| Simeon Brinberg | ||
 Secretary | ||
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TABLE OF CONTENTS
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 (Amendment No. )
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o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material | |
| BRT REALTY TRUST | ||||
(Name of Registrant as Specified In Its Charter) | ||||
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BRT REALTY TRUST
60 Cutter Mill Road
Suite 303
Great Neck, New York 11021
(516) 466-3100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 8, 20107, 2011
The Annual Meeting of Shareholders of BRT Realty Trust will be held on Monday, March 8, 2010,7, 2011, at 9:00 a.m. local time, at the offices of BRT Realty Trust, 60 Cutter Mill Road, Suite 303, Great Neck, New York 11020, for the following purposes:
Shareholders of record at the close of business on January 20, 201017, 2011 will be entitled to notice of and to vote at our annual meeting. It is important that your common shares of beneficial interest be represented and voted at the meeting. You can vote your common shares of beneficial interest by completing and returning the proxy card. Certain shareholders can also vote their common shares of beneficial interest over the internet or by telephone. If internet or telephone voting is available to you, voting instructions are printed on the proxy card sent to you. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying proxy statement.
| Simeon Brinberg | ||
Secretary | ||
Great Neck, New York
January 28, 2011
BRT REALTY TRUST20102011 ANNUAL MEETING
PROXY STATEMENT
| | Page | ||||
|---|---|---|---|---|---|
General | 1 | ||||
Voting Procedures | 1 | ||||
Solicitation | 2 | ||||
Governance of Our Company | 3 | ||||
General | 3 | ||||
Code of Business Conduct and Ethics | 4 | ||||
| 4 | ||||
| 4 | ||||
| 5 | ||||
Independence of Trustees | 6 | ||||
Compensation Committee Interlocks and Insider Participation | 7 | ||||
Compensation of Trustees | |||||
Non-Management Trustee Executive Sessions | 9 | ||||
Communications with Trustees | |||||
| 10
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Information Regarding Beneficial Ownership of Principal Shareholders, Trustees and Management | |||||
Election of Trustees (Proposal 1) | 13 | ||||
| 16 | ||||
Advisory (non-binding) vote on the Frequency of Executive Compensation Votes (Proposal 3) | 17 | ||||
Independent Registered Public Accounting Firm (Proposal | |||||
General | 17 | ||||
Change in Auditors | 18 | ||||
Audit and Other Fees | 19 | ||||
Approval Policy for Audit and Non-Audit Services | 19 | ||||
Report of | |||||
Executive Compensation | |||||
Compensation Discussion and Analysis | 22 | ||||
Highlights | 22 | ||||
General | 22 | ||||
Objectives of our Executive Compensation Program | 24 | ||||
Compensation Setting Process | 24 | ||||
Components of Executive Compensation | 27 | ||||
Deductibility of Executive Compensation | 30 | ||||
Analysis | 31 | ||||
Summary Compensation Table | 34 | ||||
Grant of Plan Based Awards | 36 | ||||
Outstanding Equity Awards at Fiscal Year-End | 36 | ||||
Option Exercises and Stock Vested | 37 | ||||
Pension Benefits | 37 | ||||
Non-Qualified Deferred Compensation | 37 | ||||
Report of the Compensation Committee | |||||
Certain Relationships and Related Transactions | |||||
Introduction | 39 | ||||
Related Party Transactions | 39 | ||||
Policies and Procedures | 41 | ||||
Section 16(a) Beneficial Ownership Reporting Compliance | |||||
Submission of Shareholder Proposals | |||||
Householding | |||||
Other Matters | |||||
| 42
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PROXY STATEMENT
Our board of trustees is furnishing you with this proxy statement to solicit proxies on its behalf to be voted at the 20102011 annual meeting of shareholders of BRT Realty Trust. In this proxy statement we refer to BRT Realty Trust as "BRT," "we," "our," "us," "our company," or the "Trust." The meeting will be held at our offices, 60 Cutter Mill Road, Suite 303, Great Neck, New York, at 9:00 a.m., local time, on Monday, March 8, 2010.7, 2011.
The date of this proxy statement is January 28, 2010,2011, the approximate date on which we are mailing this proxy statement and the accompanying form of proxy to our shareholders. Our fiscal year begins on October 1st and ends on September 30th. References in this proxy statement to the "year 2009"2010" or "fiscal 2009"2010" refers to the twelve month periodmonths from October 1, 20082009 through September 30, 2009.2010.
Our executive offices are located at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021. Our telephone number is (516) 466-3100.
Shareholders of record at the close of business on January 20, 201017, 2011 are entitled to notice of and to vote at the annual meeting of shareholders. The record date was established by our board of trustees. You are entitled to one vote for each common share of beneficial interest you own on January 20, 201017, 2011 and do not have the right to vote cumulatively in the election of trustees. Our common shares of beneficial interest, or "common shares," constitute our only outstanding class of voting securities and will vote as a single class on all matters to be considered at the annual meeting. On the record date there were 14,009,48913,932,799 common shares outstanding and entitled to vote. In order to carry on the business at the meeting, we must have a quorum present in person or by proxy. This means that at least a majority of the outstanding6,966,400 common shares must be represented at the meeting, either in person or by proxy, regardless of whether you vote your common shares. The affirmative vote ofto constitute a plurality of the outstanding common shares present and voting at the meeting, in person or by proxy, is required to elect the three nominees as Class II Trustees.quorum. The affirmative vote of a majority of ourthe outstanding common shares present and voting at the meeting, in person or by proxy, is required to elect the four nominees as Class III Trustees, to approve the amendmentsadvisory vote on executive compensation, to the BRT Realty Trust 2009 Incentive Plan and ratify the appointment of Ernst & YoungBDO USA, LLP as our independent registered public accounting firm for 2010.fiscal 2011 and to act on any other matters properly brought before the meeting. The frequency of the non-binding votes on executive compensation receiving the greatest number of votes (every one, two or three years) will be considered the frequency recommended by shareholders.
Because many shareholders cannot attend the meeting in person, it is necessary that a large number of common shares be represented by proxy. Most shareholders have a choice of voting over the internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage paid envelope provided. Please refer to your proxy card or to the information provided by your bank, broker, or other holder of record to see which options are available to you. You should be aware that if you vote over the internet, you may incur costs, such as telephone and internet access charges, for which you will be responsible. The internet and telephone voting facilities for shareholders of record will close at 11:59 p.m., E.S.T. on March 7, 2010.6, 2011. If you vote by telephone or via the internet, it is not necessary to return a proxy card. The internet and telephone voting procedures are designed to authenticate shareholders by use of a control number, and to allow you to confirm that your instructions have been properly recorded.
If you wish to name as a proxy someone other than the proxies named on the proxy card, you may do so by crossing out the name of the designated proxies and inserting the name of another person. In that case, you should sign the proxy card and deliver it to the person so named, and the person so
named must then be present to vote at the meeting. Proxy cards so marked should not be mailed to us or to our transfer agent, American Stock Transfer and Trust Company, LLC.
You can revoke your proxy at any time before it is exercised. To revoke your proxy you may file a written revocation with our Secretary, or you may deliver a properly executed proxy bearing a later date. If you vote by telephone or internet you may also revoke your proxy with a timely and valid later telephone or internet vote, as the case may be. You may also revoke your proxy by attending the meeting and voting in person. If not so revoked, the common shares represented by such proxy will be voted.
Under New York Stock Exchange Rules, the proposal to ratify the appointment of Ernst & YoungBDO USA, LLP as independent auditors for the 20102011 fiscal year is considered a "discretionary" item. This means that brokerage firms may vote in their discretion on this proposal on behalf of clients who have not furnished voting instructions at least ten days before the date of the meeting. In contrast, the election of trustees and the proposal to amendadvisory votes on executive compensation and the BRT Realty Trust 2009 Incentive Planfrequency of the advisory votes on executive compensation are non-discretionary items. This means that brokerage firms that have not received voting instructions from their clients on these proposals may not vote on them. The so called "broker non-votes," as well as abstentions to vote on these proposals, will be included in the calculation of the number of votes considered to be present at the meeting for purposes of determining a quorum, but will not be included in the total of votes cast for the election of trusteesquorum. Abstentions and the proposal to amend the BRT Realty Trust 2009 Incentive Plan and may not affect the outcome of the vote in those cases. However, since the affirmative vote of a plurality of the outstanding common shares present at the meeting in person or by proxy is required to elect the nominees and the affirmative vote of a majority of the outstanding shares present at the meeting in person or by proxy is required to approve the amendments to the BRT Realty Trust 2009 Incentive Plan, a large number of broker non-votes and abstentions will have the effect of a vote against Proposal 1 (the election of the nominees as trustees), Proposal 2 (the approval, by non-binding vote, of executive compensation) and againstProposal 4 (to ratify the proposal to amendappointment of BDO USA, LLP as our independent auditors for fiscal 2011). The frequency of the Plan.advisory vote on executive compensation (Proposal 3) receiving the greatest number of votes (every one, two or three years) will be considered the frequency recommended by shareholders. Abstentions and broker non-votes will therefore have no effect on such vote.
All common shares entitled to vote and represented by properly completed proxies received prior to the meeting and not revoked will be voted at the meeting in accordance with your instructions. If no choice is indicated on the proxy card received from a registered holder, the persons named as your proxies will vote the common shares "FOR" the threefour nominees (Matthew J.(Kenneth F. Bernstein, Fredric H. Gould, Louis C. GrassiGary Hurand and Jeffrey Rubin)Elie Weiss) for Class IIIII Trustee, "FOR" the approval of the amendmentsnon-binding vote on executive compensation, "FOR" three years with respect to frequency of the BRT Realty Trust 2009 Incentive Plan,non-binding vote on executive compensation, and "FOR" the ratification of the appointment of Ernst & YoungBDO USA, LLP as independent auditors for the 2010 fiscal year,2011, and as the proxy holders may determine, in their discretion, with respect to other matters that properly come before the meeting. The board of trustees is not currently aware of any business to be acted upon at the meeting other than that which is described in this proxy statement. A representative of American Stock Transfer and Trust Company, LLC will tabulate the votes and act as inspector of elections.
We are soliciting proxies and will pay the entire cost of soliciting proxies, including preparing and mailing this proxy statement. In addition to the solicitation of proxies by mail and through our regular employees, we will request banks, brokers, custodians, nominees and other record holders to forward copies of the proxy statement and other soliciting materials to persons for whom they hold common shares and to request instruction on how to vote the shares. We will reimburse such record holders for their reasonable out-of-pocket expenses in forwarding proxies and proxy materials to shareholders. We have retained the Altman GroupPhoenix Advisory Partners for a fee of $5,500,$4,500, plus reasonable out of pocket expenses, to aid in the solicitation of proxies from our shareholders. To the extent necessary in order to ensure sufficient representation at the meeting, we or our proxy solicitor may solicit the return of proxies by personal
interview, mail, telephone, facsimile, Internet or other means of communication or electronic transmission. The extent to which this will be necessary depends upon how promptly proxies are returned. We urge you to send in your proxy without delay.
We are governed by a board of trustees and by the committees of the board. Members of the board are kept informed about our business through discussions with our chairman, our president and chief executive officer and our other officers, by reviewing materials provided to them and by participating in meetings of the board and its committees. During fiscal 20092010, the board held four meetings. In fiscal 2009,meetings and other than Kenneth F. Bernstein (who missed a meeting due to the death of an immediate family member), each trustee attended at least 75% of the aggregate number of board and applicable committee meetings. We typically schedule a board meeting in conjunction with our annual meeting and encourage our trustees to attend the annual meeting of shareholders. AllEight of ourthe ten individuals serving as trustees attended our 2010 annual meeting of shareholders on March 16, 2009.shareholders.
Our board of trustees has three committees: an audit committee, a compensation committee and a nominating and corporate governance committee. The board has affirmatively determined that each of Kenneth F. Bernstein, Alan H. Ginsburg, Louis C. Grassi, Gary Hurand, Jeffrey Rubin, Jonathan H. Simon and Elie Weiss, a majority of our trustees, is "independent" for the purposes of Section 303A of the Listed Company Manual of the New York Stock Exchange, and all of the members of each of the audit committee, the compensation committee and the nominating and corporate governance committee are independent for the purposes of Section 303A. Messrs. Fredric H. Gould, Jeffrey A. Gould and Matthew J. Gould are not independent under New York Stock Exchange Rules because, among other reasons, they serve as our executive officers.officers of the Trust. The board based these determinations primarily on a review of the responses of our trustees to questions regarding employment and compensation history, affiliations and family and other relationships, discussions with trustees and relevant facts and circumstances provided byto management of any relationships bearing on the independence of a trustee.
In determining the independence of each of the foregoing trustees, the board considered that (i) Gary Hurand holds approximately a 40% beneficial interest in a family entity which owns a preferred limited partnership interest in Gould Investors L.P. (an affiliate of our company—see "Certain Relationships and Related Transactions"), the preferred limited partnership interest owned by the Hurand family entity has a deemed value of $14,678,000 (the redemption price of the interest) and very limited voting rights, and no member of the Hurand family, including Mr. Hurand, has any management involvement in Gould Investors L.P., and the board concluded that the Hurand family entity's passive investment in Gould Investors L.P. did not disqualify Mr. Hurand from being independent; (ii) Gould Investors L.P. and an entity affiliated with Gould Investors L.P. owns less than 2% of the outstanding shares of Newtek Business Services, Inc., a public company in which Jeffrey Rubin was a director and an executive officer until March 2009, and the board concluded that such investment by Gould Investors L.P. and an affiliated entity in Newtek Business Services, Inc. did not disqualify Mr. Rubin from being independent; (iii) Elie Weiss is the son-in-law of Gary Hurand, an independent trustee, and an entity controlled by him participated on a pari passu basis as a 25% participant in a $2 million mortgage loan originated by us in February 2007 (prior to Mr. Weiss joining the Board), which was paid off in January 2009, and the board concluded that such relationships did not disqualify Mr. Weiss from being independent; and (iv) an entity in which Jonathan H. Simon is a control person entered into a contingent contract to acquire a development site in Manhattan, New York from Gould Investors L.P. for approximately $17 million (this entity's purchase price offer was competitive with the best offers received). Due to the crisis in the real estate and credit markets, this entity terminated the contract and made a termination payment to Gould Investors L.P., in December, 2008, and the board concluded that the transaction between Gould Investors L.P. and the entity controlled by Mr. Simon did not disqualify Mr. Simon from being independent; and (iv) Elie Weiss is the son-in-law of Gary Hurand, an independent trustee, and an entity controlled by him participated on a pari passu basis as a 25% participant in a $2 million mortgage loan originated by us in February 2007 (prior to Mr. Weissindependent.
joining the Board), which was paid off in January 2009, and the board concluded that such relationships did not disqualify Mr. Weiss from being independent.
The board has adopted a charter for each committee, as well as corporate governance guidelines that address the make-up and functioning of the board. You can find each charter and the corporate governance guidelines by accessing the corporate governance section of our website atwww.brtrealty.com. Copies of these charters and the corporate governance guidelines may be obtained by writing to us at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, Attention: Secretary.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to all trustees, officers, employees, agents and consultants, including our chief executive officer, principal financial officer, principal accounting officer or controller or person performing similar functions. The code of business conduct and ethics covers a variety of topics, including those required by the Securities and Exchange Commission and the New York Stock Exchange. Topics covered include, but are not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. The code of business conduct and ethics, as amended and restated, is available at the corporate governance section of our website atwww.brtrealty.com and may be obtained by writing to us at 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, Attention: Secretary. During fiscal 2009,2010, there were no waivers of the provisions of the code of business conduct and ethics with respect to any of our trustees, officers, employees, agents or consultants. We will post any amendments to, or waivers of, our code of business conduct and ethics, as amended and restated, on our website.
Management is responsible for the day-to-day management of risks we face. Our board of trustees has overall responsibility for overseeing risk management with a focus on the more significant risks facing us. Our audit committee oversees risk policies and processes related to our financial statements, financial reporting processes and liquidity risks, our nominating and corporate governance committee oversees corporate governance risks and our compensation committee oversees risks relating to remuneration of our officers and employees. The compensation committee does not believe that the compensation programs which are in place give rise to any risk that is reasonably likely to have a material adverse effect on us.
At each quarterly meeting of the audit committee, a portion of the meeting is devoted to reviewing material credit risks, our loan portfolio, status of foreclosure and similar proceedings, status of the properties in our real estate portfolio and other matters which might have a material adverse impact on current or future operations, and, as required, the audit committee reviews risks arising from related party transactions. In addition, at each meeting of the audit committee, our chief financial officer, as well as the independent accounting firm reviewing or auditing, as the case may be, our financial statements, reports to the committee with respect to compliance by our employees with our internal control policies in order to ascertain that no failures of a material nature have occurred. This process assists the audit committee in overseeing the risks related to our financial statements and the financial reporting process.
At each meeting of the board of trustees, a portion of the meeting is dedicated to reviewing and discussing significant risk issues reviewed by the audit committee.
Our company is led by Fredric H. Gould, chairman of our board, and Jeffery A. Gould, president and chief executive officer. The board of trustees believes that: (i) separating the role of chairman and chief executive officer is the most appropriate structure at this time because it makes the best use of the abilities of Fredric H. Gould and Jeffery A. Gould; and (ii) its risk oversight activities does not have any effect on the board's leadership structure.
Committees of the Board of Trustees
Audit Committee
Our board of trustees has adopted an audit committee charter delineating the composition and responsibilities of the audit committee. The audit committee charter requires that the audit committee be comprised of at least three members, all of whom are independent trustees and at least one of whom is an "audit committee financial expert." Our board of trustees has determined that all of the members of our audit committee are independent for the purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 303.01 of the Listed Company Manual of the New York Stock Exchange, and that Louis C. Grassi, chairman of the audit committee, qualifies as anthe "audit committee financial expert,expert." as that term is defined in Item 407(d) of Regulation S-K promulgated pursuant to the Securities Exchange Act of 1934, as amended.
The audit committee, which is comprised of Gary Hurand, Alan H. Ginsburg and Louis C. Grassi (Chairman), Gary Hurand and Elie Weiss, met fourfive times during fiscal 2009.2010. (Elie Weiss joined the committee in March 2010 in connection with the annual board meeting in place of Alan H. Ginsburg). Among other things, the audit committee is responsible for assisting the board in its oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent registered public accounting firm's qualification and independence, and (iv) the performance of our internal audit function and of our independent registered public accounting firm, and for the preparation of the audit committee report required by the Securities and Exchange Commission for inclusion in this proxy statement. The board has determined that each member of the audit committee satisfies the financial literacy requirements of the New York Stock Exchange.
The compensation committee, which is comprised of Jeffrey Rubin (chairman), Alan H. Ginsburg and Jonathan H. Simon, all of whom are independent, met three times during fiscal 2009.2010. The compensation committee reviews and makes recommendations to the board with respect to the salaries, bonuses and stock incentive awards of our executive officers and key employees. The compensation committee makes recommendations with respect to the terms and conditions of our equity incentive
plans and approves our equity incentive plans, oversees administration of our equity incentive plans and approves and authorizes grants of equity compensation awards under the equity incentive plans.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee, which is comprised of Gary Hurand (chairman), Louis C. Grassi and Elie Weiss, all of whom are independent, met twiceonce in fiscal 2009.2010. The principal responsibilities of the nominating and corporate governancethis committee include proposing to the board of trustees a slate of trusteesnominees for election to the board of trustees at the annual meeting of shareholders, identificationmaking a recommendation to the board of trustees with respect to the independence of each trustee, identifying and recommendation ofrecommending candidates to fill vacancies on the board of trustees or committees thereof between annual meetings of shareholders, proposing a slate of officers to the trustees for election at the annual meeting of the board and monitoring corporate governance matters, including overseeing our corporate governance guidelines.
The board believes that it should be comprised of trustees with complementary backgrounds, and that trustees should, at a minimum, have expertise that may be useful to us. TrusteesOur nominating and corporate governance committee has not adopted a formal diversity policy in connection with the consideration of trustee nominations or the selection of nominees. It considers the personal and professional attributes and the business experience of each trustee candidate to promote diversity of expertise and experience among our trustees. Additionally, trustees should possess the highest personal and professional ethics and should be willing and able to devote the required amount of time to our business.
When considering candidates for trustee, the nominating and corporate governance committee will take into account a number of factors, including the following:
The nominating and corporate governance committee will consider candidates for trustee suggested by shareholders, applying the criteria for candidates described above, considering the additional information referred to below and evaluating such nominees in the same manner as other candidates. Shareholders wishing to suggest a candidate for trustee should write to our Secretary and include:
Before nominating a sitting trustee for re-election at an annual meeting of shareholders, the nominating and corporate governance committee will consider:
When seeking candidates for trustee, the nominating and corporate governance committee may solicit suggestions from management, incumbent trustees or others. The nominating and corporate governance committee will interview a candidate if it believes the candidate might be suitable to be a trustee. The nominating and corporate governance committee may also ask the candidate to meet with management. If the nominating and corporate governance committee believes a candidate would be a valuable addition to the board, it will recommend the candidate's election to the full board.
The following standards for "director" independence are applicable to us in accordance with the New York Stock Exchange corporate governance listing standards:
shareholder or officer of an organization that has a relationship with us or any of our subsidiaries);
Under "director" independence standards, the board must affirmatively determine that a trustee has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a trustee. The board has not adopted any requirements or standards for "director" independence beyond the New York Stock Exchange corporate governance listing standards.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee are Jeffrey Rubin (Chairman), Alan H. Ginsburg Jeffrey Rubin and Jonathan H. Simon. None of the members of the compensation committee has ever been an officer or employee of our company or any of our subsidiaries or has had any relationship with the Trust that would require disclosure under Item 404 of Regulation S-K (Certain Relationships and Related Party Transactions) and no "compensation committee interlocks" existed during fiscal 2009.2010.
Non-management members of our board of trustees are paid an annual retainer of $20,000. In addition, each member of the audit committee is paid an annual retainer of $5,000, the chairman of the audit committee is paid an additional annual retainer of $10,000, each member of the compensation committee is paid an annual retainer of $4,000, the chairman of the compensation committee is paid an additional annual retainer of $8,000, each member of the nominating and corporate governance committee is paid an annual retainer of $3,000 and the chairman of the nominating and corporate governance committee is paid an additional annual retainer of $4,000. Each non-management member of our board of trustees is also paid $1,200 for each board meeting and $1,000 for each committee meeting attended in person and $750 for each board meeting and committee meeting attended by telephone conference. In fiscal 2009,2010, each non-management member of our board of trustees was awarded 3,000 restricted common shares under the BRT Realty Trust 2003 Incentive Plan and will be awarded 3,000 restricted common shares under the BRT Realty Trust 2009 Incentive Plan in fiscal 2010.Plan. The restricted shares have a five year vesting period during which period the registered owner is entitled to vote and receive distributions on such shares. Non-management trustees who reside outside of the local area in which our executive office is located also receive reimbursement for travel expenses incurred in attending board and committee meetings.
The following table sets forth the cash and non-cash compensation of trustees for the fiscal year ended September 30, 2009:2010:
Name(1) | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Total ($)(4) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kenneth F. Bernstein* | 24,350 | 25,150 | (5) | 8,913 | 58,413 | 22,400 | 13,320 | (5) | 35,720 | ||||||||||||||
Alan H. Ginsburg* | 39,300 | 18,491 | (6) | 7,763 | 65,554 | 32,750 | 13,320 | (5) | 46,070 | ||||||||||||||
Fredric H. Gould | — | 64,054 | (7) | 23,575 | (8) | 87,629 | — | 35,520 | (6) | 35,520 | (7) | ||||||||||||
Matthew J. Gould | — | 64,054 | (7) | 23,575 | (9) | 87,629 | — | 35,520 | (6) | 35,520 | (7) | ||||||||||||
Louis C. Grassi* | 49,050 | 24,760 | (5) | 8,913 | 82,723 | 48,600 | 13,320 | (5) | 61,920 | ||||||||||||||
Gary Hurand* | 42,300 | 24,760 | (5) | 8,913 | 75,973 | 39,650 | 13,320 | (5) | 52,970 | ||||||||||||||
Jeffrey Rubin* | 38,550 | 25,921 | (5) | 8,913 | 73,384 | 39,600 | 13,320 | (5) | 52,920 | ||||||||||||||
Jonathan H. Simon* | 35,300 | 18,491 | (6) | 7,763 | 61,554 | 32,650 | 13,320 | (5) | 45,970 | ||||||||||||||
Elie Weiss* | 24,800 | 6,327 | (10) | 5,175 | 36,302 | 31,900 | 13,320 | (8) | 45,220 | ||||||||||||||
Name | Unvested Restricted Shares | |||
|---|---|---|---|---|
Kenneth F. Bernstein | ||||
Alan H. Ginsburg | ||||
Fredric H. Gould | ||||
Matthew J. Gould | ||||
Louis C. Grassi | ||||
Gary Hurand | ||||
Jeffrey Rubin | ||||
Jonathan H. Simon | ||||
Elie Weiss | ||||
Transactions" for a discussion of the compensation paid to Mr. Matthew J. Gould by our advisor in fiscal 2009.
Non-Management Trustee Executive Sessions
In accordance with New York Stock Exchange listing standards, our non-management trustees meet regularly in executive sessions without management. "Non-management" trustees are all those trustees who are not employees or officers of our company and include trustees, if any, who are not employees or officers but who were not determined to be "independent" by our board of trustees. The board has not designated a "Lead Director" or a single trustee to preside at executive sessions. The person who presides over executive sessions of non-management trustees is one of the committee chairmen. To the extent practicable, the presiding trustee at the executive sessions is rotated among the chairmen of the board's committees.
Shareholders and interested persons who want to communicate with our board or any individual trustee can write to:
BRT Realty Trust
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
Attention: Secretary
Your letter should indicate that you are a shareholder of BRT Realty Trust. Depending on the subject matter, the Secretary will:
At each board meeting, the Secretary will present a summary of communications received, if any, since the last meeting that were not forwarded and make those communications available to the trustees on request.
In the event that a shareholder, employee or other interested person would like to communicate with our non-management trustees confidentially, they may do so by sending a letter to "Non-Management Trustees" at the address set forth above. Please note that the envelope should contain a clear notation that it is confidential.
Trustee Attendance at Annual Meeting
We typically schedule a board meeting immediately following our annual meeting of shareholders and expect that, absent a valid reason, our trustees will attend our annual meeting of shareholders. At the annual meeting of shareholders held in March 2009, all trustees were in attendance.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL
SHAREHOLDERS, TRUSTEES AND MANAGEMENT
Based on a reviewThe following table sets forth information concerning our common shares owned as of filings with the Securities and Exchange Commission, we have determined that the followingJanuary 17, 2011 by (i) each person is the only non-trustee that beneficially ownsowning five percent or more than 5% of our common shares:shares, (ii) each trustee, (ii) each executive officer named in the Summary Compensation Table, and (iii) all trustees and executive officers as a group.
Name and Address of Beneficial Owner | Amount of Beneficial Ownership(1) | Percent of Class | |||||
|---|---|---|---|---|---|---|---|
Gould Investors L.P. | 2,758,437 | 19.66 | % | ||||
Name of Beneficial Owner | Amount of Beneficial Ownership(1) | Percent of Class | |||||
|---|---|---|---|---|---|---|---|
Kenneth F. Bernstein(2) | 16,898 | * | |||||
Alan H. Ginsburg(2) | 14,430 | * | |||||
Fredric H. Gould(2)(3) | 3,506,453 | 25.2 | % | ||||
Jeffrey A. Gould(2)(4) | 416,082 | 3.0 | % | ||||
Matthew J. Gould(2)(5) | 3,199,550 | 23.0 | % | ||||
Mitchell Gould | 82,729 | * | |||||
Louis C. Grassi(2) | 18,993 | * | |||||
Gary Hurand(2)(6) | 357,196 | 2.6 | % | ||||
David W. Kalish(7) | 429,010 | 3.2 | % | ||||
Mark H. Lundy(8) | 108,819 | * | |||||
Jeffrey Rubin(2) | 16,898 | * | |||||
Jonathan H. Simon(2) | 14,330 | * | |||||
Elie Weiss(2) | 31,731 | * | |||||
George Zweier | 35,490 | * | |||||
Gould Investors L.P(11) | 2,777,264 | 19.9 | % | ||||
All Trustees and Executive Officers as a group (17 persons)(9)(10) | 5,750,216 | 41.3 | % | ||||
The following table sets forth information concerning our common shares owned as of January 20, 2010 by (i) all trustees, (ii) each executive officer named in the Summary Compensation Table, and (iii) all trustees and executive officers as a group.
Name of Beneficial Owner | Amount of Beneficial Ownership(1) | Percent of Class | |||||
|---|---|---|---|---|---|---|---|
Kenneth F. Bernstein(2) | 10,798 | * | |||||
Alan H. Ginsburg(2) | 8,330 | * | |||||
Fredric H. Gould(2)(3) | 3,467,408 | 24.71 | % | ||||
Jeffrey A. Gould(2)(4) | 398,332 | 2.84 | % | ||||
Matthew J. Gould(2)(5) | 3,163,713 | 22.55 | % | ||||
Mitchell Gould | 64,979 | * | |||||
Louis C. Grassi(2) | 13,394 | * | |||||
Gary Hurand(2)(6) | 351,096 | 2.50 | % | ||||
David W. Kalish(7) | 411,258 | 2.93 | % | ||||
Mark H. Lundy(8) | 91,069 | * | |||||
Jeffrey Rubin(2) | 10,798 | * | |||||
Jonathan H. Simon(2) | 8,330 | * | |||||
Elie Weiss(2) | 25,631 | * | |||||
George Zweier | 29,590 | * | |||||
All Trustees and Executive Officers as a group (18 in number)(9)(10) | 5,305,242 | 37.81 | % | ||||
Messrs. Bernstein, Ginsburg, Grassi, Hurand, Rubin, Simon and Weiss, (b) 8,000 restricted shares to be issued on February 2, 2010 to each of Messrs. Fredric H. Gould, Jeffrey A. Gould, Matthew J. Gould, Mitchell Gould, Kalish and Lundy, and (c) 4,200 restricted shares to be issued on February 2, 2010 to Mr. Zweier. The percentage of beneficial ownership is based on 14,031,989 common shares outstanding on January 20, 2010.
wholly owned by Mr. Gouldhim is the other general partner. Does not include 30,9817,512 common shares owned by Mrs. Fredric H. Gould, as to which shares Mr. Gould disclaims beneficial interest and Mrs. Fredric H. Gould has sole voting and investment power.
power and Mr. Fredric H. Gould disclaims beneficial interest.
At our annual meeting, our shareholders are asked to approve amendments to the BRT Realty Trust 2009 Incentive Plan, which would authorize our compensation committee to grant performance based awards. Our compensation committee has commenced the process for establishing performance goals for the grant of performance based awards to our senior executive officers. If shareholders approve the amendments to our 2009 Incentive Plan, performance based awards will be granted effective in 2010 or 2011, at the discretion of the compensation committee. See "Proposal 2—Approval of Amendments to the BRT 2009 Incentive Plan."
Equity Compensation Plan Information
With respect to information regarding our equity compensation plan information, the information captioned, "Equity Compensation Plan Information" contained in Item 5 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2009, is hereby incorporated by reference.
ELECTION OF TRUSTEES
(Proposal 1)
The board of trustees is divided into three classes, each of which is elected for a staggered term of three years. Our Third Amended and Restated Declaration of Trust provides for the number of trustees to be between five and fifteen, the exact number to be determined by our board of trustees. The board has fixed the number of trustees at ten. The board may, following the meeting, increase or decrease the size of the board and fill any resulting vacancy or vacancies.
At the annual meeting of shareholders, threefour Class IIIII Trustees (Matthew J.(Kenneth F. Bernstein, Fredric H. Gould, Louis C. GrassiGary Hurand and Jeffrey Rubin)Elie Weiss) are standing for election to our board of trustees. Each nominee has been recommended to our board of trustees by the nominating and corporate governance committee for election at the annual meeting and each nominee has been nominated by our board of trustees to stand for election at the annual meeting, to hold office until our 20132014 annual meeting and until his successor is elected and qualified. Class III Trustees will be considered for election at our 2011 annual meeting and Class I Trustees will be considered for election at our 2012 annual meeting and Class II Trustees will be considered for election at our 2013 annual meeting. Proxies will not be voted for a greater number of persons than the number of nominees named in the proxy statement.
We expect each nominee to be able to serve if elected. However, if any nominee is unable to serve as a trustee, unless a shareholder withholds authority, the persons named in the proxy card may vote for any substitute nominee proposed by the board of trustees. Each nominee, if elected, will serve until the annual meeting of shareholders to be held in 2013.2014. Each other trustee whose current term will continue after the date of our 20102011 annual meeting will serve until the annual meeting of shareholders to be held in 2011 with respect to the Class III Trustees, and 2012 with respect to the Class I Trustees, and 2013 with respect to the Class II Trustees.
The following table sets forth certain information regarding each nominee for election to the board of trustees:
Nominees Forfor Election As Class II Trustees Whose Term Will Expire in 2013
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Vote Required for Approval of Proposal 1
The affirmative vote of a plurality of the voting power of shareholders present in person or represented by proxy at the meeting is required for the election of each nominee for trustee.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE ELECTION OF CLASS II TRUSTEES. THE PERSONS NAMED IN THE PROXY CARD INTEND TO VOTE SUCH PROXY FOR THE ELECTION AS TRUSTEES OF MATTHEW J. GOULD, LOUIS C. GRASSI AND JEFFREY RUBIN, UNLESS YOU INDICATE THAT YOUR VOTE SHOULD BE WITHHELD.
The following tables set forth information regarding trustees whose terms will continue after the date of the annual meeting:
Class III Trustees Whose Term Expires in 20112014
Name and Age | Principal Occupation for the past Five Years and other Directorships or Significant Affiliations | |
|---|---|---|
Kenneth F. Bernstein | Trustee since June 2004; President and Chief Executive Officer of Acadia Realty Trust, a real estate investment trust focused primarily on the ownership, acquisition, redevelopment and management of retail properties, since January 2001. His experience as president and chief executive officer of a New York Stock Exchange listed REIT for approximately nine years, his leadership positions with various real estate industry associations and his background as a practicing attorney make him a valuable member of our board. |
Name and Age | Principal Occupation for the past Five Years and other Directorships or Significant Affiliations | |
|---|---|---|
Fredric H. | Trustee since 1983; Chairman of our Board since 1984; Chairman of the Board of Directors since 1989, Chief Executive Officer from July 2005 to December 2007, and President from July 2005 to December 2006, of One Liberty Properties, Inc.; Chairman of the Board of Georgetown Partners, Inc., managing general partner of Gould Investors L.P., since December 1997 and sole member of Gould General LLC, a general partner of Gould Investors L.P.; President of REIT Management Corp., advisor to the Trust, since 1986; Director of East Group Properties, Inc. since 1998. He is the father of Matthew J. Gould and Jeffrey A. Gould. Mr. Gould has been involved in the real estate business for approximately 50 years, as an investor, owner, manager, and as the chief executive officer of publicly traded real estate entities and real estate investment trusts. He has also served as a director of four real estate investment trusts, and as a director and a member of the loan committee of two savings and loan associations. His knowledge and experience in business, finance, tax, accounting and legal matters and his knowledge of our company's business and history makes him an important member of our board of directors. | |
Gary | Trustee since 1990; President of Dawn Donut Systems, Inc. since 1971; President of Management Diversified, Inc., a real property management and development company, since 1987; Director of Citizens Republic Bancorp Inc. and predecessor since 1990. He is the father-in-law of Elie Weiss. Mr. Hurand brings valuable business and leadership skills to the board in light of his 20 years of service as a trustee of our Company, his extensive experience in commercial real estate and in business operations and as a director and member of the audit committee of a publicly traded financial institution. | |
Elie | Trustee since December 2007; engaged in real estate development since September 2007; Executive Vice President of Robert Stark Enterprises, Inc., a company engaged in the development and management of retail, office and multi-family residential properties from September 1997 to September 2007. Mr. Weiss is a principal in two restaurant development and operating groups, Paladar Latin Kitchen and Rum Bar and Province with restaurants in Ohio, Maryland, Illinois and Arizona. He is also actively engaged in managing his personal real estate investments. He is the son-in-law of Gary Hurand. His entrepreneurial and extensive real estate experience makes him a valuable member of our board. |
Vote Required for Approval of Proposal 1
The affirmative vote of a majority of the outstanding common shares is required for the election of each nominee for trustee.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE ELECTION OF CLASS III TRUSTEES. THE PERSONS NAMED IN THE PROXY CARD INTEND TO VOTE SUCH PROXY FOR THE ELECTION AS TRUSTEES OF KENNETH F. BERNSTEIN, FREDRIC H. Gould is the father of Matthew J. Gould and Jeffrey A. Gould.
The following tables set forth information regarding trustees whose terms will continue after the date of the annual meeting:
Class I Trustees Whose Term Expires in 2012
Name and Age | Principal Occupation for the past Five Years and other Directorships or Significant Affiliations | |
|---|---|---|
Alan H. Ginsburg | Trustee since December 2006; Chief Executive Officer since 1987 of The CED Companies, a private company which develops, builds and manages multi-family apartment communities. He also serves as Chairman of CED Construction, Inc. and Concord Management, Ltd. His more than 20 years experience as chief executive officer of a real estate developer/manager provides our board with a long-term perspective on the real estate and real estate lending industry. | |
Jeffrey A. | Trustee since 1997; President and Chief Executive Officer since January 2002, President and Chief Operating Officer from March 1996 to December 2001; Senior Vice President and director since December 1999 of One Liberty Properties, Inc.; Senior Vice President of Georgetown Partners, Inc., managing general partner of Gould Investors L.P., since 1996. He is the son of Fredric H. Gould and the brother of Matthew J. Gould. Mr. Jeffrey A. Gould's experience in a broad range of real estate activities, including mortgage lending, real estate evaluation, management and sale of real estate, and his nine years as our President and Chief Executive Officer enables him to provide key insights on strategic, operational and financial matters related to our business. | |
Jonathan H. Simon | Trustee since December 2006; President and Chief Executive Officer since 1994 of The Simon Development Group, a private company which has developed, owns and manages a diverse portfolio of residential, retail and commercial real |
Class II Trustees Whose Term Will Expire in 2013
Name and Age | Principal Occupation for the past Five Years and other Directorships or Significant Affiliations | |
|---|---|---|
Matthew J. Gould | Trustee since June 2004, a senior vice president since 1993, and a trustee from March 2001 to March 2004; President of Georgetown Partners, Inc., managing general partner of Gould Investors L.P., since March 1996; vice president of REIT Management Corp., advisor to the Trust, since 1986; director and senior vice president of One Liberty Properties, Inc. since 1999 and President of One Liberty Properties from 1989 to 1999. He is the son of Fredric H. Gould and brother of Jeffrey A. Gould. His experience in real estate matters, including the acquisition and sale of real property, mortgage financing and real estate management, makes him a valuable asset to our board in its deliberations. | |
Louis C. Grassi | Trustee since June 2003; Managing partner of Grassi & Co. CPAs, P.C. since 1980; Director of Flushing Financial Corp. since 1998. Mr. Grassi has been involved for more than 25 years in accounting and auditing issues. His knowledge of financial and accounting matters and his experience as a director and member of the audit committee of a publicly traded financial institution provides him with the accounting and governance background and skill needed as the chairman and financial expert of our audit committee and as a member of our compensation committee. | |
Jeffrey Rubin | Trustee since March 2004; since March 2009, President and CEO of The JR Group, which provides consulting services to the electronic payment processing industry; President and director of Newtek Business Services, Inc., a provider of business services and financial products to small and medium sized businesses, from February 1999 to March 2009. He served in 2008 and 2009 as a director of Emerging Vision, Inc., an operator of a chain of retail optical stores. Mr. Rubin's experience as the president and a director of a public company and his experience in business and financial matters are valuable to our company in his activities as the chairman of our compensation committee and in his activities as a trustee. |
PROPOSAL 2
ADVISORY APPROVAL OF AMENDMENTS TO THE BRT REALTY TRUST 2009 INCENTIVE PLAN(Proposal 2)COMPENSATION OF EXECUTIVES
General The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires that we seek a non-binding advisory vote from our shareholders to approve the compensation awarded to our named executive officers as disclosed in this proxy statement. Although the advisory vote is non-binding, the Compensation Committee and the Board will review the results of the vote and will consider our shareholders' concerns and take them into account in future determinations concerning our executive compensation program. The Board of Trustees recommends that you indicate your support for the Company's compensation policies and procedures for its named executive officers, as outlined in the resolution below. Accordingly, the following resolution will be submitted for a shareholder vote at the 2011 Annual Meeting:
Our board"RESOLVED, that the shareholders approve, on an advisory basis, the compensation of trustees approvedthe individuals identified in the Summary Compensation Table, as disclosed in the BRT Realty Trust 2009 Incentive Plan on December 8, 2008 and our shareholders approved the BRT Realty Trust 2009 Incentive Plan at our 2009 Annual Shareholders' Meeting held on March 16, 2009. The BRT Realty Trust 2009 Incentive Plan authorizes the grant of (i) options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended; (ii) non-statutory stock options; and (iii) restricted shares. Our board of trustees, subject to the approval by our shareholders, has approved the adoption of amendments to the BRT Realty Trust 2009 Incentive Plan, which authorize the grant of performance based awards under the Plan, in addition to the awards currently authorized under the Plan. The authorization of performance based awards and changes in the Plan to reflect such authorization are the proposed amendments to the Plan which shareholders are being requested to approve. In addition, our board of trustees, subject to the approval by our shareholders, has approved the adoption of amendments to the BRT Realty Trust 2009 Incentive Plan which prohibit the repricing, replacing or regranting of an option in connection with the cancellation of the Option or by amending an Award Agreement to lower the exercise price of an option or the cancellation of any award in exchange for cash without our shareholders' approval.
The complete text of the BRT Realty Trust 2009 Incentive Plan, as proposed to be amended, is attached as Exhibit A to this Proxy Statement.
Performance Based Awards
In view of our relatively small market capitalization, it has been our judgment that fair and equitable compensation of our executive officers and the alignment of the interests of our executive officers with the interests of our shareholders could be accomplished by our compensation committee, with input from our chairman, chief executive officer and senior management, analyzing our performance and the performance of each executive officer, and by awarding restricted stock to our executive officers in reasonable amounts with five-year cliff vesting. Our compensation committee has determined that it would be advantageous to us to have the ability to grant performance based awards. As a result, we are proposing amendments to the BRT Realty Trust 2009 Incentive Plan, which, if approved, will authorize our compensation committee to grant performance based awards. Our compensation committee has commenced the process for establishing performance goals for the grant of performance based awards to our senior executive officers. If shareholders approve the amendments to our 2009 Incentive Plan, performance based awards will be granted effective in 2010 or 2011 at the discretion of the compensation committee. Performance based awards will be made by the issuance of (i) options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended; (ii) non-statutory stock options; (iii) restricted shares; or (iv) the grant of performance based awards or a combination thereof, contingent upon the attainment of one or more performance goals (described below) that our compensation committee establishes. The minimum period with respect to which performance goals are measured is one year, but the compensation committee intends to establish a minimum performance cycle of not less than five years. The maximum number of shares with respect to which a participant may be granted performance based awards in any calendar year is 40,000 shares.
The terms and conditions of a performance based award will provide for the vesting of the shares underlying an award to be contingent upon the achievement of one or more specified performance goals that the compensation committee establishes. For this purpose, "performance goals" means for a
performance cycle, the specific goals thatproxy statement pursuant to the compensation committee establishesdisclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis and accompanying compensation tables and related information disclosed in the Executive Compensation section of such proxy statement)."
THE BOARD OF TRUSTEES RECOMMENDS
A VOTE IN FAVOR OF THE ADOPTION OF THIS RESOLUTION
PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY
AT WHICH WE WILL SEEK SHAREHOLDER ADVISORY
VOTES ON EXECUTIVE COMPENSATION
In addition to requesting the shareholder advisory approval of the executive compensation program, the Dodd-Frank Act also requires that may beonce every six years we seek shareholder approval of how often we will seek advisory approval of executive compensation. The Dodd-Frank Act requires that we present every one, two or three years, or abstain as alternatives for shareholders.
The Board has determined that an advisory vote on executive compensation every three years is the best approach for the Trust based on one or morea number of considerations, including the following performance criteria:following:
The performance goals need not beevaluate the same with respect to all participants and may be established for us as a whole, on a per share basis or may be based on our performance compared to the performance of businesses specified by the compensation committee or compared to any prior period.
Prohibition of Option Re-pricing, Replacing or Regranting
No awards may be made under the 2009 Incentive Plan on or after March 16, 2019. Our board of trustees may amend, suspend or terminate the Plan at any time for any reason. However, no amendment shall permit the repricing, replacing or regranting of an option in connection with the cancellation of the Option or by amending an Award Agreement to lower the exercise price of an option or the cancellation of any award in exchange for cash without the shareholders' approval. In addition, before the plan can be amended, modified or terminated, where such amendment, modification or termination would adversely affect a participant who has already been granted an award, such participant's consent must be obtained.
Our Share Price
On January 20, 2010, the closing priceeffectiveness of our common shares as reported by the NYSE was $4.78.
Summary of the 2009 Incentive Plan, as proposed to be amended
The following summary of the principal termsshort- and provisions of the 2009 Incentive Plan as proposed to be amended is qualified in its entirety by the terms of the 2009 Incentive Plan, which is included as Exhibit A attached to this proxy statement and incorporated herein by reference.
Shares Available Under the 2009 Incentive Plan
The maximum number of common shares of beneficial interest, $3.00 par value per share, with respect to which awards may be granted under the 2009 Incentive Plan is 500,000 shares. As of January 20, 2010, 492,210 of our common shares remain available for issuance under the 2009 Incentive Plan, which available balance will be reduced by 125,150 common shares following the grant of awards effective on January 29, 2010, which were approved by ourlong-term compensation committee on December 11, 2009. As of January 20, 2010, there were 14,009,489 of our common shares outstanding.
Eligibility
The 2009 Incentive Plan authorizes the discretionary grant of options intended to qualify as incentive stock options to officers, trustees and employees and the discretionary grant of other types of awards to officers, trustees, employees and consultants. The maximum number of common shares with respect to which options may be granted to any individual under the 2009 Incentive Plan during any calendar year is 40,000, the maximum number of performance based awards which may be granted to an individual under the Plan in any year is 40,000 and the maximum number of common shares with respect to which all other awards may be granted to any individual under the Plan during any calendar year is 30,000.
Duration of the 2009 Incentive Plan
The 2009 Incentive Plan will remain in effect, subject to the right of the board of trustees to terminate it earlier under certain circumstances, until all common shares subject to the 2009 Incentive Plan have been purchased or acquired pursuant to the provisions of the 2009 Incentive Plan. However, no awards of incentive stock options may be made after ten years from the effective date of the 2009 Incentive Plan.
Administration of the 2009 Incentive Plan
The 2009 Incentive Plan provides that it is to be administered by the compensation committee of the board of trustees, all of the members of which must be non-employee directors and outside directors under Treasury Regulation Section 162(m) and Section 16b-3 of the Securities Exchange Act of 1933, as amended. The compensation committee has the full power and authority to grant to eligible persons the awards described below and determine the terms and conditions under which awards are made. We do not have a formal policy with respect to whether equity compensation should be in the form of stock options, restricted shares or performance based awards. However, since the adoption of our 2003 Incentive Plan, no stock options have been awarded and we have only awarded shares of restricted shares. All restricted share awards made to date provide for a five-year "cliff" vesting. The compensation committee believes that restricted share awards with five-year "cliff" vesting provide a strong retention incentive for executives and employees, and better aligns the interests of our executive officers and employees, with that of our shareholders. If the amendments to the 2009 Incentive Plan are adopted, the compensation committee will grant performance based awards to our senior executive officers and establish the performance goals and the performance cycle over which the performance goals are to be measured.
The compensation committee may grant incentive stock options, non-statutory stock options, restricted shares or performance based awards, or any combination of the foregoing. Common shares will be made available from either our authorized but unissued shares or shares that have been issued but reacquired by us. Common shares related to awards that are forfeited, cancelled, terminated or expire unexercised will be available for grant under the 2009 Incentive Plan.
The compensation committee also has the power to:
Options
Stock options entitle Although the holder to purchase a specified number of common shares at a specified exercise price subject tovote on this Proposal is advisory and non-binding, the terms and conditions ofBoard will carefully consider the option grant.voting results. The purchase price per share for each incentive stock option is determinedalternative (i.e., one year, two years, or three years) that receives the most votes will be deemed approved by the compensation committee and must be at least 100% of the fair market value per common share on the date of grant. The aggregate fair market value of common shares with respect to which incentive stock options are exercisable for the first time by an individual during any calendar year cannot exceed $100,000. To the extent that the fair market value of common shares with respect to which incentive stock options become exercisable for the first time during any calendar year exceeds $100,000, the portion in excess of $100,000 will be treated as a non-statutory option. If an optionee owns more than 10% of the total voting power of all classes of shares at the time the optionee is granted an incentive stock option, the option price per share cannot be less than 110% of the fair market value per share on the date of grant and the term of the option cannot exceed five years.
Non-statutory options may not be granted at an exercise price per share that is less than 85% of the fair market value of one common share on the date of the grant.shareholders.
Restricted Shares
Restricted shares may not be transferred, pledged, assigned or otherwise disposed of prior to the expiration of the restriction period. Common shares covered by awards of restricted shares will be issued at the beginning of the restriction period and the compensation committee shall designate the vesting date or dates for each award of restricted shares, and may prescribe other restrictions, terms and conditions applicable to the vesting of such restricted shares. The stock certificate or certificates representing restricted shares will be registered in the name of the holder to whom such restricted shares have been awarded and during the restriction period certificates representing the restricted shares will bear a restrictive legend to the effect that ownership of the restricted shares and the enjoyment of all rights appurtenant thereto are subject to the restrictions, terms and conditions provided in the 2009 Incentive Plan and the applicable agreement entered into between us and the holder. The certificate will remain in our custody or the custody of our designee endorsed in blank so as to permit the retransfer to us of all or any portion of the restricted shares that is forfeited or otherwise does not become vested in accordance with the 2009 Incentive Plan or the applicable agreement.
The holder of restricted shares will have the right to vote such restricted shares and to receive and retain cash dividends and cash distributions paid or distributed on such restricted shares (whether or not such shares are forfeited in the future) and to exercise all of the rights, powers and privileges of a holder of common shares with respect to such restricted shares, except that unless otherwise determined by the compensation committee and provided in the applicable agreement, the holder will not be entitled to delivery of the stock certificate representing the restricted shares until the restriction period has expired and unless all other vesting requirements with respect thereto have been fulfilled or
waived. The holder is entitled to retain any distribution received whether or not such holder's shares are forfeited in the future.
Any breach of the restrictions, terms or conditions with respect to restricted shares results in the forfeiture of the restricted shares and any retained distributions thereon. Any restricted shares and retained distributions that do not become vested on the vesting date are forfeited to us and the holder will not thereafter have any rights (including dividend and distribution rights) with respect to these shares and distributions.
Performance Based Awards
Performance based awards will be made by the issuance of (i) options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended; (ii) non-statutory stock options; (iii) restricted shares; or (iv) the grant of performance based awards, or a combination thereof, contingent upon the attainment of one or more performance goals that our compensation committee establishes. The minimum period with respect to which performance goals are measured is one year, but the compensation committee intends to establish a minimum performance cycle of not less than five years. The number of shares with respect to which a participant may be granted performance based awards in any calendar year is 40,000 shares.
The terms and conditions of a performance based award will provide for the vesting of the award to be contingent upon the achievement of one or more specified performance goals that the compensation committee establishes. For this purpose, "performance goals" means for a performance cycle, the specific goals that the compensation committee establishes that may be based on one or more of the following performance criteria:
The performance goals need not be the same with respect to all participants and may be established for us as a whole, on a per share basis or may be based on our performance compared to
the performance of businesses specified by the compensation committee or compared to any prior period.
Awards Generally
The awards described above may be granted either individually or in combination with each other. Under certain conditions, including death, disability and when a change in control occurs, options will become immediately exercisable and the restrictions on restricted shares will lapse, unless individual agreements provide otherwise, or unless, in the case of a change of control, the compensation committee determines that the awards can equitably and appropriately be exchanged for new awards or assumed.
If a holder's employment terminates prior to the complete exercise of an option, during the restriction period with respect to restricted shares or before the expiration of the performance cycle with respect to performance based awards, then the option becomes exercisable, the restricted shares vest and the performance based awards are issued, in each case only to the extent provided in the applicable agreement. In no case, however, unless otherwise determined by the compensation committee and provided in the applicable agreement, (i) may an option be exercised after the earlier of one year after termination or the scheduled expiration date of the option and (ii) may an option be exercised, restricted shares vest or performance based awards be issued, as applicable, upon termination of the holder for cause.
Amendment and Termination of the 2009 Incentive Plan
No awards may be made under the 2009 Incentive Plan on or after March 16, 2019. Our board of trustees may amend, suspend or terminate the 2009 Incentive Plan at any time for any reason. However, no amendment shall permit the repricing, replacing or regranting of an option in connection with the cancellation of the option or by amending an Award Agreement to lower the exercise price of an option or the cancellation of any award in exchange for cash without our shareholders' approval. In addition, before the 2009 Incentive Plan can be amended, modified or terminated, where such amendment, modification or termination would adversely affect a participant who has already been granted an award, such participant's consent must be obtained.
Federal Income Tax Consequences of Awards Granted Under the 2009 Incentive Plan
The following is a summary of the United States Federal Income Tax consequences that generally will arise with respect to awards granted under the 2009 Incentive Plan and with respect to the sale of any common shares acquired under the 2009 Incentive Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant or exercise of any incentive stock option. Instead a participant will recognize taxable income with respect to incentive stock options only upon the sale of common shares acquired through the exercise of an option. The exercise of an incentive stock option, however, may subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling common shares acquired upon the exercise of an incentive stock option will vary with the length of time that the participant has owned the shares at the time it is sold. If the participant sells shares acquired upon the exercise of an incentive stock option after having owned it for more than two years from the date the option was granted and one year from the date the option was exercised, then the participant will recognize long-term capital gain in an amount equal to the excess of the sale price of the shares sold over the exercise price.
If the participant sells common shares acquired upon the exercise of incentive stock options for more than the exercise price prior to having owned it for more than two years from the date the option was granted and one year from the date the option was exercised (a disqualifying disposition), then the participant will recognize ordinary compensation income in an amount equal to the difference between the fair market value of the shares acquired on the date of exercise and the exercise price and the remaining gain, if any, will be capital gain. The capital gain will be a long-term gain if the participant held the shares for more then one year prior to the date of sale.
If a participant sells shares of stock acquired upon the exercise of an incentive stock option for less than the exercise price, then the participant will recognize a capital loss in an amount equal to the excess of the exercise price over the sale price of the shares. The capital loss will be a long-term loss if the participant has held the shares for more than one year prior to the date of sale.
Non-Statutory Stock Options
As in the case of an incentive stock option, a participant will not recognize taxable income upon the grant of a non-statutory stock option. Unlike the case of an incentive stock option, however, a participant who exercises a non-statutory stock option generally will recognize ordinary compensation income in an amount equal to the excess of the fair market value of the shares acquired through the exercise of the option on the date the option was exercised over the exercise price.
With respect to any shares acquired upon the exercise of a non-statutory option, a participant will have a tax basis equal to the exercise price plus any income recognized upon the exercise of the option. Upon selling the shares, a participant will generally recognize a capital gain or loss in an amount equal to the difference between the sale price of the shares and the participant's tax basis in the shares. The capital gain or loss will be a long-term capital gain or loss if the participant has held the shares for more than one year prior to the date of the sale and will be short-term capital gain or loss if the participant held the shares for a shorter period.
Restricted Shares and Performance Based Awards
A participant will not recognize taxable income upon an award of restricted shares or the grant of a performance based award unless the participant makes an election under Section 83(b) of the Internal Revenue Code of 1986, as amended. If the participant makes a Section 83(b) election within 30 days of the date restricted shares or a performance based award is granted, then the participant will recognize ordinary compensation income for the year in which the award is granted, in an amount equal to the excess of the fair market value of the shares at the time the award is granted over the purchase price, if any, paid for the shares. If such election is made and the participant subsequently forfeits some or all of the shares or no shares are issued because the vesting or performance criteria were not met, then the participant generally will not be entitled to any refund of taxes paid as a result of the Section 83(b) election, and may take a loss only with respect to the amount, if any, actually paid for the shares. If a Section 83(b) election is not made, then the participant will recognize ordinary compensation income at the time that the forfeiture provisions or restrictions on transfer lapse or performance criteria are satisfied in an amount equal to the excess of the fair market value of such shares at the time of such lapse or satisfaction of the performance criteria over the original price paid for such shares, if any. The participant will have a tax basis in the shares acquired equal to the sum of the price paid, if any, and the amount of ordinary compensation income recognized at the time the Section 83(b) election is made or at the time the forfeiture provisions or transfer restrictions lapse or performance criteria are satisfied, as applicable.
Upon the disposition of shares acquired pursuant to an award of restricted shares or the grant of a performance based award, the participant will recognize a capital gain or loss in an amount equal to the difference between the sale price of the shares and the participant's tax basis in the shares. This
capital gain or loss will be a long-term capital gain or loss if the shares are held for more than one year. For this purpose, the holding period shall begin after the date on which the forfeiture provisions or restrictions lapse if a Section 83(b) election is not made, or on the date after the award is granted if the Section 83(b) election is made.
The foregoing is a summary discussion of certain United States Federal Income Tax Consequences to certain participants under the Internal Revenue Code of 1986, as amended, and should not be construed as legal, tax, or investment advice. All participants should consult their own tax advisors as to the specific tax consequences applicable to them, including federal, state and local tax laws.
Consequences to Us
The grant of an award under the 2009 Incentive Plan will have no tax consequences to us other than related to the recognition of business expense deductions described below. Generally, neither the exercise of an incentive stock option acquired under the 2009 Incentive Plan nor the sale of any shares acquired under the 2009 Incentive Plan will have any tax consequences to us. We generally will be entitled to a business expense deduction, however, with respect to any ordinary compensation income recognized by a participant under the 2009 Incentive Plan, including in connection with an award of restricted shares or performance based awards or as a result of the exercise of a non-statutory stock option or a disqualifying disposition. Any such deduction will be subject to the limitations of Section 162(m) of the Internal Revenue Code, of 1986, as amended, to the extent applicable. Options and certain other grants under the 2009 Incentive Plan may qualify as qualified performance based compensation and as such would not be subject to the $1 million limitation in that section.
Additional Obligations under the Securities Act and Exchange Act
The 2009 Incentive Plan provides that, for so long as any common shares are registered under the Exchange Act, the Trust shall use its reasonable efforts to comply with any legal requirements (i) to maintain a registration statement in effect under the Securities Act of 1933 with respect to all common shares that may be issued to holders under the 2009 Incentive Plan and (ii) to file in a timely manner all reports required to be filed by it under the Exchange Act.
THE BOARD OF TRUSTEES RECOMMENDS THAT
A VOTE OF EVERY THREE YEARS FOR THE FREQUENCY
AT WHICH WE WILL PRESENT TO
SHAREHOLDERS AN ADVISORY VOTE IN FAVORON COMPENSATION OF THE AMENDMENTS TO THE BRT REALTY TRUST 2009 INCENTIVE PLAN. PROXIES SOLICITED BY THE BOARD OF TRUSTEES WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.EXECUTIVES
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 4)
General
The audit committee and the board of trustees is seeking ratification of the appointment of Ernst & YoungBDO USA, LLP ("BDO") as our independent registered public accounting firm for the fiscal year ending September 30, 2010. A representative2011. Representatives of BDO and Ernst & Young LLP, isour auditors for more than the past three fiscal years, are expected to be present at the annual meeting and will have the opportunity
to make a statement if he or she desiressuch representatives desire to do so and will be available to respond to appropriate questions.
We are not required to have our shareholders ratify the selection of Ernst & Young LLPBDO as our independent registered public accounting firm. We are doing so because we believe it is good corporate practice. If our shareholders do not ratify the selection, the audit committee will reconsider whether or not to retain Ernst & Young LLP,BDO, but may, after reconsidering, still decide to retain such independent registered public accounting firm. Even if the selection is ratified, the audit committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in our best interests.
The affirmative vote of the holders of a majority of outstanding common shares present at the meeting, in person or by proxy, is required to ratify the appointment of Ernst & Young LLPBDO as our independent registered public accounting firm for the fiscal year ending September 30, 2010.2011.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLPBDO AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2010. THE PERSONS NAMED IN THE PROXY CARD INTEND TO VOTE SUCH PROXY FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNLESS YOU INDICATE THAT YOUR SHARES SHOULD BE VOTED OTHERWISE.2011.
On December 14, 2010, the audit committee of our board of trustees dismissed Ernst & Young LLP as our independent registered public accounting firm.
Ernst & Young's reports on our consolidated financial statements for the fiscal years ended September 30, 2010 and 2009 did not contain an adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended September 30, 2010 and 2009 and through December 14, 2010, (i) there were no disagreements with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Ernst & Young, would have caused Ernst & Young to make a reference thereto in its reports on our consolidated financial statements for such periods and (ii) there have been no "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K.
On December 28, 2010, the audit committee of our board of trustees engaged BDO as our independent registered public accountants, as of and for the fiscal year ending September 30, 2011 and the interim periods prior to such year-end. During our two most recent fiscal years and through December 28, 2010, we did not consult with BDO regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor did BDO provide advice to us, either written or oral, that was an important factor considered by us in reaching a decision as to an accounting, auditing or financial reporting issue. Further, during our two most recent fiscal years and through December 28, 2010, we did not consult with BDO on any matter described in Item 304(a)(2)(i) or (ii) of Regulation S-K.
The following table presents the fees for professional audit services billed by Ernst & Young LLP for the audit of our annual consolidated financial statements for the years ended September 30, 20092010 and 20082009 and the audit of internal control over financial reporting for the years ended September 30, 20092010 and 20082009 and fees billed for other services rendered to us by Ernst & Young LLP for each of such years:
| | Fiscal 2009 | Fiscal 2008 | Fiscal 2010 | Fiscal 2009 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit fees(1) | $ | 471,575 | $ | 483,770 | $ | 433,201 | $ | 553,224 | ||||||
Tax fees(2) | 23,500 | 9,000 | ||||||||||||
All other fees(3) | 43,500 | 22,500 | ||||||||||||
Audit related fees(2) | — | 43,500 | ||||||||||||
Tax fees(3) | 15,130 | 23,500 | ||||||||||||
All other fees | — | — | ||||||||||||
TOTAL FEES | $ | 538,575 | $ | 515,270 | $ | 448,331 | $ | 620,224 | ||||||
The audit committee has concluded that the provision of non-audit services listed above is compatible with maintaining the independence of Ernst & Young LLP.
Pre-ApprovalApproval Policy for Audit and Non-Audit Services
The audit committee pre-approves 100% of the audit, tax and non-audit services involving our independent registered public accounting firm.
In addition to the audit work necessary for us to file required reports under the Securities Exchange Act of 1934, as amended (i.e., quarterly reports on Form 10-Q and the annual report on Form 10-K), our independent registered public accounting firm may perform non-audit services, other than those prohibited by the Sarbanes-Oxley Act of 2002, provided they are pre-approved by the audit committee. The audit committee approved 100% of the non-audit services and related fees (which are set forth in the table above) performed by our independent registered public accounting firm in fiscal 2009.
Our independent registered public accounting firm is prohibited from providing the following types of services:
Approval Process
The audit committee annually reviews and approves the retention of our independent registered public accounting firm for each fiscal year and the audit of our financial statements for such fiscal year, including the fee associated with the audit. In addition, the audit committee approves the provision of tax related and other non-audit services. Any fees for the audit and any fees for non-audit services in excess of those approved by the audit committee must receive the prior approval of the audit committee.
Proposals for any non-audit services to be performed by our independent registered public accounting firm must be approved by the audit committee in advance at a regularly scheduled meeting, by unanimous consent or at a meeting held by telephone conference.
For fiscal 2010, the audit committee pre-approved all of the audit, tax and non-audit services rendered by our independent registered public accounting firm.
The audit committee is comprised of three independent trustees and operates under a written charter adopted by the committee and the board of trustees. The audit committee reviewed and revised the charter in fiscal 2009. A copy of the revised Charter is appended to this proxy statement as Exhibit B. The board of trustees has reviewed Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, and the New York Stock Exchange listing standards independence requirements for audit committee members and has determined that each member of the audit committee is "independent," as required by Section 10A(m)(3) of the Exchange Act and the rules and regulations promulgated thereunder and by the listing standards of the New York Stock Exchange.
The audit committee is appointed by the board of trustees to oversee and monitor, among other things, the financial reporting process, the independence and performance of the independent registered public accounting firm, the Trust's internal controls and the performance of the accounting firm performing the internal audit function on behalf of the Trust. It is the responsibility of executive management to prepare the Trust's financial statements in accordance with generally accepted accounting principles, and it is the responsibility of the independent registered public accounting firm to perform an independent audit of the Trust's financial statements and to express an opinion on the conformity of those financial statements with generally accepted accounting principles.
In this context, the audit committee met on fourfive occasions in fiscal 20092010 and held discussions with management and the independent registered public accounting firm. Management represented to the audit committee that the fiscal 20092010 year end consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the audit committee reviewed and discussed the audited consolidated financial statements with management and the independent registered public accounting firm. The audit committee also reviewed and discussed the Trust's internal control procedures with management, the independent registered public accounting firm and the accounting firm performing the internal audit function on behalf of the Trust. In addition, the audit committee reviewed the activities of management's disclosure controls and procedures committee and confirmed prior to approving each quarterly filing and the annual filing with the Securities and Exchange Commission that the requisite officers of the Trust were in accord with the certifications required under the Sarbanes-Oxley Act of 2002 and would execute and deliver such certifications. In fiscal 2009,2010, the audit committee reviewed the unaudited quarterly financial statements prior to the filing of each Quarterly Report on Form 10-Q with the Securities and Exchange Commission and each earnings press release prior to issuance. The audit committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committee).
In addition, the audit committee discussed with the independent registered public accounting firm the auditor's independence, and has received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions With Audit Committees). Further, the audit committee reviewed and approved the auditors' fees, both for performing audit and non-audit services. The committee also considered whether the provision of non-audit services by the independent registered public accounting firm was compatible with maintaining the auditor's independence and concluded that it was compatible with maintaining its independence.
The audit committee was provided with a report by the independent registered public accounting firm that included a description of material issues raised by its most recent "peer review" and any inquiry or investigation by governmental or professional authorities within the past few years respecting one or more independent audits carried out by the independent registered public accounting firm.
The audit committee meets with the independent registered public accounting firm and the accounting firm performing the internal audit function, with and without management present, to
discuss the results of their examinations, their evaluations of the internal controls, and the overall quality of the Trust's financial reporting. In fiscal 2009,2010, the audit committee reviewed and discussed with the independent registered public accounting firm, the accounting firm performing the Trust's internal audit function and management, the Trust's compliance with Section 404 of the Sarbanes-Oxley Act of 2002 regarding the audit of internal controls over financial reporting.
Based on the reviews and discussions referred to above, the audit committee recommended that the Trust's audited consolidated financial statements for the year ended September 30, 20092010 be included in the Trust's Annual Report on Form 10-K for the year ended September 30, 20092010 for filing with the Securities and Exchange Commission.
| Louis C. Grassi (Chairman) Gary Hurand Elie Weiss |
Compensation Discussion and Analysis
The following are highlights of our compensation practices; we encourage you to read the more detailed information set forth herein:
This compensation discussion and analysis describes our compensation objectives and policies as applied to our named executive officers in fiscal 2009.2010. This discussion and analysis focuses on the information contained in the compensation tables that follow this discussion and analysis. We also describe compensation actions taken historically to the extent it enhances an understanding of our executive compensation disclosure. Our compensation committee oversees our compensation program, recommends the compensation of executive officers employed by us on a full-time basis to our board of
trustees for its approval, and reviews, along with our audit committee reviews the appropriateness of the allocation to us under a shared services agreement of the compensation of executive officers who perform services for us on a part time basis. Another element of our compensation program is the fee paid by us to our advisor, REIT Management Corp., pursuant to an amended and restated advisory agreement, and the related payment by our advisor of compensation to certain of our executive officers, including certain of our named executive officers.
Historically, we have used the following compensation structure with respect to the compensation paid by us to our executive officers:
our executives and employees in many other aspects of our business.business, as required. Of the named executive officers who receive compensation from the advisor, Jeffrey A. Gould is the only one who receives direct compensation from us. The basic annual compensation of David W. Kalish and Mark H. Lundy, both of whom receive compensation from our advisor, is allocated to us under the shared services agreement.
Objectives of our Executive Compensation Program
The objective of our compensation program with respect to executive officers who devote their full-time to our affairs is to ensure that the total compensation paid to such officers is fair and competitive. The compensation committee believes that relying on this principle will permit us to retain and motivate our executive officers. We have historically experienced a low level of employee (including executive) turn-over. In the event that a senior executive officer is added to our staff, the compensation of such officer is negotiated on a case-by-case basis, with the goal being to provide a competitive salary and an equity interest sufficient to motivate the executive and to align his interests with those of our shareholders. With respect to senior executive officers whose compensation is allocated to us under the shared services agreement, it is our objective that each of these executive officers receives compensation which is fair and reasonable for the services they perform on our behalf. In addition, the compensation committee must be satisfied that those executives who devote their time to us on a part-time basis provide us with sufficient time and attention to fully meet our needs and to fully perform their duties on our behalf. The compensation committee is of the opinion that our part-time executive officers are not distracted by their activities on behalf of affiliated entities and performance of activities on behalf of affiliated entities does not adversely affect their ability to perform their duties on our behalf.
Our compensation committee believes that utilizing part-time executive officers pursuant to the shared services agreement and the advisory agreement enables us to benefit from access to, and the services of, a group of senior executives with experience and knowledge in real estate lending, real estate management, finance, banking, legal, accounting and tax matters that an organization our size could not otherwise afford. The Committee is currently conducting a review of our organization structure and compensation practices.
Full-time Executive Officers
To establish compensation for our executive officers in 2009, wefor fiscal 2010, the compensation committee reviewed the annual compensation survey prepared for the National Association of Real Estate Investment Trusts (NAREIT) to understand the base salary, bonus, long-term incentives and total compensation paid by other REITs to their executive officers to assist us in providing a fair and competitive compensation package to our full-time executive officers. Although there are many companies engaged in real estate lending, there are few companies which engage in the short-term, bridge lending business in which we engage or have a market capitalization comparable to ours. As a result, the NAREIT compensation survey, although helpful, does not provide information which is directly applicable to us. Accordingly, and since we have only ten full-time employees, we determine compensation for our full-time employees, including our executive officers, on a case-by-case basis.basis and our compensation decisions are subjective. We do not utilize specific performance targets.
For our full-time executive officers, other than the president and chief executive officer, the recommendations of our president and chief executive officer plays a significant role in the compensation-setting process, since the president and chief executive officer is aware of each executive officer's duties and responsibilities and is most qualified to assess the level of each officer's performance in carrying out his duties and responsibilities. The president and chief executive officer, prior to making recommendations to the compensation committee concerning each executive officer's compensation, consults with the chairman of our board of trustees and other senior executive officers.
During this process, they consider our overall performance for the immediately preceding fiscal year, including, without limitation, our results from operations and distributions, if any, to shareholders.operations. In the 2009 fiscal year,2010, which was a very difficult year for our company due to the economic recessioncontinuing impact of the recessionary environment and the crisischallenges faced in the credit markets and in commercial real estate, consideration was given to an executive's activities in
workouts and foreclosures, property operations and sale of properties after acquisition in foreclosure.foreclosure as well as loan origination activities. Since executive officers have different responsibilities, no performance criteria is given more weight than any other. In considering base compensation, the president and chief executive officer, chairman of the board and other senior executive officers assesses an individual's performance, which assessment is highly subjective. After this process, the president and chief executive officer proposes to the compensation committee with respect to each full-time executive officer, a base salary for the next year, a bonus applicable to the preceding fiscal year (which is paid in the following year), and the number of shares of restricted stock to be awarded to each individual executive officer. At its annual compensation committee meeting, the compensation committee reviews these recommendations. The compensation committee has discretion to accept, reject or modify the recommendations. The final decision by the compensation committee on compensation matters related to executive officers, other then with respect to the president and chief executive officer, is reported to the board of trustees, which can approve or modify the action of the committee.
With respect to our president and chief executive officer, after the compensation committee has reviewed the NAREIT compensation survey for any helpful information, and our overall performance for the preceding fiscal year, the chairman of the committee meets with the president and chief executive officer to discuss and review his total compensation, including the compensation he receives from our advisor and from the other parties to the shared services agreement. The compensation committee then determines annual base compensation, and bonus, if any, for the president and chief executive officer and reports its determinations to the board of trustees. The number of shares of restricted stock to be awarded to the president and chief executive officer is considered and determined by the committee annually, at the same time the committee considers and approves all restricted stock awards to be made for that year.
"Part-Time" Executive Officers
Our chairman of the board is ana principal executive and/or sole owner of each entity which participates with us in the shared services agreement. In such capacity, our chairman, in consultation with our president and chief executive officer and others, determines the annual base compensation of our part-time executive officers to be paid in the aggregate by one or more of the entities which are parties to the shared services agreement. The annual base compensation, bonus, if any, pension contribution, and perquisites of certain of our part-time executive officers (primarily those engaged in legal and accounting functions) is allocated to us and other parties to the shared services agreement, pursuant to the shared services agreement. The shared services agreement, as approved by our board of trustees, was finalized in January 2002. The compensationOur audit committee reviews annually the amount of a part-time executive officers' base annual salary and bonus, if any, that is allocated to usallocations made under the shared services agreement to determine ifthat the allocation is fair and reasonable. The compensation committee may accept, reject or modify such allocations.allocations, including the payroll allocations, have been made in accordance with the terms of the shared services agreement.
The compensation committee is apprised of the compensation paid to our advisor, but sinceadvisor. Since the compensation we pay the advisor is pursuant to an agreement, as amended, which expires on December 31, 2010April 30, 2011 and was approved by our board of trustees, the compensation committee does not reviewapprove the fairness of any such compensation. In addition, our compensation committee is apprised of the compensation paid by our advisor and other affiliates to each of our part-time executive officers.
Compensation Consultant
In October 2008, our compensation committee engaged FPL Associates L.P., a nationally recognized compensation consulting firm specializing in the real estate industry. FPL Associates L.P. does not perform any services for us except as a compensation consultant performing services expressly set forth in an engagement letter. Prior to our engagement of FPL Associates L.P. in October 2008, it had never performed any services on our behalf or on behalf of any of our affiliates. Subsequent to the retention of FPL Associates L.P. by us in October 2008, it was retained as a compensation consultant by the compensation committee of One Liberty Properties, Inc. One Liberty Properties, Inc. may be deemed an affiliate of ours.
The primary purpose of our compensation committee's initial engagement of the compensation consultant's engagement by our compensation committee in October 2008consultant was for the consultant to conduct a comprehensive benchmarking analysis for our senior executives, to enable our compensation committee to determine if the compensation of our senior executive officers was fair and reasonable and to assist our compensation committee in making any necessary adjustments to the compensation components. In January 2010, our compensation committee engaged FPL Associates L.P. to update its benchmarking analysis. In January 2010, the compensation consultant reviewed the compensation of our named executive officers. We did not retain a compensation consultant in connection with determining compensation for fiscal 2011.
In connection with its initial benchmarking analysis, the compensation consultant and management agreed upon a methodology to determine comparative peer groups. Based upon such discussions it was determined to use two peer groups, as follows:
The peer groups used by the compensation consultant in January 2010, for its updated benchmarking analysis, are as follows:
Capital Mortgage Holdings, Inc. has mergermerged with another entity and CapitalSource Inc. is no longer a REIT.
The following are the full-time peer group companies used by the compensation consultant:consultant in its updated benchmark analysis:
| Arbor Realty Trust, Inc. | Capital Trust, Inc. | |
| Dynex Capital, Inc. | iStar Financial Inc. | |
| MFA Mortgage Investments, Inc. | New York Mortgage Trust, Inc. | |
| NorthStar Realty Financing Corp. | PMC Commercial Trust | |
| RAIT Financial Trust | Redwood Trust, Inc. |
| CapLease, Inc. | Arbor Realty Trust, Inc. | |
| Cousins Properties Incorporated | CapitalTrust, Inc. | |
| Getty Realty Corp. | iStar Financial Inc. | |
| Lexington Realty Trust | New York Mortgage Trust, Inc. | |
| Urstadt Biddle Properties, Inc. | NorthStar Realty Financing Corp. | |
| W.P. Carey and Co. LLC | RAIT Financial Trust. |
The compensation consultant used the 25th percentile as the market comparison in its conclusions because of our relatively smaller size compared to the peer group. The compensation consultant also used a plus/minus 15% threshold to define "in line" (competitive) with the market. Based on its benchmarking analysis, the compensation consultant advised that: (i) the compensation paid by us to Jeffrey A. Gould, our president and chief executive officer, is in line with market, (i.e., 25th percentile), and the compensation paid by us to Mitchell Gould, our executive vice president, and George Zweier, our chief financial officer, is in line with or slightly below market, (ii) the compensation of shared senior executives (David W. Kalish, senior vice president, finance and Mark H. Lundy, a senior vice president and general counsel) allocated to us is below 25th percentile market practices, (iii) the total compensation paid to Jeffrey A. Gould (including all compensation paid to Jeffrey Gould by affiliated companies) is above market, (iv) the total compensation paid to shared senior executives by us and affiliated companies (David W. Kalish and Mark H. Lundy) is above their peers, and (v) the equity awards are a smaller portion of total compensation compared to peers.
Components of Executive Compensation
The principal elements of our compensation program for executive officers in 20092010 were:
The special benefits and perquisites which were provided to some, but not all, of our executive officers in 2009,2010, consisted of:
In determining 20092010 compensation, the compensation committee did not have a specific allocation goal between cash and equity-based compensation.
Base Salary
Base salary is the basic, least variable form of compensation for the job an executive officer performs and provides each full-time executive officer with a guaranteed monthlyannual income. Base salaries of executive officers compensated by us directly are targeted to be competitive with the salaries paid to executives performing substantially similar functions at other REITs with a market capitalization similar to ours. Any increase in base salary is determined on a case by case basis, is not based upon a structured formula and is based upon, among other considerations (i) our performance in the preceding fiscal year (net income or loss, cash distributions, if any, paid to shareholders, stock price performance), (ii) such executive's current base salary, (iii) amounts paid by peer group companies for executive's performing substantially similar functions, (iv) years of service, (v) current job responsibilities, and(vi) the individual's performance, and (vi)(vii) the recommendation of the president and chief executive officer and other senior executive officers.
Our chairman of the board, in consultation with our president and chief executive officer and others, determines the annual base salary to be paid to each part-time senior executive officer by all the entities which are parties to the shared services agreement. In setting the annual base salary, the chairman of the board considers primarily the executive's responsibilities to all parties to the shared services agreement, the executive's performance, years of service, current annual base salary and the performance of the companies which participate in the shared services agreement in the preceding fiscal year. The annual base salary is allocated to the entities which are parties to the shared services agreement, including us, based on the estimated time devoted to each of the entities. The compensation committee reviews on an annual basis,is apprised of the amounts allocated byallocations to the part-timeTrust of the payroll relating to our executive officers' to us to determine if they are fairofficers and reasonable. The compensation committee is also apprised of the compensation received by our executive officers from our advisor and the other entities which are parties to the shared services agreement. The compensation committee does not reviewapprove the payments made by us to the advisor since all such payments are made pursuant to the advisory agreement, which was approved by our board of trustees, and does not reviewapprove the payments made by the advisor to the part-time executive officers.
Each year theOur audit committee of our board of trustees reviews annually the allocation process under the shared services agreement pursuant to which the base salary, bonus, if any, pension contributions and perquisites of our part-time executive officers is allocated to us, to determine if the allocation process was carried out in accordance with the shared services agreement. The compensation committee reviewed the part-time executive officers' compensation allocated to us and taking into consideration the services rendered to us by each such part-time executive officer and the report provided by the compensation consultant, determined that such amounts were fair and reasonable.
Commissions
We provide the opportunity for executive officers involved primarily in loan origination activities to earn a commission on each loan we originate. The commission is provided to motivate our loan origination group. The commission, which is currently an aggregate of 10-basis points of the loans originated, is divided among our full-time executive officers and employees engaged primarily in loan origination activities. Mitchell Gould is our only named executive officer who engages primarily in loan origination activities.
Bonus
We provide the opportunity for our full-time executive officers and other full-time employees to earn an annual cash bonus. We provide this opportunity both to reward our personnelofficers and employees for past performance and to motivate and retain talented people. We recognize that annual bonuses are almost universally provided by other companies with which we might compete for talent. Annual cash bonuses for our executive officers (including the three named executive officers who devote all, or substantially all, their business time to our affairs) are determined on a case-by-case basis and are determined subjectively. In arriving at the annual cash bonuses, consideration is given to both an executive's performance and to our performance. Once our compensation committee has approved the annual bonus to be paid to each executive officer, the compensation committee presents its recommendations to the board of trustees for their approval. Based on our present structure and the small number of full-time executive officers, our compensation committee has not established formulas or performance goals to determine cash bonuses for our executive officers.
Long-term Equity Awards
We provide the opportunity for our executive officers to receive long-term equity incentive awards. Our long-term equity incentive compensation program is designed to recognize responsibilities, reward performance, motivate future performance, align the interests of our executive officers with our shareholders' and retain our executive officers. The compensation committee reviews long-term equity incentives for all our officers, trustees and employees annually and makes recommendations to our board of trustees for the grant of equity awards. In determining the long-term equity compensation component, the compensation committee considers all relevant factors, including our performance and individual performance. Existing ownership levels are not a factor in award determination.determinations.
We do not have a formal policy with respect to whether equity compensation should be paid in the form of stock options or restricted stock. Prior to 2003, we awarded stock options rather than restricted stock, but instock. In 2003 a determination was made to only award restricted stock. The compensation committee believes restricted stock awards are more effective in achieving our compensation objectives, as restricted stock has a greater retention value. In addition, because fewer shares are normally awarded, it is potentially less dilutive. Executive officers realize value upon the vesting of the restricted stock, with the value potentially increasing if our stock performance increases. Before vesting, cash dividends to shareholders, if any, are paid on all outstanding awards of restricted stock as an additional element of compensation.
All the restricted stock awards made to date provide for a five-year "cliff" vesting. The compensation committee believes that restricted stock awards with five-year "cliff" vesting provide a strong retention incentive for executives, and aligns the interests of our executive officers with our shareholders. We view our capital stock as a valuable asset that should be awarded judiciously. For that reason, it has been our policy that the aggregate equity incentives granted each year to our executive officers, employees, trustees and consultants should be approximately 1% of our issued and outstanding common shares.
We do not have a formal policy on timing equity compensation grants in connection with the release of material non-public information. Generally our compensation committee recommends and our board of trustees approves the granting of equity awards to be effective on or about the last business day in January of each year. On December 10, 2009, the compensation committee approved the award of 125,150Effective January 15, 2011, we awarded 138,200 shares of restricted stock (including an aggregate of 21,700 shares awarded to non-management trustees and set the grant date foran aggregate of 43,200 shares to our restricted stock incentive awards at January 29, 2010.named executive officers). The aggregate restricted stock authorized for awards by us on January 29, 2010such date is approximately .89%.99% shares of our issued and outstanding common shares.
Executive Benefits and Perquisites
We provide our executive officers and our employees with a competitive benefits and perquisites program. We recognize that similar benefits and perquisites are commonly provided at other companies that we might compete with for talent. We review our executive benefits and perquisites program periodically to ensure it remains fair to our executives and employeesreasonable and supportable to our shareholders. For 2009,2010, the executive benefits and perquisites we provided to executive officers accounted for a small percentage of the compensation provided by, us or allocated to, us for our executive officers, and were determined to be reasonable by our compensation committee.officers. The executive benefits and perquisites we provided to certain of our full-time executive officers, in addition to the benefits and perquisites we provided to all our full-time employees, consisted of an automobile allowance or payments for automobile maintenance and repairs, the payment of certain educational expenses, the payment of the premiums for additional disability insurance and payment of the premiums for long-term care insurance. With respect to our part-time executive officers, the cost of their executive benefits and perquisites, which also consisted of an automobile allowance or payments for automobile maintenance and repairs, the payment of certain educational expenses, the payment of the premiums for additional disability insurance and payment of premiums for long-term care insurance, was allocated among us and other entities pursuant to the shared services agreement.
Severance and Change of Control Agreements
Neither our executive officers nor our employees have employment or severance agreements with us. They are "at will" employees who serve at the pleasure of our board of trustees.trustees and management, respectively.
Except for provisions for accelerated vesting of awards of our restricted stock in a "change of control" transaction, we do not provide for any change of control protection for our executive officers, trustees or employees. Under the terms of each restricted share awards agreement, accelerated vesting occurs with respect to each person who has been awarded shares if (i) any person, corporation or other entity purchases our shares of stock for cash, securities or other consideration pursuant to a tender offer or an exchange offer, without the prior consent of our board, or (ii) any person, corporation or other entity shall become the "beneficial owner" (as such term is defined in Rule 13-d-313d-3 under the Securities and Exchange Act of 1934, as amended)Act), directly or indirectly of our securities representing 20% or more of the combined voting power of our then outstanding securities ordinarily having the right to vote in the election of trustees, other than in a transaction approved by our board of trustees.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a limitation on the deductibility of certain non-cash compensation in excess of $1 million earned by each of the chief executive officer and the four other most highly compensated officers of publicly held companies. In 2009,2010, all compensation paid to our full-time executives was deductible by us. The compensation committee intends to preserve the deductibility of compensation payments and benefits to the extent reasonably practicable. The compensation committee has not adopted a formal policy that requires all compensation paid to the executive officers to be fully deductible.
Base Salary and Bonus
In accordance with the compensation setting process described above, base salary increases and bonuses for 2010 were approved as follows for named executive officers who are compensated directly by us:
| | 2009 Base Salary ($) | 2008 Base Salary ($) | 2009 Bonus ($)(1) | 2008 Bonus ($)(2) | Percentage % Increase (Decrease) of Salary and Bonus Combined | 2010 Base Salary($) | 2009 Base Salary ($) | 2010 Bonus ($)(1) | 2009 Bonus ($)(2) | Percentage % Increase of Salary and Bonus Combined | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jeffrey A. Gould | 441,633 | 442,890 | 13,200 | 60,000 | (9.56 | ) | 437,835 | 441,633 | 17,000 | 13,200 | — | |||||||||||||||||||||
Mitchell Gould | 236,886 | (3) | 247,360 | (3) | 12,000 | 22,000 | (7.60 | ) | 258,046 | (3) | 236,886 | (3) | 13,000 | 12,000 | 8.9 | |||||||||||||||||
George Zweier | 186,404 | 175,124 | 11,300 | 20,000 | 1.33 | 192,545 | 186,404 | 14,000 | 11,300 | 4.5 | ||||||||||||||||||||||
The base salary of Jeffrey A. Gould, president and chief executive officer, has been maintained in 2010 at approximately the level fixed effective January 1, 2006. AlthoughWith respect to the 2010 bonus for our chief executive officer, the compensation committee was satisfied with his performance as chief executive officer, particularlyconsidered both his handling of the problems which developedwere encountered by us as a result of the credit and real estate crisis and his activities in redirecting our overall performance in fiscal 2009 was given more weight than his individual performance in setting his 2009 bonus.focus to our basic lending business. The base salary of Mitchell Gould in 2009,2010, as compared to 20082009 (excluding commissions paid to Mitchell Gould)commissions), was based on his overall performance as executive vice president.president, including administrative duties, loan workout negotiations and origination activities (which were at an increased level in 2010). The bonus of Mitchell Gould in 2009 was decreased by 45% because of our overall performance in 2009. Mitchell Gould's overall compensation,2010, including commissions, decreasedincreased by 7.6%1.5% year-over-year due to reducedincreased commissions, as the credit and real estate crisisbased on increased loan originations in 2009 resulted in a substantial decrease in our loan originations.2010. The base salary of George Zweier, our chief financial officer, as well as his bonus applicable to 2010, was increased in 2009 to recognize his individual performance, and his bonus was decreased due to our overall performance in fiscal 2009.performance.
Mark H. Lundy serves as our senior vice president and general counsel. He is responsible for legal matters relating to loan origination and lending documentation, foreclosure activities, bankruptcy claims and issues, credit line documentation and other agreements entered into by us. In addition, he reviews our filings under the Securities Exchange Act of 1934, as amended, and our public disclosures. David W. Kalish serves as our senior vice president, finance. He has overall responsibility for implementation and enforcement of our internal controls, performs oversight and guidance in connection with our annual audit and our quarterly reports, performs oversight and guidance related to tax matters, is involved in banking relationships, chairs our disclosure controls and procedures committee and participates in the preparation and review of all our disclosures under the Securities Exchange Act of 1934, as amended, and press releases. The compensation committee determined that based on the value of his services on our behalf, the compensation of Messrs. Lundy and Kalish, which is allocated to us, was fair and reasonable.
The base salary and bonus of Jeffrey A. Gould, our president and chief executive officer, in 20092010 is 83%68% greater than the compensation of Mitchell Gould, our executive vice president, and 130%120% greater than the compensation of George Zweier, our chief financial officer. We have not adopted a policy with regard to the relationship of compensation among named executive officers or other employees. The compensation committee reviewedwas aware of the differential in compensation between Jeffrey A. Gould and Mitchell Gould and George Zweier and concluded that the differential was appropriate. Both Mitchell Gould and George Zweier have responsibilities primarily related to a specific activity, whereas
Jeffrey A. Gould's responsibilities cover all our business activities including, among other things, loan originations and underwriting, negotiating joint venture agreements, loan enforcement, property sales, capital raising and investor relations matters.relations.
Long-term Equity Awards
We believe that our long-term equity compensation program, using restricted stock awards with five-year cliff vesting provides motivation for our executives and employees and is a beneficial retention tool. We are mindful of the potential dilution and compensation cost associated with awarding shares of restricted stock. Our policy remains to limit dilution and compensation costs, andcosts. On January 15, 2011 we are mindful of the findingsissued 138,200 restricted share awards representing 0.99% of our compensation consultant to the effect that in the aggregate we award shares within the competitive range but less than our peer group. The award which will be made on January 29, 2010 will be 125,150 commonoutstanding shares. In the past five years, we have awarded an average of 62,89180,531 shares each year, representing an average of .59%0.67% per annum of our outstanding shares.
Our compensation committee has commenced the process for establishing performance goals for the grant of performance based awards to senior executives, including our president and chief executive officer. If the proposed amendments to our 2009 Incentive Plan are approved by our shareholders,We anticipate that performance based awards will be granted effective in 2010 or 2011, at the discretion of our compensation committee. Vesting of performance based awards will be contingent on the attainment, prior to the end of a performance cycle, of the performance goal(s) that our compensation committee establishes. The minimum period with respect to which performance goals are to be measured is one year, but our compensation committee intends to establish a minimum performance cycle of five years. The number of shares with respect to which any participant may be granted performance based awards in any calendar year is 40,000 shares.
Advisor Fees
Fees paid to our advisor under the advisory agreement, as amended, are based on a percentage of our assets and a portion of our loan origination fees. Our main assets are real estate loans and real estate acquired in foreclosure proceedings, which generates interest and fee and rental income. Fredric H. Gould, chairman of our board, is the sole shareholder of our advisor. The advisory agreement was renegotiated between the independent trustees and management in November and December 2006 and amended effective January 1, 2007. At that time, there were four years remaining on the term of the existing agreement. The two basic changes made in the amended agreement were (i) a reduction of the percentage of assets on which the fee is based from 1% (in most instances) to6/10 of 1% and (ii) a change in the origination fee payments to the advisor by our borrowers from 1% to1/2 of 1%, with the proviso that no origination fee is to be paid to the advisor unless we receive an origination fee of at least 1%. The advisory agreement, which was to terminate on December 31, 2010, has been extended to April 30, 2011. During this extension period, certain of our independent trustees will be discussing and examining various alternatives for compensating our full-tine and part-time executive officers and employees.
Since the fee paid by us to the advisor under the advisory agreement is based on an agreement which was approved by our board of trustees, the compensation committee does not review the fee nor the determinations made by Fredric H. Gould as to the payment of compensation by the advisor to any of our senior executive officers.
Three of our named executive officers (Jeffrey A. Gould, David W. Kalish and Mark H. Lundy) receive compensation from our advisor. The compensation committee is advised of all such payments. The compensation committee has determined that if the compensation paid by us to our executive officers is fair and reasonable, then the amounts paid to them by the advisor should not be considered as a factor in the determination of compensation relating to such executive's performance for us as long as these persons are satisfactorily performing their duties on our behalf. The compensation committee has determined that all persons who receive compensation from us and also from our advisor satisfactorily performed their duties on our behalf.
Equity Compensation PoliciesStock Ownership Policy
We do not have any policy regarding ownership requirements for officers or trustees. In view of the fact that all of our officers and trustees own some of our common shares (and many of our officers hold a significant number of common shares), and none of the current trustees or named executive officers has sold any shares during more than the past five years, we do not believe there is a need to adopt a policy regarding ownership of our common shares by officers and trustees.
Perquisites
The perquisites we provide to our executive officers, which are in addition to the benefits we provide to all our employees, account for a small percentage of the compensation paid by us to or allocated to us for our executive officers. We believe that such perquisites are competitive and appropriate.
Severance and Change of Control Agreements
Except for provisions for accelerated vesting of awards of our restricted stock in a "change of control" transaction, we do not provide for any severance, termination or change of control payment or protection to our officers, trustees or employees. Accordingly, upon a change of control, the restricted stock issued to our officers, trustees, employees and consultants would automatically vest. This is the only automatic compensation benefit our officers would receive in a change of control transaction. In the event that a change of control occurred as of September 30, 2009,2010, the restricted stock held by our named executives officers would have automatically vested and the value of each such officer's restricted stock, based uponon the closing price of our stock on September 30, 2009,2010 of $6.39 per share, would have been as follows:
Name | Number of Shares of Unvested Restricted Stock Held as of September 30, 2009 | Value of Outstanding Shares of Unvested Restricted Stock Upon a Change of Control at September 30, 2009 ($)(1) | |||||
|---|---|---|---|---|---|---|---|
Jeffrey A. Gould | 20,500 | $ | 116,850 | ||||
George Zweier | 9,300 | $ | 53,010 | ||||
Mitchell Gould | 17,600 | $ | 100,320 | ||||
David W. Kalish | 20,500 | $ | 116,850 | ||||
Mark H. Lundy | 20,500 | $ | 116,850 | ||||
Name | Number of Shares of Unvested Restricted Stock Held as of September 30, 2010 | Value of Outstanding Shares of Unvested Restricted Stock Upon a Change of Control at September 30, 2010 ($) | |||||
|---|---|---|---|---|---|---|---|
Jeffrey A. Gould | 25,600 | 163,584 | |||||
George Zweier | 12,900 | 82,431 | |||||
Mitchell Gould | 24,500 | 156,555 | |||||
David W. Kalish | 25,600 | 163,584 | |||||
Mark H. Lundy | 25,600 | 163,584 | |||||
The following summary compensation table discloses the compensation paid and accrued for services rendered in all capacities to us during the 2010, 2009 2008 and 20072008 fiscal years for our chief executive officer, chief financial officer and the three other most highly compensated executive officers other than our chief executive officer and chief financial officer:
Name and Principal Position | Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(1)(2) | Stock Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(1)(2) | Stock Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jeffrey A. Gould, | 2009 | 441,633 | 13,200 | 64,054 | 207,471 | (5) | 726,358 | ||||||||||||||||||||||||||||||||
| Jeffrey A. Gould | Jeffrey A. Gould | 2010 | 437,835 | 17,000 | 35,520 | 224,762 | (5) | 715,117 | |||||||||||||||||||||||||||||||
President and Chief Executive Officer | 2008 | 442,890 | 60,000 | 66,654 | 390,098 | (5) | 956,313 | President and Chief Executive | 2009 | 441,633 | 13,200 | 32,400 | 207,471 | (5) | 694,704 | ||||||||||||||||||||||||
| 2007 | 434,929 | 60,000 | 55,943 | 537,776 | (5) | 1,088,648 | Officer | 2008 | 442,890 | 60,000 | 62,760 | 390,098 | (5) | 955,748 | |||||||||||||||||||||||||
George Zweier, | George Zweier, | 2009 | 186,404 | 11,300 | 25,585 | 50,708 | (6) | 273,997 | George Zweier, | 2010 | 192,545 | 14,000 | 18,648 | 39,909 | (6) | 265,102 | |||||||||||||||||||||||
Vice President and Chief | 2008 | 175,134 | 20,000 | 23,718 | 52,482 | (6) | 271,334 | Vice President and Chief Financial | 2009 | 186,404 | 11,300 | 17,010 | 50,708 | (6) | 265,422 | ||||||||||||||||||||||||
Financial Officer | 2007 | 146,965 | 30,000 | 17,568 | 41,960 | (6) | 236,493 | Officer | 2008 | 175,134 | 20,000 | 31,380 | 52,482 | (6) | 278,996 | ||||||||||||||||||||||||
Mitchell Gould, | 2009 | 236,886 | 12,000 | 48,494 | 66,578 | (7) | 363,958 | ||||||||||||||||||||||||||||||||
Mitchell Gould | Mitchell Gould | 2010 | 258,046 | 13,000 | 35,520 | 46,574 | (7) | 353,140 | |||||||||||||||||||||||||||||||
Executive Vice President | 2008 | 247,360 | 22,000 | 44,186 | 77,023 | (7) | 385,686 | Executive Vice President | 2009 | 236,886 | 12,000 | 32,400 | 66,578 | (7) | 347,864 | ||||||||||||||||||||||||
| 2007 | 287,966 | 35,000 | 33,059 | 58,125 | (7) | 414,150 | 2008 | 247,360 | 22,000 | 54,915 | 77,023 | (7) | 401,298 | ||||||||||||||||||||||||||
David W. Kalish, | David W. Kalish, | 2009 | 176,695 | — | 64,054 | 117,456 | (8) | 358,205 | David W. Kalish, | 2010 | 148,012 | — | 35,520 | 77,655 | (8) | 261,187 | |||||||||||||||||||||||
Senior Vice President—Finance | 2008 | 163,678 | — | 66,654 | 229,889 | (8) | 460,221 | Senior Vice President, Finance | 2009 | 176,695 | — | 32,400 | 117,456 | (8) | 326,551 | ||||||||||||||||||||||||
| 2007 | 138,940 | — | 55,943 | 328,068 | (8) | 522,951 | 2008 | 163,678 | — | 62,760 | 229,889 | (8) | 456,327 | ||||||||||||||||||||||||||
Mark H. Lundy, | Mark H. Lundy, | 2009 | 180,810 | — | 64,054 | 148,915 | (9) | 393,779 | Mark H. Lundy, | 2010 | 163,141 | — | 35,520 | 107,701 | (9) | 306,362 | |||||||||||||||||||||||
Senior Vice President | 2008 | 181,020 | — | 66,524 | 296,442 | (9) | 542,533 | Senior Vice President | 2009 | 180,810 | — | 32,400 | 148,915 | (9) | 362,125 | ||||||||||||||||||||||||
| 2007 | 146,724 | — | 55,943 | 430,800 | (9) | 633,467 | 2008 | 181,020 | — | 62,760 | 296,442 | (9) | 540,222 | ||||||||||||||||||||||||||
an annual contribution to the plan for each officer and employee whose base salary is paid directly by us (and entities which are parties to the shared services agreement make annual contributions to its plan for each of its officers and employees) equal to 15% of such person's annual earnings, not to exceed $36,750 in 2010, $36,750 in 2009 and $34,500 in 2008 and $33,563 in 2007 for any person. With respect to Jeffrey A. Gould, David W. Kalish and Mark H. Lundy, the total amount set forth in the column "All Other Compensation" also includes compensation paid to them in fiscal 2010, 2009 2008 and 20072008 by our advisor, REIT Management Corp. See footnotes (5), (8) and (9) below. REIT Management Corp. is wholly owned by Fredric H. Gould, the chairman of our board.
The following table discloses the grants of plan-based awards during the 20092010 fiscal year for our chief executive officer, chief financial officer and the three other most highly compensated executive officers other than our chief executive officer and chief financial officer:
| | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Grant Date | Committee Action Date | Threshold (#) | Target (#)(1) | Maximum (#) | Grant Date Fair Value of Stock Awards $(2) | ||||||||||||||
| Jeffrey A. Gould, | 2/2/09 | 12/10/08 | — | 8,000 | — | 32,400 | ||||||||||||||
| President and Chief Executive Officer | ||||||||||||||||||||
George Zweier, | 2/2/09 | 12/10/08 | — | 4,200 | — | 17,010 | ||||||||||||||
| Vice President and Chief Financial Officer | ||||||||||||||||||||
Mitchell Gould, | 2/2/09 | 12/10/08 | — | 8,000 | — | 32,400 | ||||||||||||||
| Executive Vice President | ||||||||||||||||||||
David W. Kalish, | 2/2/09 | 12/10/08 | — | 8,000 | — | 32,400 | ||||||||||||||
| Senior Vice President—Finance | ||||||||||||||||||||
Mark H. Lundy, | 2/2/09 | 12/10/08 | — | 8,000 | — | 32,400 | ||||||||||||||
| Senior Vice President | ||||||||||||||||||||
Name | Grant Date | Board Action Date | All Other Stock Awards: Number of Shares of Stocks or Units (#)(1) | Grant Date Fair Value of Stock Awards $(2) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jeffrey A. Gould | 1/29/10 | 1/14/10 | 8,000 | 35,520 | |||||||||
George Zweier | 1/29/10 | 1/14/10 | 4,200 | 18,648 | |||||||||
Mitchell Gould | 1/29/10 | 1/14/10 | 8,000 | 35,520 | |||||||||
David W. Kalish | 1/29/10 | 1/14/10 | 8,000 | 35,520 | |||||||||
Mark H. Lundy | 1/29/10 | 1/14/10 | 8,000 | 35,520 | |||||||||
Outstanding Equity Awards at Fiscal Year-End
The following table discloses the outstanding equity awards at September 30, 20092010 for our chief executive officer, chief financial officer and the three other most highly compensated executive officers other than our chief executive officer and chief financial officer:
| | Option Awards | Stock Awards | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||||
| Jeffrey A. Gould, | — | — | — | — | 20,500 | (1) | 116,850 | |||||||||||||
| President and Chief Executive Officer | ||||||||||||||||||||
George Zweier, | 2,500 | — | 7.75 | (4) | 12/10/10 | 9,300 | (2) | 53,010 | ||||||||||||
| Vice President and Chief | 5,000 | — | 10.45 | (4) | 12/9/11 | |||||||||||||||
| Financial Officer | ||||||||||||||||||||
Mitchell Gould, | — | — | — | — | 17,600 | (3) | 100,320 | |||||||||||||
| Executive Vice President | ||||||||||||||||||||
David W. Kalish, | — | — | — | — | 20,500 | (1) | 116,850 | |||||||||||||
| Senior Vice President—Finance | ||||||||||||||||||||
Mark H. Lundy, | — | — | — | — | 20,500 | (1) | 116,850 | |||||||||||||
| Senior Vice President | ||||||||||||||||||||
| | Option Awards | Stock Awards | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||||||||||
Jeffrey A. Gould | — | — | — | — | 25,600 | (1) | 163,584 | ||||||||||||
George Zweier | 2,500 | — | 6.40 | (4) | 12/10/10 | 12,900 | (2) | 82,431 | |||||||||||
| 5,000 | — | 8.63 | (4) | 12/9/11 | |||||||||||||||
Mitchell Gould | — | — | — | — | 24,500 | (3) | 156,555 | ||||||||||||
David W. Kalish | — | — | — | — | 25,600 | (1) | 163,584 | ||||||||||||
Mark H. Lundy | — | — | — | — | 25,600 | (1) | 163,584 | ||||||||||||
Option Exercises and Stock Vested
The following table discloses options exercised and stock vested during the 20092010 fiscal year for our chief executive officer, chief financial officer and the three other most highly compensated executive officers other than our chief executive officer and chief financial officer:
| | Option Awards | Stock Awards | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||
| Jeffrey A. Gould, | — | — | 2,220 | 8,791 | ||||||||||
| President and Chief Executive Officer | ||||||||||||||
George Zweier, | 400 | 1,584 | ||||||||||||
| Vice President and Chief Financial Officer | ||||||||||||||
Mitchell Gould, | — | — | 750 | 2,970 | ||||||||||
| Executive Vice President | ||||||||||||||
David W. Kalish, | — | — | 2,220 | 8,791 | ||||||||||
| Senior Vice President—Finance | ||||||||||||||
Mark H. Lundy, | — | — | 2,220 | 8,791 | ||||||||||
| Senior Vice President | ||||||||||||||
| | Option Awards | Stock Awards | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||||||||
Jeffrey A. Gould | — | — | 2,900 | 12,876 | |||||||||
George Zweier | — | — | 600 | 2,664 | |||||||||
Mitchell Gould | — | — | 1,100 | 4,884 | |||||||||
David W. Kalish | — | — | 2,900 | 12,876 | |||||||||
Mark H. Lundy | — | — | 2,900 | 12,876 | |||||||||
Since the only pension benefit plan we maintain is a tax qualified defined contribution plan, a Pension Benefits Table is not provided. Contributions to the defined contribution plan for each of Jeffrey A. Gould, George Zweier and Mitchell Gould areis included in the Summary Compensation Table and the amount allocated to us pursuant to athe shared services agreement for the pension benefitsamounts contributed by Gould Investors L.P. to its defined contribution plan for the benefit of David W. Kalish and Mark H. Lundy to the Gould Investors L.P. defined contribution plan is also included in the Summary Compensation Table.
We have adopted a tax qualified defined contribution pension plan covering all our employees. The pension plan is administered by Fredric H. Gould, Simeon Brinberg and David W. Kalish (Messrs. Brinberg and Kalish are non-trustee officers of ours). Annual contributions are based on 15% of an employee's annual earnings (including any cash bonus), not to exceed $36,188$36,750 per employee in fiscal 2009.2010. Partial vesting commences two years after employment, increasing annually until full vesting is achieved at the completion of six years of employment. The method of payment of benefits to participants upon retirement is determined solely by the participant, who may elect a lump sum payment, the purchase of an annuity or a rollover into an individual retirement account, the amount of which is based on the amount of contributions and the results of the plan's investments.
For the year ended September 30, 2009, $36,1882010, $36,750 was contributed for the benefit of Jeffrey A. Gould, with 2223 years of credited service, $35,323$35,053 was contributed for the benefit of George Zweier, with 1112 years of credited service $36,188and $36,750 was contributed for the benefit of Mitchell Gould, with 1112 years of credited service. The aggregate amount accumulated to date for Jeffrey A. Gould, George Zweier and Mitchell Gould is approximately $906,333, $301,515$1,142,000, $310,000 and $231,120,$398,000, respectively.
Non-Qualified Deferred Compensation
We do not provide any non-qualified deferred compensation to our executive officers.
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussions with management, we recommended to the Board of Trustees that the Compensation Discussion and Analysis be included in this proxy statement.
| The Compensation Committee | ||
Jeffrey Rubin (Chairman) Alan Ginsburg Jonathan H. Simon |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fredric H. Gould, chairman of our board of trustees, is chairman of the board of directors of One Liberty Properties, Inc., a real estate investment trust listed on the New York Stock Exchange that is engaged in the ownership of a diversified portfolio of income-producing real properties that are net leased to tenants, generally under long-term leases. He is also chairman of the board of directors and sole stockholder of the managing general partner of Gould Investors L.P., a limited partnership that owns and operates a diversified portfolio of real estate and invests in other companies active in the real estate and finance industries, and the sole member of a limited liability company which is the other general partner of Gould Investors L.P. Gould Investors L.P. owns approximately 19.66%19.9% of our outstanding common shares. In addition, Mr. Gould is an officer and sole shareholder of REIT Management Corp., our advisor.
Jeffrey A. Gould, a trustee and our president and chief executive officer, is a senior vice president and a director of One Liberty Properties, Inc. and a vice president of the managing general partner of Gould Investors L.P. Matthew J. Gould, a trustee and one of our senior vice presidents, is a senior vice president and a director of One Liberty Properties, Inc., and president of the managing general partner of Gould Investors L.P. He is also an executive officer of REIT Management Corp. and of Majestic Property Management Corp. In addition, David W. Kalish, Simeon Brinberg, Mark H. Lundy and Israel Rosenzweig, each of whom is an executive officer of our company, are executive officers of One Liberty Properties, Inc. and of the corporate managing general partner of Gould Investors L.P. Messrs. Kalish and Lundy are also officers of Majestic Property Management Corp.
We and certain related entities, including Gould Investors L.P., One Liberty Properties, Inc., Majestic Property Management Corp. and REIT Management Corp., occupy common office space and share certain services and personnel in common. In fiscal 2009,2010, we reimbursed Gould Investors L.P. $1,002,000$822,000 for common general and administrative expenses, including rent, telecommunication services, computer services, bookkeeping, secretarial and other clerical services and legal and accounting services. ThisThe reimbursement amount includes $83,000$79,000 contributed to the annual rent of $441,000$495,000 paid by Gould Investors L.P., One Liberty Properties, Inc. and related entities to a subsidiary of Gould Investors L.P. which owns the building in which the offices of these entities are located, and an aggregate of $668,000$590,000 allocated to us for services performed by certain executive officers who are engaged by us on a part-time basis, including the amounts allocated for the salary and benefits of David W. Kalish and Mark H. Lundy as set forth in the "Summary Compensation Table" and $128,483$124,901 allocated for the salary of Simeon Brinberg. The allocation of general and administrative expenses is computed in accordance with a shared services agreement, and is based on the estimated time devoted by executive, administrative and clerical personnel to the affairs of each participating entity to the shared services agreement. The services of secretarial personnel generally is allocated on the same basis as that of the executive to whom each secretary is assigned. The amount of general and administrative expenses allocated to us, represents approximately 26.7%24.8% of the total expenses allocated to all entities which are parties to the shared services agreement. We also lease under a direct lease with a subsidiary of Gould Investors L.P. approximately 1,800 square feet of office space at an annual rental of $58,000,$60,000, which is a competitive rent for comparable office space in the area in which the building is located.
We are party to an advisory agreement between us and REIT Management Corp., a company wholly-owned by Fredric H. Gould. Pursuant to the advisory agreement, REIT Management Corp. furnishes advisory and administrative services with respect to our business, including, without limitation, arranging credit lines, interfacing with lending banks, participating in our loan analyses and approvals, providing investment advice, providing assistance with building inspections, construction supervision,
and workout and litigation and foreclosure action support. Pursuant to the advisory agreement, REIT Management Corp. receives an annual fee of6/10 of 1% of our invested assets and our borrowers pay a fee to REIT Management Corp., upon funding a loan commitment, of1/2 of 1% of the total commitment amount, provided that we have received at least a loan commitment fee of 1% from the borrower in any such transaction and any loan commitment fee in excess of 11/2% is to be paid to us. The annual fee to REIT Management Corp. includes non-accruing mortgages receivable. Borrowers may also pay an inspection fee to REIT Management Corp. for building inspections relating to loan originations and to construction loan fundings. The advisory agreement, as extended, will expire on December 31, 2010.April 30, 2011. In fiscal 2009,2010, we paid a fee under the advisory agreement to REIT Management Corp. of $1,173,000$785,000 and our borrowers paid fees to REIT Management Corp. of $44,000.$84,000.
All of the outstanding shares of REIT Management Corp. are owned by Fredric H. Gould. Fredric H. Gould and Matthew J. Gould are executive officers of REIT Management Corp. The total compensation they each received from REIT Management Corp. in fiscal 20092010 is $136,619$93,524 and $117,106,$96,781, respectively. The compensation received in fiscal 20092010 by Jeffrey A. Gould, David W. Kalish and Mark H. Lundy from REIT Management Corp. is set forth in the Summary Compensation Table and the notes to the table. Simeon Brinberg and Israel Rosenzweig, also executive officers of ours, received compensation from REIT Management Corp. in fiscal 20092010 of $19,425$16,000 and $77,775,$49,485, respectively.
Majestic Property Management Corp., a company which is wholly-owned by Fredric H. Gould, provides real property management services and construction supervisory fees, real estate brokerage, mortgage brokerage and construction supervision services for affiliated entities, as well as companies that are non-affiliated entities. In fiscal 2009,2010, we paid Majestic Property Management Corp. fees for management and construction supervisory services totaling $131,000,$54,000, representing, in the aggregate, less than 1%2.0% of the fiscal 20092010 revenues of Majestic Property Management Corp. In addition, in fiscal 2009, six2010, two unconsolidated joint ventures, in which we owned a 50% joint venture interest, paid Majestic Property Management Corp. for management services and brokerage commissions, a total $44,000,$11,500, representing less than 1% of the fiscal 20092010 revenues of Majestic Property Management Corp. Fredric H. Gould received compensation from Majestic Property Management Corp. of $33,100$0 in fiscal 2009,2010, and the following executive officers of ours (some of whom are officers of Majestic Property Management Corp.) received compensation from Majestic Property Management Corp. in fiscal 20092010 as follows: Simeon Brinberg, $44,500;$17,000; Jeffrey A. Gould, $303,250;$176,323; Matthew J. Gould, $228,250;$115,385; David W. Kalish, $131,500;$68,323; Mark H. Lundy, $184,850;$98,380; and Israel Rosenzweig, $142,450.$59,516. None of this compensation is included in the compensation set forth in our Summary Compensation Table. The real property management services provided by Majestic Property Management Corp. to us and our joint ventures include, among other things, rent billing and collection, leasing (including compliance with regulatory statutes and rules; i.e., New York City rent control and rent stabilization rules) and construction supervision of property improvements, maintenance and repairs related to foreclosed properties.
The fees paid by us to REIT Management Corp. and Majestic Property Management Corp. and the expenses reimbursed to Gould Investors L.P. under the shared services agreement were reviewed by our audit committee and non-management trustees.committee. The fees paid to REIT Management Corp. are paid pursuant to the advisory agreement, which was revised and amended effective January 1, 2007, after review by our independent trustees. The expenses reimbursed to Gould Investors L.P. are reimbursed pursuant to the shared services agreement. The fees to Majestic Property Management Corp. are based on fees which would have been charged by unaffiliated persons for comparable services. Simeon Brinberg, Fredric H. Gould, Jeffrey A. Gould, Matthew J. Gould, David W. Kalish, Mark H. Lundy and Israel Rosenzweig also receive compensation from other entities wholly-owned by Fredric H. Gould and parties to the shared services agreement, none of which provided services to us or received compensation from us in fiscal 2009.
Table of Contents2010.
Effective January 1, 2007, we, Gould Investors L.P., One Liberty Properties and Fredric H. Gould (personally) purchased from Citation Shares Sales, Inc., a fractional 6.25% interest in an airplane. We
purchased our fractional interest in order to facilitate property site inspections by our officers, employees and loan underwriters. We purchased 40% of the 6.25% of interest for $172,000 (depreciable over five years), representing our pro rata share of the total purchase price and agreed to pay our pro rata share of the operating costs. The management agreement for the airplane with Citation Sales Shares Inc. is for a period of five years and provides for the monthly operating costs to be adjusted annually, based upon a fixed schedule set forth in the agreement. Georgetown Partners, Inc., managing general partner of Gould Investors L.P., acting as nominee for the purchasers executed the purchase agreement and "management agreement." We are allotted our pro rata share of 250 hours of usage under the purchase agreement for the five years of the agreement. The airplane (or any substitute airplane used pursuant to the terms of the agreement) is used by us for business purposes only. All payments made by us in this transaction are made directly to the seller of the aircraft and the manager, both unrelated parties. At the conclusion of each year, the parties which purchased the fractional interest and pay a pro rata share of operating expenses, "true up" operating expenses, if any participant uses hours in excess of those allotted to it. The purchasers of the 6.25% fractional interest, as a group, have the right to reconvey the interest to the seller at any time, twelve months subsequent to the date that title to the aircraft was acquired, at a price equal to the fair market value of the interest, determined by negotiation and if the parties cannot agree on a price, then independent third party appraisals are to be performed. In fiscal 2009,2010, we incurred net maintenance charges of $92,157$89,000 and expensed depreciation of $35,764$36,000 with respect to the fractional interest.
Our code of business conduct and ethics provides in the "Conflicts of Interest" section that our board of trustees is aware of certain transactions between us and affiliated entities, including the sharing of services pursuant to the terms of a shared services agreement and the provision of services by affiliated entities to us. The provision states that the board has determined that the services provided by affiliated entities to us are beneficial and that we may enter into a contract or transaction with an affiliated entity provided that any such transaction is approved by the audit committee which is satisfied that the fees, charges and other payments made to the affiliated entities are at no greater cost or expense to us then would be incurred if we were to obtain substantially the same services from unrelated and unaffiliated entities. The term "affiliated entities" is defined in the code of business conduct and ethics as all parties to the shared services agreement and other entities in which our officers and trustees have an interest.
Our audit committee is advised of related party transactions which occurred in the prior quarter at each quarterly meeting, reviews the facts of the transactions and either approves/ratifies or disapproves the transactions. If a transaction relates to a member of our audit committee, such member does not participate in the audit committee's deliberations. Our audit committee presents the facts of all related party transactions to our board of trustees on an annual basis. A majority of our independent trustees must approve/ratify or disapprove such related party transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, trustees and persons who beneficially own more than 10% of our common shares to file Initial Reports of Ownership and Reports of Changes in Ownership with the Securities and Exchange Commission and the New York Stock Exchange. Executive officers, trustees and greater than 10% beneficial owners are required by the rules and regulations promulgated pursuant to the Securities Exchange Act of 1934, as amended, to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of copies of these reports filed with the SEC, we believe that none of our trustees, executive officers and greater than 10% beneficial owners have failed to file on a timely basis reports required by Section 16(a) during fiscal 2009, except for (i) one Form 4/A filed on November 2, 2009 for Gould Investors L.P. in connection with a purchase on June 15, 20092010.
SUBMISSION OF SHAREHOLDER PROPOSALS
Our annual meeting of shareholders for the year ending September 30, 20102011 is scheduled to be held in March 2011.2012. In order to have any proposal presented by a shareholder at the meeting included in the proxy statement and form of proxy relating to the 20112012 meeting, the proposal must be received by us no later than November 16, 2010.September 30, 2011.
For any proposal that is not submitted for inclusion in next year's proxy statement, but is instead intended to be presented directly at the 20112012 annual meeting of shareholders, rules and regulations promulgated pursuant to the Securities Exchange Act of 1934, as amended, permit us to exercise discretionary authority to the extent conferred by proxy if we:
Beneficial owners of our common shares who share a single address may receive only one copy of the proxy materials unless their broker, bank or nominee has received contrary instructions from any beneficial owner at that address. This practice, known as "householding," is designed to reduce printing and mailing costs. If any beneficial shareowner(s) at such an address wish to discontinue householding and receive a separate copy of the proxy materials, they may contact Broadridge, either by calling (800) 579-1639,(1) if their shares are held in street name, notify their broker, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.(2) if they are shareholders of record, direct a written request to: BRT Realty Trust, 60 Cutter Mill Road, Suite 303, Great Neck, NY 11021, Attn: Corporate Secretary.
As of the date of this proxy statement, we do not know of any matter other than those stated in this proxy statement which are to be presented at the annual meeting of shareholders. If any other matter should properly come before the meeting, the persons named in the proxy card will vote the common shares represented by it in accordance with their best judgment. Discretionary authority to vote on other matters is included in the proxy.
| By order of the Board of Trustees | ||
Simeon Brinberg,Secretary |
BRT REALTY TRUST 2009 INCENTIVE PLAN,As Amended March 8, 2010
1. Purpose.
The purpose of the BRT Realty Trust 2009 Incentive Plan is to advance the interests and promote the success of BRT Realty Trust by providing an opportunity to officers, trustees, selected employees, and consultants of the Trust to purchase shares of beneficial interest $3.00 par value, of the Trust and/or to receive stock awards provided for in the Plan. By encouraging such share ownership, the Trust seeks to attract, retain and motivate officers, trustees, employees and consultants of experience and ability. It is intended that this purpose will be effected by the granting of the following share-based incentives: (a) Non-statutory Stock Options; (b) Incentive Stock Options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (c) Restricted Shares; and (d) Performance Based Awards.
2. Definitions.
Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether used in the singular or plural).
"Affiliate" of the Trust means any corporation, partnership, or other business association that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Trust.
"Approved Transaction" means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the shareholders of the Trust) shall approve (i) any consolidation or merger of the Trust, or binding share exchange, pursuant to which Beneficial Shares would be changed or converted into or exchanged for cash, securities, or other property, other than any such transaction in which the holders of Beneficial Shares of the Trust immediately prior to such transaction have the same proportionate ownership of the common stock of, and voting power with respect to, the surviving entity immediately after such transaction, (ii) any merger, consolidation, or binding share exchange to which the Trust is a party as a result of which the Persons who are holders of Beneficial Shares of the Trust immediately prior thereto have less than a majority of the combining voting power of the outstanding capital stock of the surviving entity ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of Trustees (directors) immediately following such merger, consolidation, or binding share exchange, (iii) the adoption of any plan or proposal for the liquidation or dissolution of the Trust, or (iv) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Trust.
"Award" means a grant of Options, Restricted Shares or Performance-Based Awards under this Plan.
"Beneficial Shares" means shares of beneficial interest, $3.00 par value of the Trust.
"Board" means the Board of Trustees of the Trust.
"Board Change" means, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the Trustees then still in office who were Trustees at the beginning of the period.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.
"Committee" means the committee of the Board appointed to administer the Plan.
"Control Purchase" means any transaction (or series of related transactions) in which (i) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation, or other entity (other than the Trust, any Subsidiary of the Trust, or any employee benefit plan sponsored by the Trust or any Subsidiary of the Trust) shall purchase any Beneficial Shares of the Trust (or securities convertible into Beneficial Shares of the Trust) for cash, securities, or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board, or (ii) any person (as such term is so defined), corporation, or other entity (other than the Trust, any Subsidiary of the Trust, any employee benefit plan sponsored by the Trust or any Subsidiary of the Trust or any Exempt Person (as defined below)) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Trust representing 20% or more of the combined voting power of the then outstanding securities of the Trust ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of Trustees (calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Trust's securities), other than in a transaction (or series of related transactions) approved by the Board. For purposes of this definition, "Exempt Person" means each of Gould Investors L.P. and Fredric H. Gould, Jeffrey A. Gould, Matthew J. Gould, and the respective successors and assigns, family members, estates, and heirs of an Exempt Person and any trust or other investment vehicle for the primary benefit of any Exempt Person or their family members or heirs. As used with respect to any Person, the term "family member" means the spouse, siblings, and lineal descendants of such Person and lineal descendants of siblings.
"Disability" means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
"Domestic Relations Order" means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.
"Effective Date" means the date the Plan is approved by the Trust's shareholders. The Plan shall become effective immediately upon such approval.
"Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act section shall include any successor section.
"Fair Market Value" of Beneficial Shares on any day means the last sale price (or, if no last sale price is reported, the average of the high bid and low asked prices) for a Beneficial Share on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the principal national securities exchange on which Beneficial Shares are listed on such day or if such shares are not then listed on a national securities exchange, then as reported on Nasdaq or, if such shares are not then listed or quoted on Nasdaq, then as quoted by the National Quotation Bureau Incorporated. If for any day the Fair Market Value of a Beneficial Share is not determinable by any of the foregoing means, then the Fair Market Value for such day shall be determined in good faith by the Committee on the basis of such quotations and other considerations as the Committee deems appropriate.
"Holder" means a Person who has received an Award under this Plan.
"Incentive Stock Option" means an Option intended to meet the requirements of Section 422 of the Code.
"Nasdaq" means The Nasdaq Stock Market
"Non-statutory Stock Option" means an option not intended to meet the requirements of Section 422 of the Code.
"Option" means either an Incentive Stock Option meeting the requirements of Section 422 of the Code or a Non-statutory Stock Option which are not intended to meet the requirements of Section 422 of the Code.
"Participant" means an officer, employee, director or consultant of the Trust who has been granted an Award under the Plan.
"Performance-Based Award" means any Restricted Stock Award or Performance Share Award granted to a Participant that qualifies as "performance based compensation" under Section 162(m) of the Code.
"Performance Criteria" shall mean any, a combination of, or all of the following: revenue, earnings, earnings per share, share price, costs, return on equity, shareholders' equity (book value), per share shareholders' equity (per share book value), asset growth, net operating income (NOI), cash available for distribution (CAD), CAD per share, total shareholder return on an absolute or a peer comparable basis (TSR), return on assets, revenue growth, or goals relating to loan originations or property sales. Performance Goals need not be the same with respect to all Participants and may be established separately for the Trust as a whole, or on a per share basis, and may be based on performance compared to performance by businesses specified by the Committee, or compared to any prior period. All calculations and financial accounting matters relevant to this Plan shall be determined in accordance with GAAP, except as otherwise directed by the Committee.
"Performance Cycle" means one or more periods of time which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to and the payment of a Performance-Based Award. A Performance Cycle shall not be less then twelve months.
"Performance Goals" means for a Performance Cycle, the specific goals established by the Committee for a Performance Cycle based upon the Performance Criteria.
"Person" means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.
"Plan" means this BRT Realty Trust 2009 Incentive Plan, as amended from time to time.
"Restricted Shares" means Beneficial Shares awarded in accordance with the terms ascribed in Section 9.
"Restriction Period" means the period during which Restricted Shares awarded hereunder are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of Performance Goals or the occurrence of other events as determined by the Committee.
"Subsidiary" of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns, directly or indirectly, 50% or more of the voting, capital, or profits interests. An entity shall be deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.
"Trust" means BRT Realty Trust, a Massachusetts Business Trust.
3. Shares Subject to the Plan.
(a) The maximum number of Beneficial Shares with respect to which Awards may be granted under the Plan shall not exceed 500,000 Beneficial Shares, subject to adjustment as provided in paragraph 3(c) hereof. Any Beneficial Share subject to an Award which for any reason (i) expires, is cancelled or is forfeited prior to becoming vested, or (ii) is terminated unexercised, shall again be available for purposes of the Plan. The Beneficial Shares delivered pursuant to Awards granted under the Plan may, in whole or in part, be authorized but unissued shares, treasury shares, or any other issued shares subsequently reacquired by the Trust, including shares purchased in the open market.
(b) The Committee may impose such restrictions on any Beneficial Shares acquired hereunder as it may deem advisable or appropriate, including, but not limited to, restrictions related to applicable Federal securities laws, the requirements of any national securities exchange or system upon which the Beneficial Shares are then listed or traded, and any blue sky or state securities laws.
(c) If the Trust subdivides its outstanding Beneficial Shares into a greater number of Beneficial Shares (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding Beneficial Shares into a smaller number of Beneficial Shares (by reverse stock split, reclassification, or otherwise) or if the Committee determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Beneficial Shares, or other similar corporate event (including mergers or consolidations other than those which constitute Approved Transactions, adjustments with respect to which shall be governed by paragraph 11(b)) affects any Beneficial Shares so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under this Plan, then the Committee, in its sole discretion and in such manner as the Committee may deem equitable and appropriate, may make such adjustments to any or all of (i) the number and kind of shares of stock which thereafter may be awarded, optioned, or otherwise made subject to the benefits contemplated by the Plan, (ii) the number and kind of shares of stock subject to outstanding Awards, and (iii) the purchase or exercise price with respect to any of the foregoing, provided, however, that the number of shares subject to any Award shall always be a whole number. Notwithstanding the foregoing, if all Beneficial Shares are redeemed, then each outstanding Award shall be adjusted to substitute for the shares subject thereto the kind and amount of cash, securities or other assets issued or paid in the redemption of the equivalent number of Beneficial Shares and otherwise the terms of such Award, including in the case of Options or similar rights, the total exercise price shall remain constant before and after the substitution (unless otherwise determined by the Committee and provided in the applicable Agreement). The Committee may, if deemed appropriate, provide for a cash payment to any Holder of an Award in connection with any adjustment made pursuant to this paragraph 3(c). Any such numerical limitations shall be subject to adjustment under this Section only to the extent such adjustment will not affect the status of any Award intended to qualify as "performance-based compensation" under section 162(m) of the Code or the ability to grant or the qualification of Incentive Stock Options under the Plan.
4. Administration.
The Plan shall be administered by the Compensation Committee of the Board unless a different committee is appointed by the Board. The Board may from time to time appoint members of the Committee in substitution for and in addition to members previously appointed and may fill vacancies and may remove members of the Committee. All of the members of the Committee must be Trustees of the Trust. All of the members of the compensation committee or any different Committee approved by the board must be non-employee and outside trustees (directors) under (Treasury Regulation 162(m) and Section 16b-3 of the Exchange Act. The Committee shall have the exclusive authority to administer
and construe the Plan in accordance with its provisions. The Committee's authority shall include, without limitation, the power to (a) determine persons eligible for Awards, (b) prescribe the terms and conditions of the Awards, (c) construe and interpret the Plan, the Awards and any Award Agreement, (d) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith and (e) establish, interpret, amend or revoke any such rules. With respect to any Award that is intended to qualify as "performance-based compensation" within the meaning of section 162(m) of the Code, the Committee shall have no discretion to increase the amount of compensation that otherwise would be due upon attainment of a Performance Goal, although the Committee may have discretion to deny an Award or to adjust downward the compensation payable pursuant to an Award, as the Committee determines in its sole judgment. All determinations and decisions made by the Committee and any of its delegates pursuant to this Section 4 shall be final, conclusive and binding on all Holders, and shall be given the maximum deference permitted by law.
5. Eligible Persons.
In its sole discretion, the Committee may grant (i) Incentive Stock Options, Non-statutory Stock Options, Restricted Shares, or Performance Based Awards, and any combination of the foregoing, to such officers, Trustees, employees and consultants providing services to the Trust or its Subsidiaries ("Eligible Persons") as are selected by the Committee. The maximum number of Beneficial Shares with respect to which Options may be granted to any Eligible Person under this Plan during any calendar year shall be 40,000 Beneficial Shares, the maximum number of Beneficial Shares to which Performance Based Awards may be granted to any Eligible Person under this Plan is 40,000 and the maximum number of Beneficial Shares with respect to which all other Awards may be granted to any Eligible Person under this Plan during any calendar year shall be 30,000, in each case, subject to adjustment as provided in Paragraph 3(c) hereof.
6. Duration of the Plan.
The Plan shall terminate when all Beneficial Shares that may be made subject to Awards under the Plan have been acquired and, in the case of Incentive Stock Options only, ten years from the effective date of this Plan, if earlier, unless terminated earlier pursuant to paragraph 11(j) hereof, and no Awards may be granted thereafter.
7. Stock Options.
(a) Subject to the limitations of the Plan, the Committee shall designate from time to time those Eligible Persons to be granted Options, the time when each Option shall be granted to such Eligible Persons, the number of Beneficial Shares subject to such Options, and, subject to paragraph 7(b), the purchase price of the Beneficial Shares subject to such Option.
(b) The price at which shares may be purchased upon exercise of an Option shall be fixed by the Committee and subject to paragraph 8 hereof may not be less than the Fair Market Value of the Beneficial Shares subject to the Option as of the date the Option is granted.
(c) Subject to the provisions of the Plan with respect to death, retirement, and termination of employment and subject to paragraph 8 hereof, the term of each Option shall be for such period as the Committee shall determine as set forth in the applicable Agreement.
(d) An Option granted under the Plan shall become (and remain) exercisable during the term of the Option to the extent provided in the applicable Agreement and this Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable, in whole or in part, at any time and from time to time during such term; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the
time or times at which such Option may be exercised in whole or in part (without reducing the term of such Option).
(e) (i) An Option shall be exercised by written notice to the Trust upon such terms and conditions as the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Committee may establish from time to time. The method or methods of payment of the purchase price for the shares to be purchased upon exercise of an Option and of any amounts required by paragraph 11(m) shall be determined by the Committee and may consist of (A) cash, (B) check, (C) whole Beneficial Shares, or (D) any combination of the foregoing methods of payment. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash or check, shall be set forth in the applicable Agreement and may be subject to such conditions as the Committee deems appropriate.
(ii) Unless otherwise determined by the Committee and provided in the applicable Agreement, any Beneficial Shares delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and Beneficial Shares withheld for payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.
(iii) The Trust shall effect the issuance or transfer of the Beneficial Shares purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price thereof and of any amounts required by paragraph 11(m), and within a reasonable time thereafter, such issuance or transfer shall be evidenced on the books of the Trust. Unless otherwise determined by the Committee and provided in the applicable Agreement, (A) no Holder or other Person exercising an Option shall have any of the rights of a shareholder of the Trust with respect to shares subject to an Option granted under the Plan until due exercise and full payment has been made, and (B) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.
(f) Unless otherwise determined by the Committee and provided in the applicable Agreement, Options shall not be transferable other than by will or the laws of descent and distribution or pursuant to a Domestic Relations Order, and, except as otherwise required pursuant to a Domestic Relations Order, Options may be exercised during the lifetime of the Holder thereof only by such Holder (or his or her court-appointed legal representative).
(g) Without shareholder approval, (i) the Trust will not reprice, replace or regrant an outstanding Option either in connection with the cancellation of such Option or by amending an Award Agreement to lower the exercise price of such Option, and (ii) the Trust will not cancel outstanding Options in exchange for cash or other Awards.
8. Restrictions on Options.
(a) The aggregate Fair Market Value of the Beneficial Shares with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year shall not exceed $100,000. If an Incentive Stock Option is granted pursuant to which the aggregate Fair Market Value of shares with respect to which it first becomes exercisable in any calendar year by an individual exceeds the aforementioned $100,000 limitation, the portion of such option which is in excess of the $100,000 limitation shall be treated as a Non-statutory Stock Option pursuant to Section 422(d)(1) of the Code. In the event that an individual is eligible to participate in any other share option plan of the Trust or any parent or Subsidiary of the Trust which is also intended to comply with the provisions of Section 422 of the Code, the $100,000 limitation shall, to the extent provided under Section 422 of the Code, apply to the aggregate number of shares for which Incentive Stock Options may be granted under all such plans.
(b) Subject to the conditions in paragraph 8(c) hereof, if applicable, the purchase price per share payable upon the exercise of each Incentive Stock Option granted hereunder shall be as determined by the Committee in its discretion, but shall be at least 100% of the Fair Market Value on the date of grant.
(c) If any Participant, on the date of grant, is the owner of shares (as determined under Sections 422(b)(6) and 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of shares of the Trust or any parent or Subsidiary of the Trust, then the option price per share subject to such Incentive Stock Option shall not be less than 110% of the Fair Market Value, and the term of the option shall not exceed five years after the date of such grant.
(d) The purchase price per share payable upon the exercise of each non-statutory Option granted hereunder shall be determined by the Committee in its discretion, and shall be at least 85% of the Fair Market Value on the date of grant.
9. Restricted Shares.
(a) Subject to the limitations of the Plan, the Committee shall designate those Eligible Persons to be granted awards of Restricted Shares, and shall determine the time when each such Award shall be granted. Beneficial Shares covered by awards of Restricted Shares will be issued at the beginning of the Restriction Period. The Committee shall designate the vesting date or vesting dates for each award of Restricted Shares, and may prescribe other restrictions, terms, and conditions applicable to the vesting of such Restricted Shares in addition to those provided in the Plan. The Committee shall determine the price, if any, to be paid by the Holder for the Restricted Shares. All determinations made by the Committee pursuant to this paragraph 9(a) shall be specified in the Agreement.
(b) The stock certificate or certificates representing Restricted Shares shall be registered in the name of the Holder to whom such Restricted Shares shall have been awarded. During the Restriction Period, certificates representing the Restricted Shares shall bear a restrictive legend to the effect that ownership of the Restricted Shares, and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and the applicable Agreement. Such certificates shall remain in the custody of the Trust or its designee, and the Holder shall deposit with the custodian stock powers or other instruments of assignment, each endorsed in blank, so as to permit retransfer to the Trust of all or any portion of the Restricted Shares that shall be forfeited or otherwise not become vested in accordance with the Plan and the applicable Agreement.
(c) Restricted Shares shall constitute issued and outstanding Beneficial Shares. The Holder will have the right to vote such Restricted Shares, to receive and retain cash dividends and cash distributions, paid or distributed on such Restricted Shares, and to exercise all other rights, powers, and privileges of a Holder of Beneficial Shares with respect to such Restricted Shares; except, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Shares until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled or waived; (ii) the Trust or its designee will retain custody of the stock certificate or certificates representing the Restricted Shares during the Restriction Period as provided in paragraph 9(b) above; (iii) other than cash dividends and cash distributions as provided in this paragraph 9(c) distributions of Beneficial Shares as a dividend in lieu of a cash dividend distribution and as the Committee may designate, the Trust or its designee will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the same restrictions, terms and vesting, and other conditions as are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid, or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in a separate account; (iv) the
Holder may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Shares or any Retained Distributions or his interest in any of them during the Restriction Period; and (v) a breach of any restrictions, terms, or conditions provided in the plan or established by the Committee with respect to any Restricted Shares or Retained Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with respect thereto.
(d) Upon the expiration of the Restriction Period with respect to each award of Restricted Shares and the satisfaction of any other applicable restrictions, terms, and conditions, (i) all or the applicable portion of such Restricted Shares shall become vested, and (ii) any Retained Distributions with respect to such Restricted Shares shall become vested to the extent that the Restricted Shares related thereto shall have become vested, all in accordance with the terms of the applicable Agreement. Any such Restricted Shares and Retained Distributions, that shall not become vested shall be forfeited to the Trust, and the Holder shall not thereafter have any rights (including dividend and voting rights) with respect to such Restricted Shares and Retained Distributions that shall have been so forfeited.
(e) For purposes of qualifying grants of Restricted Shares as "performance-based compensation" under Section 162(m) of the Code, the Committee, in its sole discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Restricted Shares to qualify as "performance-based compensation" under section 162(m) of the Code. In granting Restricted Shares that are intended to qualify under section 162(m) of the Code, the Committee shall follow any procedures determined by it in its sole discretion from time to time to be necessary, advisable or appropriate to ensure qualification of the Restricted Shares under section 162(m) of the Code.
10. Performance-Based Awards.
(a) Eligible Persons selected by the Committee may be granted one or more Performance Based-Awards upon the attainment of the Performance Goals that are established by the Committee and related to one or more of the Performance Criteria, in each case on a specified date or dates or over a Performance Cycle determined by the Committee. The Committee, in its sole discretion, shall determine whether or not a Performance Award is to qualify as "performance based compensation" under Section 162(m) of the Code. The Committee shall define the manner of calculating the Performance Criteria it selects to use for any Performance Cycle. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of the overall performance of the Trust or the performance of an individual. The Committee, in its sole discretion, may adjust or modify the calculation of Performance Goals for such Performance Cycle in order to prevent the dilution or enlargement of the rights of an individual (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development, (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Trust, or the financial statements of the Trust, or (iii) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions;provided however, that the Committee may not exercise such discretion in a manner that would increase the Performance-Based Award granted to a Holder. Each Performance-Based Award shall comply with the provisions set forth below.
(b) With respect to each Performance-Based Award granted to a Holder, if intended by the Committee to qualify as "performance based compensation" under Section 162(m) of the Code, the Committee shall select, within the first 90 days of a Performance Cycle, the Performance Criteria for such grant, and the Performance Goals with respect to each Performance Criteria (including a threshold level of performance below which no amount will become payable with respect to such Award). Each Performance-Based Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable Performance Goals. The Performance Criteria established by the Committee may be different for each Performance Cycle and different Performance Goals may be applicable to Performance-Based Awards to different Eligible Holders.
(c) Following the completion of a Performance Cycle, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if achieved, to calculate and certify in writing the amount of the Performance-Based Awards earned for the Performance Cycle. The Committee shall then determine the actual size of each Participant's Performance-Based Award, and, in doing so, may reduce or eliminate the amount of the Performance-Based Award for a Participant if, in its sole judgment, such reduction or elimination is appropriate.
(d) The maximum number of shares of Beneficial Interest underlying a Performance-Based Award granted to any one Eligible Person for a Performance Cycle is an aggregate of 40,000 Beneficial Shares (subject to adjustment as provided in Sections 3(c) and 10(a) hereof).
11. General Provisions.
(a) If a Holder's employment or other relationship with the Trust shall terminate by reason of death or Disability, unless the applicable Agreement provides otherwise: (i) each outstanding Option granted under the Plan shall immediately become exercisable in full in respect of the aggregate number of shares covered thereby; and (ii) the Restriction Period applicable to each Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares and any related Retained Distributions shall become vested; however with respect to a Performance Based Award, the Performance Based Award shall vest only if the Performance Goals shall have been satisfied and only to the extent set forth in the applicable Agreement.
(b) In the event of any Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule, Restriction Period or Performance Goals in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option, each such outstanding Option granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby; and (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares and any related Retained Distributions shall become vested; however, with respect to a Performance Based Award, the Performance Based Award shall vest only as shall be provided in the applicable Agreement. Notwithstanding the foregoing, unless otherwise provided in the applicable Agreement, the Committee may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective provision has been made for the taking of such action which, in the opinion of the Committee, is equitable and appropriate to substitute a new Award for such Award or to assume such Award and to make such new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the extent applicable, the kind and amount of securities, cash, or other assets into or for which the Beneficial Shares may be changed, converted, or exchanged in connection with the Approved Transaction.
(c) If a Holder's employment shall terminate for any reason, other than death and disability prior to the complete exercise of an Option or during the Restriction Period with respect to any Restricted Shares or during a Performance Cycle with respect to Performance Based Awards, then such Option shall thereafter be exercisable, and the Holder's rights to any unvested Restricted Shares and Retained Distributions, and the Holder's rights to the Beneficial Shares underlying the Performance Based Awards shall thereafter vest, in each case only if and to the extent provided in the applicable Agreement;provided, however, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Option may be exercised after the scheduled expiration date thereof; (ii) the Option shall remain exercisable for a period of at least one year following such termination
(but not later than the scheduled expiration of such Option); and (iii) any termination of the Holder's employment for cause will be treated in accordance with the provisions of paragraph 11(d).
(d) If a Holder's employment or relationship with the Trust or a Subsidiary of the Trust shall terminate for cause by the Trust or such Subsidiary during the Restriction Period with respect to any Restricted Shares, or prior to the expiration of a Performance Cycle with respect to any Performance Based Awards or prior to the exercise of any Option (for these purposes, cause shall have the meaning ascribed thereto in any employment agreement to which such Holder is a party or, in the absence thereof, shall include, but not limited to, insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind, and the refusal to perform his duties and responsibilities for any reason (other than illness or incapacity) then, unless otherwise determined by the Committee and provided in the applicable Agreement, (i) all Options shall immediately terminate and (ii) such Holder's rights to all Restricted Shares and Retained Distributions and all shares underlying Performance Based Awards shall be forfeited immediately.
(e) Unless otherwise determined by the Committee and provided in the applicable Agreement, Awards made under the Plan shall not be affected by any change of employment so long as the Holder continues to be an employee of the Trust or any Subsidiary of the Trust.
(f) Nothing contained in the Plan or in any Award, and no action of the Trust or the Committee with respect thereto, shall confer or be construed to confer on any Holder any right to continue in the employ of the Trust or any of its Subsidiaries or interfere in any way with the right of the Trust or any Subsidiary of the Trust to terminate the employment of the Holder at any time, with or without cause, subject, however, to the provisions of any employment agreement between the Holder and the Trust or any Subsidiary of the Trust.
(g) Except as set forth herein, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the Person entitled to such benefits.
(h) Each grant of an Option under the Plan shall be evidenced by a stock option agreement; each award of Restricted Shares shall be evidenced by a restricted shares agreement; and each Performance Based Award shall be evidenced by a Performance Based Award Agreement, each in such form and containing such terms and provisions not inconsistent with the provisions of the Plan as the Committee from time to time shall approve;provided, however, that if more than one type of Award is made to the same Holder, such Awards may be evidenced by a single Agreement with such Holder. Each grantee of an Option, Restricted Shares or Performance Based Awards shall be notified promptly of such grant, and a written Agreement shall be executed and delivered by the Trust. Any such written Agreement may contain (but shall not be required to contain) such provisions as the Committee deems appropriate (i) to insure that the penalty provisions of Section 4999 of the Code will not apply to any stock or cash received by the Holder from the Trust or (ii) to provide cash payments to the Holder to mitigate the impact of such penalty provisions upon the Holder. Any such Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by paragraph 11(j) (ii).
(i) Every Holder may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Committee on a form to be prescribed by it, provided that no such designation shall be effective unless so filed prior to the death of such Holder.
(j) (i) Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the Plan on or after the tenth anniversary of the Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of the Effective Date and may, from time to time,
be suspended or discontinued or modified or amended if such action is deemed advisable by the Committee.
(ii) No termination, modification or amendment of the Plan may, without the consent of the Holder to whom any Award shall theretofore have been granted, adversely affect the rights of such Holder with respect to such Award. No modification, extension, renewal, or other change in any Award granted under the Plan shall be made after the grant of such Award, unless the same is consistent with the provisions of the Plan. With the consent of the Holder and subject to the terms and conditions of the Plan, the Committee may amend outstanding Agreements with any Holder, including, without limitation, any amendment which would (A) accelerate the time or times at which the Award may be exercised and/or (B) extend the scheduled expiration date of the Award. Without limiting the generality of the foregoing, the Committee may, but solely with the Holder's consent unless otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a new Award in substitution therefore, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is made. Nothing contained in the foregoing provisions of this paragraph 11(j)(ii) shall be construed to prevent the Committee from providing in any Agreement that the rights of the Holder with respect to the Award evidenced thereby shall be subject to such rules and regulations as the Committee may, subject to the express provisions of the Plan, adopt from time to time or impair the enforceability of any such provision.
(k) The amendment, suspension or termination of the Plan shall not, without the consent of the Holder, alter or impair any rights or obligations under any Award theretofore granted to such Holder. No Award may be granted during any period of suspension or after termination of the Plan.
(l) The obligation of the Trust with respect to Awards shall be subject to all applicable laws, rules, and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange or association on which the Beneficial Shares may be listed or quoted. For so long as any Beneficial Shares are registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (i) to maintain a registration statement in effect under the Securities Act of 1933 with respect to all Beneficial Shares that may be issued to Holders under the Plan and (ii) to file in a timely manner all reports required to be filed by it under the Exchange Act.
(m) The Trust's obligation to deliver Beneficial Shares or pay cash in respect of any Award under the Plan shall be subject to applicable federal, state, and local tax withholding requirements. Federal, state, and local withholding tax due at the time of an Award, upon the exercise of any Option or upon the vesting of, or expiration of restrictions with respect to, Restricted Shares may, in the discretion of the Committee, be paid in Beneficial Shares already owned by the Holder or through the withholding of shares otherwise issuable to such Holder, upon such terms and conditions as the Committee shall determine. If the Holder shall fail to pay, or make arrangements satisfactory to the Committee for the payment to the Trust of, all such federal, state and local taxes required to be withheld by the Trust, then the Trust shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Holder an amount equal to any federal, state, or local taxes of any kind required to be withheld by the Trust with respect to such Award.
(n) The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and the awarding of stock and cash otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
(o) By acceptance of an Award, unless otherwise provided in the applicable Agreement, each Holder shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as salary, compensation, or bonus in determining the amount of any payment under any pension, retirement, or other employee benefit plan, program, or policy of the Trust or any Subsidiary of the Trust. In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Trust on the life of the Holder which is payable to such beneficiary under any life insurance plan covering employees of the Trust or any Subsidiary of the Trust.
(p) Neither the Trust nor any Subsidiary of the Trust shall be required to segregate any cash or any Beneficial Shares which may at any time be represented by Awards, and the Plan shall constitute an "unfunded" plan of the Trust. Neither the Trust nor any Subsidiary of the Trust shall, by any provisions of the Plan, be deemed to be a trustee of any Beneficial Shares or any other property, and the liabilities of the Trust and any Subsidiary of the Trust to any employee pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to the Plan, and the rights of any employee, former employee, or beneficiary under the Plan shall be limited to those of a general creditor of the Trust or the applicable Subsidiary of the Trust as the case may be. In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet the obligations of the Trust under the Plan, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
(q) The Plan shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusettes.
(r) The delivery of any Beneficial Shares and the payment of any amount in respect of an Award shall be for the account of the Trust or the applicable Subsidiary of the Trust, as the case may be, and any such delivery or payments shall not be made until the recipient shall have paid or made satisfactory arrangements for the payment of any applicable withholding taxes as provided in Paragraph 11(m).
(s) Each certificate evidencing Beneficial Shares subject to an Award shall bear such legends as the Committee deems necessary or appropriate to reflect or refer to any terms, conditions, or restrictions of the Award applicable to such shares, including, without limitation, any to the effect that the shares represented thereby may not be disposed of unless the Trust has received an opinion of counsel, acceptable to the Trust, that such disposition will not violate any federal or state securities laws.
(t) The grant of Awards pursuant to the Plan shall not affect in any way the right of power of the Trust to make reclassifications, reorganizations, or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell, or otherwise dispose of all or any part of its business or assets.
CHARTERAUDIT COMMITTEE OF THE BOARD OF TRUSTEES
I. Purpose
The Audit Committee (the "Committee") is a committee of the Board of Trustees (the "Board"). The primary function of the Committee is to represent and assist the Board with the oversight of: (i) the quality and integrity of the Trust's financial statements and internal controls, (ii) the Trust's compliance with legal and regulatory requirements, (iii) the independent auditor's qualifications and independence, and (iv) the performance of the Trust's internal audit function and independent auditors. In addition, the Committee will prepare the audit committee report required by the Securities and Exchange Commission for inclusion in the Trust's annual proxy statement. The Committee will fulfill its responsibilities by carrying out its activities and duties consistent with this Charter. The Committee shall be given full and direct access to the Trust's management, Trust's employees, independent auditors and the firm and/or person(s) performing the internal audit function, as necessary to carry out these responsibilities.
II. Composition
The Committee shall be comprised of three or more Trustees. The members of the Committee shall be nominated by the Nominating and Corporate Governance Committee of the Board and elected by the Board at the annual organizational meeting to one-year terms or until their successors are elected and qualified. Each member of the Committee shall satisfy the independence requirements of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 and applicable rules and regulations of the Securities and Exchange Commission, and be financially literate, as determined by the Board in its business judgment.
At least one member of the Committee shall be a "financial expert," as determined by the Board in compliance with the Sarbanes-Oxley Act of 2002, the New York Stock Exchange listing standards and the rules and regulations of the Securities and Exchange Commission. In addition, at least one member of the Committee shall be determined by the Board, in its business judgment, as having accounting or related financial management expertise. If the Board determines that a Committee member is a "financial expert," it may presume that such member has accounting or related financial management expertise. The designation of one or more members as a "financial expert" shall not impose any duties, obligations or liabilities on such member greater than the regular duties, obligations, and liabilities of a member of the Committee or the Board.
No trustee shall simultaneously serve on the audit committee of more than two other public companies, unless the Board has determined that such simultaneous service will not impair the ability of such trustee to effectively serve on the Trust's Committee and discloses such determination in the Trust's annual proxy statement.
Unless a Chair of the Committee is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
No consulting, advisory or compensatory fees shall be paid by or for the Trust to any member of the Committee or to any entity with which he or she is affiliated, other than Trustee and committee fees payable by the Trust in the regular course. Board and committee fees may be payable in cash, shares of capital stock, options and/or in kind. Committee members may receive additional compensation from the Trust for their service on the Committee.
III. Meetings
The Committee shall meet once every quarter, or more frequently if circumstances require, to discuss with management the annual or quarterly financial statements, as the case may be. The timing of the meetings shall be determined by the Committee. However, the Committee will meet at any mutually convenient time that management, the independent auditors or the firm and/or person(s) performing the internal audit function believe communication with the Committee is required. As part of its job to foster open communication, the Committee shall meet periodically with management, the Board, the independent auditors and the firm and/or person(s) performing the internal audit function in separate executive sessions to discuss any matter which the Committee or each of these groups believe should be discussed privately. Except for executive sessions of the Committee, minutes shall be kept of each meeting of the Committee.
IV. Committee Responsibilities and Duties
The Committee shall have the following duties and responsibilities:
GENERAL RESPONSIBILIITES:
To report Committee activities to the Board on a regular basis and make appropriate recommendations.
To inquire as to the independence of the independent auditors. As part of this responsibility, the Committee will ensure that the independent auditors submit on a periodic basis to the Committee a formal written statement delineating all relationships between such auditors and the Trust. The Committee is responsible for actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors and for recommending that the Board take appropriate action in response to the independent auditors' report to satisfy itself of the independent auditors' independence.
To conduct or authorize investigations into matters within the Committee's scope of responsibility. The Committee is authorized to the extent it deems necessary or appropriate, at the Trust's expense and without Board approval, to retain independent counsel, accountants or other advisors to assist the Committee in fulfilling its duties. The Committee may request any officer, trustee or employee of the Trust or the Trust's outside counsel, independent auditors or the firm and/or person(s) performing the internal audit function to attend any meeting of the Committee or to meet with any members of or consultants to the Committee.
To review and approve, specifically and in advance, any permitted non-audit services proposed to be provided to the Trust by its independent auditors, and ensure that such services do not interfere with the independence of such auditors, and do not give rise to an appearance of impropriety. Pre-approval of permitted non-audit services may be delegated to the Chairperson or another member of the Committee.
To consider policies and procedures for audit partner rotation on a five-year cycle.
To establish procedures for the receipt, retention and treatment of complaints received by the Trust regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding accounting, auditing or internal control issues.
To meet separately and periodically, with management, the independent auditors and the firm and/or person(s) performing the internal audit function.
To establish and review hiring policies regulating the hiring by the Trust of employees or former employees of the Trust's independent auditors.
To review and approve all related party transactions involving the Trust and any affiliated company, executive officer, trustee or employee, or family member of any of the foregoing in accordance with the Trust's policies in effect from time to time.
RESPONSIBILITIES FOR ENGAGING INDEPENDENT AUDITORS AND REVIEWING INTERNAL AUDIT FUNCTION:
To be directly and solely responsible for the appointment, retention and evaluation of the independent auditors and to directly and be solely responsible for the approval of any replacement of the independent auditors. The Committee also will review and approve fees paid to the independent auditors, including audit and non-audit fees.
To confirm and assure the objectivity of the internal audit function and the independence of independent auditors, including a review of all services provided by the independent auditors.
To obtain from the independent auditors a timely report relating to the Trust's annual audited financial statements describing all critical accounting policies and practices used, all alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and any material communications between the independent auditors and management.
To inquire of the Trust's chief executive officer and chief financial officer as to the existence of any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Trust's ability to record, process, summarize and report financial information, and as to the existence of any fraud, whether or not material, that involves management or other employees who have a significant role in the Trust's internal control over financial reporting.
RESPONSIBILITIES REGARDING THE ANNUAL AUDIT, INTERNAL AUDITS AND QUARTERLY AND ANNUAL FINANCIAL STATEMENTS:
At least annually, the Committee will obtain and review a report by the independent auditors describing: the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor's independence) all relationships between the independent auditors and the Trust.
To review with the independent auditor any audit problems or difficulties and management's response.
The Committee will advise management, the independent auditors and the firm and/or person(s) performing the internal audit function that they must provide the Committee with a timely notification and analysis of significant financial reporting issues.
The Committee will review and discuss with management and the independent auditors each quarterly report filed with the Securities and Exchange Commission (Form 10-Q). Each Form 10-Q must be approved by the Committee prior to filing, either at a meeting, or by a telephone conference call in which management and the independent auditors participate.
The Committee will review and discuss with management and the independent auditors the annual report filed with the Securities and Exchange Commission (Form 10-K) and other published documents containing the Trust's financial statements. Each Form 10-K must be approved by the Committee prior to filing, either at a meeting, or by a telephone conference call in which management and the independent auditors participate.
THE COMMITTEE WILL DISCUSS THE FOLLOWING WITH THE INDEPENDENT AUDITORS:
The planned arrangements and written scope of the annual audit.
The adequacy of the Trust's internal controls, including computerized information systems controls and security.
Any significant findings and recommendations made by the independent auditors together with management's response.
The need for the independent auditors to assess their responsibility for detecting accounting and financial reporting errors, fraud, and defalcations, illegal acts and noncompliance with the Trust's Code of Business Conduct and Ethics and regulating requirements.
The need for changes or improvements, including improvements in efficiency, in financial or accounting practices or controls.
THE COMMITTEE WILL DISCUSS WITH MANAGEMENT AND THE INDEPENDENT AUDITORS:
The Trust's annual financial statements and related notes and quarterly financial statements, including all of the Trust's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
The independent auditor's audit of and report on the financial statements.
The independent auditor's qualitative judgment about the quality, not just the acceptability, of the accounting principles and financial disclosures.
The matters required to be discussed by Statement on Auditing Standards No. 61, as it may be amended, including but not limited to:
Methods used to account for significant unusual transactions.
Effect of significant accounting policies in controversial or emerging areas.
Process and basis for sensitive accounting estimates.
Disagreements between independent auditors and management over accounting or disclosure matters.
Any significant matters arising from any audit relating to the Trust's financial statements, and discuss any difficulties the independent auditors encountered in the course of the audit, including any restrictions on their activities or access to requested information, and any significant disagreements with management. The Committee is responsible for the resolution of disagreements between management and the Trust's independent auditors regarding financial reporting.
Review and discuss with management, the independent auditors and the firm and/or person(s) performing the internal audit function the Trust's policies with respect to risk assessment and risk management and review contingent liabilities and risks that may be material to the Trust.
Review and discuss with management and the independent auditor the responsibilities, organization, budget, staffing and qualification of the Trust's internal audit function, including the appointment, reassignment, or discharge of any internal auditors employed by the Trust or any outsourced provider of internal auditing services, as the case may be.
Discuss with the firm and/or person(s) performing the internal audit function any audit problems, significant difficulties or disagreements with management encountered in the course of the internal audit, including any restrictions on the scope of the audit or access to information.
Discuss with the Trust's general counsel any significant legal, compliance or regulatory matters that may have a material adverse effect on the Trust's financial statements or business or compliance policies, including material notices to or inquiries from governmental agencies.
PERIODIC RESPONSIBILITIES:
Review annually the Committee's Charter for adequacy and recommend any changes to the Board.
Meet with the independent auditors and management in separate executive sessions to discuss matters that should be discussed privately with the Committee.
Review the Committee's methodology and functions at least annually; evaluate its performance and institute appropriate changes to improve performance or reflect changes in the business environment.
Prepare an annual Committee report or other proxy statement disclosure about the Committee in accordance with rules and regulations of the Securities and Exchange Commission and other applicable law.
Include a copy of the Committee Charter as an appendix to the proxy statement at least once every three years.
Review and update periodically the Trust's policies and procedures that pertain to the Trust's financial reporting process, system of internal controls, and compliance and ensure that management has established a system to enforce these policies.
Discuss with management the Trust's earnings press releases prior to issuance, as well as financial information and earnings guidance provided to analysts and rating agencies, if any.
Perform an annual self-evaluation of its performance and compliance with the Charter and present its findings to the Board.
V. Miscellaneous
The management of the Trust is responsible for the preparation, presentation and integrity of the Trust's financial statements and for the effectiveness of internal control over financial reporting. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for planning and carrying out a proper audit of the Trust's annual financial statements, reviews of the Trust's quarterly financial statements prior to their filing, and annually auditing management's assessment of the effectiveness of internal control over financial reporting, and other procedures. In fulfilling their duties hereunder, it is recognized that members of the Committee are not (i) performing the functions of auditors or accountants, and therefore, it is not their responsibility to conduct "field work" or other types of auditing or accounting reviews and (ii) employees, and rely, without independent verification, on the information provided to them and the representations made to them by management, the independent auditors and the firm and/or firm and/or person(s) performing the internal audit function.
The Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting policies, appropriate internal controls and procedures or appropriate disclosure controls and procedures, or that the Trust's reports and information provided under the Securities Exchange Act of 1934, as amended, are accurate and complete. Furthermore, the Committee's consideration and discussions referred to in this Charter do not assure that the audit of the Trust's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles, that the Trust's independent auditors are in fact "independent," or that the matters required to be certified by the Trust's chief executive officer, chief financial officer or other officers of the Trust under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations of the Securities and Exchange Commission have been properly and accurately certified.
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| ANNUAL MEETING OF SHAREHOLDERS OF BRT REALTY TRUST March |
| Signature of Shareholder Date: Signature of Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. 1. Election of Trustees |
