberger
		Senior Vice President and   Chief Accounting Officer

4

Exhibit Index

Exhibit No.	Description
3.01	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit A to Exhibit 2.01 to the Company’s Current Report on Form 8-K dated and filed with the Commission on June 11, 2003, Commission File No. 1-10524).
3.02	Articles Supplementary filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 3.02 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.03	Articles of Amendment to the Amended and Restated Articles of Incorporation filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 3.03 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.04	Certificate of Correction to Articles of Merger between the Company and United Dominion Realty Trust, Inc., a Virginia corporation, filed with the State Department of Assessments and Taxation of the State of Maryland on March 21, 2005 (incorporated by reference to Exhibit 2.02 to the Company’s Current Report on Form 8-K dated March 17, 2005 and filed with the Commission on March 22, 2005, Commission File No. 1-10524).
3.05	Articles Supplementary filed with the State Department of Assessments and Taxation of the State of Maryland on May 4, 2005.
10.01	Description of the Company’s New Out-Performance Program.
10.02	Description of the Series C Out-Performance Program.
10.03	Description of the Amendment to the Series A Out-Performance Program.
10.04	Description of the Series A Out-Performance Program (incorporated by reference to Exhibit 10(xviii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, Commission File No. 1-10524).

5

EX-3.05

EXHIBIT 3.05

ARTICLES SUPPLEMENTARY

(Under Section 2-208 of the Maryland General Corporation Law)

United Dominion Realty Trust, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:

     FIRST: Under the authority contained in the charter of the Corporation (the “Charter”), the Board of Directors of the Corporation has classified and designated 20,000,000 unissued shares of the Preferred Stock of the Corporation as the same number of unissued shares of Series F Preferred Stock. A description of the said Series F Preferred Stock, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, as set by the Board of Directors of the Corporation, is as follows:

     “Section 5.4(e) Series F Preferred Stock.

          (i) Designation and Number. A series of the preferred stock, designated the “Series F Preferred Stock” (the “Series F Preferred”), is hereby established. The number of shares of the Series F Preferred shall be 20,000,000.

          (ii) Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Corporation, the Series F Preferred shall rank junior to Common Stock and any other class or series of capital stock of the Corporation.

          (iii) Dividends.

               (A) The Series F Preferred is not entitled to receive dividends.

               (B) The Series F Preferred shall not be entitled to participate in the earnings or assets of the Corporation.

          (iv) Liquidation Rights. Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of shares of the Series F Preferred then outstanding shall not be entitled to receive and to be paid out of the assets of the Corporation legally available for distribution to its stockholders. The holders of the Series F Preferred as such shall have no right or claim to any of the assets of the Corporation.

          (v) Voting Rights. Except as otherwise required by law or provided in this Charter, and subject to the express terms of any series of Preferred Stock, each share of Series F Preferred shall entitle the holder thereof to one vote for each share of Series F Preferred held by such holder on each matter submitted to a vote at a meeting

of the stockholders of the Corporation upon which holders of Common Stock are entitled to vote. The holders of Series F Preferred shall be entitled to receive notice of all meetings of the stockholders of the Corporation at which the holders of Common Stock are entitled to such notice.

          (vi) Conversion of Series F Preferred. The Series F Preferred is not convertible into or exchangeable for any other property or securities of the Corporation.

          (vii) Redemption of Series F Preferred. The holders of Series F Preferred shall not have any right to redeem the Series F Preferred. Each share of Series F Preferred shall automatically be redeemed by the Corporation for no consideration without notice to its holder and without further action by the Corporation in the event that either (A) the Partnership Unit (as defined in that certain Amended and Restated Agreement of Limited Partnership of United Dominion Realty, L.P., dated as of February 23, 2004) or (B) the Limited Partnership Interest (as defined in that certain Second Amended and Restated Agreement of Limited Partnership of Heritage Communities L.P., dated as of September 18, 1997) underlying such share of Series F Preferred is no longer outstanding.”

     SECOND: The Series F Preferred has been classified and designated by the Board of Directors of the Corporation under the authority contained in the Charter.

     THIRD: These Articles Supplementary have been approved by the Board of Directors of the Corporation in the manner and by the vote required by law.

     FOURTH: These Articles Supplementary shall become effective upon acceptance for record by the SDAT.

[END OF PAGE]

IN WITNESS WHEREOF, these Articles Supplementary are hereby signed for and on behalf of the Corporation by its Executive Vice President and Chief Financial Officer, who hereby acknowledges that said Articles Supplementary is the act of said Corporation and hereby states under the penalties of perjury that the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects to the best of his knowledge, information, and belief, and said Articles Supplementary are hereby witnessed by the Secretary of the Corporation.

Executed on this 4^th day of May, 2005.

United Dominion Realty Trust, Inc.
By:	/s/ Christopher D. Genry
	Christopher D. Genry
	Executive Vice President and Chief Financial Officer

Witness: May 4, 2005
 

/s/ Mary Ellen Norwood  

Mary Ellen Norwood 

Secretary 

Please return to:
Morrison & Foerster LLP
370 17^th Street
Suite 5200
Denver, Colorado 80202
Attn: Warren L. Troupe, Esq.

EX-10.01

Description of the Company’s
New Out-Performance Program

Exhibit 10.01

Background

      United Dominion Realty Trust, Inc. (the “Company”) competes for management talent with both public and private real estate investment vehicles and constantly reviews compensation structures and practices in an effort to remain competitive. The Company’s compensation programs are designed to further the Company’s primary goal of increasing dividend income and share price appreciation. The Company’s Board of Directors intends for these goals to be the primary economic motivation of the Company’s executive officers and other key employees.

      The Company’s Board of Directors believes that it is in the best interest of the Company’s stockholders to retain a management team that has a meaningful equity stake in the long-term success of the Company. The Company’s Board of Directors does not view stock options as an effective long-term incentive vehicle, due in part to the relatively low historical stock price appreciation in the REIT industry, and therefore does not plan to make grants of stock options to the Company’s executive officers. The Company’s out-performance programs and the 1999 Long-Term Incentive Plan currently represent the primary long-term incentive programs for the Company’s executive officers and other key employees.

New Out-Performance Program

      The Company’s New Out-Performance Program was approved by its stockholders at the Company’s Annual Meeting of Stockholders held on May 3, 2005 (the “Meeting”). Pursuant to the New Out-Performance Program, certain of the Company’s executive officers and other key employees may be given the opportunity to invest in performance shares of United Dominion Realty, L.P., a Delaware limited partnership (“UDR LP”), in which the Company is the sole general partner. The new out-performance partnership shares to be issued under the New Out-Performance Program are referred to herein as the “New OPPSs.” The first series of New OPPSs to be issued under the New Out-Performance Program will be the Series C OPPSs. The Company’s Series C Out-Performance Program was also approved by the Company’s stockholders at the Meeting and is described in more detail in Exhibit 10.02 to the Company’s Current Report on Form 8-K dated May 3, 2005 (Commission File No. 1-10524).

     Like the Series A Out-Performance Program approved by the Company’s stockholders in 2001 and the Series B Out-Performance Program approved by the Company’s stockholders in 2003, the New Out-Performance Program is designed to provide participants with the possibility of substantial returns on their investment if the total return on the Company’s common stock exceeds targeted levels, while putting the participants’ investment at risk if the targeted levels are not exceeded. The New Out-Performance Program will be administered by the Compensation Committee of the Company’s Board of Directors. Members of the Company’s Board of Directors who are not our employees are not eligible to participate in the New Out-Performance Program.

     Terms of New OPPSs

      The Company’s performance for each series of New OPPSs under the New Out-Performance Program will be measured over a period to be determined by the Compensation Committee with respect to each such series (the “Measurement Period”). Each series of New OPPSs will be issued by UDR LP to a separate limited liability company, referred to herein as a “New LLC,” to be formed for the benefit of selected executive officers and other key employees of the Company who agree to invest in that series of New OPPSs. The New LLC that holds such series of New OPPSs will have no right to receive distributions or allocations of income or loss, or to redeem those units prior to the date, referred to as the “Valuation Date,” that is the earlier of (i) the expiration of the Measurement Period for such series of New OPPSs, or (ii) the date of a change of control of the Company (defined as a “Transaction” in UDR LP’s Amended and Restated Agreement of Limited Partnership).

      Each series of New OPPSs will only be entitled to receive distributions and allocations of income and loss if, as of the Valuation Date, the threshold return during the Measurement Period for such series was achieved. If the threshold return is met, holders of such series of New OPPSs will be entitled to begin receiving distributions and allocations of income and loss from UDR LP equal to the distributions and allocations that would be received on the similar number of limited partnership interests in UDR LP, referred to herein as “OP Units.”

      For each series of New OPPSs, the total payout, if any, under each such series of New OPPSs will be capped at 1% of Market Capitalization. “Market Capitalization” is defined as the average number of shares of the Company outstanding (including common stock, common stock equivalents and OP Units) over the measurement period for each respective series of New OPPSs multiplied by the daily closing price of the Company’s common stock.

      If, on the respective Valuation Date, the threshold return does not meet the minimum return, then holders of each of such series of New OPPSs will forfeit their initial investment.

     Participation in New OPPSs

      Any executive officer or other key employee of the Company who is provided the opportunity to participate in the New OPPSs is under no obligation to exercise that right. Each New LLC will have the right, but not the obligation, to repurchase units from members whose employment with the Company terminates and such units may be re-sold by such New LLC to selected executive officers or

other key employees of the Company. If some of those eligible to participate elect not to participate in a particular series of New OPPSs, the remaining units of such series of New OPPSs shall be retained by UDR LP and may be offered in the future to existing participants or other executive officers or key employees.

      We may issue up to one series of New OPPSs per year for the next five years, beginning with the Series C OPPSs. Each series of New OPPSs will have the same terms and conditions as New OPPSs of the same series but may have different terms than New OPPSs of a different series. Each series of New OPPSs will be issued by UDR LP to a New LLC. The participants contribute funds or offer other consideration to purchase interests in such New LLC and will indirectly participate in such series of New OPPSs on the basis of each participant’s investment in the corresponding New LLC. The purchase price for each series of New OPPSs will be set by the Compensation Committee based upon the advice of an independent valuation expert. The specific features of the New OPPSs, the designation of executive officers and other key employees as potential participants and the level of participation of each participant may vary from series to series of New OPPSs. The Company anticipates that interests under an outstanding OPPSs program may also be tendered to the Company for purchase or exchanged in payment for a participant’s investment in any subsequent out-performance programs. (Any such exchange will be based on the fair market value at the time as determined by an independent valuation expert.)

     New LLC Governance and Restrictions on Transfer

      Except as described below, no series of New OPPSs may be transferred by a New LLC without the approval of the managers of such New LLC, who are expected to be the two largest participants in such New LLC, as long as they are employees of the Company, and two or more representatives of the independent directors of our Board of Directors. New OPPSs of any series may only be transferred by such New LLC without the consent of the managers of such New LLC after targeted returns have been achieved and the measurement period for such series of New OPPSs has passed. Once the series of New OPPSs has vested, individuals may exchange their interests in such series for an equivalent number of OP Units. Participants in the New Out-Performance Program may transfer New OPPSs or OP Units received to a family member (or a family-owned entity), in the event of death or disability, sell them to the Company or exchange them for interests in subsequent out-performance programs. (Based on fair market value at the time as determined by an independent valuation expert.)

      The terms of the operating agreement of each New LLC will restrict the participants’ ability to transfer their interests in the New LLC without the consent of the managers of such New LLC. Each New LLC will have the right, but not the obligation, to repurchase the interest of any participant in such New LLC at the original purchase price if prior to the end of the Measurement Period such participant’s employment with the Company is terminated for any reason other than by death or disability and such units may be retained or re-sold by such New LLC to selected executive officers or other key employees of the Company. Each New LLC will be used as a vehicle to purchase such New OPPSs to ensure that there would be no opportunity for the participants to profit from the ownership of those New OPPSs of such series prior to the Valuation Date.

      The New OPPSs will not be convertible into shares of the Company’s common stock. However, in the event of a change of control of the Company, each New LLC or any participant that holds any New OPPSs will have the same redemption rights as other holders of OP Units. Upon the occurrence of a change of control, each New LLC or participant that holds New OPPSs may require UDR LP to redeem all or a portion of the units held by such party in exchange for a cash payment per unit equal to the market value of a share of the Company’s common stock at the time of redemption. However, in the event that any units are tendered for redemption, the limited partnership’s obligation to pay the redemption price will be subject to the prior right of the Company to acquire such units in exchange for an equal number of shares of common stock.

     Possible Negative Effects of the New OPPSs

      Although we do not believe that the sale of the New OPPSs will have an antitakeover effect, the New OPPSs could increase the potential cost of acquiring control of the Company and thereby discourage an attempt to take control of the Company. However, our Board of Directors is not aware of any attempt to take control of the Company, and our Board of Directors has not approved the sale of the New OPPSs with the intention of discouraging any such attempt.

      If with respect to any series of New OPPSs, the threshold return over the Measurement Period is achieved, then the New LLC that holds such series of New OPPSs will be entitled to receive the same distributions and allocations as the holder of a similar number of OP Units of UDR LP. This could have a dilutive effect on future earnings per share of our common stock and on our equity ownership in UDR LP. However, the dilutive impact of each series of New OPPSs will be limited to 1.0%.

EX-10.02 4 d25153exv10w02.htm DESCRIPTION OF SERIES C OUT-PERFORMANCE PROGRAM

Exhibit 10.02

Description of the
Series C Out-Performance Program

General

      The New Out-Performance Program, including the Series C Out-Performance Program, of United Dominion Realty Trust, Inc. (the “Company”), was approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders held on May 3, 2005. Pursuant to the New Out-Performance Program, certain of the Company’s executive officers and other key employees may be given the opportunity to invest in performance shares of United Dominion Realty, L.P., a Delaware limited partnership (“UDR LP”), in which the Company is the sole general partner. The first series of new out-performance partnership shares, or “New OPPSs,” to be issued under the New-Out Performance Program will be the Series C Out-Performance Shares, referred to herein as the “Series C OPPSs.” The principal terms of the Series C OPPSs that the Company intends to offer to participants in 2005 are the principal terms set forth below in the description of the New OPPSs and as described in Exhibit 10.01 to the Company’s Current Report on Form 8-K dated May 3, 2005 (Commission File No.1-10524). Like the Series A Out-Performance Program approved by the Company’s stockholders in 2001 and the Series B Out-Performance Program approved by the Company’s stockholders in 2003, the Series C Out-Performance Program is designed to provide participants with the possibility of substantial returns on their investment if the total return of the Company’s common stock exceeds targeted levels, while putting the participants’ investment at risk if the targeted levels are not exceeded. The New Out-Performance Program, including the Series C Out-Performance Program, will be administered by the Compensation Committee of the Company’s Board of Directors.

Overview of the New Out-Performance Program

     Terms of New OPPSs

      The Company’s performance for each series of New OPPSs under the New Out-Performance Program will be measured over a period to be determined by the Compensation Committee with respect to each such series (the “Measurement Period”). Each series of New OPPSs will be issued by UDR LP to a separate limited liability company, referred to herein as a “New LLC,” to be formed for the benefit of selected executive officers and other key employees of the Company who agree to invest in that series of New OPPSs. The New LLC that holds such series of New OPPSs will have no right to receive distributions or allocations of income or loss, or to redeem those units prior to the date, referred to as the “Valuation Date,” that is the earlier of (i) the expiration of the Measurement Period for such series of New OPPSs, or (ii) the date of a change of control of the Company (defined as a “Transaction” in UDR LP’s Amended and Restated Agreement of Limited Partnership).

      Each series of New OPPSs will only be entitled to receive distributions and allocations of income and loss if, as of the Valuation Date, the threshold return during the Measurement Period for such series was achieved. If the threshold return is met, holders of such series of New OPPSs will be entitled to begin receiving distributions and allocations of income and loss from UDR LP equal to the distributions and allocations that would be received on the similar number of limited partnership interests in UDR LP, referred to herein as “OP Units.”

      For each series of New OPPSs, the total payout, if any, under each such series of New OPPSs will be capped at 1% of Market Capitalization. “Market Capitalization” is defined as the average number of shares of the Company outstanding (including common stock, common stock equivalents and OP Units) over the measurement period for each respective series of New OPPSs multiplied by the daily closing price of the Company’s common stock.

      If, on the respective Valuation Date, the threshold return does not meet the minimum return, then holders of each of such series of New OPPSs will forfeit their initial investment.

     Participation in New OPPSs

      Any executive officer or other key employee of the Company who is provided the opportunity to participate in the New OPPSs is under no obligation to exercise that right. Each New LLC will have the right, but not the obligation, to repurchase units from members whose employment with the Company terminates and such units may be re-sold by such New LLC to selected executive officers or other key employees of the Company. If some of those eligible to participate elect not to participate in a particular series of New OPPSs, the remaining units of such series of New OPPSs shall be retained by UDR LP and may be offered in the future to existing participants or other executive officers or key employees.

      We may issue up to one series of New OPPSs per year for the next five years, beginning with the Series C OPPSs. Each series of New OPPSs will have the same terms and conditions as New OPPSs of the same series but may have different terms than New OPPSs of a different series. Each series of New OPPSs will be issued by UDR LP to a New LLC. The participants contribute funds or offer other consideration to purchase interests in such New LLC and will indirectly participate in such series of New OPPSs on the basis of each participant’s investment in the corresponding New LLC. The purchase price for each series of New OPPSs will be set by the Compensation Committee based upon the advice of an independent valuation expert. The specific features of the New OPPSs, the designation of executive officers and other key employees as potential participants and the level of participation of each participant may vary from series to series of New OPPSs. The Company anticipates that interests under an outstanding OPPSs program may also be tendered to the Company for purchase or exchanged in payment for a participant’s investment in any subsequent out-performance programs. (Any such exchange will be based on the fair market value at the time as determined by an independent valuation expert.)

     New LLC Governance and Restrictions on Transfer

      Except as described below, no series of New OPPSs may be transferred by a New LLC without the approval of the managers of such New LLC, who are expected to be the two largest participants in such New LLC, as long as they are employees of the Company, and two or more representatives of the independent directors of the Company’s Board of Directors. New OPPSs of any series may only be transferred by such New LLC without the consent of the managers of such New LLC after targeted returns have been achieved and the measurement period for such series of New OPPSs has passed. Once the series of New OPPSs has vested, individuals may exchange their interests in such series for an equivalent number of OP Units. Participants in the New Out-Performance Program may transfer New OPPSs or OP Units received to a family member (or a family-owned entity), in the event of death or disability, sell them to the Company or exchange them for interests in subsequent out-performance programs. (Based on fair market value at the time as determined by an independent valuation expert.)

      The terms of the operating agreement of each New LLC will restrict the participants’ ability to transfer their interests in the New LLC without the consent of the managers of such New LLC. Each New LLC will have the right, but not the obligation, to repurchase the interest of any participant in such New LLC at the original purchase price if prior to the end of the Measurement Period such participant’s employment with the Company is terminated for any reason other than by death or disability and such units may be retained or re-sold by such New LLC to selected executive officers or other key employees of the Company. Each New LLC will be used as a vehicle to purchase such New OPPSs to ensure that there would be no opportunity for the participants to profit from the ownership of those New OPPSs of such series prior to the Valuation Date.

      The New OPPSs will not be convertible into shares of the Company’s common stock. However, in the event of a change of control of the Company, each New LLC or any participant that holds any New OPPSs will have the same redemption rights as other holders of OP Units. Upon the occurrence of a change of control, each New LLC or participant that holds New OPPSs may require UDR LP to redeem all or a portion of the units held by such party in exchange for a cash payment per unit equal to the market value of a share of the Company’s common stock at the time of redemption. However, in the event that any units are tendered for redemption, the limited partnership’s obligation to pay the redemption price will be subject to the prior right of the Company to acquire such units in exchange for an equal number of shares of common stock.

     Possible Negative Effects of the New OPPSs

      Although we do not believe that the sale of the New OPPSs will have an antitakeover effect, the New OPPSs could increase the potential cost of acquiring control of the Company’s and thereby discourage an attempt to take control of the Company. However, the Company’s Board of Directors is not aware of any attempt to take control of the Company, and the Board of Directors has not approved the sale of the New OPPSs with the intention of discouraging any such attempt.

      If with respect to any series of New OPPSs, the threshold return over the Measurement Period is achieved, then the New LLC that holds such series of New OPPSs will be entitled to receive the same distributions and allocations as the holder of a similar number of OP Units of UDR LP. This could have a dilutive effect on future earnings per share of our common stock and on the Company’s equity ownership in UDR LP. However, the dilutive impact of each series of New OPPSs will be limited to 1.0%.

Series C Out-Performance Program

Terms of the Series C OPPSs

      The principal terms of the Series C OPPSs that the Company intends to offer to participants in 2005 are the principal terms set forth above in the description of the New OPPSs under the New Out-Performance Program.

Participants

      For the Series C OPPSs, participation rights will be approximately as follows:

	Percentage of Units
Participant	to be Offered
Thomas W. Toomey		25-33%
W. Mark Wallis		10-12%
Christopher D. Genry		10-12%
Martha R. Carlin		8-10%
Richard A. Giannotti		8-10%
Rodney A. Neuheardt		5-8%
Scott A. Shanaberger		5-8%
Mark E. Wood		5-8%
Patrick S. Gregory		5-8%
Lester C. Boeckel		5-8%
Michael J. Kelly		5-8%
Thomas A. Spangler		5-8%
Matthew T. Akin		5-8%
Other Executive Officers as a Group		5-8%
Non-Executive Officers as a Group		0%

Purchase Price

      The purchase price for the Series C OPPSs has been determined by the Compensation Committee to be $750,000, assuming 100% participation, and was based upon the advice of an independent valuation expert. The valuation took into account that any investment in the Series C OPPSs will become worthless if the targeted Total Return (as defined below) is not achieved. The value of the Series C OPPSs also has been discounted significantly because of the restrictions on transfer and the limited redemption rights provided for with respect to the Series C OPPSs.

      Subscription

      Any executive officer or other key employee of the Company who is provided the opportunity to invest is under no obligation to exercise that right. The Series C OPPSs must be initially subscribed within 60 days of stockholder approval. However, the New LLC that will hold the Series C OPPSs has the right, but not the obligation, to repurchase units from members whose employment with the Company terminates and such units may be retained or re-sold by the New LLC to selected executive officers or other key employees of the Company. If some of those eligible to participate elect not to participate, the remaining OPPSs may be reoffered in the future to existing participants or other executive officers or key employees.

      Measurement Period

      The Company’s performance for the Series C OPPSs will be measured over a 36-month, period beginning June 1, 2005. The New LLC that holds the Series C OPPSs will have no right to receive distributions or allocations of income or loss, or to redeem those shares prior to the date, referred to as the “Series C Valuation Date,” that is the earlier of (i) the expiration of the measurement period for the series (May 30, 2008), or (ii) the date of a change of control of the Company (defined as a “Transaction” in UDR LP’s Amended and Restated Agreement of Limited Partnership).

      Payments to Participants

      The Series C OPPSs will only be entitled to receive distributions and allocations of income and loss if, as of the Series C Valuation Date, the cumulative Total Return of the Company's common stock during the measurement period is at least the equivalent of a 36% Total Return or 12% annualized (the “Minimum Return”).

      If the threshold is met, holders of the Series C OPPSs will be entitled to begin receiving distributions and allocations of income and loss from UDR LP equal to the distributions and allocations that would be received on a similar number of OP Units, obtained by:

      (i) determining the amount by which the cumulative Total Return of the Company's common stock over the measurement period exceeds the Minimum Return (such excess being the “Excess Return”);

      (ii) multiplying 2.0% of the Excess Return by our Market Capitalization; and

      (iii) dividing the number obtained in clause (ii) by the market value of one share of the Company's common stock on the Series C Valuation Date, computed as the volume-weighted average price per day of the Company's common stock for the 20 trading days immediately preceding the Series C Valuation Date.

      For the Series C OPPSs, the number determined pursuant to clause (ii) in the preceding paragraph is capped at 1% of Market Capitalization. “Market Capitalization” is defined as the average number of shares outstanding over the 36-month period (including common stock, common stock equivalents and OP Units) multiplied by the daily closing price of the Company's common stock.

      “Total Return” means, 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.

      Forfeiture of Investment

      If, on the Series C Valuation Date, the cumulative Total Return of the Company's common stock does not meet the Minimum Return and there is no Excess Return, then holders of Series C OPPSs will forfeit their initial investment.

       Examples of the Value of Series C OPPSs

      The following table illustrates the value of the Series C OPPSs under different share prices and Total Returns at the Series C Valuation Date, assuming the starting price of the Company’s common stock for the valuation period was $22.00.

	Value to Stockholders
						Value of Series C
	United Dominion			Stockholder Value		OPPSs
Stock Price at Series C Valuation Date	Total Return (1)			Achieved(2)		to Participants(3)
				(Million)		(Million)
$23.00		21.59	%	$	173	$	—
$24.00		26.14			324		—
$25.00		30.68			475		—
$26.00		35.23			625		—
$27.00		39.77			776		2.81
$28.00		44.32			927		6.29
$29.00		48.86			1,078		9.91
$30.00		53.41			1,229		13.67
$31.00		57.95			1,380		17.56
$32.00		62.50			1,531		21.59
$33.00		67.05			1,682		25.76
$34.00		71.59			1,833		30.07
$35.00		76.14			1,984		34.51
$36.00		80.68			2,135		39.09
$37.00		85.23			2,286		43.80

(1)	Total Return to our stockholders, assuming a 3% dividend growth rate.
(2)	Total Return multiplied by beginning market capitalization of $3.3 billion (based on 150,000,000 outstanding shares of common stock, common stock equivalents and OP Units, and an assumed per share price of $22.00 at the beginning of the Series C OPPSs measurement period).
(3)	Out-Performance stockholder value multiplied by management participation of 2% subject to 1% dilution limit.

      The numbers used in the table above are for illustrative purposes only, and actual outcomes may not be within the ranges used. The results set forth in the table may be affected by the market value of the Company’s common stock during any Measurement Period, general economic conditions, local real estate conditions and the Company’s dividend policy.

EX-10.03 5 d25153exv10w03.htm DESCRIPTION OF AMENDMENT TO SERIES A OUT-PERFORMANCE PROGRAM

Exhibit 10.03

Description of the Amendment to the Series A Out-Performance Program

      The Series A Out-Performance Program of United Dominion Realty Trust, Inc. (the “Company”), was approved by the Company’s stockholders at its 2001 Annual Meeting of Shareholders. The Series A Out-Performance Program was designed to provide participants with the possibility of substantial returns on their investment if the total return on the Company’s common stock exceeded targeted levels, while putting the participants’ investment at risk if those levels were not exceeded. The Series A Out-Performance Partnership Shares, referred to herein as the “Series A OPPSs,” vested in June 2003.

      The Series A Out-Performance Program, as approved by the Company’s stockholders in 2001, permitted individuals to transfer Series A OPPSs only to a family member or a family-owned entity or in the event of death or disability. These restrictions on transfer provide limited liquidity for the holders of interests in the Series A Out-Performance Program and they do not allow such holders to tender their Series A OPPSs as consideration for their investment in a subsequent out-performance program. Participating in an out-performance program can involve a significant upfront cash investment by a participant, which many participants may not have and cannot fund out of existing assets or without borrowing or without selling the participant’s existing shares of the Company’s common stock. The Company believes that requiring participants to pay cash upfront as the only means of participating in an out-performance program has limited the attractiveness and participation by some of the Company’s executives and other key employees in subsequent out-performance programs. At the Company’s Annual Meeting of Stockholders held on May 3, 2005 (the “Meeting”), the Company’s stockholders approved an amendment to the Series A Out-Performance Program that was designed to address this concern. The amendment to the Series A Out-Performance Program, approved by the Company’s stockholders at the Meeting, allows the participants to sell the Series A OPPSs to the Company or to exchange the Series A OPPSs for interests in subsequent out-performance programs, with the prior written consent of the board of managers of UDR Out-Performance I, LLC. The value of the interests in the Series A Out-Performance Program that are exchanged for interests in a subsequent out-performance program will be determined based on the fair market value at the time as determined by an independent valuation expert. UDR Out-Performance I, LLC is a limited liability company owned by members of the Company’s senior management and other key employees whose current board of managers is comprised of two of the Company’s independent directors and two members of the Company’s senior management. Amending the Series A Out-Performance Program to allow participants to sell Series A OPPSs to the Company or to exchange Series A OPPSs for interests in subsequent out-performance programs will allow the Series A participants to participate in subsequent out-performance programs, such as the New Out-Performance Program that was also approved by the Company’s stockholders at the Meeting, by tendering the Series A OPPSs, instead of cash, as consideration for their investment in the subsequent out-performance program.

     A description of the Series A Out-Performance Program is attached as Exhibit 10(xviii) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (Commission File No. 1-10524).

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