Exhibit 10.4

 

[3 Year Measurement Period]

 

INVESTORS REAL ESTATE TRUST

 

Stock Award Agreement

 

THIS STOCK AWARD AGREEMENT (this “Agreement”), dated as of the 16th day of
September, 2015, governs the Stock Award granted by INVESTORS REAL ESTATE TRUST,
a North Dakota real estate investment trust (the “Company”) to [             ]
(the “Participant”), in accordance with and subject to the provisions of the
Company’s 2015 Incentive Plan (the “Plan”).  A copy of the Plan has been made
available to the Participant.  All terms used in this Agreement that are defined
in the Plan have the same meaning given them in the Plan.

 

1.                                      Grant of Stock Award.  In accordance
with the Plan, and effective as of September 16, 2015 (the “Date of Grant”), the
Company granted to the Participant, subject to the terms of the Plan and this
Agreement, a Stock Award of [      ] common shares of beneficial interest (the
“Shares”).  Up to two-thirds of the Shares will be earned to the extent that the
performance objectives described in paragraph 2(a) are satisfied (the “Relative
TSR Shares”) and up to one-third of the Shares will be earned to the extent that
the performance objectives described in paragraph 2(b) are satisfied (the
“Absolute TSR Shares”).

 

2.                                      Earning the Shares.  Pursuant to the
terms of the Plan and this Agreement, the Participant will earn all or part of
the Shares as follows:

 

(a)                                 The Relative TSR Shares will become Earned
Shares based on the Company TSR for the Measurement Period as compared to the
Index Return for the Measurement Period as follows:

 

(i)                                     If the Company TSR for the Measurement
Period is a positive percentage and the Index Return for the Measurement Period
is a positive percentage, then:

 

(x)                                 If the Company TSR for the Measurement
Period is at least ninety percent (90%) of the Index Return for the Measurement
Period, then thirty-seven and one- half percent (37.5%) of the Relative TSR
Shares will be Earned Shares.

 

(y)                                 If the Company TSR for the Measurement
Period is at least one hundred five percent (105%) of the Index Return for the
Measurement Period, then fifty percent (50%) of the Relative TSR Shares will be
Earned Shares.

 

(z)                                  If the Company TSR for the Measurement
Period is at least one hundred twenty percent (120%) of the Index Return for the
Measurement Period, then one hundred percent (100%) of the Relative TSR Shares
will be Earned Shares.

 

If the Company TSR for the Measurement Period relative to the Index Return falls
between the goals set forth in (x) and (y) above or between the goals set forth
in (y) and (z) above, then the number of Relative TSR Shares that become Earned
Shares shall be determined using linear interpolation.

 

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(ii)                                  If the Company TSR for the Measurement
Period is a negative percentage and the Index Return for the Measurement Period
is a negative percentage, then:

 

(x)                                 If the Company TSR for the Measurement
Period is less than the Index Return for the Measurement Period by an amount
that is not more than ten percent (10%) of the Index Return for the Measurement
Period, then thirty-seven and one-half percent (37.5%) of the Relative TSR
Shares will be Earned Shares.  For example, if the Index Return for the
Measurement Period is negative eight percent (-8%), then thirty-seven and
one-half percent (37.5%) of the Relative TSR Shares will be Earned Shares if the
Company TSR for the Measurement Period is negative eight and eight-tenths
percent (-8.8%).

 

(y)                                 If the Company TSR for the Measurement
Period is greater than the Index Return for the Measurement Period by an amount
equal to five percent (5%) of the Index Return for the Measurement Period, then
fifty percent (50%) of the Relative TSR Shares will be Earned Shares.  For
example, if the Index Return for the Measurement Period is negative eight
percent (-8%), then fifty percent (50%) of the Relative TSR Shares will be
Earned Shares if the Company TSR for the Measurement Period is negative seven
and six-tenths percent (-7.6%).

 

(z)                                  If the company TSR for the Measurement
Period is greater than the Index Return for the Measurement Period by an amount
equal to twenty percent (20%) of the Index Return for the Measurement Period,
then one hundred percent (100%) of the Relative TSR Shares will be Earned
Shares.  For example, if the Index Return for the Measurement Period is negative
eight percent (-8%), then one hundred percent (100%) of the Relative TSR Shares
will be Earned Shares if the Company TSR for the Measurement Period is negative
six and four-tenths percent (-6.4%).

 

For the avoidance of doubt, the Company TSR is greater than the Index Return if,
for example, the Company TSR is -8% and the Index Return is -10%.

 

If the Company TSR relative to the Index Return falls between the goals set
forth in (x) and (y) above or between the goals set forth in (y) and (z) above,
then the number of Relative TSR Shares that become Earned Shares shall be
determined using linear interpolation.

 

(iii)                               Unless otherwise determined by the Committee
in its sole discretion, if the Company TSR for the Measurement Period is a
positive percentage and the Index Return for the Measurement Period is a
negative percentage, then one hundred percent (100%) of the Relative TSR Shares
will be Earned Shares.

 

(iv)                              Unless otherwise determined by the Committee
in its sole discretion, if the Company TSR for the Measurement Period is a
negative percentage and the Index Return for the Measurement Period is a
positive percentage, then none of the Relative TSR Shares will be Earned Shares.

 

(b)                                 The Absolute TSR Shares will become Earned
Shares based on the Company TSR for the Measurement Period as follows:

 

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(i)                                     If the Company TSR for the Measurement
Period is ten percent (10%) then thirty-seven and one-half percent (37.5%) of
the Absolute TSR Shares will be Earned Shares.

 

(ii)                                  If the Company TSR for the Measurement
Period is twelve percent (12%), then fifty percent (50%) of the Absolute TSR
Shares will be Earned Shares.

 

(iii)                               If the Company TSR for the Measurement
Period is fourteen percent (14%), then one hundred percent (100%) of the
Absolute TSR Shares will be Earned Shares.

 

If the Company TSR for the Measurement Period is more than ten percent (10%) but
less than twelve percent (12%), or if the Company TSR for the Measurement Period
is more than twelve percent (12%) but less than fourteen percent (14%), then the
number of Absolute TSR Shares that become Earned Shares shall be determined
using linear interpolation.

 

If the Measurement Period ends on a Control Change Date, then the performance
objectives for the Company TSR prescribed by this paragraph 2(b) may be adjusted
as the Committee, in its sole discretion, determines is appropriate to reflect
the termination of the Measurement Period before April 30, 2018.

 

(c)                                  As soon as practicable after the end of the
Measurement Period, but in all events no later than March 15, 2019, the
Committee shall determine and certify in writing the number of Shares that have
become Earned Shares; provided, however, that if the Measurement Period ends on
account of a Change in Control, the Committee’s determination and certification
shall be made no later than the Control Change Date.

 

(d)                                 Except as provided in paragraphs 3(b) and
3(c), (i) no Shares will become Earned Shares unless the Participant remains in
the continuous employ of the Company or an Affiliate from the Date of Grant
until the last day of the Measurement Period and (ii) all of the Shares will be
forfeited on the date that the Participant ceases to be employed by the Company
or an Affiliate if such employment ends before the last day of the Measurement
Period.

 

3.                                      Vesting in Earned Shares.  The
Participant’s interest in the Earned Shares shall become vested and
nonforfeitable in accordance with the provisions of this paragraph 3.

 

(a)                                 This paragraph 3(a) applies if a Change in
Control does not occur before April 30, 2018.  If the Participant remains in the
continuous employ of the Company or an Affiliate from the Date of Grant until
April 30, 2018, then the Participant’s interest in 50% of the Earned Shares
shall be vested and nonforfeitable as of such date.  If the Participant remains
in the continuous employ of the Company or an Affiliate from the Date of Grant
until April 30, 2019, then the Participant’s interest in the remaining Earned
Shares shall be vested and nonforfeitable as of such date.

 

(b)                                 This paragraph 3(b) applies if the
Participant remains in the continuous employ of the Company or an Affiliate from
the Date of Grant until the date of a Qualifying Termination.  If the Qualifying
Termination occurs before the last day of the Measurement

 

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Period, then (i) the Shares will remain outstanding until the last day of the
Measurement Period, (ii) the number of Earned Shares shall be determined in
accordance with paragraph 2 and (iii) the Participant will have a vested and
nonforfeitable interest in a pro rata number of the Earned Shares.  The pro rata
number of Earned Shares that vest shall be determined by multiplying the total
number of Earned Shares by a fraction, the numerator of which is the number of
days of the Participant’s employment with the Company or an Affiliate on and
after the first day of the Measurement Period and before the date of a
Qualifying Termination and the denominator of which is 1,095.  If the Qualifying
Termination occurs on or after the last day of the Measurement Period, then any
Earned Shares that have not become vested and nonforfeitable shall be vested and
nonforfeitable on the date of the Qualifying Termination.

 

(c)                                  This paragraph 3(c) applies if the
Participant remains in the continuous employ of the Company or an Affiliate from
the Date of Grant until a Control Change Date.  If the Control Change Date
occurs before April 30, 2018, then (i) the number of Earned Shares shall be
determined in accordance with paragraph 2 as of the Control Change Date and
(ii) the Participant will have a vested and nonforfeitable interest in a pro
rata number of the Earned Shares.  The pro rata number of Earned Shares that
vest shall be determined by multiplying the total number of Earned Shares by a
fraction, the numerator of which is the number of days of the Participant’s
employment with the Company or an Affiliate on and after the first day of the
Measurement Period and before the Control Change Date and the denominator of
which is 1,095.  If the Control Change Date occurs after April 30, 2018, and the
Participant has remained in the continuous employ of the Company or an Affiliate
from the Date of Grant until the Control Change Date, then any Earned Shares
that have not become vested and nonforfeitable shall be vested and
nonforfeitable on the Control Change Date.

 

Any Shares, including Earned Shares, that do not become vested and
nonforfeitable in accordance with this paragraph 3 shall be forfeited.

 

4.                                      Transferability.  Shares that are not
Earned Shares that have become vested in accordance with paragraph 3 may not be
transferred; provided, however, that the Participant may transfer the
Participant’s rights under this Agreement by will or the laws of descent and
distribution.  Subject to the requirements of applicable securities laws, Earned
Shares that have become vested in accordance with paragraph 3 may be
transferred.

 

5.                                      Shareholder Rights.  On and after the
Date of Grant and prior to the date that Shares are forfeited, the Participant
shall have the right to vote the Shares.  Prior to the date that the Shares
become vested and nonforfeitable in accordance with paragraph 3, any dividends
or distributions on the Shares shall be accumulated, without interest, and paid
when and only to the extent that, the Shares become Earned Shares and become
vested and nonforfeitable.  Notwithstanding the preceding sentences, the Company
shall retain custody of any certificates evidencing the Shares until the date
the Shares become vested and nonforfeitable in accordance with paragraph 3 and
the Participant hereby appoints the Company’s President and the Company’s
Secretary as the Participant’s attorneys-in-fact, with full power of
substitution, with the power to transfer to the Company and cancel any Shares
that are forfeited in accordance with this Agreement.

 

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6.                                      No Section 83(b) Election.  In
consideration for the grant of the Stock Award evidenced by this Agreement, the
Participant hereby agrees and covenants that the Participant will not make an
election under Section 83(b) of the Code with respect to the grant of the Stock
Award or the issuance of the Shares.

 

7.                                      Definitions.  For purposes of this
Agreement, the following shall have the following meanings:

 

(a)                                 “Cause” means (i) the Participant’s willful
conduct that is demonstrably and materially injurious to the Company or an
Affiliate, monetarily or otherwise; (ii) the Participant’s material breach of
written agreement between the Participant and the Company; (iii) the
Participant’s breach of the Participant’s fiduciary duties to the Company or an
Affiliate; (iv) the Participant’s conviction of any crime (or entering a plea of
guilty or nolo contendre to any crime) constituting a felony; or (v) the
Participant’s entering into an agreement or consent decree or being the subject
of any regulatory order that in any of such cases prohibits the Participant from
serving as an officer or director of a company that has publicly traded
securities.  A termination of the Participant shall not be for “Cause” unless
the decision to terminate the Participant is set forth in a resolution of the
Board to that effect and which specifies the particulars thereof and that is
approved by a majority of the members of the Board (exclusive of the Participant
if the Participant is a member of the Board) adopted at a meeting called and
held for such purpose (after reasonable notice to the Participant and an
opportunity for the Participant to be heard before the Board).  No act or
failure to act by the Participant will be deemed “willful” if it was done or
omitted to be done by the Participant in good faith or with a reasonable belief
on the part of the Participant that the action or omission was in the best
interests of the Company or an Affiliate.  Any act or failure to act by the
Participant based upon authority given pursuant to a resolution duly adopted by
the Board or based on the advice of counsel to the Company shall be conclusively
presumed to be done or omitted to be done by the Participant in good faith and
in the best interest of the Company and its Affiliates.

 

(b)                                 “Company TSR” means the compounded annual
growth rate, expressed as a percentage (rounded to the nearest tenth of a
percent (0.1%)) in the value of a common share of beneficial interest (“Common
Share”) during the Measurement Period reflecting the appreciation/depreciation
in the price per Common Share and dividends paid on a Common Share during the
Measurement Period, including the reinvestment of dividends.  The Company TSR
for each 12-month period in the Measurement Period (or any fractional year that
ends on the last day of the Measurement Period) shall be calculated as follows: 
(i) the closing price of the Common Share on the last day of such period (but
using the average closing price for the 20 trading days ending on the last day
of the Measurement Period for the last such period) plus dividends paid during
such period divided by (ii) the closing price of the Common Share on the first
day of such 12-month period (but using the average closing price for the 20
trading days ending before the first day of the Measurement Period for the first
12-month period).  The Company TSR shall be calculated using information
currently reported under “Comparative Returns” by Bloomberg L.P. or such other
reporting service that the Committee may designate from time to time.”  If the
Measurement Period ends on account of a Change in Control, the Company TSR for
the period from the most recent fiscal year end to the Control Change Date shall
be annualized for purposes of calculating the Company TSR.”

 

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(c)                                  “Disability” means the Participant has been
determined, by a physician selected by the Company and reasonably acceptable to
the Participant, to be unable to engage in any substantial gainful activity by
reason of a medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months.

 

(d)                                 “Earned Shares” means the total of the
Relative TSR Shares that are earned in accordance with paragraph 2(a) and the
Absolute TSR Shares that are earned in accordance with paragraph 2(b).

 

(e)                                  “Good Reason” means, without the express
written consent of the Participant (i) a change in the Participant’s position
with the Company or an Affiliate which results in a material diminution of the
Participant’s authority, duties or responsibilities; (ii) a material reduction
by the Company or an Affiliate in the annual rate of the Participant’s base
salary or (iii) a change in the location of the Participant’s principal office
to a different place that is more than fifty miles from the Participant’s
principal office immediately prior to such change.  A reduction in the
Participant’s rate of annual base pay shall be material if the rate of annual
base salary on any date is less than ninety percent (90%) of the Participant’s
highest rate of annual base pay as in effect on any date in the preceding
thirty-six (36) months; provided, however, that a reduction in the Participant’s
rate of annual base pay shall be disregarded to the extent that the reduction is
applied similarly to the Company’s other officers or other employees. 
Notwithstanding the two preceding sentences, a change in the Participant’s
duties or responsibilities or a reduction in the annual rate of the
Participant’s base salary in connection with the Participant’s termination of
employment (for Cause, Disability or retirement), shall not constitute Good
Reason and the Participant shall not have Good Reason to resign solely because
the Company does not have common shares or other securities that are publicly
traded.  A resignation by the Participant shall not be with “Good Reason” unless
the Participant gives the Company written notice specifying the event or
condition that the Participant asserts constitutes Good Reason, the notice is
given no more than ninety days after the occurrence of the event or initial
existence of the condition that the Participant asserts constitutes Good Reason
and the Company has failed to remedy or cure the event or condition during the
thirty day period after such written notice is given to the Company.

 

(f)                                   “Index Return” means the total shareholder
return reported on the MSCI US REIT Index for the Measurement Period, expressed
as a percentage.

 

(g)                                  “Measurement Period” means the period
beginning on May 1, 2015 and ending on the earlier of (i) April 30, 2018 or
(ii) a Control Change Date.

 

(h)                                 “Qualifying Termination” means a termination
of the Participant’s employment with the Company and its Affiliates on account
of (i) the Participant’s death, (ii) the Participant’s Disability, (iii) the
Company’s termination of the Participant for a reason other than Cause or
Disability or (iv) the Participant’s resignation with Good Reason.

 

8.                                      No Right to Continued Employment.  This
Agreement and the grant of the Stock Award do not give the Participant any
rights with respect to continued employment by the

 

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Company or an Affiliate.  This Agreement and the grant of the Stock Award shall
not interfere with the right of the Company or an Affiliate to terminate the
Participant’s employment.

 

9.                                      Change in Capital Structure.  In
accordance with the terms of the Plan, the terms of this Agreement and the
number and kind of Shares shall be adjusted as the Board determines to be
equitably required in the event the Company effects one or more stock dividends,
stock split-ups, subdivisions or consolidations of shares or other similar
changes in capitalization.

 

10.                               Governing Law; Venue.  The laws of the State
of North Dakota shall govern all matters arising out of or relating to this
Agreement including, without limitation, its validity, interpretation,
construction and performance but without giving effect to the conflict of laws
principles that may require the application of the laws of another
jurisdiction.  Any party bringing a legal action or proceeding against any other
party arising out of or relating to this Agreement may bring the legal action or
proceeding in the United States District Court for the District of North Dakota
or in any court of the State of North Dakota sitting in Minot, North Dakota. 
Each party waives, to the fullest extent permitted by law (i) any objection it
may now or later have to the laying of venue of any legal action or proceeding
arising out of or relating to this Agreement brought in a court described in the
preceding sentence and (ii) any claim that any legal action or proceeding
brought in any such court has been brought in an inconvenient forum.

 

11.                               Conflicts.  In the event of any conflict
between the provisions of the Plan as in effect on the Date of Grant and this
Agreement, the provisions of the Plan shall govern.  All references herein to
the Plan shall mean the Plan as in effect on the Date of Grant.

 

12.                               Participant Bound by Plan.  The Participant
hereby acknowledges that a copy of the Plan has been made available to the
Participant and the Participant agrees to be bound by all of the terms and
provisions of the Plan.

 

13.                               Binding Effect.  Subject to the limitations
stated above and in the Plan, this Agreement shall be binding upon the
Participant and the Participant’s successors in interest and the Company and any
successors of the Company.

 

14.                               Recoupment.  The Participant acknowledges and
agrees that the Participant’s rights in the Shares and any dividends or other
distributions paid or payable with respect to the Shares are subject to
recoupment or repayment if, and to the extent that, such action is required
under applicable law or any Company recoupment or “clawback” policy.

 

IN WITNESS WHEREOF, the Company and the Participant have executed this Stock
Award Agreement as of the date first set forth above.

 

INVESTORS REAL ESTATE TRUST

 

[NAME OF PARTICIPANT]

 

 

 

 

 

 

 

By:

 

 

 

 

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Name:

 

 

Title:

 

 

 

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