UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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Investors
Real Estate Trust
(Name of
Registrant as Specified in its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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x No
fee required.
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o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1) Title of each class of
securities to which transaction applies:
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2) Aggregate number of securities
to which transaction applies:
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3) Per unit price or other
underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated
and state how it was determined):
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4) Proposed maximum aggregate
value of transaction:
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5) Total Fee
Paid:
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o Fee
paid previously with preliminary
materials.
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o Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1) Amount Previously
Paid:
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2) Form, Schedule or Registration
Statement No.:
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3) Filing
Party:
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4) Date
Filed:
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Investors
Real Estate Trust
12
Main Street South
PO
Box 1988
Minot,
ND 58702-1988
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August 4,
2008
Dear
Shareholder:
It is a
pleasure to invite you to attend our 38th Annual Meeting of Shareholders to be
held on Tuesday, September 16, 2008, at 7:00 p.m., CDT, at the Grand
International, 1505 North Broadway, Minot, North Dakota.
This
booklet includes the Notice of the Annual Meeting and the Proxy Statement
relating to the annual meeting, each of which contains important information
about the formal business to be acted on by the shareholders. The annual meeting
will also feature a report on the operations of your Company, followed by a
question and answer period. After the annual meeting, you will have the
opportunity to speak informally with the trustees and officers of the
Company.
At the
annual meeting, you will be asked to vote on the following items: (i) the
election as trustees of the Company of the nine (9) nominees named in this Proxy
Statement, each for a term of one year, (ii) the approval of the Company’s 2008
Incentive Award Plan, (iii) the ratification of Deloitte & Touche LLP as the
Company’s independent auditors for the current fiscal year, and (iv) such other
matters as may properly come before the annual meeting or any adjournment(s) or
postponement(s) thereof.
The Board
of Trustees unanimously recommends that you vote to elect the nine trustee
nominees named in this Proxy Statement, to approve the Company’s 2008 Incentive
Award Plan, and to ratify the appointment of Deloitte & Touche as the
Company’s independent auditors.
It is
important that your common shares of beneficial interest be voted regardless of
whether you plan to be present at the annual meeting. Please complete, sign,
date and return the enclosed proxy promptly or authorize a proxy by telephone or
through the internet site designated on the enclosed proxy card. If you attend
the annual meeting and wish to vote your shares in person, you may revoke any
previously executed or authorized proxy.
Please
vote promptly. I look forward to seeing you at the annual
meeting.
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Sincerely,
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Investors
Real Estate Trust
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Thomas
A. Wentz, Sr.
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President
and Chief Executive Officer
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TABLE
OF CONTENTS
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A-1
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_______________________________
To
Be Held on Tuesday, September 16, 2008, at 7:00 p.m. (CDT)
_______________________________
Notice is
hereby given that the Annual Meeting of Shareholders of Investors Real Estate
Trust (the “Company”) will be held on Tuesday, September 16, 2008, at 7:00 p.m.,
CDT, at the Grand International, 1505 North Broadway, Minot, North Dakota,
58703, for the following purposes:
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1.
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To
elect as trustees of the Company the nine (9) nominees named in this Proxy
Statement, each for a term of one
year,
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2.
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To
approve the Company’s 2008 Incentive Award
Plan,
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3.
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To
ratify Deloitte & Touche LLP as the Company’s independent auditors for
the current fiscal year, and
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4.
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To
transact such other business as may properly come before the annual
meeting or any adjournment(s) or postponement(s)
thereof.
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These
items are described in the proxy statement, which is part of this notice. We
have not received notice of other matters that may properly be presented at the
annual meeting.
The
Company’s Board of Trustees has fixed the close of business on July 21, 2008, as
the record date for determining the shareholders entitled to receive notice of
and to vote at the annual meeting or any adjournment(s) or postponement(s)
thereof.
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By
Order of the Board of Trustees,
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Michael
A. Bosh
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Secretary
and General Counsel
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Minot,
North Dakota
August 4,
2008
Whether
or not you expect to be present at the annual meeting, please sign, date and
return the enclosed proxy or authorize a proxy by telephone or through the
internet site designated on the enclosed proxy card. If you attend
the annual meeting, you may revoke your proxy and vote in person.
This page
has been intentionally left blank.
2
Investors
Real Estate Trust
12 Main
Street South
PO Box
1988
Minot, ND
58702-1988
Telephone: (701)
837-4738
Fax: (701)
838-7785
_____________________________
August 4,
2008
_____________________________
Proxies
are solicited by the Board of Trustees of Investors Real Estate Trust, a North
Dakota Real Estate Investment Trust (the “Company”), for use at the 2008 Annual
Meeting of Shareholders of the Company (the “Annual Meeting”) to be held on
Tuesday, September 16, 2008, at 7:00 p.m. CDT. The Annual Meeting will be held
at the Grand International, 1505 North Broadway, Minot, North Dakota,
58703. Only the holders of record of the Company’s common shares of
beneficial interest, no par value (“Shares” or “common shares”) at the close of
business on July 21, 2008 (the “Record Date”), are entitled to vote at the
Annual Meeting. The holders of the Company’s 8.25% Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest, no par value (the
“Preferred Shares”), are not entitled to vote at the Annual
Meeting. As of the close of business on July 21, 2008, the Company
had 58,198,751 Shares issued and outstanding, each of which is entitled to one
vote at the Annual Meeting. Thirty-three and one-third percent (33
1/3%) of the Shares outstanding on the Record Date must be present in person or
by proxy to have a quorum.
The cost
of soliciting proxies will be borne by the Company. Trustees, officers and
employees of the Company may, without additional compensation, solicit proxies
by mail, internet, personal interview, telephone and/or telecopy. In
addition, the Company has retained Morrow & Co., LLC to assist in the
solicitation of proxies. This proxy statement and the enclosed proxy
card are scheduled to be mailed to shareholders commencing on or about August 4,
2008.
The
Company will request banks, brokerage houses and other institutions, nominees or
fiduciaries to forward the soliciting material to the beneficial owners of
Shares and to obtain authorization for the execution of proxies. The Company
will, upon request, reimburse banks, brokerage houses and other institutions,
nominees and fiduciaries for their reasonable expenses in forwarding proxy
materials to the beneficial owners. If a shareholder is a participant in the
Company’s Distribution Reinvestment and Share Purchase Plan (the “Plan”), the
proxy represents a voting instruction as to the number of full Shares in such
shareholder’s Plan account, as well as any Shares held directly by the
shareholder.
All
properly executed or authorized proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting as specified in such
proxies. If no vote is specified on a proxy, the Shares represented by such
proxy will be voted FOR
the election of each of the nine (9) nominees for trustee, FOR the approval of the
Company’s 2008 Incentive Award Plan, and FOR the ratification of the
selection of Deloitte & Touche LLP as the Company’s independent
auditors. If other matters are properly presented for voting at the
Annual Meeting, the persons named as proxies will vote on such matters in
accordance with their best judgment. We have not received notice of other
matters that may properly be presented for voting at the Annual
Meeting.
Shares
which are entitled to vote but which, at the direction of the beneficial owner,
are not voted on one or more matters (“abstentions”) will be counted for the
purpose of determining whether there is a quorum for the transaction of business
at the 2008 Annual Meeting. Shares held by brokers who do not have discretionary
authority to vote on a particular matter and who have not received voting
instructions from their customers (“broker non-votes”) are counted as present
for the purpose of determining the existence of a quorum at the Annual
Meeting.
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy at the Annual Meeting, provided a quorum is present, is
required to elect each of the nine (9) nominees for trustee (Proposal
1).
3
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy at the Annual Meeting, provided a quorum is present, is
required to approve the Company’s 2008 Incentive Award Plan (Proposal
2).
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy at the Annual Meeting, provided a quorum is present, is
required to ratify the selection of Deloitte & Touche as the Company’s
independent auditors (Proposal 3).
Both
broker non-votes and abstentions are counted in determining whether the
shareholders have approved these proposals. As such, if brokers and
banks vote on their clients’ behalf, such votes will affect the proposal as
voted (either for or against). If brokers and banks do not vote on
their clients’ behalf, such broker non-votes will have the effect of a vote
against the proposals. Abstentions also have the effect of a vote
against the proposals.
Any proxy
given pursuant to this solicitation may be revoked by the person giving it at
any time before its use at the Annual Meeting by delivering to Michael A. Bosh,
the Secretary and General Counsel of the Company, a written notice of revocation
or a duly executed proxy bearing a later date, by authorizing a subsequent proxy
by telephone or through the designated internet site, or by attending the Annual
Meeting and voting in person.
The
Company’s principal executive offices are located at 12 Main Street South,
Minot, North Dakota, 58702-1988. The Company’s telephone number is (701)
837-4738, and facsimile number is (701) 838-7785.
The
remainder of this page has been intentionally left blank.
4
General
The
Articles of Amendment and Third Restated Declaration of Trust of the Company
(the “Third Restated Declaration of Trust”) provides that the Board of Trustees
shall be comprised of not less than five (5) nor more than fifteen (15)
trustees. The Board currently consists of eight (8) trustees, with an
additional unfilled vacancy created by the resignation in January 2008 of Mr.
Edward T. Schafer.
At the
Annual Meeting, nine trustees are to be elected for a term of one year (expiring
at the 2009 Annual Meeting) or until the election and qualification of their
successors. The persons proposed for election as trustees of the
Company are Patrick G. Jones, Timothy P. Mihalick, Jeffrey L. Miller, C.W.
“Chip” Morgan, John T. Reed, W. David Scott, Stephen L. Stenehjem, John D.
Stewart and Thomas A. Wentz, Jr., each of whom, with the exception of Mr. Reed,
is presently a member of the Board.
In the
unanticipated event that any nominee should become unavailable for election or,
upon election, should be unable to serve, the proxies will be voted for the
election of such other person or persons as shall be determined by the persons
named in the proxy in accordance with their judgment or, if none, the size of
the Board will be reduced.
Vote
Required
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy at the Annual Meeting, provided a quorum is present, is
required to elect each of the nine nominees. The Board
unanimously recommends that the shareholders vote FOR Messrs. Patrick G. Jones,
Timothy P. Mihalick, Jeffrey L. Miller, C.W. “Chip” Morgan, John T. Reed, W.
David Scott, Stephen L. Stenehjem, John D. Stewart and Thomas A. Wentz,
Jr.
Nominees
The
following table sets forth certain information regarding each of the nominees,
including their age as of July 1, 2008, principal business experience during the
past five years, the year they each first became a trustee and their current
Board committee membership, if applicable. With the exception of Mr.
Reed, who is a director of Level 3 Communications, Inc., a NASDAQ-listed
communications company, no nominee currently serves as a trustee or board member
for any other company that has a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) or subject to the requirements of Section 15(d) of the Exchange Act or any
company registered as an Investment Company under the Investment Company Act of
1940, as amended.
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Nominee
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Principal
Business Experience
During
Past Five Years
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Age
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Trustee
Since
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Board
Committee Membership
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 Patrick
G. Jones
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Private
Investor;
Former
General Manager of the Minot Daily News;
Former
President of Central Venture Capital Inc., an investment
firm
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60
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1986
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Compensation
& Nominating
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5
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 Timothy
P. Mihalick
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Senior
Vice President & Chief Operating Officer of the Company;
Board
Member of Trinity Health Group;
Former
Vice President of Odell-Wentz & Associates, LLC
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49
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1999
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Executive
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 Jeffrey
L. Miller
Chairman
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Private
Investor;
Former
President of M&S Concessions, Inc.; a food service and facility
management company;
Managing
Partner of Miller Properties, LLP
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64
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1985
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Compensation,
Executive (Chair) & Nominating (Chair)
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 C.W.
“Chip” Morgan
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President
and Chief Executive Officer of Northwest Respiratory Services, LLC, a home
medical company
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60
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2006
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Audit,
Compensation & Nominating
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 John
T. Reed
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Private
Investor;
Former
Chairman of HMG Properties, a real estate investment bank (2000 to
February 2005)
Former
Chairman of McCarthy & Co., an investment bank (1997 to
2000)
Former
Partner, Arthur Andersen LLP, an accounting firm
Board
member of Level 3 Communications, Inc., Tetrad Corporation, and First
National of Nebraska
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65
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N/A
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N/A
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6
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 W.
David Scott
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Chief
Executive Officer of Tetrad Corporation (fka Magnum Resources, Inc.) a
real estate services and investment firm
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47
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2006
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None
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 Stephen
L. Stenehjem
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President
& Chief Executive Officer of Watford City BancShares, Inc., a bank
holding company;
President
& Chairman of First International Bank & Trust, Watford City, ND,
a state banking and trust association
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53
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1999
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Audit,
Executive, & Compensation (Chair)
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 John
D. Stewart
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President
& Director of Fisher Motors, Inc., Minot, N.D., an automobile
dealership;
President
of Glacial Holdings, Inc. and Glacial Holdings LLC, multi-family
residential and commercial real estate holding companies;
President
of Glacial Holdings Property Management, Inc., a property management
company;
Chairman
of Bank of North Dakota Advisory Board;
Former
Certified Public Accountant and Partner, Brady, Martz and Associates,
P.C.
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51
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2004
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Audit
(Chair) & Compensation
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 Thomas
A. Wentz, Jr. (1)
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Senior
Vice President of the Company;
Director
of SRT Communications, Inc.;
Sole
General Partner of Wenco, Ltd.
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42
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1996
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None
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(1) Mr.
Wentz is the son of Thomas A. Wentz, Sr., the President and Chief Executive
Officer of the Company.
7
Attendance
at Board, Committee and Annual Shareholders’ Meetings
During
the fiscal year ended April 30, 2008, the Board held eight regular meetings and
one special meeting. All trustees are expected to attend each meeting of the
Board and the committees on which they serve, and are also expected to attend
each annual meeting of shareholders. No trustee attended fewer than 75% of the
meetings of the Board and the committees on which they served during the past
fiscal year. All trustees, with the exception of Mr. Thomas Wentz,
Jr., and Mr. W. David Scott, attended the 2007 Annual Meeting of
Shareholders.
Trustee
Independence
The Board
of Trustees has determined that each of Patrick G. Jones, Jeffrey L. Miller,
C.W. “Chip” Morgan, John T. Reed, Stephen L. Stenehjem and John D. Stewart
qualify as “independent directors” in accordance with the listing standards of
the NASDAQ. Under the NASDAQ listing standards (the “Standards”), in
order to be considered independent, a trustee of the Company must have no
relationship that, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
Company trustee. The Standards specify certain relationships that are deemed to
impair independence; including, for example, employment by the Company, or
engaging in certain business dealings with the Company. In making these
determinations, the Board reviewed and discussed information provided by the
trustees and the Company with regard to each trustee’s business and personal
activities as they may relate to the Company and the Company’s
management. In the event the nine nominees for trustee of the Company
are elected at the Annual Meeting, the Company’s Board of Trustees will consist
of six trustees who are independent as defined by the Standards (Messrs. Jones,
Miller, Morgan, Reed, Stenehjem and Stewart), and three trustees who are not
independent under the Standards (Timothy Mihalick and Thomas Wentz, Jr., who are
employees of the Company, and W. David Scott, who is a controlling shareholder
and executive officer of an entity to which the Company made payments for
property and services within the past three fiscal years that exceed 5% of the
recipient’s consolidated gross revenues for that year). The Company
accordingly will be in compliance with the Standards.
In
addition, as required by the Standards, the members of the Company’s Audit
Committee each qualify as “independent” under the Standards and under special
standards established by the Securities and Exchange Commission (“SEC”) for
members of audit committees. The Audit Committee also consists of three
independent members (Mr. C.W. “Chip” Morgan, Mr. Stephen L. Stenehjem and Mr.
John D. Stewart) who have been determined by the Board to meet the
qualifications of an “audit committee financial expert” in accordance with SEC
rules.
Committees
The Board
has created four committees in order to more effectively direct and review the
Company’s operations and strategic outlook. In addition, the committees allow
management to timely respond to factors affecting the ongoing operations of the
Company. Management regularly consults with committee chairmen to review
possible actions and seek counsel. Where appropriate, the Board delegates
authority to committees (within specified parameters) to finalize the execution
of various Board functions. While the committee structure has
improved the level of Board oversight, it has also greatly increased the effort
and time required of Board members who serve on the various
committees.
The Board
has established the following committees: Audit, Compensation, Executive and
Nominating. The present members of these committees are indicated in the
preceding section of this proxy statement. During the fiscal year
ended April 30, 2008, the Audit Committee of the Board met four times, the
Compensation Committee met four times, and the Nominating Committee met
once. The Executive Committee met once in fiscal year
2008.
The Audit
Committee is composed of three trustees, all of whom are independent as that
term is defined by the NASDAQ, and are independent as defined in rules of the
SEC. Information regarding the functions performed by the committee is set forth
in the “Report of the Audit Committee,” beginning on page 24 of this proxy
statement. The Audit Committee is governed by a written charter that has been
approved by both the Audit Committee and the Board. The Audit Committee Charter
was adopted by the Board in January 2004 in response to changes in the listing
standards of the NASDAQ, and replaced the Audit Committee’s previous
charter. The Audit Committee annually
8
reviews
and assesses the adequacy of its charter. The most recent such review
was carried out at the Audit Committee’s meeting in March 2008, and Committee
members concluded that the charter satisfactorily states the responsibilities of
the Audit Committee. A copy of the Audit Committee Charter is
available on the Company’s website at www.iret.com.
The
Compensation Committee approves the compensation of the executive officers of
the Company and the Company’s management succession plan and attends to other
matters relating to executive retention and compensation. The Compensation
Committee is composed of five trustees, all of whom are independent as defined
by the NASDAQ. For more information, see the “Compensation Discussion and
Analysis” beginning on page 12 of this proxy statement.
The
Executive Committee, which is composed of three trustees, two of whom are
independent as defined by the NASDAQ, has all of the powers of the Board with
respect to the management and affairs of the Company, subject to limitations
prescribed by the Board and by North Dakota law, and may exercise the authority
of the Board between Board meetings, except to the extent that the Board has
delegated authority to another committee.
The
Nominating Committee, composed of three trustees, all of whom are independent as
defined by the NASDAQ, identifies individuals qualified to become Board members
and approves the nominees to stand for election and re-election to the Board.
The Nominating Committee is responsible for reviewing the appropriate skills and
characteristics required of Board members. This assessment includes
consideration of the factors specified in the committee’s charter and the
trustee qualification requirements of the Company’s Bylaws. These factors
include age (at least 21 years of age and less than 74 years of age, in
accordance with the Company’s Bylaws); broad leadership experience in business,
government, education, public service or in other management or administrative
positions; willingness and ability to apply sound and independent business
judgment; loyalty to the Company and commitment to its success; commitment to
enhancing shareholder value; personal integrity; and independence, as defined in
applicable laws and regulations.
Consideration
of new Board candidates typically involves a series of internal discussions,
review of information concerning candidates and informal interviews with
selected candidates. In general, candidates for nomination to the
Board are suggested by Board members or by Company
employees. In fiscal year 2008, the Company did not
employ a search firm or pay fees to other third parties in connection with
seeking or evaluating Board candidates.
In
accordance with the Company’s Bylaws and with procedures adopted by the
Nominating Committee in January 2004, the Nominating Committee will consider
nominations from shareholders. Shareholders who wish to recommend individuals
for consideration by the Nominating Committee to become nominees for election to
the Board may do so by submitting a written recommendation addressed to both the
Chairman of the Nominating Committee and to the Company’s Secretary at the
following address: Investors Real Estate Trust, PO Box 1988, Minot, North
Dakota, 58702-1988. Submissions must be received by the Chairman and the
Secretary in writing on or before the first day of June of each year for
consideration for nomination for election at the next annual meeting of
shareholders. Submissions must include biographical information concerning the
recommended individual, including age and a five-year employment history with
employer names and a description of the employer’s business, and must be
accompanied by a written consent of the individual to stand for election if
nominated by the Board and to serve if elected by the shareholders. The
Nominating Committee will not alter the manner in which it evaluates candidates,
including consideration of the factors set forth in the committee’s charter,
based on whether the candidate was recommended by a shareholder or was
identified by other means.
All
committees of the Board operate under written charters approved by the
Board. Copies of each charter are posted on the Company’s Investor
Relations website at www.iret.com under the “Corporate Governance”
heading.
In
addition to the above four committees of the Board, the membership of each of
which consists entirely of trustees, the Board, in recognition of the growth of
the Company and the consequent increase in capital expenditures and asset
acquisition and disposition activity, has also established an Investment
Committee. The membership of the Investment Committee may consist of trustees
and/or employees of the Company. The Investment Committee may act on behalf of
the Board in the best interests of the Company and its shareholders to consider,
approve and effect investment plans, capital expenditures and the purchase and
sale, transfer or other acquisition or disposition of property and assets, in
accordance with the delegation of investment authority conferred by the Board
and subject to
9
approval
levels established by the Board from time to time. Members of the Investment
Committee are appointed by the Board. The Investment Committee did not meet
during fiscal year 2008.
Communications
from Shareholders to the Board
The Board
recommends that shareholders initiate any communications with the Board in
writing and send them in care of the Company’s
Secretary. Shareholders may send written communications to the Board,
the Audit, Compensation and Nominating Committees of the Board or to any
individual trustee c/o the Secretary, Investors Real Estate Trust, PO Box 1988,
Minot, North Dakota, 58702-1988, or via e-mail to trustees@iret.com. All
communications will be compiled by the Secretary and forwarded to the Board, the
specified Board Committee or to individual trustees, as the case may be, not
less frequently than monthly. This centralized process will assist the Board in
reviewing and responding to shareholder communications in an appropriate manner.
The name of any specific intended board recipient should be noted in the
communication.
Code
of Conduct and Code of Ethics for Senior Financial Officers
All of
the Company’s trustees and employees, including our Chief Executive Officer and
other senior executives, are required to comply with a Code of Conduct adopted
by the Board in January 2004. The Board adopted the Code of Conduct to codify
and formalize certain of the Company’s long-standing policies and principles
that help ensure our business is conducted in accordance with the highest
standards of moral and ethical behavior. Our Code of Conduct covers all areas of
professional conduct, including conflicts of interest, insider trading and
confidential information, as well as requiring strict adherence to all laws and
regulations applicable to our business. Employees are required to bring any
violations and suspected violations of the Code of Conduct to the attention of
the Company, through management or Company legal counsel. Additionally, our
Chief Executive Officer, Chief Operating Officer and Chief Financial Officer are
also subject to a Code of Ethics for Senior Financial Officers, which contains
certain specific policies in respect of internal controls, the public
disclosures of the Company, violations of the securities or other laws, rules or
regulations and conflicts of interest.
The full
text of the Code of Conduct and Code of Ethics for Senior Financial Officers is
published on our website, at www.iret.com, under the “Corporate Governance”
heading. The Company intends to disclose any future amendments to, or waivers
of, the Code of Conduct and Code of Ethics for Senior Financial Officers on our
website promptly following the date of any such amendment or waiver, and, to the
extent required by the NASDAQ Standards, on a current report on Form
8-K.
Executive
Sessions
The Board
holds regular executive sessions at which our independent trustees meet without
Company management or employees present. Executive sessions are held not fewer
than four times per year.
Complaint
Procedure
The
Sarbanes-Oxley Act of 2002 requires companies to maintain procedures to receive,
retain and treat complaints received regarding accounting, internal accounting
controls or auditing matters and to allow for the confidential and anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters. The Company’s Audit Committee has adopted a complaint
procedure that requires the Company to forward to the Audit Committee any
complaints that it has received regarding financial statement disclosures,
accounting, internal accounting controls or auditing matters. Any
employee of the Company may submit, on a confidential, anonymous basis if the
employee so chooses, any concerns on accounting, internal accounting controls,
auditing matters or violations of the Company’s Code of Conduct or Code of
Ethics for Senior Financial Officers. All such employee concerns are to be
forwarded in a sealed envelope to the chairman of the Audit Committee, in care
of the Company’s General Counsel, who will forward any such envelopes promptly
and unopened. The Audit Committee will investigate any such
complaints submitted.
10
Audit
Committee Financial Expert
The Board
has determined that Mr. John Stewart, the Chair of the Audit Committee, and Mr.
Stephen L. Stenehjem and Mr. C.W. “Chip” Morgan, members of the Audit Committee,
are “audit committee financial experts,” as that term is defined in rules of the
SEC. Mr. Stewart, Mr. Morgan and Mr. Stenehjem are also independent
as defined by the NASDAQ Standards and special standards established by the SEC
for Audit Committee members.
Audit
Committee Pre-Approval Policies
Rules
adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act
of 2002 require public company audit committees to pre-approve audit and
non-audit services provided by their independent auditors. The Company’s Audit
Committee has adopted detailed pre-approval policies and procedures pursuant to
which audit, audit-related and tax services, and all permissible non-audit
services, are pre-approved. During the year, in the event it becomes necessary
to engage the independent auditor for additional services not contemplated in
the original pre-approval, the Company will obtain the specific pre-approval of
the Audit Committee before engaging the independent auditor. The pre-approval
policy requires the Audit Committee to be informed of each service performed by
the independent auditor, and the policy does not include any delegation of the
Audit Committee’s responsibilities to management. The Audit Committee may
delegate pre-approval authority to one or more of its members. The member to
whom such authority is delegated will report any pre-approval decisions to the
Audit Committee as a whole at its next scheduled meeting.
The
following table lists, as of June 30, 2008, the beneficial ownership of common
shares of the Company and of limited partnership units of IRET Properties, a
North Dakota Limited Partnership and a subsidiary of the Company, which are
convertible into common shares on a one-to-one basis, or cash, at the option of
the Company (“Units”), by (i) each trustee and nominee for trustee of the
Company, (ii) the named executive officers of the Company and (iii) all trustees
and executive officers of the Company as a group. The amounts shown are based on
information provided by the individuals named, and Company
records. Except as otherwise indicated, the persons listed have sole
voting and investment power.
|
Name
of Beneficial Owner
|
Common
Shares (1)
|
Units
(2)
|
Total
Common
Shares
and Units
As
of June
30,
2008
|
Percent
of Class(3)
of
Common
Shares
and Units
|
||||
|
Diane
K. Bryantt
Senior
Vice President & Chief
Financial
Officer
|
17,670
|
0
|
17,670
|
*
|
||||
|
Patrick
G. Jones
Trustee
|
388,937
|
0
|
388,937
|
*
|
||||
|
Timothy
P. Mihalick
Trustee,
Senior Vice President &
Chief
Operating Officer
|
44,302
|
0
|
44,302
|
*
|
||||
|
Jeffrey
L. Miller
Trustee
& Chairman of the Board
|
476,123
|
6,725
|
482,848
|
1.0%
|
||||
|
C.W.
“Chip” Morgan
Trustee
|
927
|
0
|
927
|
--
|
||||
|
John
T. Reed
Trustee
Nominee
|
6,000
|
0
|
6,000
|
--
|
||||
|
W.
David Scott
Trustee
|
33,408
|
0
|
(4)
|
33,408
|
*
|
|||
|
Stephen
L. Stenehjem
Trustee
|
178,559
|
(5) |
0
|
178,559
|
*
|
|||
|
John
D. Stewart
Trustee
|
41,290
|
0
|
41,290
|
*
|
||||
|
Kelly
A. Walters
Vice
President
|
50,000
|
0
|
50,000
|
*
|
||||
|
11
|
||||||||
|
Name
of Beneficial Owner
|
Common
Shares (1)
|
Units
(2)
|
Total
Common
Shares
and Units
As
of June
30,
2008
|
Percent
of Class(3)
of
Common
Shares
and Units
|
||||
|
Thomas
A. Wentz, Sr.
President
& Chief Executive Officer
|
325,046
|
129,572
|
(6)
|
454,618
|
1.0%
|
|||
|
Thomas
A. Wentz, Jr.
Trustee
& Senior Vice President
|
255,052
|
(7) |
0
|
255,052
|
*
|
|||
|
Trustees
and executive officers as a group
(13
individuals)
|
1,822,393
|
136,297
|
1,954,190
|
3.0%
|
||||
_________________
|
(1)
|
The
amounts of common shares beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities.
|
|
(2)
|
The
Units do not have voting rights but are exchangeable for common shares or
cash, at the option of the Company, upon expiration of an initial
mandatory holding period.
|
|
(3)
|
Percentage
of class is based on a total of 70,572,488 common shares and Units
(eligible for redemption) outstanding as of June 30,
2008.
|
|
(4)
|
Entities
in which Mr. Scott has an ownership and/or control interest hold 5,886,949
Units; these Units are not included in this table because the initial
mandatory holding period to which they are subject has not yet expired,
and the Units accordingly are not currently exchangeable for common shares
of the Company, or cash.
|
|
(5)
|
Mr.
Stenehjem disclaims beneficial ownership of all but 144,702 of these
common shares.
|
|
(6)
|
The
Units are pledged as security against a line of
credit.
|
|
(7)
|
Includes
approximately 220,692 common shares owned by Wenco, Ltd., a partnership of
which Mr. Wentz is the general partner. Mr. Wentz disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
in the partnership. Includes 100,000 common shares pledged as security
against a line of credit.
|
|
*
|
Represents
less than 1% of the total of common shares and Units outstanding as of
June 30, 2008.
|
Principal
Shareholder Beneficial Ownership
The
following table identifies each person or group known to the Company to
beneficially own as of June 30, 2008, more than five percent (5%) of the
outstanding common shares of the Company, the only class of security entitled to
vote at the 2008 Annual Meeting.
|
Name
of Shareholder
|
Beneficial
Ownership
|
Percent
of Class
|
|
The
Vanguard Group, Inc.(1)
|
3,318,301
|
5.87%
|
|
Barclays
Global Investors, NA and affiliated entities(2)
|
2,905,653
|
5.14%
|
|
1)
|
Based
on information of beneficial ownership as of December 31, 2007, included
in a Schedule 13G filed on February 12, 2008. The Vanguard
Group, Inc. reports sole voting power with respect to 78,811 shares and
sole dispositive power with respect to 3,318,301
shares.
|
|
2)
|
Based
on information of beneficial ownership as of December 31, 2007, included
in a Schedule 36G filed on February 5, 2008. Barclays Global Investors, NA
and its affiliated entities report sole voting power with respect to
2,534,326 shares and sole dispositive power with respect to 2,905,653
shares.
|
Named
Executive Officers
The
following Compensation Discussion and Analysis describes the material elements
of compensation for the following individuals, collectively referred to as the
“named executive officers”: Thomas A. Wentz, Sr., President and Chief
Executive Officer; Diane K. Bryantt, Senior Vice President and Chief Financial
Officer; Timothy P. Mihalick, Senior Vice President and Chief Operating Officer;
Thomas A. Wentz, Jr., Senior Vice President; and Kelly A. Walters, Vice
President.
Executive
Compensation Philosophy
The
Compensation Committee of the Board (the “Committee”), composed entirely of
trustees who are independent under the listing standards of the NASDAQ, operates
under a written charter adopted in January 2004
12
and
amended in July 2007, and is responsible for establishing the terms of the
compensation of the Company’s named executive officers. The Committee
believes that the Company’s compensation program for executive officers
should:
|
·
|
attract
and retain highly qualified
executives
|
|
·
|
motivate
these executives to improve the Company’s financial position and increase
shareholder value
|
|
·
|
provide
total compensation that is competitive with compensation provided by other
employment opportunities potentially available to Company
executives
|
|
·
|
provide
total compensation with reference to compensation provided by other real
estate investment trusts with comparable total assets and annual
revenues
|
|
·
|
provide
a total compensation pay mix that includes both base salary and incentive
components
|
|
·
|
promote
teamwork and cooperation throughout the Company and within the management
group
|
The
Committee applies these philosophies in establishing each of the elements of
executive compensation. The Committee reviews peer company market
data (salary information for companies that are similar to the
Company is obtained by reference to the public disclosures made in the
Securities and Exchange Commission filings of such companies), and considers
internal equity among executive officers, individual and Company performance,
and cost to the Company, when determining levels of compensation. The
current executive compensation program is policy only and may be changed by the
Committee at any time without notice to or approval by the
shareholders. The Company is in a very competitive industry where
success is based largely on the ability of senior management to identify,
acquire and manage real estate properties. Therefore, to continue to properly
manage and grow the Company, it may be necessary to increase the amounts payable
under the Company’s base salary and incentive bonus programs in order to attract
and retain qualified executives.
Executive
Officer Compensation Processes
The
Committee meets in executive session without management present to discuss
various compensation matters, including the compensation of the Company’s Chief
Executive Officer. In addition, the Committee annually reviews all elements of
executive compensation and benefit programs for reasonableness and
cost-effectiveness. While the Committee has authority under its
Charter to engage the services of outside consultants to advise it on matters
relating to executive compensation, through fiscal year 2008 the Committee had
never hired outside advisors. Recently, however, the Committee has
engaged Riley, Dettmann & Kelsey LLC, a management consulting firm
specializing in compensation strategies, to advise the Committee and the Board
in regard to the Company’s proposed 2008 Incentive Award Plan. The
2008 Incentive Award Plan, if approved by the Company’s shareholders, would
permit the Compensation Committee and/or the Company’s Board of Trustees to
grant incentive awards in the form of restricted stock, cash bonuses, stock
bonuses or other performance or incentive awards that are paid in cash, common
stock or a combination thereof. Currently all incentive awards
granted to officers or employees are paid in cash. See Proposal 2
below for a discussion of the proposed 2008 Incentive Award Plan.
Role
of Management in Executive Compensation Decisions
Company
management is involved in the following executive compensation
processes:
|
·
|
the
Chief Operating Officer (“COO”), General Counsel and/or the Company’s
Director of Human Resources, as requested by the Committee, develop or
oversee the creation of written background and supporting materials for
distribution to the Committee prior to its
meetings
|
|
·
|
at
the request of the Committee, certain employees of the Company (generally
the Director of Human Resources and/or the Associate General Counsel) have
collected data for the Committee on compensation levels and programs at
comparable companies
|
13
|
·
|
at
the end of each calendar year, the CEO and COO provide the Committee with
comments and recommendations regarding salary levels and salary increases
for members of management, including the named executive
officers (other than themselves); increases in base salary are generally
effective as of January 1 each year
|
Components
of the Executive Compensation Program
The
primary elements of the Company’s executive compensation program
are:
Base
salary
Annual
Incentive Award
Health
and Retirement Programs
Executive
Benefits and Perquisites
Base
Salary
Base
salaries for the executive officers of the Company, including the Chief
Executive Officer, are designed to compensate such individuals for their
sustained performance. Base salaries are established by evaluating
the responsibilities of the position held, the experience of the particular
individual, a comparison of salaries paid for comparable positions by other
companies in the real estate industry, and the Committee’s desire to achieve the
appropriate mix between fixed compensation and incentive
compensation.
It is
currently the Company’s practice that base salaries of the executive officers,
including the Chief Executive Officer, are generally increased on January 1 of
each year at the discretion of the Committee, based on, among other things, the
individual’s performance over the past year, changes in the individual’s
responsibility and/or necessary adjustments to maintain base salaries that are
competitive with industry practices and similar companies. For the
calendar year beginning January 1, 2008, the base salaries of the named
executive officers were increased by an average of 15.65%.
Annual
Incentive Awards
Incentive
awards are intended to further motivate the named executive officers, including
the Chief Executive Officer, by linking incentive compensation to the Company’s
performance. During fiscal year 2005, the Compensation Committee revised the
Company’s incentive bonus program to provide for bonus payments based on the
following specific objective measures of the Company’s performance: an increase
in funds from operations; an increase in GAAP earnings per share; a target
return on equity of 12%; improvement in economic vacancy rates at the Company’s
properties; and a target of 10% growth in assets. For fiscal year
2008, the Committee determined that the maximum bonus payable in regard to each
of these factors is $120,000, for a potential total bonus pool of
$600,000. The bonus pool will be divided, proportionately to the
individual’s base salary, among Company officers specified by the Committee; the
officers eligible to receive a bonus for fiscal year 2008 are the named
executive officers and two additional members of the Company’s senior management
team. The Company’s incentive bonus program is the only form of
executive compensation that is tied to the performance of the
Company. If the Company’s performance, as judged by the measures
identified above, does not improve compared to performance during the prior
fiscal year, no incentive bonuses will be paid to Company executive
officers. If a performance target is only partially met, the
Committee may exercise its discretion to award a bonus in respect of such
target. In regard to fiscal year 2008, the Committee has determined
that incentive bonuses were earned by the named executive officers and two
additional members of the Company’s senior management. The incentive
bonus amount earned by each individual named executive officer is set forth in
the the Summary Compensation Table included in this proxy statement for the
Company’s 2008 Annual Meeting of Shareholders. The Committee has
directed that the incentive bonuses be paid to the named executive officers no
later than August 1, 2008. In making this determination, the
Committee reviewed the following financial and operational results for fiscal
year 2008:
Fiscal Year 2008 Bonus Award
Performance Measures
|
·
|
Increase in
FFO: The Company reported Funds from Operations of $.87
per share/unit for the fiscal year ended April 30, 2008, compared to Funds
from Operations of $.88 per share/unit for the fiscal year
ended
|
14
April 30,
2007. The Committee determined that the Company’s performance did not
meet this benchmark, and that this component of the bonus should accordingly not
be funded.
|
·
|
Increase in GAAP
earnings per share: The Company reported earnings per
share of $.18 for the fiscal year ended April 30, 2008, compared to
earnings per share of $.24 for the fiscal year ended April 30,
2007. The Committee determined that the Company’s performance
did not meet this benchmark, and that this component of the bonus should
accordingly not be funded.
|
|
·
|
Return on equity
target of 12%: The Company’s return on equity,
determined by dividing the Company’s net taxable income by its total
equity, for the fiscal year ended April 30, 2008, was 10.0%, compared to
10.3% for the fiscal year ended April 30, 2007. The Committee
determined that the Company’s performance did not fully meet this
benchmark, but the Committee exercised its discretion to fund 80% of this
component of the bonus at $96,000.
|
|
·
|
Improvement in
economic vacancy: The economic vacancy rate at the
Company’s multi-family residential properties was 7.3% for the fiscal year
ended April 30, 2008, compared to 6.8% for the fiscal year ended April 30,
2007. Economic vacancy rates at the Company’s office, medical,
industrial and retail properties were 7.9%, 4.7%, 12.8%, and 10.8%,
respectively, for the fiscal year ended April 30, 2008, compared to 8.1%,
3.3%, 4.9%, and 10.4% for the fiscal year ended April 30,
2007. The Committee determined that the Company’s performance
did not meet this benchmark, and that this component of the bonus should
accordingly not be funded.
|
|
·
|
Asset growth target of
10%: The Company’s property owned increased from $1.49
billion for the fiscal year ended April 30, 2007, to $1.65 billion for the
fiscal year ended April 30, 2008, an increase of 10.7%. The
Committee determined that the Company’s performance met this benchmark,
and that this component of the bonus should be fully funded at
$120,000.
|
Health,
Retirement and Other Benefits
In an
effort to attract, retain and fairly compensate talented employees, the Company
offers various benefit plans to its employees, including a retirement plan that
is intended to be a qualified retirement plan under the Internal Revenue Code of
1986, as amended, a 401(k) benefit plan, and health, life insurance and
disability plans. These benefit plans are part of the Company’s
broad-based employee benefits program, and none of these plans is offered to the
named executive officers either exclusively or with terms different from those
offered to other eligible Company employees.
Executive
Benefits and Perquisites
As noted
above, the Company’s named executive officers are generally offered the same
employee benefits and perquisites offered to all employees. The only
benefits or perquisites offered to any named executive officer either
exclusively or with terms different from those offered to other eligible Company
employees are the following: payment of annual country club
membership dues and the associated minimum meal purchase requirement and other
expenses for Mr. Timothy Mihalick, the Company’s COO, the provision of a
Company-purchased vehicle to Mr. Mihalick, the provision of Northwest Airlines
World Club memberships to Mr. Mihalick and to Mr. Thomas Wentz, Jr., a Senior
Vice President of the Company, and the payment of certain service club dues on
behalf of Mr. Wentz, Jr. The Company provides executive benefits and perquisites
to retain executive talent.
Stock-based
Awards, Severance and Change-in-Control
The
Company currently does not offer stock-based awards to any Company executive
officer or employee, and has not entered into severance or change-in-control
agreements with any Company officer or employee.
The
Company’s Board of Trustees has approved a proposed Incentive Award Plan (see
Proposal 2 below for a discussion of the Company’s 2008 Incentive Award Plan)
which would, if approved by the shareholders of the Company, permit the
Committee and/or the Board to grant employees, officers, trustees and
consultants of the Company incentive awards in the form of restricted stock,
cash bonuses, stock bonuses or other performance or
15
incentive
awards that are paid in cash, common stock or a combination
thereof. Currently all incentive awards granted to officers or
employees are paid in cash.
Tax
Implications of Executive Compensation
Section
162(m) of the Internal Revenue Code places a limit of $1 million in compensation
per year on the amount that the Company may deduct with respect to each of its
named executive officers (excluding compensation that qualifies as
“performance-based compensation”). The Company does not compensate
any executive officer or employee at a level that exceeds this available
deduction.
The
Compensation Committee of the Board has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K with
management, and based on such review and discussions, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement.
|
Stephen
L. Stenehjem (Chair)
|
|
|
Patrick
G. Jones
|
|
|
Jeffrey
L. Miller
|
|
|
C.W.
“Chip” Morgan
|
|
|
John
D. Stewart
|
The table
below summarizes the total compensation paid to or earned by the Chief Executive
Officer (“CEO”), Chief Financial Officer (“CFO”) and our three most highly
compensated executive officers (collectively “named executive officers”;
individually a “named executive officer”), based on total compensation for the
fiscal year ended April 30, 2008. (The format of the following table differs
from the specified format included in SEC rules; columns for Bonus, Stock
Awards, Option Awards, Change in Pension Value and Non-Qualified Deferred
Compensation Earnings are not applicable and have been omitted.)
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Non-equity
Incentive Plan Compensation(1)
($)
|
All
Other
Compensation(2)
($)
|
Total
($)
|
||||
|
Thomas
A. Wentz, Sr.
President
and Chief Executive Officer
|
2008
|
238,333.36
|
35,597.00
|
25,713.96
|
299,644.32
|
||||
|
2007
|
213,333.36
|
60,453.00
|
20,829.70
|
294,616.06
|
|||||
|
Diane
K. Bryantt
Senior
Vice President and Chief Financial Officer
|
2008
|
159,666.64
|
23,848.00
|
23,267.76
|
206,782.40
|
||||
|
2007
|
144,655.91
|
41,768.00
|
19,024.00
|
205,447.95
|
|||||
|
Timothy
P. Mihalick
Senior
Vice President and Chief Operating Officer, and Trustee
|
2008
|
315,000.00
|
47,049.00
|
29,764.05
|
391,813.05
|
||||
|
2007
|
283,999.27
|
82,436.00
|
30,919.31
|
397,354.58
|
|||||
|
Thomas
A. Wentz, Jr.
Senior
Vice President and Trustee
|
2008
|
262,500.08
|
39,207.00
|
19,959.04
|
321,666.12
|
||||
|
2007
|
233,333.36
|
68,697.00
|
18,389.41
|
320,419.77
|
|||||
|
Kelly
A. Walters
Vice
President
|
2008
|
190,000.00
|
28,378.00
|
22,628.37
|
241,006.37
|
||||
|
2007
|
107,916.62
|
0
|
(3)
|
12,987.46
|
120,904.08
|
||||
|
(1)
|
The
amounts included in this column represent cash payments awarded under the
Company’s annual incentive bonus program for executive officers, with
reference to financial and operational targets achieved during fiscal
years 2008 and 2007, respectively. See the Compensation Discussion and
Analysis in this Proxy Statement for further information on the Company’s
incentive bonus program for executive
officers.
|
16
|
(2)
|
All
Other Compensation for the fiscal years ended April 30, 2008 and 2007
consists of the following:
|
|
Years
|
401(k)
Company Contribution
($)
|
Health
and Dental Coverage
($)
|
Company
Contribution to Profit-Sharing Plan
($)
|
Life
Insurance & Long-term Disability Coverage
($)
|
Other
($)
|
Total
($)
|
||||||
|
Thomas
A. Wentz, Sr.
|
2008
|
7,300.00
|
7,464.00
|
10,949.96
|
0
|
0
|
25,713.96
|
|||||
|
2007
|
6,400.00
|
4,829.70
|
9,600.00
|
0
|
0
|
20,829.70
|
||||||
|
Diane
K. Bryantt
|
2008
|
6,043.04
|
7,245.60
|
9,064.60
|
914.52
|
0
|
23,267.76
|
|||||
|
2007
|
4,339.98
|
7,259.64
|
6,509.97
|
914.45
|
0
|
19,024.04
|
||||||
|
Timothy
P. Mihalick
|
2008
|
7,180.02
|
7,245.60
|
10,770.07
|
914.52
|
3,653.84
|
(a)
|
29,764.05
|
||||
|
2007
|
6,869.98
|
7,259.64
|
10,305.01
|
914.45
|
5,570.23
|
(b)
|
30,919.31
|
|||||
|
Thomas
A. Wentz, Jr.
|
2008
|
7,125.04
|
0
|
10,687.48
|
914.52
|
1,232.00
|
(c)
|
19,959.04
|
||||
|
2007
|
6,850.00
|
0
|
10,274.96
|
914.45
|
350.00
|
(d)
|
18,389.41
|
|||||
|
Kelly
A. Walters
|
2008
|
5,700.00
|
7,464.00
|
8,549.93
|
914.44
|
0
|
22,628.37
|
|||||
|
2007
|
3,237.50
|
4,360.24
|
4,856.18
|
533.54
|
0
|
12,987.46
|
|
a)
|
Consists
of $571.69 for personal use of a Company-supplied car (calculated using
approximately 8% of the annual insurance, depreciation, gasoline and
maintenance costs; it is estimated that personal use comprises
approximately 8% of the mileage for the company-owned car), $895 for a
three-year Northwest Airlines World Club membership and $2,187.15 for
country club dues and associated personal meal and other
expenses.
|
|
b)
|
Consists
of $558.48 for personal use of a Company-supplied car (calculated using
approximately 8% of the annual insurance, depreciation, gasoline and
maintenance costs; it is estimated that personal use comprises
approximately 8% of the mileage for the company-owned car), $400 for
Northwest Airlines World Club membership and $4,611.75 for country club
dues and associated personal meal and other
expenses.
|
|
c)
|
Consists
of $882 for annual service club dues, and $350 for Northwest Airlines
World Club membership.
|
|
d)
|
Consists
of $350 for Northwest Airlines World Club
membership.
|
|
(3)
|
Mr.
Walters was not eligible for inclusion in the Non-equity Incentive Plan
bonus in fiscal year 2007.
|
Retirement
and 401(k) Plans
The
Company’s retirement plan is intended to be a qualified retirement plan under
the Internal Revenue Code of 1986, as amended. All full-time
employees of the Company over the age of 21 and with one year of service are
eligible to participate in the retirement plan. Contributions to the retirement
plan by the Company are at the discretion of the Company’s
management. The Company currently contributes an amount equal to 4.5%
of the salary of each employee participating in the retirement plan. All
employees over the age of 21 are immediately eligible to participate in the
Company’s 401(k) plan, and may contribute up to maximum levels established by
the Internal Revenue Services. The Company currently contributes an
amount equal to 3% of the wages of each employee participating in the 401(k)
plan.
Compensation
Committee Interlocks and Insider Participation
None of
the members of the Company’s Compensation Committee currently is, or was
formerly, an officer or employee of the Company. None of the
Company’s executive officers currently serves on the compensation committee or
any similar committee of any other entity and none of the executive officers
serves as a director for any other entity whose executive officers serve on the
Company’s compensation committee.
17
Chairman,
and other Audit Committee members received an additional $2,500 per year for
service on the Audit Committee. Audit committee members also
received $1,000 for each Audit committee meeting they attended in person or via
conference call. Members of other committees received $250 for each
committee meeting attended in person or via conference call. Trustees
who are employees of the Company do not receive any separate compensation or
other consideration, direct or indirect, for service as a trustee.
Trustee
Compensation Table for Fiscal Year Ended April 30, 2008
The
following table summarizes the total compensation paid to or earned by the
non-employee members of the Company’s Board of Trustees during the fiscal year
ended April 30, 2008. (The format of the following table differs from
the specified format included in SEC rules; columns for Stock Awards, Option
Awards and Change in Pension Value and Nonqualified Deferred Compensation
Earnings are not applicable and have been omitted.)
|
Name
|
Fees
Earned or Paid in Cash(1)
($)
|
Total
($)
|
|
Patrick
G. Jones
|
46,500.01
|
46,500.01
|
|
Jeffrey
L. Miller
|
51,750.02
|
51,750.02
|
|
C.W.
“Chip” Morgan
|
51,750.03
|
51,750.03
|
|
Edward
T. Schafer (2)
|
31,000.01
|
31,000.01
|
|
W.
David Scott
|
44,200.01
|
44,200.01
|
|
Stephen
L. Stenehjem
|
54,500.04
|
54,500.04
|
|
John
D. Stewart
|
55,500.01
|
55,500.01
|
|
1)
|
Includes
annual fees, meeting attendance fees and additional amounts paid to the
Board Chairman, Vice-Chairman, Audit Committee Chair and Audit Committee
members; does not include reimbursed
expenses.
|
|
2)
|
Mr.
Schafer resigned as a trustee of the Company effective January 1, 2008,
following his appointment by President Bush as Secretary of
Agriculture.
|
Related
Employee
During
fiscal year 2008, Karin M. Wentz, daughter of Thomas A. Wentz, Sr., the
Company’s President and Chief Executive Officer, and sister of Thomas A. Wentz,
Jr., a Trustee and Senior Vice President of the Company, was employed by the
Company as Associate General Counsel. Ms. Wentz was paid a salary
totaling $136,667 for her services during fiscal year 2008. Ms. Wentz also
received in fiscal year 2008 the standard benefits provided to other Company
employees.
Banking
Services
The
Company maintains an unsecured line of credit with First International Bank and
Trust, Watford City, North Dakota. During fiscal year 2008, the
Company had no borrowings under this line of credit, and incurred no interest
charges. During fiscal years 2007 and 2006, respectively, the
Company’s interest charges were $71,128 and $14,167 for borrowings under the
First International line of credit. During fiscal year 2007, the
Company entered into two loans with First International in the amounts of
$450,000 and $2,400,000, respectively, paying a total of $34,287 in origination
fees and loan closing costs for these two loans, and paying interest on the
loans of $25,545 and $69,328, respectively, during fiscal year 2007, and $34,034
and $173,663, respectively, during fiscal year 2008. The Company also
maintains a number of checking accounts with First International. In
each of fiscal years 2008, 2007 and 2006, IRET paid less than $500 in total in
various wire transfer and other fees charged on these checking
accounts. Stephen L. Stenehjem, a member of the Company’s Board of
Trustees and Audit Committee, is the President and Chief Executive Officer of
First International, and the bank is owned by Mr. Stenehjem and members of his
family.
Property
Acquisition
During
fiscal year 2008, the Company acquired the Intertech Building, a two-story,
approximately 64,607 square foot office building located on approximately 3.4
acres in Fenton, Missouri. The Company paid $7 million in cash for the
property. The purchase price was negotiated based on the results of
an appraisal obtained by the
18
Company. The
Company acquired the property from affiliates of W. David Scott, a member of the
Company’s Board of Trustees. As required by the Company’s Declaration
of Trust, the acquisition was approved by a majority of IRET’s trustees (with
Mr. Scott abstaining), and by a majority of the independent trustees, and the
property was purchased at a cost less than its current appraised
value.
Related
Party Transactions Policy
In
February 2007 the Company’s Board of Trustees adopted a written related party
transactions approval policy, which sets forth the Company’s policies and
procedures for the review, approval or ratification of any transaction required
to be reported in Company filings with the Securities and Exchange Commission.
The policy applies to any transaction, arrangement or relationship or series of
similar transactions, arrangements or relationships in which the Company (or any
of its subsidiaries) is a participant, in which the aggregate amount involved
will or may be expected to exceed $120,000 in any fiscal year, and in which a
related party has a direct or indirect interest (other than solely as a result
of being a director or a less than 10 percent beneficial owner of another
entity).
The Audit
Committee of the Board of Trustees must approve any related party transaction
subject to this policy before commencement of the transaction, or, if it is not
practicable to wait until the next Audit Committee meeting, the transaction may
be submitted to the Chair of the Audit Committee, who has the delegated
authority to act between Audit Committee meetings to pre-approve, or ratify, as
applicable, any related party transaction in which the aggregate amount involved
is expected to be less than $250,000. Related party transactions that
are identified as such subsequent to their commencement will promptly be
submitted to the Audit Committee or the chair of the Audit Committee, which
shall, if they determine it to be appropriate, ratify the
transaction. The Audit Committee will annually review all ongoing
related party transactions and assess whether they remain
appropriate. Under the policy, the Audit Committee or its Chair shall
approve only those related party transactions that are in, or are not
inconsistent with, the best interests of the Company and its shareholders, as
determined by the Committee or the Chair in good faith.
Section
16(a) of the Securities Exchange Act of 1934, as amended (“Section 16(a)”)
requires that the trustees and executive officers of the Company file with the
SEC, within specified due dates, initial reports of ownership of the Company’s
shares of beneficial interest and Units and Preferred Shares, and reports of
changes in ownership of Shares, Units and Preferred Shares. As a
matter of practice, the Company’s administrative staff assists our trustees and
executive officers with these reporting requirements, and typically files these
reports on their behalf. The Company is required to disclose whether it has
knowledge that any person required to file such reports may have failed to do so
in a timely manner. Based solely on a review of the copies of the fiscal year
2008 reports in the Company’s possession, and on written representations from
the Company’s reporting persons that no other reports were required during the
year ended April 30, 2008, the Company believes that all of the trustees and
executive officers of the Company have timely satisfied their Section 16(a)
reporting obligations for the fiscal year ended April 30, 2008, except for a
late Form 4 filing arising from the sale of 7,233 common shares of beneficial
interest on behalf of Mr. John Stewart on August 22, 2007, notice of which was
filed on Form 4 on September 20, 2007, or 19 business days late. Mr.
Stewart informed the Company that these shares were to have been transferred
from a brokerage account to another account, but were instead mistakenly sold,
and that because he was not promptly advised of the sale he accordingly did not
make a timely Form 4 filing.
PROPOSAL
2: APPROVAL OF THE COMPANY’S 2008 INCENTIVE AWARD PLAN
The Board
of Trustees has adopted, subject to approval by the Company’s shareholders, the
2008 Incentive Award Plan of Investors Real Estate Trust and IRET Properties, a
North Dakota Limited Partnership (the “Incentive Award Plan”). If approved, the Incentive Award Plan would provide
for the grant of long-term incentive awards, consisting of restricted shares,
performance awards and stock payment awards, to eligible employees, consultants
and trustees of the Company and IRET Properties (the “Operating
Partnership”). The Company currently has no equity-based incentive
award plan; any and all incentive awards currently made to eligible employees
and trustees are paid in cash. The Company’s Compensation Committee
and Board of Trustees believe that it is in the best interests of the Company
and its shareholders that the Board of Trustees have the ability to pay
incentive awards to Company officers, employees, consultants and trustees in
whole or in part in common shares and restricted shares of the Company, rather
than exclusively in cash. The Incentive Award Plan will contribute to
an alignment of the
19
interests
of management, employees, consultants and trustees with those of the Company and
its shareholders, as the value of equity awards is directly linked to the market
value of the Company’s Shares. Under the listing requirements of the
NASDAQ, shareholder approval of the Incentive Award Plan is necessary to permit
the Board to grant incentive awards payable in the Company’s common
shares.
The
Incentive Award Plan contains a number of provisions that the Board believes are
consistent with the interest of the shareholders and with sound corporate
governance practices, including:
|
·
|
Reasonable
Limitation on Shares Issued. The authorized share pool of 2
million shares is approximately 3.5 percent of common shares outstanding
as of June 30, 2008.
|
|
·
|
No
Discount Shares. All Shares will be awarded at the market price
on the date of award.
|
The Board
of Trustees is asking Company shareholders to approve the Incentive Award Plan
because it believes that the plan will contribute to the continued success of
the Company. The Incentive Award Plan will become effective upon
approval by the Company’s shareholders.
A summary
of the material features of the Incentive Award Plan is set forth
below. This summary is qualified in its entirety by reference to the
Incentive Award Plan itself, which is included herein as Appendix
A.
General
The
Incentive Award Plan generally provides for the grant of long-term incentive
awards to eligible employees, trustees and consultants of the Company and the
Operating Partnership, and their subsidiaries. The purpose of the
Incentive Award Plan is to promote the success and enhance the value of the
Company by linking the personal interests of employees (including executive
officers), trustees and consultants to those of the Company’s shareholders by
providing such individuals with an incentive for outstanding performance to
generate superior returns to the Company’s shareholders.
Types
of Awards
Awards
issuable under the Incentive Award Plan are limited to restricted shares,
performance awards (payable in cash, Shares or a combination of both cash and
Shares) and stock payment awards. No stock options, stock
appreciation rights or deferred stock awards are issuable under the Incentive
Award Plan.
Shares
Available for Awards
The
Incentive Award Plan provides that a total of two million of the Company’s
common shares of beneficial interest will be reserved for issuance pursuant to
the plan, subject to certain adjustments set forth therein. To the
extent that an award terminates, lapses, expires, or is canceled or forfeited
without having been fully exercised, any common shares subject to the award will
again be available for the grant of awards under the Incentive Award
Plan.
Eligibility
Employees
and consultants of the Company, the Operating Partnership or any subsidiary of
the Company or Operating Partnership, and trustees of the Company, are eligible
to be granted restricted shares, performance awards (payable in cash, Shares or
a combination of both cash and Shares) and stock payment awards under the
Incentive Award Plan. As of April 30, 2008, we had 69 employees,
seven of whom constitute our senior executive group, and eight trustees who are
eligible to participate in the Incentive Award Plan.
Administration
The
Incentive Award Plan is administered by the Compensation Committee, except that
the full Board of Trustees administers awards to trustees. Each
member of the Compensation Committee that administers the Incentive Award Plan
will be both a “non-employee director” within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934 (the “Exchange Act”), and an “outside director”
within the meaning of Section 162(m) of the Internal Revenue
Code. The Incentive Award Plan also requires that each such trustee
be an “independent director” under the rules of the NASDAQ (or other securities
market on which the Company’s common shares are then
20
traded). Under
the Incentive Award Plan, any action taken by the Compensation Committee will be
valid and effective, whether or not members of the Committee are later
determined not to have satisfied these membership requirements or otherwise
provided in the Committee’s charter. The Incentive Award Plan
provides that the administrator of the plan has the authority to designate
recipients of awards and to determine the terms and provisions of awards,
including the expiration date and vesting schedule.
Restricted
Shares and Stock Payment Awards
The
Incentive Award Plan provides for the issuance of restricted stock awards and
stock payment awards to eligible individuals. Restricted stock awards
will generally be subject to such transferability and vesting restrictions as
the administrator shall determine. The Company, Operating Partnership or
subsidiary, as the case may be, will have the right to repurchase restricted
Shares immediately upon the termination of the holder’s employment, trusteeship
or consultancy, as the case may be, at a cash price per Share equal to the price
paid by the holder for the restricted Shares. The administrator will determine
the terms and conditions of stock payment awards, including vesting and other
conditions, and whether the awards will be based on specified performance
criteria. A stock payment award is only payable while the holder of
the award is an employee, consultant or trustee, as the case may be, unless the
administrator determines otherwise.
Performance
Awards
Performance
awards are also issuable under the Incentive Award Plan. Any participant
selected by the Compensation Committee may be granted a performance award in the
form of a cash bonus, stock bonus or payable in a combination of cash and common
shares. The Compensation Committee may grant performance awards in the form of a
cash bonus to employees who are or may be “covered employees,” as defined in
Section 162(m) of the Internal Revenue Code, that are intended to be
performance-based awards within the meaning of Section 162(m) of the Internal
Revenue Code in order to preserve the deductibility of these awards for federal
income tax purposes. Participants are only entitled to receive
payment for a performance-based award for any given performance period to the
extent that pre-established performance goals set by the Compensation Committee
for the period are satisfied. These pre-established performance goals
must be based on one or more of the following performance criteria relating to
the Company, the Operating Partnership or any subsidiary, division or operating
unit of the Company or Operating Partnership: (1) funds from operations and
funds from operations per share and unit, (2) United States generally accepted
accounting principles earnings per share, (3) improvement in economic vacancy or
other operational targets, (4) asset growth, (5) pre-tax or after-tax income
(before or after allocation of corporate overhead and bonus), (6) net income
(before or after taxes), (7) reduction in expenses, (8) pre-tax or after-tax
operating income, (9) earnings (including earnings before taxes, earnings before
interest and taxes, or earnings before interest, taxes, depreciation and
amortization, (10) gross revenue, (11) working capital, (12) profit margin or
gross profits, (13) Share price, (14) cash flow or cash flow
per Share (before or after dividends), (15) cash flow return on
investment, (16) return on capital (including return on total capital or return
on invested capital), (17) return on assets or net assets, (18) market share,
(19) pre-tax or after-tax earnings per Share, (20) pre-tax or after-tax
operating earnings per Share, (21) total stockholder return, (22) growth
measures, including revenue growth, as compared with a peer group or other
benchmark, (23) economic value-added models or equivalent metrics, (24)
comparisons with various stock market indices, (25) improvement in or attainment
of expense levels or working capital levels, (26) operating margins, gross
margins or cash margins, (27) year-end cash, (28) debt reductions, (29)
stockholder equity, (30) regulatory achievements, (31) implementation,
completion or attainment of measurable objectives with respect to research,
development, products or projects, production volume levels, acquisitions and
divestitures and recruiting and maintaining personnel, (32) customer
satisfaction, (33) operating efficiency, productivity ratios, (34) strategic
business criteria, consisting of one or more objectives based on meeting
specified revenue, market penetration, geographic business expansion goals
(including accomplishing regulatory approval for projects), cost or cost savings
targets, accomplishing critical milestones for projects, and goals relating to
acquisitions or divestitures, or any combination thereof (in each case before or
after such objective income and expense allocations or adjustments as the
Committee may specify within the applicable period). Each such goal
may be expressed on an absolute and/or relative basis, may be based on or
otherwise employ comparisons based on current internal targets, the past
performance of the Company (including the performance of one or more
subsidiaries, divisions and/or operating units) and/or the past or current
performance of other companies, and in the case of earnings-based measures, may
use or employ comparisons relating to capital (including, but limited to, the
cost of capital), stockholders’ equity
21
and/or
Shares outstanding, or to assets or net assets. Generally, a
recipient of a performance award will have to be employed by the Company, the
Operating Partnership or a subsidiary on the date the performance award is
paid.
Adjustments
and Company Transactions
In the
event of certain Company transactions and changes in our organizational
structure or capitalization, the administrator will make appropriate adjustments
to the aggregate number of shares issuable under the Incentive Award Plan and
the terms and conditions of any outstanding awards, including the number of
shares issuable thereunder. The administrator also has the authority
under the Incentive Award Plan to take certain other actions with respect to
outstanding awards in the event of a Company transaction, including provision
for the cash-out, termination, assumption or substitution of such
awards.
Termination
and Amendment
The
administrator may at any time terminate, amend, suspend or modify the Incentive
Award Plan, but the Company must obtain shareholder approval of any amendment if
necessary and desirable to comply with any applicable law, regulation or stock
exchange rule. No amendment to the Incentive Award Plan can be made without the
approval of our shareholders if the amendment increases the number of common
shares issuable under the plan. Unless the award itself expressly provides
otherwise, any termination, amendment or modification of the Incentive Award
Plan which materially adversely affects any outstanding award requires the prior
written consent of the affected holder. Unless sooner terminated by the Board,
the Incentive Award Plan will automatically terminate on the 10th
anniversary of the date on which the plan was adopted by the Board. No award may
be granted under the Incentive Award Plan after its termination, but awards that
are outstanding at such time will remain in effect. The Incentive Award Plan
will become effective if and when it is approved by our
shareholders.
Additional
Restrictions on Awards
The
Incentive Award Plan provides that no participant in the Incentive Award Plan
will be permitted to acquire, or will have any right to acquire, shares
thereunder if such acquisition would be prohibited by the share ownership limits
contained in our Declaration of Trust, or would impair our status as a
REIT.
Federal
Income Tax Consequences
The
following discussion of the federal income tax consequences of the Incentive
Award Plan under current federal income tax law is a summary only, dealing with
the general tax principles applicable to the Incentive Award Plan, and is
intended for general information only. The discussion does not
purport to be a complete analysis of all of the potential tax effects of the
incentive Award Plan. It is based upon laws, regulations, rulings and
decisions now in effect, all of which are subject to change. Foreign,
state and local tax laws, and estate and gift tax considerations are not
discussed, and may vary depending on individual circumstances and from locality
to locality.
Stock Payment and
Performance Awards. Subject to Section 162(m) discussed below, stock
payment awards and cash or stock-based performance awards are subject to tax at
the time of payment. Compensation otherwise effectively deferred is taxed
when paid. The Company, our Operating Partnership or the participant’s
employer, as applicable, will generally have a corresponding deduction at the
time the participant recognizes income, subject to Section 162(m) of the Code
with respect to covered employees.
Restricted Stock
Awards. Subject to Section 162(m) of the Code, discussed
below, the Company, our Operating Partnership or the participant’s employer
receives a deduction and the participant recognizes taxable income equal to the
fair market value of the restricted stock at the time the restrictions on it
lapse over the amount, if any, the participant paid for the restricted
stock. If the Company consents, the participant may recognize income
immediately by so electing not later than 30 days after the date the
restricted stock is granted as permitted under Section 83(b) of the Code, in
which case the deduction and the participant’s inclusion in income occur on the
grant date based on the fair market value of stock on that date. Any dividends
received on restricted stock during the restriction period are deductible and
included in the participant’s ordinary income.
Tax Deductibility
and Section 162(m) of the Code. Section 162(m) of the
Code generally places a $1 million annual limit on the amount of compensation
paid to each of the Company’s named executive officers that may be
22
deducted
by the Company for federal income tax purposes unless such compensation
constitutes “qualified performance-based compensation” which is based on the
achievement of pre-established performance goals set by a committee of the Board
pursuant to an incentive plan that has been approved by the Company’s
shareholders. The Incentive Award Plan provides that certain awards
made thereunder may, in the discretion of the Compensation Committee, be
structured so as to qualify for the “qualified performance-based compensation”
exception to the $1 million annual deductibility limit of Section
162(m).
Other
Considerations. Awards that are
granted, accelerated or enhanced upon the occurrence of a change in control may
give rise, in whole or in part, to excess parachute payments within the meaning
of Section 280G of the Code to the extent that such payments, when aggregated
with other payments subject to Section 280G, exceed the limitations contained in
that provision. Such excess parachute payments are not deductible by
the Company and are subject to an excise tax of 20% payable by the
recipient.
The
Incentive Award Plan is not subject to any provision of the Employee Retirement
Income Security Act of 1974, as amended, and is not qualified under Section
401(a) of the Code. Special rules may apply to a participant who is
subject to Section 16 of the Exchange Act.
Plan
Benefits
No awards
will be granted pursuant to the Incentive Award Plan until it is approved by the
Company’s shareholders. In addition, awards are subject to the
discretion of the administrator. As of the date of this proxy
statement, no determination has been made as to the types or amounts of awards
that will be granted to specific individuals pursuant to the Incentive Award
Plan. Therefore, it is not possible to determine the benefits that will be
received in the future by participants in the Incentive Award Plan.
Supplemental
Information
In
accordance with Instruction 5 of Item 10 of Schedule 14A, please be advised that
the Company intends to register under the Securities Act of 1933, as amended, on
Form S-8, the common shares of beneficial interest of the Company that may be
made subject to awards under the Company’s 2008 Incentive Award Plan prior to
the issuance of such awards.
Closing
Sale Price of Common Shares
The
closing sale price of our common shares on July 18, 2008, as reported by the
NASDAQ Global Market, was $9.92 per Share.
Vote
Required
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy at the Annual Meeting, provided a quorum is present, is
required to approve the Company’s proposed 2008 Incentive Award
Plan. The Board
unanimously recommends that you vote FOR the approval of the 2008 Incentive
Award Plan.
PROPOSAL
3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit
Committee has approved Deloitte & Touche LLP (“Deloitte & Touche”) as
the Company’s independent auditors for the current fiscal year ending April 30,
2009. Deloitte & Touche completed the audits for the Company’s
last five fiscal years, ended April 30, 2008, 2007, 2006, 2005 and
2004. The Company’s fiscal year 2004 was the first year that Deloitte
& Touche audited the Company’s financial statements. As a matter
of good corporate governance, the Audit Committee has determined to submit its
selection to shareholders for ratification. In the event that this
selection of auditors is not ratified by a majority of the voting power of the
shareholders present in person or by proxy at the Annual Meeting, the Audit
Committee will review its future selection of independent auditors.
The
Company expects that a representative of Deloitte & Touche will be present
at the Annual Meeting. The representative will have the opportunity
to make a statement if he or she so desires. The representative will also be
available to respond to questions from shareholders.
23
Fees
Paid to the Company’s Principal Independent Accountants
The
following table shows the aggregate fees billed to date for the audit and other
services provided by Deloitte & Touche LLP, the Company’s independent
registered public accounting firm, for fiscal years 2008 and
2007. These amounts exclude reimbursed expenses.
|
2008
|
2007
|
|||||||
|
Audit
Fees
|
$ | 313,300 | $ | 283,100 | ||||
|
Audit-Related
Fees
|
0 | 13,000 | ||||||
|
Tax
Fees
|
0 | 0 | ||||||
|
All
Other Fees
|
0 | 0 | ||||||
|
TOTAL
|
$ | 313,300 | $ | 296,100 | ||||
Audit
Fees: This
category includes the audit of the Company’s annual financial statements, review
of financial statements included in the Company’s quarterly reports on Form
10-Q, and services that are normally provided by the independent accountant in
connection with regulatory filings, such as comfort letters and consents and
assistance with and reviews of documents filed with the SEC.
Audit-Related
Fees: This
category consists of assurance and related services provided by the independent
accountant that are reasonably related to the performance of the audit or review
of the Company’s financial statements and are not reported above under “Audit
Fees.” The services for the fees disclosed under this category
generally include fees for stand-alone audits of subsidiaries, due diligence
associated with acquisitions, benefit plan audits, other accounting consulting,
and Sarbanes-Oxley Section 404 pre-implementation assistance. The
Company’s independent registered public accounting firm performed no services in
this category during fiscal year 2008.
Tax Fees:
This category consists of professional services rendered by the independent
accountant primarily in connection with the Company’s tax compliance activities,
including the preparation of tax returns and technical tax advice related to the
preparation of tax returns. The Company’s independent registered
public accounting firm performed no services in this category during fiscal
years 2008 and 2007.
All Other
Fees: This
category consists of fees for other permissible services that do not meet the
above category descriptions. The Company’s independent registered public
accounting firm performed no services in this category during fiscal years 2008
and 2007.
Vote
Required
The
affirmative vote of a majority of the voting power of the shareholders present
in person or by proxy, provided a quorum is present, at the Annual Meeting, is
required to approve Proposal 3. The Board
unanimously recommends that you vote FOR the ratification of the selection of
Deloitte & Touche LLP as the Company’s independent auditors for fiscal year
2009.
The Audit
Committee of the Board of Trustees (the “Audit Committee”) oversees the
accounting and financial reporting processes of the Company and the audits of
the Company’s annual financial statements. The Audit Committee is
made up solely of independent trustees, as defined in the applicable NASDAQ and
SEC rules, and it operates under a written charter adopted by the Board, a copy
of which is available on the Company’s investor relations website at
www.iret.com, under the “Corporate Governance” caption. The Audit
Committee reviews and assesses the adequacy of its charter on an annual
basis. The Company’s Board of Trustees has determined that each of
John D. Stewart, the Chair of the Audit Committee, and Stephen L. Stenehjem and
C.W. “Chip” Morgan, members of the Audit Committee, is an audit committee
financial expert as defined by the rules of the SEC.
The Audit
Committee held four meetings during fiscal year 2008. The Audit
Committee met quarterly with representatives of Deloitte & Touche LLP, the
Company’s independent registered public accounting firm (the “independent
auditors”), during fiscal year 2008, and met with the independent auditors
subsequent to the fiscal year end as well, in respect of the year-end
audit. Among other matters, the Audit Committee has discussed with
the
24
independent
auditors the matters required to be discussed by auditing standards of the
Public Company Accounting Oversight Board (United States) (hereinafter referred
to as “the PCAOB standards”), in particular Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended by Statement on Auditing
Standards No. 90, Audit Committee Communications. The Audit Committee
has received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as currently in effect. The Audit
Committee has also discussed with the independent auditors their
independence. The independent auditors have free access to the Audit
Committee to discuss any matters they deem appropriate.
As
described more fully in its Charter, the Audit Committee represents and assists
the Board of Trustees in its oversight of the integrity of the Company’s
financial reporting, the independence, qualifications and performance of the
Company’s independent auditors, and the Company’s compliance with legal and
regulatory requirements. Company management has the primary
responsibility for the financial statements and the reporting
process. The Company’s independent auditing firm is responsible for
performing an independent audit of the consolidated financial statements in
accordance with the PCAOB standards. In accordance with law, the
Audit Committee has the ultimate authority and responsibility to select,
compensate, evaluate and, when appropriate, replace the Company’s independent
auditors. The Audit Committee has the authority to engage its own
outside advisors as it determines appropriate, apart from counsel or advisors
hired by management.
In
accordance with law, the Audit Committee has established procedures for the
receipt, retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, including the
confidential, anonymous submission by Company employees of concerns regarding
accounting or auditing matters. Further, the Audit Committee has pre-approved
all audit and audit-related services provided by the independent auditors to the
Company, and the related fees for such services, and has concluded that all such
services are compatible with the auditors’ independence. No non-audit
services were provided to the Company by the independent auditors in fiscal year
2008. See “Proposal 3: Ratification of Selection of Independent
Auditors” for more information regarding fees paid to the Company’s independent
auditors for services in fiscal years 2007 and 2008.
The Audit
Committee reviewed and discussed with management its assessment and report on
the effectiveness of the Company’s internal control over financial reporting as
of April 30, 2008, which management made using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework. The Audit Committee also reviewed and
discussed with Deloitte & Touche LLP its report on the Company’s internal
control over financial reporting. The Company published these reports
in its Annual Report on Form 10-K for the fiscal year ended April 30,
2008.
The Audit
Committee has reviewed and discussed the consolidated financial statements for
fiscal year 2008 with management and the independent auditors. This
review included a discussion with management of the quality of the Company’s
accounting principles, the reasonableness of significant estimates and
judgments, and the clarity of disclosure in the Company’s financial statements,
including the disclosures related to critical accounting
estimates. Following these discussions and the Audit Committee’s
review of the report of the independent auditors, the Audit Committee
recommended to the Board, and the Board approved, the inclusion of the audited
financial statements in the Company’s Annual Report on Form 10-K for the year
ended April 30, 2008, for filing with the SEC.
The Audit
Committee has selected Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for fiscal year 2009. The Board of
Trustees has concurred in that selection and has presented the matter to the
shareholders of the Company for ratification.
John D.
Stewart (Chair)
Stephen
L. Stenehjem
C.W.
“Chip” Morgan
25
We did
not receive a request from any shareholder that a matter be submitted to a vote
at the 2008 Annual Meeting. Shareholders who wish to submit a
proposal for presentation at the annual meeting of shareholders to be held in
2009 must submit the proposal to the Company at PO Box 1988, Minot, ND,
58702-1988, Attention: Secretary. Such proposal must be received by the Company
no later than April 6, 2009, in order to be included in the Company’s proxy
statement and form of proxy relating to that meeting. Such proposals must comply
with the requirements as to form and substance established by the SEC and set
forth in Rule 14a-8 of the Securities Exchange Act in order to be included in
the proxy statement.
Shareholders
who wish to make a proposal at the 2009 Annual Meeting of Shareholders without
having the proposal included in the Company’s proxy statement and form of proxy
relating to that meeting must notify the Company by June 20, 2009. If the
shareholder fails to give notice by this date, then such notice will be
considered untimely under Rule 14a-4(c)(1) of the Securities Exchange Act, and
the persons named as proxies in the proxies solicited by the Board for the 2008
Annual Meeting may exercise discretionary voting power with respect to any such
proposal.
The
Company reserves the right to reject, rule out of order or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
For
information on recommending individuals for consideration as nominees to IRET’s
Board of Trustees, see the discussion under the subheading “Committees” in the
section of this proxy statement entitled “Information Concerning the Board of
Trustees.”
We are
pleased to offer Company shareholders the choice of receiving our proxy
materials electronically over the Internet instead of receiving paper copies
through the mail. Choosing electronic delivery will save us the costs
of printing and mailing these materials, and will help conserve natural
resources. Our fiscal year 2008 annual report and proxy statement are
being mailed to all shareholders who have not already elected to receive these
materials electronically. If you are a shareholder of record and
would like to receive these materials electronically in the future, you may
enroll for this service on the Internet after you vote your shares in accordance
with the instructions for Internet voting set forth on the enclosed proxy
card. We encourage our shareholders to receive proxy materials via
the Internet because it reduces Company expenses, is easier on the environment,
and offers additional convenience for shareholders. Beginning with
our fiscal year 2009 proxy materials, and in accordance with new SEC rules, we
plan to send all shareholders who have not affirmatively opted to receive paper
materials, all of their proxy materials via the Internet. However,
you still may opt to continue receiving paper copies of proxy materials, at no
cost to you, by following the provided instructions. You may also enroll for
electronic delivery of future Company shareholder materials at any time on our
website at www.iret.com. Select the “Investor Relations” link and
then the “Click Here to Enroll” link. As with all Internet usage, the user must
pay all access fees and telephone charges. An electronic version of this proxy
statement is posted on our website at www.iret.com. Select the “Investor
Relations” link and then either the “SEC Filings” link or the “Corporate
Governance” link.
In
accordance with notices that we sent to certain shareholders, we are sending
only one copy of our annual report and proxy statement to shareholders who share
the same last name and address, unless they have notified us that they want to
continue receiving multiple copies. This practice, known as “householding,” is
designed to reduce duplicate mailings and save significant printing and postage
costs as well as natural resources.
Householding
for bank and brokerage accounts is limited to accounts within the same bank or
brokerage firm. For example, if you and your spouse share the same last name and
address, and you and your spouse each have two accounts containing IRET common
shares at two different brokerage firms, your household will receive two copies
of the Company’s annual meeting materials - one from each brokerage
firm.
If you
received a householded mailing this year and you would like to have additional
copies of our annual report and/or proxy statement mailed to you, or you would
like to opt out of this practice for future mailings, please
26
submit
your request to our Investor Relations department by fax to (701) 838-7785, by
mail to the Company at Investor Relations, PO Box 1988, Minot,
ND 58702-1988 or by calling Investor Relations between 8:30 a.m. and
5:00 p.m. CT at 1-888-478-4738. Similarly, you may also contact us if you
received multiple copies of the annual meeting materials and would prefer to
receive a single copy in the future.
If you
would like to receive information about Investors Real Estate Trust, you may use
one of the following methods:
|
1.
|
The
Company’s internet site, located at www.iret.com, contains information
about the Company and its properties. The Company’s Investor Relations
site contains press releases, earnings releases, financial information and
stock quotes, as well as corporate governance information and links to the
Company’s SEC filings. This proxy statement and our 2008 Annual Report on
Form 10-K are both available on the internet at
www.iret.com.
|
|
2.
|
To
have information such as our latest Form 10-Q or annual report mailed to
you, please call us at 1-888-478-4738 or send a fax with your request to
(701)-838-7785.
|
If you
would like to contact us, call IRET Investor Relations at 1-888-478-4738, or
send correspondence to IRET, Attn: Investor Relations, PO Box 1988,
Minot, North Dakota 58702-1988.
It is not
expected that any matters other than those described in this proxy statement
will be brought before the Annual Meeting. If any other matters are
properly presented at the meeting for action, the persons named in the
accompanying proxy will vote upon them in accordance with their best
judgment.
|
By
Order of the Board of Trustees
|
|
 |
|
|
Michael
A. Bosh
|
|
|
Secretary
and General Counsel
|
August 4,
2008
Minot,
North Dakota
Upon
written request of any shareholder entitled to receive this proxy statement, the
Company will provide, without charge, a copy of its Annual Report on Form 10-K,
including the consolidated financial statements, the notes thereto and financial
statement schedules, as filed with the Securities and Exchange
Commission. Any such request should be addressed to Michael A. Bosh,
Secretary and General Counsel of the Company, at PO Box 1988, Minot, ND
58702-1988. This request must include a representation by the
shareholder that as of July 21, 2008, the shareholder was entitled to vote at
the Annual Meeting.
27
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has been intentionally left blank.
25
Appendix
A
2008
INCENTIVE AWARD PLAN
OF
INVESTORS
REAL ESTATE TRUST
AND
IRET
PROPERTIES, A NORTH DAKOTA LIMITED PARTNERSHIP
Investors
Real Estate Trust, a North Dakota real estate investment trust (the “Company”), and IRET
Properties, a North Dakota Limited Partnership (the “Partnership”), have
adopted this 2008 Incentive Award Plan (the “Plan”) effective as
of September __, 2008, for the benefit of their eligible employees, consultants
and trustees and those of their subsidiaries.
The
purposes of the Plan are as follows:
(1) To
provide an additional incentive for trustees, consultants and key employees of
the Company and the Partnership and their subsidiaries to further the growth,
development and financial success of the Company by personally benefiting
through the ownership of Company stock which recognize such growth, development
and financial success.
(2) To
enable the Company, the Partnership and their subsidiaries, to obtain and retain
the services of trustees, consultants and key employees considered essential to
the long range success of the Company by offering them an opportunity to own
stock in the Company which will reflect the growth, development and financial
success of the Company.
ARTICLE
I.
DEFINITIONS
Wherever
the following terms are used in the Plan they shall have the meanings specified
below, unless the context clearly indicates otherwise. The singular pronoun
shall include the plural where the context so indicates.
1.1.
“Administrator”
shall mean the entity that conducts the general administration of the Plan as
provided herein. With reference to the administration of the Plan with respect
to Awards granted to Independent Trustees, the term “Administrator” shall refer
to the Board. With reference to the administration of the Plan with respect to
any other Award, the term “Administrator” shall refer to the Committee unless
the Board has assumed the authority for administration of the Plan generally as
provided in Section 6.1.
1.2.
“Award” shall
mean a Restricted Stock Award, Stock Payment Award or a Performance Award that
may be awarded or granted under the Plan (collectively, “Awards”).
1.3.
“Award
Agreement” shall mean a written agreement executed by an authorized
officer of the Company and the Holder which shall contain such terms and
conditions with respect to an Award as the Administrator shall determine,
consistent with the Plan.
1.4.
“Award Limit”
shall have the meaning set forth in Section 2.1(b).
1.5.
“Board” shall
mean the Board of Trustees of the Company.
1.6.
“Change in
Control” shall mean the occurrence of any of the following
events:
(i) the
acquisition, directly or indirectly, by any “person” or “group” (as those terms
are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the
rules thereunder) of “beneficial ownership” (as determined pursuant to Rule
13d-3 under the Exchange Act) of securities entitled to vote generally in the
election of Trustees (“voting securities”)
of the Company that represent 35% or more of the combined voting power of the
Company’s then outstanding voting securities, other than
A-1
(A) an
acquisition of securities by a trustee or other fiduciary holding securities
under any employee benefit plan (or related trust) sponsored or maintained by
the Company or any person controlled by the Company or by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any person
controlled by the Company, or
(B) an
acquisition of securities by the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the stock of the Company, or
(C) an
acquisition of securities pursuant to a transaction described in clause
(iii) below that would not be a Change in Control under clause
(iii).
Notwithstanding
the foregoing, the following event shall not constitute an “acquisition” by any
person or group for purposes of this clause (i): an acquisition of the Company’s
securities by the Company which causes the Company’s voting securities
beneficially owned by a person or group to represent 35% or more of the combined
voting power of the Company’s then outstanding voting securities; provided, however, that if a
person or group shall become the beneficial owner of 35% or more of the combined
voting power of the Company’s then outstanding voting securities by reason of
share acquisitions by the Company as described above and shall, after such share
acquisitions by the Company, become the beneficial owner of any additional
voting securities of the Company, then such acquisition shall constitute a
Change in Control;
(ii)
individuals who, as of the effective date of this Plan, constitute the Board
(the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any
individual becoming a Trustee subsequent to the date hereof whose election by
the Company’s shareholders, or nomination for election by the Board, was
approved by a vote of at least a majority of the Trustees then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of Trustees or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board;
(iii) the
consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets or (z) the
acquisition of assets or stock of another entity, in each case, other than a
transaction
(A) which
results in the Company’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person that, as a result
of the transaction, controls, directly or indirectly, the Company or owns,
directly or indirectly, all or substantially all of the Company’s assets or
otherwise succeeds to the business of the Company (the Company or such person,
the “Successor
Entity”)) directly or indirectly, at least 50% of the combined voting
power of the Successor Entity’s outstanding voting securities immediately after
the transaction, and
(B) after
which no person or group beneficially owns voting securities representing 35% or
more of the combined voting power of the Successor Entity; provided, however, that no
person or group shall be treated for purposes of this clause (B) as beneficially
owning 35% or more of combined voting power of the Successor Entity solely as a
result of the voting power held in the Company prior to the consummation of the
transaction; or
(iv)
approval by the Company’s shareholders of a liquidation or dissolution of the
Company.
For
purposes of clause (i) above, the calculation of voting power shall be made as
if the date of the acquisition were a record date for a vote of the Company’s
shareholders, and for purposes of clause (iii)
A-2
above,
the calculation of voting power shall be made as if the date of the consummation
of the transaction were a record date for a vote of the Company’s
shareholders.
1.7.
“Code” shall
mean the Internal Revenue Code of 1986, as amended, and any regulations
promulgated under the Code.
1.8.
“Committee”
shall mean the Compensation Committee of the Board, or another committee or
subcommittee of the Board, appointed as provided in Section 6.1.
1.9.
“Common Stock”
shall mean the common shares of beneficial interest of the Company, no par value
per share.
1.10.
“Company” shall
mean Investors Real Estate Trust, a North Dakota real estate investment
trust.
1.11.
“Company
Consultant” shall mean any consultant or adviser if: (i) the consultant
or adviser renders bona fide services to the Company or any Company Subsidiary;
(ii) the services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s
securities; and (iii) the consultant or adviser is a natural person who has
contracted directly with the Company or any Company Subsidiary to render such
services.
1.12.
“Company
Employee” shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company or of any
Company Subsidiary.
1.13.
“Company
Subsidiary” shall mean (i) a corporation, association or other business
entity of which 50% or more of the total combined voting power of all classes of
capital stock is owned, directly or indirectly, by the Company or by one or more
Company Subsidiaries or by the Company and one or more Company Subsidiaries,
(ii) any partnership or limited liability company of which 50% or more of the
capital and profits interests is owned, directly or indirectly, by the Company
or by one or more Company Subsidiaries or by the Company and one or more Company
Subsidiaries, and (iii) any other entity not described in clauses (i) or
(ii) above of which 50% or more of the ownership and the power, pursuant to a
written contract or agreement, to direct the policies and management or the
financial and the other affairs thereof, are owned or controlled by the Company
or by one or more other Company Subsidiaries or by the Company and one or more
Company Subsidiaries; provided, however, that
“Company Subsidiary” shall not include the Partnership, or any Partnership
Subsidiary.
1.14.
“Consultant”
shall mean any Company Consultant or Partnership Consultant.
1.15.
“DRO” shall
mean a domestic relations order assigning an interest in an Award.
1.16.
“Employee”
shall mean any Company Employee or Partnership Employee.
1.17.
“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.
1.18.
“Fair Market
Value” means, as of any given date, (a) if the Common Stock is traded on
an exchange, the closing price of a share of Common Stock as reported in the
Wall Street Journal (or
such other source as the Company may deem reliable for such purposes) for such
date, or if no sale occurred on such date, the first trading date immediately
prior to such date during which a sale occurred; or (b) if the Common Stock is
not traded on an exchange but is quoted on a quotation system, the mean between
the closing representative bid and asked prices for the Common Stock on such
date, or if no sale occurred on such date, the first date immediately prior to
such date on which sales prices or bid and asked prices, as applicable, are
reported by such quotation system; or (c) if the Common Stock is not publicly
traded, the fair market value established by the Administrator acting in good
faith.
1.19.
“Holder” shall
mean a person who has been granted or awarded an Award.
1.20.
“Independent
Trustee” shall mean a member of the Board who is not an
Employee.
A-3
1.21.
“Partnership”
shall mean IRET Properties, a North Dakota Limited Partnership.
1.22.
“Partnership
Agreement” shall mean the Agreement of Limited Partnership of IRET
Properties, a North Dakota Limited Partnership, dated as of January 31, 1997, as
the same may be amended, modified or restated from time to time.
1.23.
“Partnership
Consultant” shall mean any consultant or adviser if: (i) the consultant
or adviser renders bona fide services to the Partnership or any Partnership
Subsidiary; (ii) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital raising transaction
and do not directly or indirectly promote or maintain a market for the Company’s
securities; and (iii) the consultant or adviser is a natural person who has
contracted directly with the Partnership or any Partnership Subsidiary to render
such services.
1.24.
“Partnership
Employee” shall mean any employee (as defined in accordance with Section
3401(c) of the Code) of the Partnership or any entity which is then a
Partnership Subsidiary.
1.25.
“Partnership
Subsidiary” shall mean (i) a corporation, association or other business
entity of which 50% or more of the total combined voting power of all classes of
capital stock is owned, directly or indirectly, by the Partnership or by one or
more Partnership Subsidiaries or by the Partnership and one or more Partnership
Subsidiaries, (ii) any partnership or limited liability company of which 50% or
more of the capital and profits interests is owned, directly or indirectly, by
the Partnership or by one or more Partnership Subsidiaries or by the Partnership
and one or more Partnership Subsidiaries, and (iii) any other entity not
described in clauses (i) or (ii) above of which 50% or more of the ownership and
the power, pursuant to a written contract or agreement, to direct the policies
and management or the financial and the other affairs thereof, are owned or
controlled by the Partnership or by one or more other Partnership Subsidiaries
or by the Partnership and one or more Partnership Subsidiaries.
1.26.
“Performance
Award” shall mean a cash bonus, stock bonus or other performance or
incentive award that is paid in cash, Common Stock or a combination thereof,
awarded under Article V of the Plan.
1.27.
“Performance
Criteria” shall mean the goals established by the Committee, which shall
be satisfied or met as a condition to the exercisability, vesting or receipt of
all or a portion of an Award. Such goals shall be based exclusively
on one or more of the following with respect to the Company, the Partnership,
and any Subsidiary or any division or operating unit thereof: (1) funds from
operations and funds from operations per share and unit, (2) United States
generally accepted accounting principles earnings per share, (3) improvement in
economic vacancy or other operational targets, (4) asset growth, (5) pre-tax or
after-tax income (before or after allocation of corporate overhead and bonus),
(6) net income (before or after taxes), (7) reduction in expenses, (8) pre-tax
or after-tax operating income, (9) earnings (including earnings before taxes,
earnings before interest and taxes, or earnings before interest, taxes,
depreciation and amortization, (10) gross revenue, (11) working capital, (12)
profit margin or gross profits, (13) Share price, (14) cash flow or cash flow
per Share (before or after dividends), (15) cash flow return on
investment, (16) return on capital (including return on total capital or return
on invested capital), (17) return on assets or net assets, (18) market share,
(19) pre-tax or after-tax earnings per Share, (20) pre-tax or after-tax
operating earnings per Share, (21) total stockholder return, (22) growth
measures, including revenue growth, as compared with a peer group or other
benchmark, (23) economic value-added models or equivalent metrics, (24)
comparisons with various stock market indices, (25) improvement in or attainment
of expense levels or working capital levels, (26) operating margins, gross
margins or cash margins, (27) year-end cash, (28) debt reductions, (29)
stockholder equity, (30) regulatory achievements, (31) implementation,
completion or attainment of measurable objectives with respect to research,
development, products or projects, production volume levels, acquisitions and
divestitures and recruiting and maintaining personnel, (32) customer
satisfaction, (33) operating efficiency, productivity ratios, (34) strategic
business criteria, consisting of one or more objectives based on meeting
specified revenue, market penetration, geographic business expansion goals
(including accomplishing regulatory approval for projects), cost or cost savings
targets, accomplishing critical milestones for projects, and goals relating to
acquisitions or divestitures, or any combination thereof (in each case before or
after such objective income and expense allocations or adjustments as the
Committee may specify within the applicable period). Each such goal
may be expressed on an absolute and/or relative basis, may be based on or
otherwise employ comparisons based on current
A-4
internal
targets, the past performance of the Company (including the performance of one
or more subsidiaries, divisions and/or operating units) and/or the past or
current performance of other companies, and in the case of earnings-based
measures, may use or employ comparisons relating to capital (including, but
limited to, the cost of capital), stockholders’ equity and/or shares
outstanding, or to assets or net assets. In all cases, the
performance criteria shall be such that they satisfy any applicable requirements
under Treas. Reg. Sec. 1.162-27(e)(2) (as amended from time to time) that the
achievement of such goals be “substantially uncertain” at the time that they are
established, and that the award opportunity be defined in such a way that a
third party with knowledge of the relevant facts could determine whether and to
what extent the performance goal has been met, and, subject to the Committee’s
right to apply negative discretion (within the meaning of Treas. Reg. Sec.
1.162-27(d)(iii)), the amount of the Award payable as a result of such
performance. To the extent applicable, the measures used in setting
performance criteria set under the Plan for any given performance period shall
be determined in accordance with GAAP and in a manner consistent with the
methods used in the Company’s audited financial statements, without regard
to: (i) extraordinary items as determined by the Company’s
independent public accountants in accordance with GAAP; (ii) changes in
accounting, unless, in each case, the Committee decides otherwise within the
applicable period; or (iii) non-recurring acquisition expenses and restructuring
charges. Notwithstanding the foregoing, in calculating operating
earnings or operating income (including on a per Share basis), the Committee
may, within the applicable period for a given performance period, provide that
such calculation shall be made on the same basis as reflected in a release of
the Company’s earnings for a previously completed period as specified by the
Committee. For purposes hereof, the “applicable period,” with respect
to any performance period, is the period commencing on or before the first day
of the performance period and ending no later than the earlier of (x) the
ninetieth (90th) day of
the performance period, or (y) the date on which twenty-five percent (25%) of
the performance period has been completed.
1.28.
“Plan” shall
mean this 2008 Incentive Award Plan of Investors Real Estate Trust and IRET
Properties, a North Dakota Limited Partnership.
1.29.
“REIT” shall
mean a real estate investment trust within the meaning of Sections 856 through
860 of the Code.
1.30.
“Restricted
Stock” shall mean Common Stock awarded under Article IV of the
Plan.
1.31.
“Rule 16b-3”
shall mean Rule 16b-3 promulgated under the Exchange Act, as such Rule may be
amended from time to time.
1.32.
“Section 162(m)
Participant” shall mean any key Employee designated by the Administrator
as a key Employee whose compensation for the fiscal year in which the key
Employee is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
1.33.
“Securities
Act” shall mean the Securities Act of 1933, as amended.
1.34 “Stock Payment” shall
mean a payment in the form of shares of Common Stock, awarded under Article V of
the Plan.
1.35.
“Subsidiary”
shall mean any Company Subsidiary or Partnership Subsidiary.
1.36.
“Termination of
Consultancy” shall mean the time when the engagement of a Holder as a
Consultant to the Company, the Partnership or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous commencement of employment with the Company, the
Partnership or a Subsidiary. The Administrator, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Consultancy, including, but not by way of limitation, the question of whether
a Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Consultancy. Notwithstanding any other provision of the Plan, the Company, the
Partnership or a Subsidiary has an absolute and unrestricted right to terminate
a Consultant’s service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in
writing.
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1.37.
“Termination of
Trusteeship” shall mean the time when a Holder who is an Independent
Trustee ceases to be a Trustee for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death or
retirement. The Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Trusteeship with
respect to Independent Trustees.
1.38.
“Termination of
Employment” shall mean the time when the employee-employer relationship
between a Holder and the Company, the Partnership or a Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death, disability or retirement; but
excluding (a) terminations where there is a simultaneous reemployment or
continuing employment of a Holder by the Company, the Partnership or a
Subsidiary, and (b) at the discretion of the Administrator, terminations
which result in a temporary severance of the employee-employer relationship. The
Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of
Employment.
1.39.
“Trustee” shall
mean a member of the Board.
1.40.
“Trustee Restricted
Stock Award” shall have the meaning set forth in
Section 4.2.
ARTICLE
II.
SHARES
SUBJECT TO PLAN
2.1.
Shares Subject to
Plan.
(a) The
shares of stock subject to Awards shall be Common Stock. Subject to adjustment
as provided in Section 7.3, the aggregate number of shares of Common Stock
that may be issued under all Awards granted under the Plan shall not exceed
2,000,000. The shares of Common Stock issuable under Awards may be either
previously authorized but unissued shares of Common Stock or treasury shares of
the Company.
(b)
Notwithstanding any provision in the Plan to the contrary, and subject to
Section 7.3, the maximum number of shares of Common Stock that may be
subject to one or more Awards that may be granted to any one individual in any
calendar year shall not exceed 50,000 and the maximum amount that may be paid in
cash to any one individual in any calendar year with respect to one or more
Performance Awards not denominated in Common Stock or otherwise for which the
foregoing limitation would not be an effective limitation shall be $500,000 (the
“Award
Limit”);
2.2.
Add-back of
Rights. To the extent that an Award terminates, lapses, expires or is
canceled or forfeited without having been fully paid out, any shares of Common
Stock subject to the Award may again be granted or awarded hereunder, subject to
the limitations of Section 2.1. Any shares of Common Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall be counted as issued or transferred under the Plan
and shall not subsequently be available for the grant of an Award pursuant to
the Plan. To the extent permitted by applicable law or any exchange rule, shares
of Common Stock issued in assumption of, or in substitution for, any outstanding
awards of any entity acquired in any form of combination by the Company or any
Subsidiary shall not be counted against shares of Common Stock available for
grant pursuant to this Plan.
ARTICLE
III.
GRANTING
OF AWARDS
3.1.
Award
Agreement. Each Award shall be evidenced by an Award Agreement. Award
Agreements evidencing Awards intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code or the Administrator may determine to
include.
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3.2.
Provisions Applicable
to Section 162(m) Participants.
(a) The
Committee, in its discretion, may determine whether an Award is to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code.
(b)
Notwithstanding anything in the Plan to the contrary, the Committee may grant
any Award to a Section 162(m) Participant, including Restricted Stock, the
restrictions with respect to which lapse upon the attainment of performance
goals which are related to one or more of the Performance Criteria and any
performance or incentive award described in Article V that vests or becomes
payable upon the attainment of performance goals which are related to one or
more of the Performance Criteria.
(c) To
the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Articles IV and V which may be granted to one or more Section
162(m) Participants, no later than ninety (90) days following the commencement
of any calendar or fiscal year in question or any other designated calendar or
fiscal period or period of service (or such other time as may be required or
permitted by Section 162(m) of the Code), the Committee shall, in writing, (i)
designate one or more Section 162(m) Participants, (ii) select the Performance
Criteria applicable to the calendar or fiscal year or other designated calendar
or fiscal period or period of service, (iii) establish the various performance
targets, in terms of an objective formula or standard, and amounts of such
Awards, as applicable, which may be earned for such calendar or fiscal year or
other designated calendar or fiscal period or period of service, and (iv)
specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such calendar or fiscal year or other designated
calendar or fiscal period or period of service. Following the completion of each
calendar or fiscal year or other designated calendar or fiscal period or period
of service, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such calendar or fiscal year or other
designated calendar or fiscal period or period of service. In determining the
amount earned by a Section 162(m) Participant, the Committee shall have the
right to reduce (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Committee may deem
relevant to the assessment of individual or corporate performance for the
calendar or fiscal year or other designated calendar or fiscal period or period
of service.
(d)
Furthermore, notwithstanding any other provision of the Plan, any Award which is
granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m)
of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and the Plan shall be deemed amended to the extent necessary to conform to
such requirements.
3.3.
Limitations Applicable
to Section 16 Persons. Notwithstanding any other provision of the Plan,
the Plan and any Award granted or awarded to any individual who is then subject
to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that
are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. In addition, the Administrator may amend the terms of any Award
or related Award Agreement without the consent or approval of the Holder of the
Award or Award Agreement to the extent the Administrator deems necessary to
conform the Award or related Award Agreement to such applicable exemptive
rule.
3.4.
At-Will
Employment. Nothing in the Plan or in any Award Agreement hereunder shall
confer upon any Holder any right to continue in the employ of, or as a
Consultant for, or as a Trustee of, the Company, the Partnership or a
Subsidiary, or shall interfere with or restrict in any way the rights of any
such entity, which are hereby expressly reserved, to discharge any Holder at any
time for any reason whatsoever, with or
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without
cause, except to the extent expressly provided otherwise in a written employment
agreement between the Holder and such entity.
ARTICLE
IV.
AWARD OF
RESTRICTED STOCK
4.1.
Eligibility.
Subject to the Award Limit, Restricted Stock may be awarded to any Employee,
Trustee or Consultant (including Employees, Trustees or Consultants who have
previously received other Awards under the Plan) whom the Administrator
determines should receive such an Award.
4.2.
Award of Restricted
Stock.
(a) The
Administrator may from time to time, in its absolute discretion determine the
purchase price, if any, and other terms and conditions (including, without
limitation, in the case of Awards to Employees, Consultants or Trustees of the
Partnership or any Partnership Subsidiary, the mechanism for the transfer of the
Restricted Stock and payment therefor, and any surrender of such Restricted
Stock pursuant to Section 4.5) applicable to such Restricted Stock,
consistent with the Plan.
(b) Upon
the selection of an Employee, Trustee or Consultant to be awarded Restricted
Stock, the Administrator shall instruct the Secretary of the Company to issue
such Restricted Stock and may impose such conditions on the issuance of such
Restricted Stock as it deems appropriate.
4.3.
Rights as
Stockholders. Subject to Section 4.5, upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 4.7, the Holder shall
have, unless otherwise provided by the Administrator, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that in the
discretion of the Administrator, any extraordinary distributions with respect to
the Common Stock shall be subject to the restrictions set forth in Section
4.4.
4.4.
Restriction.
All shares of Restricted Stock issued under the Plan (including any shares
received by holders thereof with respect to shares of Restricted Stock as a
result of stock dividends and other distributions paid or made with respect to
the shares, stock splits or any other form of recapitalization) shall, in the
terms of each individual Award Agreement, be subject to such restrictions as the
Administrator shall provide, which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and restrictions based
on duration of employment or service with the Company, the Partnership, or a
Subsidiary, performance of the Company, the Partnership, or a Subsidiary and
individual performance; provided, however, that, except
with respect to shares of performance based Restricted Stock granted to Section
162(m) Participants, by action taken after the Restricted Stock is issued, the
Administrator may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no cash consideration was paid by the
Holder upon issuance, a Holder’s rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company or the
Partnership, as applicable, without consideration, upon a Termination of
Employment, Termination of Trusteeship or Termination of
Consultancy.
4.5.
Repurchase of
Restricted Stock. The Administrator shall provide in the terms of each
individual Award Agreement that the Company, the Partnership or their
Subsidiaries shall have the right to repurchase from the Holder the Restricted
Stock then subject to restrictions under the Award Agreement immediately upon a
Termination of Employment, Termination of Trusteeship or Termination of
Consultancy, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock.
4.6.
Escrow. The
Secretary of the Company or such other escrow holder as the Administrator may
appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Award Agreement
with respect to the shares evidenced by such certificate expire or shall have
been removed.
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4.7.
Legend. In
order to enforce the restrictions imposed upon shares of Restricted Stock
hereunder, the Administrator shall cause a legend or legends to be placed on
certificates representing all shares of Restricted Stock that are still subject
to restrictions under Award Agreements, which legend or legends shall make
appropriate reference to the conditions imposed thereby.
ARTICLE
V.
PERFORMANCE
AWARDS AND STOCK PAYMENTS
5.1.
Eligibility.
Subject to the Award Limit, one or more Performance Awards and/or Stock Payments
may be granted to any Employee, Trustee or Consultant (including Employees,
Trustees or Consultants who have previously received other Awards under the
Plan) whom the Administrator determines should receive such an
Award.
5.2.
Performance
Awards.
(a) The
value of such Performance Awards may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined
appropriate by the Administrator, in each case on a specified date or dates or
over any period or periods determined by the Administrator. In making such
determinations, the Administrator shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Employee, Trustee or
Consultant.
(b)
Without limiting Section 5.2(a), the Administrator may grant Performance Awards
to any 162(m) Participant in the form of a cash bonus payable upon the
attainment of one or more of the Performance Criteria, in each case on a
specified date or dates or over any period or periods determined by the
Administrator. Any such bonuses paid to 162(m) Participants shall be based upon
objectively determinable bonus formulas established in accordance with the
provisions of Section 3.2. The maximum amount of any Performance Award
payable to a 162(m) Participant under this Section 5.2(b) shall not exceed the
Award Limit with respect to any calendar year. Unless otherwise specified by the
Administrator at the time of grant, the Performance Criteria with respect to a
Performance Award payable to a 162(m) Participant shall be determined on the
basis of United States generally accepted accounting principles.
5.3. Stock
Payments. Any key Employee, Trustee or Consultant selected by
the Administrator may receive Stock Payments in the manner determined from time
to time by the Administrator. The number of shares shall be
determined by the Administrator and may be based upon the Performance Criteria
or other criteria determined appropriate by the Administrator, determined on the
date such Stock Payment is made or on any date thereafter.
5.4.
Term. The term
of a Performance Award and/or Stock Payment shall be set by the Administrator in
its discretion.
5.5.
Payment Upon
Termination of Employment, Termination of Consultancy or Termination of
Trusteeship. A Performance Award and/or Stock Payment is payable only
while the Holder is an Employee, Consultant or Trustee, as
applicable. However, the Administrator in its sole and absolute
discretion may provide that a Performance Award and/or Stock Payment granted to
a Section 162(m) Participant may be paid subsequent to a Termination of
Employment, Termination of Trusteeship or Termination of Consultancy without
cause, or following a Change in Control of the Company, or because of the
Holder’s retirement, death or disability, or otherwise.
5.6.
Time and Form of
Payment. Payment of the amount determined under Section 5.2 or 5.3 above
shall be in cash, in Common Stock or a combination of both, as determined by the
Administrator. To the extent any payment under this Article V is effected in
Common Stock, it shall be made subject to satisfaction of all provisions of
Section 6.6. In no event will payment be made later than the fifteenth day of
the third month following the later of the calendar year or fiscal year in which
the Performance Award is no longer subject to a performance condition (i.e., a
substantial risk of forfeiture) such as the requirement to remain in
employment.
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ARTICLE
VI.
ADMINISTRATION
6.1.
Compensation
Committee. The Compensation Committee (or another committee or a
subcommittee of the Board assuming the functions of the Committee under the
Plan) shall consist solely of three or more Independent Trustees, each of whom
is a “non-employee director” as defined by Rule 16b-3, an “outside director” for
purposes of Section 162(m) of the Code, and an “independent director” under the
rules of the NASDAQ Stock Market (or other principal securities exchange or
market on which shares of Common Stock are traded, if any). Any action taken by
the Committee shall be valid and effective, whether or not members of the
Committee at the time of such action are later determined not to have satisfied
the requirements for membership set forth in this Section 6.1 or otherwise
provided in any charter of the Committee. The governance of the Committee shall
be subject to the charter of the Committee as approved by the
Board.
6.2.
Duties and Powers of
Committee. It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Award Agreements, and to
adopt such rules for the administration, interpretation and application of the
Plan as are consistent therewith, to interpret, amend or revoke any such rules.
The Committee shall have the power to amend any Award and related Award
Agreement without the approval or consent of the Holder of the Award and related
Award Agreement provided that the rights or obligations of such Holder are not
affected adversely; provided, however, that without
the approval of the stockholders of the Company, neither the Committee nor the
Board may amend any outstanding Award or related Award Agreement to reduce its
purchase price below the per share purchase price as of the date the Award is
granted, and, except as permitted by Article II, no Award shall be canceled and
replaced with the grant of an Award having a lower purchase price. No Award may
be settled in cash for an amount that is greater than the intrinsic value of the
Award at the time of settlement. Grants or Awards under the Plan need not be the
same with respect to a single Holder or among Holders. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Awards granted to Independent Trustees.
6.3.
Majority Rule;
Unanimous Written Consent. The Committee shall act by a majority of its
members in attendance at a meeting at which a quorum is present or by a
memorandum or other written instrument signed by a majority of the members of
the Committee.
6.4.
Professional
Assistance; Good Faith Actions. All expenses and liabilities
which members of the Committee incur in connection with the administration of
the Plan shall be borne by the Company. The Committee may, with the approval of
the Board, employ attorneys, consultants, accountants, appraisers, brokers, or
other persons. The Committee, the Company and the Company’s officers and
Trustees shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and determinations
made by the Committee or the Board in good faith shall be final and binding upon
all Holders, the Company and all other interested persons. No members of the
Committee or Board, nor any person delegated authority under Section 6.5, shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or Awards, and all members of the Committee
and the Board and any person delegated authority under Section 6.5 shall be
fully protected by the Company in respect of any such action, determination or
interpretation to the full extent permitted by law, except as otherwise may be
provided in the Company’s governing documents, and under any insurance liability
policy of the Company that may be in effect from time to time.
6.5.
Delegation of
Authority to Grant Awards. The Committee may, but need not, delegate from
time to time some or all of its authority to grant Awards under the Plan to a
committee consisting of one or more members of the Committee or of one or more
officers of the Company; provided, however, that the
Committee may not delegate its authority to grant Awards to individuals (a) who
are subject on the date of the grant to the reporting rules under Section 16(a)
of the Exchange Act, (b) who are Section 162(m) Participants, or (c) who are
officers of the Company who are delegated authority by the
Committee
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hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 6.5 shall serve in such capacity at the pleasure of the
Committee.
6.6. Conditions to Issuance of
Stock Certificates. Neither the Company nor the Partnership shall be
required to issue or deliver any certificate or certificates for shares of
Common Stock purchased upon the vesting of any Award or portion thereof prior to
fulfillment of all of the following conditions:
(a) The
admission of such shares to listing on all stock exchanges on which such class
of Common Stock is then listed;
(b) The
completion of any registration or other qualification of such shares under any
state or federal law, or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the
Administrator shall, in its absolute discretion, deem necessary or
advisable;
(c) The
obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The
lapse of such reasonable period of time following the vesting of the Award as
the Administrator may establish from time to time for reasons of administrative
convenience; and
(e) The
receipt by the Company or the Partnership of full payment for such shares,
including payment of any applicable withholding tax.
ARTICLE
VI.
MISCELLANEOUS
PROVISIONS
7.1.
Transferability of
Awards.
(i) No
Award under the Plan may be sold, pledged, assigned or transferred in any manner
other than by will or the laws of descent and distribution or, subject to the
consent of the Administrator, pursuant to a DRO, unless and until the shares
underlying such Award have been issued, and all restrictions applicable to such
shares have lapsed; and
(ii)
No Award or interest or right therein shall be liable for the debts, contracts
or engagements of the Holder or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding
sentence.
7.2.
Amendment, Suspension
or Termination of the Plan. Except as otherwise provided in this Section
7.2, the Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Administrator.
However, without approval of the Company’s stockholders given within 12 months
before the grant of any Award under this Plan, no action of the Administrator
may, except as provided in Section 7.3, (i) increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under the Plan
or (ii) be taken that would otherwise require stockholder approval as a
matter of applicable law, regulation or rule. No amendment, suspension or
termination of the Plan shall, without the consent of the Holder, alter or
impair any rights or obligations under any Award theretofore granted or awarded,
unless the Award itself otherwise expressly so provides. No Awards may be
granted or awarded during any period of suspension or after termination of the
Plan. The Plan will expire on, and no Award may be granted pursuant to the Plan
after, the tenth anniversary of the date on which the Board originally adopted
this 2008 Equity Incentive Award Plan of Investors Real Estate Trust and IRET
Properties, a North Dakota Limited Partnership. Any Awards that are outstanding
on such date
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shall
remain in full force and effect according to the terms of the Plan and the
applicable Award Agreement.
7.3.
Changes in Common
Stock or Assets of the Company, Acquisition or Liquidation of the Company and
Other Corporate Events.
(a)
Subject to Section 7.3(e), in the event that any dividend or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company or the
Partnership, or exchange of Common Stock or other securities of the Company or
the Partnership, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company or Partnership, or other similar corporate
transaction or event affects the Common Stock or securities of the Partnership
such that an adjustment becomes appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Award, the Administrator shall make
proportionate adjustments to any or all of the following in order to prevent
such dilution or enlargement:
(i) The
number and kind of shares of Common Stock (or other securities or property) with
respect to which Awards may be granted or awarded (including, but not limited
to, adjustments of the limitations in Section 2.1 on the maximum number and kind
of shares which may be issued and adjustments of the Award Limit);
(ii) The
number and kind of shares of Common Stock (or other securities or property)
subject to outstanding Awards; and
(iii) The
grant or purchase price with respect to any Award.
(b)
Subject to Sections 7.3(c) and 7.3(e), in the event of any transaction or event
described in Section 7.3(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable laws,
regulations, or accounting principles, the Administrator in its sole and
absolute discretion, and on such terms and conditions as it deems appropriate,
either by the terms of the Award or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Holder’s request,
is hereby authorized to take any one or more of the following actions whenever
the Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:
(i) To
provide for either the purchase of any such Award for an amount of cash equal to
the amount that could have been attained upon the payment of such Award or
realization of the Holder’s rights had such Award been currently payable or
fully vested or the replacement of such Award with other rights or property
selected by the Administrator in its sole discretion;
(ii) To
provide that the Award cannot vest or become payable after such
event;
(iii) To
provide that such Award shall be payable as to all shares covered
thereby;
(iv) To
provide that such Award be assumed by the successor or survivor corporation, or
a parent or subsidiary thereof, or shall be substituted for similar rights or
awards covering the stock of the successor or survivor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices;
(v) To
make adjustments in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and in the number and
kind of outstanding Restricted
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Stock
and/or in the terms and conditions of (including the grant or purchase price),
and the criteria included in, outstanding rights and awards and rights and
awards which may be granted in the future; and
(vi) To
provide that, for a specified period of time prior to such event, the
restrictions imposed under an Award Agreement upon some or all shares of
Restricted Stock may be terminated, and, in the case of Restricted Stock, some
or all shares of such Restricted Stock may cease to be subject to repurchase
under Section 4.6 or forfeiture under Section 4.5 after such
event.
(c)
Notwithstanding any other provision of the Plan, in the event the Company is a
party to a merger, exchange, reorganization, or the sale of substantially all of
the assets of the Company, outstanding Awards shall be subject to the terms and
conditions of the agreement of merger, exchange, reorganization or sale, which
may include, without limitation, accelerating the vesting or exercise date of
Awards and the cancellation of outstanding Awards in exchange for the immediate
distribution of a cash payment equal to, in the case of Restricted Stock and
Performance Awards, the Fair Market Value of a share on the date of the Change
in Control multiplied by the number of shares then subject to the
Award.
(d)
Subject to Sections 3.2, 3.3 and 7.3(e), the Administrator may, in its
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company.
(e) With
respect to Awards which are granted to Section 162(m) Participants and are
intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 7.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 7.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole
number.
(f) The
existence of the Plan, the Award Agreement and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
7.4.
Approval of Plan by
Stockholders. The Plan will be submitted for the approval of the
Company’s stockholders within 12 months after the date of the Board’s adoption
of the Plan, and any amendment to the Plan increasing the aggregate number of
shares of Common Stock issuable under the Plan will be submitted for the
approval of the Company’s stockholders after the date of the Board’s adoption of
such amendment. Awards may be granted or awarded prior to such stockholder
approval, provided that such Awards shall not vest prior to the time when the
Plan is approved by the stockholders, and provided further that if such approval
is not obtained, all Awards previously granted or awarded under the Plan shall
thereupon be canceled and become null and void. In addition, if the Board
determines that Awards which may be granted to Section 162(m) Participants
should continue to be eligible to qualify as performance based compensation
under Section 162(m)(4)(C) of the Code, the Performance Criteria must be
disclosed to and approved by the Company’s stockholders no later than the first
stockholder meeting that occurs in the fifth year following the year in which
the Company’s stockholders previously approved the Performance
Criteria.
A-13
7.5.
Tax
Withholding. The Company or the Partnership, as applicable, shall be
entitled to require payment in cash or deduction from other compensation payable
to each Holder of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting, exercise or payment of any
Award. Notwithstanding any other provision of the Plan, the number of shares of
Common Stock which may be withheld with respect to the issuance, vesting or
payment of any Award (or which may be repurchased from the Holder of such Award
within six months after such shares of Common Stock were acquired by the Holder
from the Company) in order to satisfy the Holder’s federal and state income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal and state tax income and payroll tax purposes that are applicable to
such supplemental taxable income.
7.6.
Loans. The
Committee may, in its discretion, extend one or more loans to Employees in
connection with the exercise or receipt of an Award granted or awarded under the
Plan, or the issuance of Restricted Stock awarded under the Plan. The terms and
conditions of any such loan shall be set by the Committee. Notwithstanding the
foregoing, in no event shall any loan that is prohibited by the Sarbanes-Oxley
Act of 2002 or that is inconsistent with the Company’s qualification as a REIT
be permitted under the Plan.
7.7.
Forfeiture
Provisions. Pursuant to its general authority to determine the terms and
conditions applicable to Awards under the Plan, the Administrator shall, to the
extent permitted by applicable law, have the right to provide, in the terms of
Awards made under the Plan, or to require a Holder to agree by separate written
instrument, that (a)(i) any proceeds, gains or other economic benefit actually
or constructively received by the Holder upon any receipt, vesting or payment of
the Award, or upon the receipt or resale of any Common Stock underlying the
Award, must be paid to the Company, the Partnership, or a Subsidiary and (ii)
the Award shall terminate and any unvested portion of the Award (whether or not
vested) shall be forfeited, if (b)(i) a Termination of Employment, Termination
of Consultancy or Termination of Trusteeship occurs prior to a specified date,
or within a specified time period following receipt, vesting or payment of the
Award, or (ii) the Holder at any time, or during a specified time period,
engages in any activity in competition with the Company, the Partnership, or a
Subsidiary or which is inimical, contrary or harmful to the interests of the
Company, the Partnership or a Subsidiary as further defined by the Administrator
or (iii) the Holder incurs a Termination of Employment, Termination of
Consultancy or Termination of Trusteeship for cause.
7.8.
Effect of Plan Upon
Options and Compensation Plans. The adoption of the Plan shall not affect
any other compensation or incentive plans in effect for the Company, the
Partnership, or any Subsidiary. Nothing in the Plan shall be construed to limit
the right of the Company (a) to establish any other forms of incentives or
compensation for Employees, Trustees or Consultants of the Company, the
Partnership or any Subsidiary or (b) to grant or assume options or other rights
or awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
7.9.
Section 83(b) Election
Prohibited. No Holder may make an election under Section 83(b) of
the Code with respect to any award or grant under the Plan without the consent
of the Company, which the Company may grant or withhold in its sole
discretion.
7.10.
Grant of Awards to
Certain Employees or Consultants. The Company and the Partnership or any
Subsidiary may provide through the establishment of a formal written policy or
otherwise for the method by which shares of Common Stock and/or payment therefor
may be exchanged or contributed between the Company and such other party, or may
be returned to the Company upon any forfeiture of Common Stock by the Holder,
for the purpose of ensuring that the relationship between the Company and the
Partnership, or such Subsidiary, remains at arm’s-length.
7.11.
Restrictions on
Awards. This Plan shall be interpreted and construed in a manner
consistent with the Company’s status as a REIT. No Award shall be granted or
awarded:
A-14
(a) to
the extent such Award could cause the Holder to be in violation of the Ownership
Limit (as defined in the Company’s Articles of Amendment and Third Restated
Declaration of Trust, as amended from time to time); or
(b) if,
in the discretion of the Administrator, such Award could impair the Company’s
status as a REIT.
7.12.
Compliance with
Laws. The Plan, the granting and vesting of Awards under the Plan and the
issuance and delivery of shares of Common Stock and the payment of money under
the Plan or under Awards granted or awarded hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law and federal margin requirements)
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under the Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
7.13.
Titles. Titles
are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of the Plan.
7.14.
Governing Law.
This Plan and any agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of North Dakota without regard to
conflicts of laws thereof.
7.15.
Conflicts with
Company’s Declaration of Trust. Notwithstanding any other provision of
the Plan, no Holder shall acquire or have any rights to acquire any Common
Stock, and shall not have other rights under the Plan, which are prohibited
under the Company’s Articles of Amendment and Third Restated Declaration of
Trust, as amended from time to time.
7.16.
Section 409A.
To the extent that the Committee determines that any Award granted under the
Plan is subject to Section 409A of the Code, the Award Agreement evidencing such
Award shall incorporate the terms and conditions required by Section 409A of the
Code. To the extent applicable, the Plan and Award Agreements shall be
interpreted in accordance with Section 409A of the Code and Department of
Treasury regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other guidance that may be
issued subsequent to the adoption of this Plan or issuance of any Award.
Notwithstanding any provision of the Plan to the contrary, in the event that
following the effective date of this Plan or issuance of any Award, the
Committee determines that any Award may be subject to Section 409A of the Code
and related Department of Treasury guidance (including such Department of
Treasury guidance as may be issued after the adoption of this Plan or issuance
of any Award), the Committee may adopt such amendments to the Plan and the
applicable Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other
actions, that the Committee determines are necessary or appropriate to (a)
exempt the Award from Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Award, or (b) comply with
the requirements of Section 409A of the Code and related Department of
Treasury guidance.
A-15
I hereby
certify that the foregoing Plan was duly adopted by the Board of Trustees of
Investors Real Estate Trust, and by the Board of Directors of IRET, Inc.,
general partner of IRET Properties, a North Dakota Limited Partnership, on July
9, 2008.
Executed
on this 21st day of
July, 2008.
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By:
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/s/
Michael A. Bosh
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Michael
A. Bosh
Secretary
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A-16
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INVESTORS
REAL ESTATE TRUST
12
Main Street South
Minot,
ND 58701
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VOTE
BY INTERNET-www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand when you
access the website and follow the instructions to obtain your records and
to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If
you would like to reduce the costs incurred by Investors Real Estate Trust
in mailing proxy materials, you can consent to receive all future proxy
statements, proxy cards and annual reports electronically via e-mail or
the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate
that you agree to receive or access shareholder communications
electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the
instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage paid envelope
we have provided or return it to Investors Real Estate Trust, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
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INVRE1
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KEEP
THIS PORTION FOR YOUR RECORDS.
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DETACH
AND RETURN THIS PORTION ONLY.
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INVESTORS REAL ESTATE TRUST
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Vote
on Trustees
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For
All
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Withhold
All
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For
All
Except
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To
withhold authority to vote for any individual nominee, mark “For All
Except” and write the nominee’s number on the line
below.
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1.
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ELECTION
OF TRUSTEES
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NOMINEES
ARE:
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o
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o
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o
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|||||||||||||||||||||||||||||||||
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(01)
— Patrick G. Jones
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(06)
— W. David Scott
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(02)
— Timothy P. Mihalick
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(07)
— Stephen L. Stenehjem
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(03)
— Jeffrey L. Miller
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(08)
— John D. Stewart
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(04)
— C.W. “Chip” Morgan
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(09)
— Thomas A. Wentz, Jr.
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(05)
— John T. Reed
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Vote
on Proposal
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For
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Against
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Abstain
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2. APPROVAL
OF 2008 INCENTIVE AWARD PLAN
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o
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o
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o
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Trustees
Recommend a vote FOR this proposal.
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Vote
on Proposal
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For
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Against
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Abstain
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3.
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RATIFICATION
OF SELECTION OF DELOITTE & TOUCHE, LLP AS THE COMPANY’S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 2009.
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o
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o
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o
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Trustees
Recommend a vote FOR this proposal.
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(Signature(s)
should be exactly as name or names appear on this proxy. If
shares are held in two or more names, all should sign. If signing is
by attorney, executor, administrator, personal representative, trustee,
guardian, custodian, partner or corporate officer, please include full
title.)
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For
address changes and/or comments, please check this box and write them on
the back where indicated.
Please
indicate if you plan to attend this meeting.
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Yes
o
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No
o
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||||||||||||||||||||||||||||||||||
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Signature
[PLEASE SIGN WITHIN BOX]
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Date
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Signature
(Joint Owners)
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Date
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PROXY
The
Investors Real Estate Trust 38th Annual Meeting of
Shareholders
will be held on September 16, 2008, at 7:00 p.m.
at
the Grand International
1505
North Broadway, Minot, North Dakota, 58703
This
Proxy is Solicited on Behalf of the Board of Trustees.
The
undersigned holder of Common Shares of Beneficial Interest of INVESTORS REAL
ESTATE TRUST, a North Dakota Real Estate Investment Trust (“IRET”), hereby
appoints Jeffrey L. Miller, Michael A. Bosh and John D. Stewart, and each of
them (the “Representatives”), the true and lawful proxies of the undersigned,
with full power of substitution, to vote on behalf of the undersigned all Common
Shares of Beneficial Interest of IRET which the undersigned is entitled to vote
at the 2008 Annual Meeting of Shareholders of IRET to be held at the Grand
International, 1505 North Broadway, Minot, North Dakota, on September 16, 2008,
at 7:00 p.m., CDT, or at any adjournment thereof, in the manner hereafter
indicated. In their discretion, the Representatives are authorized to vote upon
such other matters as may properly come before the meeting.
THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN HEREIN, BUT IF SUCH INSTRUCTIONS ARE NOT MARKED HEREIN, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED FOR ELECTION AS TRUSTEES, FOR
APPROVAL OF THE COMPANY’S 2008 INCENTIVE AWARD PLAN, AND FOR RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE, LLP AS THE COMPANY’S INDEPENDENT AUDITORS
AND, WITH RESPECT TO ANY OTHER MATTERS PROPERLY COMING BEFORE THE MEETING, IN
THE DISCRETION OF THE PROXY HOLDERS, ALL IN ACCORDANCE WITH THE ACCOMPANYING
PROXY STATEMENT OF IRET, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.
This
proxy may be revoked at any time before it is voted at the meeting by delivering
written notice of revocation to IRET.
Please
date, sign and return this proxy promptly using the enclosed
envelope.
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Address
Changes/Comments:
|
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(If you
noted any Address Changes/Comments above, please mark corresponding box on the
reverse side.)
CONTINUED
AND TO BE SIGNED ON REVERSE