EXHIBIT 10.25
COMPENSATION SUMMARY
EXECUTIVE COMPENSATION
BASE SALARY. The following table sets forth the annual base salary
levels of the Company's Named Executive Officers (which officers were determined
by reference to the Company's proxy statement for the Annual Meeting of
Stockholders to be held on May 3, 2005) for 2005 and 2004:
<Table>
<Caption>
NAME AND PRINCIPAL POSITION YEAR BASE SALARY
- ----------------------------------------------------------- ---- -----------
Thomas W. Toomey 2005 $450,000
Chief Executive Officer and President 2004 $400,270
W. Mark Wallis 2005 $260,000
Senior Executive Vice President 2004 $251,300
Christopher D. Genry 2005 $260,000
Executive Vice President and Chief Financial Officer 2004 $245,000
Martha R. Carlin 2005 $220,000
Senior Vice President, Director of Property Operations 2004 $211,300
Richard A. Giannotti 2005 $200,000
Executive Vice President--Asset Quality 2004 $190,000
</Table>
ANNUAL INCENTIVE COMPENSATION. Annual incentive compensation (bonuses)
is tied to our performance and the degree to which our executives' individual
objectives are achieved. Annual incentive compensation is designed to bring our
executives' total compensation to approximately equal to industry averages when
performance objectives are met and to the upper percentile when performance is
superior. The primary corporate objectives considered in determining annual
incentive compensation for our executive officers are: (1) growth in funds from
operations per share, or FFO, (2) our total return to common stockholders, (3)
our balance sheet strength and flexibility, (4) growth of dividend, and (5) key
company objectives. The following table sets forth information regarding annual
incentive compensation for our Named Executive Officers for 2004 and 2003:
<Table>
<Caption>
NAME YEAR BONUS
- --------------------------- ---- -------------
Thomas W. Toomey 2004 $1,250,000(1)
2003 $ 950,000 (2)
W. Mark Wallis 2004 $ 550,000 (1)
2003 $ 450,000 (2)
Christopher D. Genry 2004 $ 550,000 (1)
2003 $ 500,000 (2)
Martha R. Carlin 2004 $ 420,000 (1)
2003 $ 335,000 (2)
Richard A. Giannotti 2004 $ 155,000 (1)
2003 $ 140,000
</Table>
- ----------------------
(1) Mr. Toomey received $1,000,000, Mr. Wallis received $200,000, Mr. Genry
received $200,000, and Ms. Carlin received $120,000 of their 2004 bonus in
the form of a grant of 44,743, 8,949, 8,949, and 5,369 shares,
respectively, of restricted common stock at a price of $22.35 per share on
the date of grant. Mr. Toomey's restricted common stock vests on February
18, 2009. The other Named Executive Officers' shares vest pro rata over a
four-year period ending February 18, 2009. Distributions are paid on the
restricted common stock at the same rate as on unrestricted common stock.
(2) Mr. Toomey received $950,000, Mr. Wallis received $100,000, Mr. Genry
received $250,000, and Ms. Carlin received $50,000 of their 2003 bonus in
the form of a grant of 51,463, 5,417, 13,543, and 2,709 shares,
respectively, of restricted common stock at a price of $18.46 per share on
the date of grant. Mr. Toomey's restricted common stock vests on February
12, 2009. The other Named Executive Officers' shares vest pro rata over a
five-year period ending February 12, 2009. Distributions are paid on the
restricted common stock at the same rate as on unrestricted common stock.
LONG-TERM INCENTIVE COMPENSATION. Long-term incentive compensation is
targeted to be approximately equal to industry averages when performance
objectives are met and to be above industry averages when the long-term
performance of our common stock is above average. For 2004 and 2003, the
components of our long-term incentive compensation were the 1999 Long-Term
Incentive Plan and the Series B Out-Performance Program. The Compensation
Committee determines long-term incentive compensation in consultation with its
independent consultant and our Chief Executive Officer.
In addition to the restricted stock grants described in the table above
under "Annual Incentive Compensation," Mr. Giannotti and Ms. Carlin each
received a grant on October 20, 2003 of 2,740 shares of restricted common stock
priced at $18.24 per share on the date of grant. The grants of restricted common
stock to our Named Executive Officers as described herein were made under our
1999 Long-Term Incentive
Plan. Distributions are paid on the restricted common stock at the same rate as
on unrestricted common stock.
The Series B Out-Performance Program is designed to provide
participants with the possibility of substantial returns on their investment if
the total return on our common stock exceeds targeted levels, while putting the
participants' investment at risk if those levels are not exceeded. The
membership units have the following features:
o They represent equity in United Dominion Realty, L.P., or "UDR LP." UDR
LP has outstanding an aggregate of 1,000,000 of its Class II
Out-Performance Partnership Shares that it sold to UDR Out-Performance
II, LLC , or the "Series B LLC". The Series B LLC is a limited
liability company formed and owned by the holders of the membership
units and governed by a board of managers consisting of Messrs.
Klingbeil, Larson, Toomey and Wallis. The membership units were sold at
a cash price of $1.00 per unit to the purchasers.
o The purchase price for the membership units was determined by the
Compensation Committee based on the advice of an independent valuation
expert.
o If a holder of membership units leaves our employ prior to the
completion of the performance period and the vesting of the membership
units, the Series B LLC has the right, but not the obligation, to
repurchase the membership units for the initial price paid by the
purchaser. Should the Series B LLC choose to resell those membership
units, the purchase price will be determined by the Compensation
Committee based upon the advice of an independent valuation expert.
o The membership units will have no value unless the cumulative total
return on our common stock for the 24-month period from June 1, 2003 to
May 31, 2005 exceeds the cumulative total return of the Morgan Stanley
REIT Index peer group index over the same period and is at least the
equivalent of a minimum 22% total return or 11% annualized. (As of
March 1, 2005 the cumulative total of the Morgan Stanley REIT Index was
53.72% and cumulative total return on our common stock was 42.54%.)
If the cumulative total return on our common stock satisfies the above
performance criteria at the conclusion of the measurement period, the holders of
the membership units will receive distributions and allocations of income and
loss from UDR LP based on the number of membership units in the Series B LLC. If
on the Valuation Date the cumulative total return on our common stock does not
satisfy the performance criteria, the holders of the membership units will
forfeit their initial investment.
The Series B LLC currently has outstanding a total of 690,000 of its
membership units held by members of our senior management and has 310,000 units
available for issuance. The following table sets forth information regarding
membership units that have been sold to our Named Executive Officers in 2004 and
2003 in accordance with our Series B Out-Performance Program:
<Table>
<Caption>
NAME YEAR NUMBER OF UNITS
- ----------------------------- ---- ---------------
Thomas W. Toomey 2004 0
2003 340,000
W. Mark Wallis 2004 0
2003 140,000
Christopher D. Genry 2004 0
2003 130,000
Martha R. Carlin 2004 0
2003 0
Richard A. Giannotti 2004 30,000
2003 0
</Table>
A copy of our 1999 Long-Term Incentive Plan, as amended and restated
through July 22, 2004, and the form of restricted stock award thereunder, are
attached as Exhibits 99.6 and 99.5, respectively, to our Current Report on Form
8-K dated December 31, 2004 and are incorporated herein by reference. A
description of our Series B Out-Performance Program is attached as Exhibit 10.22
to our Annual Report on Form 10-K for the year ended December 31, 2003 and is
incorporated herein by reference.
OTHER COMPENSATION. In 2003, Mr. Genry, Mr. Giannotti and Ms. Carlin
each received a $6,000 non-discretionary 401(k) matching contribution made by us
under our Profit Sharing Plan. In 2004, Mr. Genry and Mr. Giannotti each
received a $6,500 non-discretionary 401(k) matching contribution and Ms. Carlin
received a $1,780 non-discretionary 401(k) matching contribution made by us
under our Profit Sharing Plan.
DIRECTOR COMPENSATION
2004 DIRECTOR COMPENSATION. In fiscal 2004, non-employee directors did
not receive any cash compensation for their services other than reimbursement of
expenses. Each non-employee director received a grant of 5,000 shares of
restricted stock that vested on January 1, 2005.
2005 DIRECTOR COMPENSATION. Our compensation program for non-employee
directors consists of a combination of cash retainers for board and committee
service, service-based restricted stock and performance shares that vest only if
our total stockholder return over a three-year period meets or exceeds that of a
designated peer group of apartment REITs. Total pay associated with cash
retainers and restricted stock is targeted at peer group median levels. If we
outperform our peers in terms of total stockholder return, total pay can equal
or exceed 75th percentile levels. Annual retainers
for board and committee service are set at competitive levels in recognition of
the time commitments and responsibility levels associated with serving on public
company boards within the current environment.
For 2005, each non-employee director will receive an annual retainer
fee of $40,000 ($75,000 for a non-employee chairman of the board of directors),
which may be taken in cash or shares of restricted common stock. Non-employee
directors, other than committee chairpersons, also receive an annual retainer
fee of $5,000 for each committee on which they serve. The chairpersons of each
of the Audit, Compensation, Executive and Governance Committees receive an
annual retainer fee of $10,000. These fees were paid in January 2005.
Also in January 2005, each non-employee director received a grant of
2,000 shares of restricted stock that vests one year from the date of grant and
a grant of 3,000 shares of restricted stock that vests one-third on each
anniversary of the date of grant if the company has met certain performance
thresholds. Such 3,000 shares vest over a three-year measurement period from the
date of grant on the following basis (1) 100 shares will vest if our total
stockholder return (share price appreciation plus dividends paid) during such
measurement period is at the 50th percentile of total stockholder return from a
REIT peer group index to be selected by the board of directors, (2) 100 shares
will vest for each percentage point by which our total stockholder return for
such measurement period exceeds the 50th percentile of such peer group index,
and (3) the remainder will vest if total stockholder return during such
measurement period is equal to or exceeds the 75th percentile of such peer group
index.
Directors are entitled to receive dividends during the vesting period;
however, any unvested shares at the end of the three-year vesting period will be
returned to us and cancelled. All restricted stock granted to our non-employee
directors is priced at the closing price of our common stock on the grant date.
Directors who are also employees of the company receive no additional
compensation for service as a director.