<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6 (e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-II(c) or Rule 14a-12
IRT PROPERTY COMPANY
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[ ] Fee paid previously with preliminary materials.
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE> 3
IRT PROPERTY COMPANY
200 GALLERIA PARKWAY, SUITE 1400
ATLANTA, GEORGIA 30339
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 18, 1998
To the Shareholders of IRT Property Company:
The Annual Meeting of Shareholders (the "Annual Meeting") of IRT Property
Company, a Georgia corporation (the "Company"), will be held at the Cobb
Galleria Centre, Two Galleria Parkway, Room 105, Atlanta, Georgia, on Thursday,
June 18, 1998, at 10:00 a.m. local time, for the following purposes:
1. To elect seven directors to serve until the annual meeting of
shareholders in 1999 or, in the case of each director, until his or her
successor is duly elected and qualified;
2. To approve the IRT Property Company 1998 Long-Term Incentive Plan;
and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Only shareholders of record at the close of business on May 6, 1998 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. A complete list of shareholders entitled to vote at the Annual Meeting
will be available at the Annual Meeting.
The Company's Proxy Statement is enclosed. The Company's Annual Report for
the fiscal year ended December 31, 1997, was mailed to shareholders on April 22,
1998.
By Order of the Board of Directors
W. BENJAMIN JONES III
Executive Vice President
Atlanta, Georgia
May 22, 1998
YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY IN THE
ENVELOPE PROVIDED SO THAT YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH YOUR
WISHES. RETURNING YOUR PROXY DOES NOT DEPRIVE YOU OF YOUR RIGHT TO ATTEND THE
MEETING AND VOTE YOUR SHARES IN PERSON.
<PAGE> 4
IRT PROPERTY COMPANY
200 GALLERIA PARKWAY, SUITE 1400
ATLANTA, GEORGIA 30339
---------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 18, 1998 AND ANY ADJOURNMENTS THEREOF
---------------------
APPROXIMATE DATE PROXY MATERIALS FIRST SENT TO SHAREHOLDERS:
MAY 22, 1998
GENERAL INFORMATION
The enclosed proxy is solicited by the Board of Directors of IRT Property
Company (the "Company") for use at the Annual Meeting of Shareholders of the
Company to be held at 10:00 a.m. local time at the Cobb Galleria Centre, Two
Galleria Parkway, Room 105, Atlanta, Georgia, on June 18, 1998, and any
adjournments or postponements thereof (the "Annual Meeting"). The enclosed proxy
is revocable at any time before its exercise at the Annual Meeting by (i)
written notice to the Executive Vice President of the Company, (ii) properly
submitting to the Company a duly executed proxy bearing a later date, or (iii)
attending the Annual Meeting and voting in person.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with directions
given. Shareholders may vote in favor of all nominees for election as directors
to serve until the annual meeting of shareholders in 1999, withhold their votes
as to all nominees, or withhold their votes as to specific nominees. If a
shareholder does not specify otherwise, the shares represented by his or her
proxy will be voted "FOR" the election of all nominees.
As of May 6, 1998 (the "Record Date"), 32,931,557 shares of Company common
stock, $1.00 par value (the "Common Stock"), were outstanding. Each outstanding
share of Common Stock is entitled to one vote. Only shareholders of record at
the close of business on the Record Date are entitled to vote or to execute
proxies with respect to the Annual Meeting. No shares of the Company's preferred
stock, $1.00 par value (the "Preferred Stock"), were outstanding as of the
Record Date.
Pursuant to the Company's Articles of Incorporation and By-Laws, the
holders of shares entitled to cast a majority of the votes on the matters at
issue at the Annual Meeting, present in person or by proxy, will constitute a
quorum. For the purpose of determining a quorum, abstentions and broker
non-votes will be counted as present. A broker non-vote occurs when shares held
by brokers or nominees for beneficial owners are voted on some matters, but not
on others.
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ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Board of Directors is elected at each annual meeting of shareholders
for a one-year term. Seven incumbent directors have been nominated and have
agreed to serve as directors if elected. Mr. James H. Nobil, a Company director,
retired on May 5, 1998 and will not stand for reelection at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" DONALD W. MACLEOD; THOMAS H.
MCAULEY; MARY M. THOMAS; PATRICK L. FLINN; HOMER B. GIBBS, JR.; SAMUEL W.
KENDRICK; AND BRUCE A. MORRICE AS DIRECTORS TO HOLD OFFICE UNTIL THE ANNUAL
MEETING OF SHAREHOLDERS IN 1999 AND UNTIL THEIR SUCCESSORS ARE ELECTED AND
QUALIFIED. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE SHARES OF
COMMON STOCK CAST AT THE ANNUAL MEETING IS REQUIRED WITH RESPECT TO THE ELECTION
OF THE NOMINEES. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE NO EFFECT ON THE
ELECTION OF DIRECTORS.
CERTAIN INFORMATION CONCERNING NOMINEES AND NAMED EXECUTIVE OFFICERS
The following table sets forth the name and age of each nominee for
election to the Board of Directors of the Company and information as of April 1,
1998 regarding the beneficial ownership of the Company's Common Stock by each
director of the Company, by the Named Executive Officers (as hereinafter
defined), and by all directors and executive officers as a group. The amounts
shown are based upon information furnished by the individuals named. Management
is not aware of any person that beneficially owns 5% or more of the Company's
Common Stock.
<TABLE>
<CAPTION>
COMPANY SHARES
OWNED PERCENTAGE OF
BENEFICIALLY AND OUTSTANDING
NAME CURRENT POSITION NATURE OF BENEFICIAL SHARES OWNED
(DIRECTOR SINCE) AGE WITH COMPANY OWNERSHIP(L) BENEFICIALLY(1)
- ---------------- --- ------------------------ -------------------- ---------------
<S> <C> <C> <C> <C>
NOMINEES
Donald W. MacLeod(2)................. 72 Chairman of the Board 120,080(5) (8)
(1969)
Thomas H. McAuley(2)................. 53 President and Chief 98,050(6) (8)
(1987) Executive Officer,
Director
Mary M. Thomas(2).................... 51 Executive Vice President 82,128(6) (8)
(1994) and Chief Financial
Officer, Director
Patrick L. Flinn..................... 56 Director 2,250(6) (8)
(1997)
Homer B. Gibbs, Jr.(3)(4)............ 66 Director 31,216(6)(7) (8)
(1976)
Samuel W. Kendrick(2)(4)............. 58 Director 7,940(6) (8)
(1993)
Bruce A. Morrice(2)(3)(4)............ 64 Director 17,772(6)(7) (8)
(1986)
</TABLE>
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<TABLE>
<CAPTION>
COMPANY SHARES
OWNED PERCENTAGE OF
BENEFICIALLY AND OUTSTANDING
NAME CURRENT POSITION NATURE OF BENEFICIAL SHARES OWNED
(DIRECTOR SINCE) AGE WITH COMPANY OWNERSHIP(L) BENEFICIALLY(1)
- ---------------- --- ------------------------ -------------------- ---------------
<S> <C> <C> <C> <C>
OTHER NAMED EXECUTIVE OFFICERS
W. Benjamin Jones III................ 48 Executive Vice President 64,028(6) (8)
Robert E. Mitzel..................... 49 Executive Vice President 63,722(6)(7) (8)
All Directors, Nominees, and
Executive
Officers (13 Persons) as a Group... 611,962 1.84%(9)
</TABLE>
- ---------------
(1) The amounts and percentages of the Company's Common Stock beneficially owned
are reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. The beneficial owner
has both voting and investment power over the shares, unless otherwise
indicated.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee. The Compensation Committee also acts
as the Stock Option Committee.
(5) This amount includes 7,233 shares owned by Mr. MacLeod's wife. Mr. MacLeod
is deemed to be the beneficial owner of such shares under the regulations of
the SEC, but he disclaims such beneficial ownership.
(6) The number of shares reflected as being owned includes 80,800 shares for Mr.
McAuley; 53,800 shares for Ms. Thomas; 1,250 shares for Mr. Flinn; 11,250
shares each for Messrs. Gibbs and Morrice; 6,250 shares for Mr. Kendrick,
51,718 shares for Mr. Jones; and 52,675 shares for Mr. Mitzel, which each
has the right to acquire pursuant to the Company's Stock Option Plan.
(7) The number of shares reflected as being beneficially owned by Mr. Morrice
includes 2,966 shares owned by a marital trust, over which he has no voting
or investment power; and with regard to Messrs. Gibbs and Mitzel includes
2,500 and 392 shares, respectively, owned by their wives. Messrs. Morrice,
Gibbs, and Mitzel are deemed to be beneficial owners of such shares under
the regulations of the SEC, but they disclaim such beneficial ownership.
(8) Less than 1%.
(9) This amount includes 270,293 shares which the Company's executive officers
have the right to acquire and 30,000 shares which the Company's
non-management directors have the right to acquire pursuant to the Company's
Stock Option Plan. Additionally, this amount includes 10,125 shares owned by
spouses of the directors and executive officers and 2,966 shares owned by
trusts. The directors and executive officers are deemed to be the beneficial
owners of such shares under the regulations of the SEC, but they disclaim
beneficial ownership in such shares. This amount also includes 50,875 shares
beneficially owned as of April 1, 1998, by Lee A. Harris, Senior Vice
President and Secretary of the Company, who died April 16, 1998, and 40,601
shares beneficially owned by Mr. James H. Nobil, who is not standing for
reelection as a director.
COMMITTEES OF THE BOARD OF DIRECTORS, MEETINGS AND COMPENSATION OF DIRECTORS
In accordance with the By-Laws of the Company, the Board of Directors has
established an Executive Committee, an Audit Committee, and a Compensation
Committee (which also serves as a Stock Option Committee). The members of these
Committees are indicated in the preceding section of this Proxy Statement.
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The Executive Committee may exercise the powers of the Board of Directors
except with respect to a limited number of matters which include (i) amending
the Articles of Incorporation or the By-Laws of the Company, (ii) adopting a
plan of merger or consolidation, (iii) the sale, lease, exchange, or other
disposition of all or substantially all the property and assets of the Company,
and (iv) a voluntary dissolution of the Company or a revocation thereof. The
Executive Committee may also serve as a Nominating Committee which serves the
limited purpose of nominating persons to serve as directors of the Company. The
full Board of Directors, however, currently acts as the Nominating Committee
and, as such, nominated the seven persons named in the foregoing table. No
recommendations were submitted by shareholders with respect to the nomination of
directors, and the Nominating Committee has no policy with respect to whether or
not it would consider such recommendations by shareholders. The Executive
Committee held one meeting during 1997.
The Audit Committee, composed entirely of outside directors, approves any
transactions involving related parties, recommends to the Board of Directors the
engagement of the independent auditors of the Company, and reviews with the
independent auditors the scope and results of the Company's audits, the
Company's internal accounting controls and the professional services furnished
by the independent auditors to the Company. The Audit Committee met once in
1997.
The Compensation Committee, composed entirely of outside directors,
determines the salary and other compensation to be paid to the executive
officers of the Company. It also acts as the Stock Option Committee and is
responsible for the administration of the Company's Stock Option Plan. The
Compensation Committee met once in 1997.
During the Company's fiscal year ended December 31, 1997, the Company's
Board of Directors held eight meetings. All of the directors attended more than
75% of the aggregate of all meetings of the Board of Directors and the
committees on which they served during 1997.
The Company's policy regarding the compensation of directors is to pay
directors who are not also employees of the Company a retainer fee of $1,000 per
month; $1,000 plus expenses for each Board meeting attended; and $500 plus
expenses for each Executive Committee, Audit Committee or Compensation Committee
meeting attended. Directors' fees in 1997 aggregated $94,500, a portion of which
was deferred. In addition, under the Company's 1989 Stock Option Plan, each
non-employee director receives nonqualified stock options to purchase 1,250
shares of the Company's Common Stock upon his or her election and each annual
re-election to the Board.
On December 22, 1995, the Company adopted the IRT Property Company Deferred
Compensation Plan for Outside Directors. Such plan allows non-employee directors
to defer retainer and/or meeting fees to the earlier of the date selected by the
director or the date the director ceases to be a board member. Any such fees
deferred will accrue interest monthly at an annual rate based on 13-week
Treasury Bills. During 1997, $26,000 in fees were deferred in accordance with
this plan.
There is no family relationship between any of the directors and/or
executive officers of the Company.
PRINCIPAL OCCUPATIONS OF NOMINEES FOR ELECTION DURING THE PAST FIVE YEARS
The principal occupations during the past five years of the nominees for
election as directors of the Company are as follows:
Mr. MacLeod has been Chairman of the Board of Directors of the Company
since its inception in 1979 and was Chief Executive Officer from June 1979 to
January 1, 1997. He also served as President from June 1979 to October 1995. He
previously served as President and Managing Trustee of the Company's
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<PAGE> 8
predecessor, Investors Realty Trust. Mr. MacLeod retired from the day-to-day
operations of the Company on June 30, 1997. He is a director of Abrams
Industries, Inc., a real estate development and contracting company, and a
member of the American Institute of Real Estate Appraisers ("M.A.I.").
Mr. McAuley has been President of the Company since October 1, 1995 and was
named Chief Executive Officer of the Company on January 1, 1997. He was regional
partner of Faison Associates, Inc. ("Faison"), a real estate development and
management company headquartered in Charlotte, North Carolina, from May 1993
through September 1995. From June 1988 to May 1993, he served as Chairman and
Chief Executive Officer and part owner of Ewing Southeast Realty, Inc.
("Ewing"), an Atlanta, Georgia real estate company. Faison purchased Ewing on
May 1, 1993, the date Mr. McAuley became a Faison partner. Prior to 1988, Mr.
McAuley held various senior management positions, including serving as President
and a director of Ewing and Johnstown Mortgage Company, an Atlanta mortgage
banking company.
Ms. Thomas has been Executive Vice President of the Company since May 1991
and Chief Financial Officer of the Company or its predecessor, Investors Realty
Trust, since 1976. She served as Senior Vice President from May 1987 to May 1991
and Vice President from 1981 to 1987.
Mr. Flinn is currently occupied as a private investor and serves as a
director of Metrotrans Corporation. He retired from BankSouth Corporation after
serving as Chairman and Chief Executive Officer from August 1991 to January
1996.
Mr. Gibbs is currently occupied as a private investor. He retired as Vice
Chairman of Mid-South Financial Corporation, a Nashville, Tennessee mortgage
banking firm, on January 1, 1994, a position he held since 1986. He was
President of Gibbs and Company, a Nashville, Tennessee mortgage banking firm,
from 1965 through 1986.
Mr. Kendrick retired from Ruddick Investment Company ("RIC") after serving
as President from November 1994 to April 1998. RIC, an affiliate of Harris
Teeter, Inc. ("Harris Teeter"), is involved in real estate development and
venture capital investment. Mr. Kendrick served as Executive Vice President of
Harris Teeter, a supermarket chain with principal executive offices in
Charlotte, North Carolina, from July 1992 to October 1994. He was Senior Vice
President/Finance and Administration for Harris Teeter from October 1989 to
1992, Vice President/ Real Estate and Construction from February 1986 to 1989,
and Vice President/Real Estate from February 1984 to 1986.
Mr. Morrice is Managing Director of Morrice Financial Corp., a Dallas,
Texas real estate finance and investment firm. He was President of Lion Service
Corp., a Dallas, Texas service corporation of Federated Savings and Loan,
engaged in the origination and servicing of loans and real estate investment
mortgage banking, from 1983 to 1987. He was President of Morrice Financial Corp.
from 1977 until 1985.
EXECUTIVE OFFICERS
In addition to Thomas H. McAuley, President and Chief Executive Officer,
and Mary M. Thomas, Executive Vice President and Chief Financial Officer, the
executive officers of the Company are as follows:
Mr. W. Benjamin Jones III has been Executive Vice President of the Company
since May 1994. He served as Senior Vice President from May 1987 to May 1994 and
Secretary of the Company or its predecessor, Investors Realty Trust, from 1977
to May 1992, and Vice President from 1981 to 1987.
Mr. Robert E. Mitzel has been Executive Vice President of the Company since
May 1994. He served as Senior Vice President from May 1991 to May 1994 and Vice
President from January 1988 to May 1991.
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Mr. Daniel F. Lovett, age 51, was employed by the Company in October 1994
as Vice President and Director of Construction and was promoted to Senior Vice
President in February 1998. From 1979 to September 1994, he was with Southeast
Shopping Centers Corp., a South Florida neighborhood and community shopping
center developer, serving as Vice President and Director of Development.
Mr. Kip R. Marshall, age 48, was employed by the Company in March 1998 as
Senior Vice President. From 1996 to 1997, he was employed as an Asset Manager
for Bullock, Terrell & Mannelly, a full service real estate firm based in
Atlanta, Georgia, and from 1991 to 1995, he served as Vice President of
Travelers Realty Investment Company. The executive officers are elected by and
serve at the pleasure of the Board of Directors.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee, composed entirely of outside directors,
determines the salary and other compensation to be paid to the executive
officers of the Company. The Compensation Committee typically reviews the salary
of each executive officer once each year at its November meeting. At that
meeting, the Compensation Committee, acting as a Stock Option Committee, also
usually determines the individuals to whom incentive stock options are to be
awarded and the number of shares for which options are to be granted.
The Company's executive compensation program has three primary objectives:
- Reward executives for long-term management focus and the enhancement of
shareholder value.
- Attract and retain key executives critical to the long-term success of
the Company.
- Support the achievement of desired Company performance.
In determining the compensation to be paid to the executive officers of the
Company, the Compensation Committee considers compensation paid to other
executives performing similar jobs within the industry. Some of the companies
considered by the Compensation Committee are included in the NAREIT All REIT
Index included in the Comparative Stock Performance section of this Proxy
Statement. In addition, the members of the Compensation Committee rely upon
their own knowledge of compensation paid to executives of companies of
comparable size and complexity. In these comparisons the Compensation Committee
strives to fix the compensation of the Company's executive officers in the
middle of the class of comparable companies. The members also consider the
performance of the Company and the merits of the individual under consideration.
The members will use their discretion to set executive compensation where in
their judgment external, internal or an individual's circumstances warrant it.
Executive Officer Compensation Program
The Company's executive officer compensation program is comprised of base
salary, year-end additional cash compensation, long-term incentive compensation
in the form of stock options, and various benefits, including medical and life
insurance generally available to all employees of the Company.
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<PAGE> 10
Base Salary
The Chief Executive Officer recommends to the Compensation Committee the
base salary levels for the Company's executive officers (other than the Chief
Executive Officer) based on his evaluation of individual experience and
performance, on his review of employee evaluation reports prepared by certain of
the executive officers and in his subjective discretion on the overall operating
performance of the Company. Base salary levels are then set in the discretion of
the Compensation Committee after consideration of the foregoing recommendations.
The Compensation Committee members also have access to salary levels of
executive officers of other companies within the industry which they may
consult.
401(k) Plan, Year-End Additional Cash Compensation, and Certain Employment
Agreements
During 1980 the Board of Directors approved and adopted a pension program
for the employees of the Company. The program included a noncontributory pension
plan for all employees of the Company, under which the Company accrued and
funded pension costs each year equal to 12% of employees' annual base salaries,
and each employee became "vested" with respect to his or her accumulated pension
account at the rate of 20% per year, with full "vesting" upon completion of five
years of service with the Company. Effective June 30, 1990, the Board of
Directors elected to terminate the pension plan.
Upon termination of the pension plan, the Board of Directors determined
that it would be appropriate to substitute in lieu thereof a program of year-end
cash payments to the executive officers of the Company and certain other
corporate employees of the Company selected in the discretion of the Chief
Executive Officer and the President. This program was instituted in 1990. Under
this program (the "Year-End Additional Cash Compensation Program"), participants
received a year-end cash payment from the Company, the amount of which was based
upon each participant's length of service with the Company. Each participant who
had been employed by the Company for more than five years received a year-end
cash payment equal to 12% of his or her salary. Each participant with less than
five years received year-end cash payments in graduated amounts designed to
produce a cumulative 12% payment after completion of five years of service. The
Company paid or accrued approximately $179,000 and $200,000 under this program
in 1996 and 1995, respectively.
In August 1996, the Company terminated the Year-End Additional Cash
Compensation Program and adopted a 401(k) Plan. All employees who have completed
one year of service and are at least 18 years of age are eligible to participate
in the 401(k) Plan, and the Company matches 100% of employee contributions, up
to 6% of each individual participant's compensation. Employees vest in the
Company match based on length of service, with full vesting after 5 years of
service. The Company contributed approximately $56,000 to the 401(k) Plan for
the period from August 1 through December 31, 1996 and approximately $131,000
during 1997.
The Company, in 1980, in conjunction with the adoption of the
noncontributory pension plan, agreed to provide deferred compensation to Mr.
MacLeod upon his retirement in recognition of his time in service with the
Company, which had been significantly longer than that of the remaining
employees. The Company agreed to annually accrue deferred compensation allocable
to Mr. MacLeod for each year beginning in 1980. Because Mr. MacLeod was over 70
years of age upon his retirement in June 1997, the Company commenced payments of
deferred compensation to him of approximately $29,000 per year, in accordance
with the agreement. The Company accrued approximately $23,000 for this contract
in each of 1996 and 1995 and paid approximately $15,000 in 1997.
The Company currently has no other postretirement or postemployment
benefits.
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Stock Option Program
Long-term incentives are presently provided through the Company's 1989
Stock Option Plan (the "1989 Plan"). The purpose of the 1989 Plan is to promote
the long-term success of the Company by providing financial incentives to the
directors, officers, and employees of the Company who are in positions to make
significant contributions toward the success of the Company.
Options granted under the 1989 Plan may be either incentive stock options
(options that meet certain requirements of the Internal Revenue Code, thereby
receiving special tax treatment) or nonqualified stock options (options that do
not meet the special requirements for incentive stock options). Incentive stock
options ("ISOs") may be granted only to persons who are employees of the
Company, including members of the Board of Directors who are also employees of
the Company. Nonqualified stock options ("NSOs") may also be granted to officers
and employees of the Company.
The 1989 Plan is currently administered by the Compensation Committee.
Subject to the approval of the Board of Directors, the Compensation Committee
has the authority to determine the individuals to whom stock options are
awarded, the number of shares for which options are granted (the aggregate fair
market value of stock with respect to which ISOs are exercisable for the first
time by any individual during any calendar year shall not, however, exceed
$100,000, and no person shall be eligible to receive an ISO for shares in excess
of such limitation), and the determination of whether an option shall be an ISO
or a NSO. In addition, the 1989 Plan provides for the automatic grant of NSOs to
purchase 1,250 shares of the Company's Common Stock to each non-employee
director upon his or her election and each annual re-election to the Board.
Options granted under the 1989 Plan are exercisable no later than ten years
from the date of grant with the exercise price being equal to 100% of the market
value on the date of grant. The 1989 Plan replaced the Key Employee Stock Option
Plan adopted in 1983, as amended by the Board of Directors on February 9, 1987
(the "1983 Plan"). No further options or Stock Appreciation Rights ("SARs") may
be granted under the 1983 Plan, although unexercised options previously granted
under the 1983 Plan remain in full force and effect. The 1989 Plan does not
provide for SARs.
In determining the grants of stock options to officers and employees of the
Company, including the executive officers other than the Chief Executive
Officer, the Compensation Committee reviewed with the Chief Executive Officer,
the recommended individual awards, based on the respective performance,
responsibilities, and contributions of each of the individuals under
consideration, and the operating performance of the Company. The Compensation
Committee also considered the expected performance requirements and
contributions, as well as the position level, of each of these individuals. The
Chief Executive Officer and the Compensation Committee did not give
consideration to current holdings of the Common Stock or options to purchase the
Common Stock of the Company when making their decision regarding option awards.
Compensation to Chief Executive Officer
Mr. McAuley has been Chief Executive Officer since January 1, 1997, and has
served as President since October 1, 1995.
Mr. McAuley's base salary for fiscal year 1997 was $302,808, as compared to
$251,250 for fiscal year 1996, and $62,502 for fiscal year 1995. Under the
Company's program of year-end cash payments, which was terminated in 1996, Mr.
McAuley also received $17,500 in additional cash compensation for fiscal year
1996 compared to $0 for fiscal year 1995. Mr. McAuley also was awarded, during
fiscal years 1997, 1996, and 1995,
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incentive stock options to purchase 8,750, 5,000, and 0 shares of the Company's
Common Stock, respectively. See "Employment Agreements" for a description of Mr.
McAuley's $100,000 commencement bonus and a 50,000 share NSO granted to Mr.
McAuley upon acceptance of employment in 1995.
The Compensation Committee considered Mr. McAuley's role as Chief Executive
Officer and President during fiscal year 1997, and as President during fiscal
years 1996 and 1995, and the salaries and benefits of other chief executive
officers for similar companies within the industry in determining his cash
compensation. The award of stock options to Mr. McAuley was made separately and
was based, among other things, on competitive practice within the industry, the
Committee's perception of his past and expected contributions to the Company's
long-term performance, and the $100,000 ISO limitation as described above.
Section 162(m) of the Internal Revenue Code (the "Code") adopted as part of
the Revenue Reconciliation Act of 1993, generally limits to $1 million the
deduction that can be claimed by any publicly-held corporation for compensation
paid to any "covered employee" in any taxable year beginning after December 31,
1993. The term "covered employee" for this purpose is defined generally as the
Chief Executive Officer and the four other highest paid employees of the
Company. Performance-based compensation is outside the scope of the $1 million
limitation and, hence, generally can be deducted by a publicly-held corporation
without regard to amount, provided that, among other requirements, such
compensation is approved by the shareholders. The Compensation Committee has not
and does not anticipate the need to develop a formal policy on this matter since
the compensation of the Company's executive officers is clearly outside the
scope of the limitations of Section 162(m).
COMPENSATION COMMITTEE
Bruce A. Morrice, Chairman
Homer B. Gibbs, Jr.
Samuel W. Kendrick
James H. Nobil
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SUMMARY COMPENSATION TABLE
The following table shows the compensation for the past three years of the
Chief Executive Officer and each of the four other most highly-compensated
executive officers whose total annual salary and bonus exceeded $100,000 in
fiscal 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------------------- SECURITIES
OTHER ANNUAL 401(K) UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) CONTRIBUTION OPTIONS (#) COMPENSATION
- --------------------------- ---- -------- ------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas H. McAuley......... 1997 $302,808 $ -- $ -- $9,500 8,750 $ --
President and Chief....... 1996 251,250 -- 17,500 5,255 5,000 --
Executive Officer(2).... 1995 62,502 100,000(3) -- -- 50,000(3)(4) --
Mary M. Thomas............ 1997 174,613 -- -- 9,500 7,500 --
Executive Vice............ 1996 161,438 -- 11,025 3,853 7,500 --
President and Chief..... 1995 150,000 -- 18,000 -- 7,500 --
Financial Officer
W. Benjamin Jones III..... 1997 145,788 -- -- 8,747 7,500 --
Executive Vice............ 1996 134,788 -- 9,205 3,217 7,500 --
President............... 1995 125,000 -- 15,000 -- 7,500 --
Robert E. Mitzel.......... 1997 145,788 -- -- 8,747 7,500 --
Executive Vice............ 1996 134,788 -- 9,205 3,217 7,500 --
President............... 1995 125,000 -- 15,000 -- 7,500 19,393(5)
Donald W. MacLeod......... 1997 82,500 -- 9,000 -- 8,750 84,000(6)
Chairman of the Board..... 1996 300,000 -- 36,000 -- 10,000 22,571(6)
1995 300,000 -- 36,000 -- 9,500 22,571(6)
</TABLE>
- ---------------
(1) Year-End Additional Cash Compensation in lieu of pension.
(2) Mr. McAuley has served as President and Chief Operating Officer since
October 1, 1995, and was named Chief Executive Officer on January 1, 1997.
(3) See "Employment Agreements" for a description of Mr. McAuley's $100,000
commencement bonus and a 50,000 share nonqualified stock option granted to
Mr. McAuley upon acceptance of employment. The payment of the $100,000
commencement bonus was deferred until January 1996 but was expensed by the
Company in 1995 for financial reporting purposes.
(4) Excludes a nonqualified option for 1,250 shares granted to Mr. McAuley in
May 1995 upon his reelection as a non-employee director of the Company, as
this was prior to Mr. McAuley's October 1, 1995 commencement of employment.
(5) Amount comprised entirely of expenses related to Mr. Mitzel's relocation
from the Charlotte regional office to the Atlanta corporate office.
(6) For fiscal 1997, amount accrued pursuant to a consulting agreement effective
with Mr. MacLeod's July 1, 1998 retirement from day-to-day operations, and
for fiscal 1996 and 1995, amounts accrued by the Company under Mr. MacLeod's
agreement relating to deferred compensation for amounts payable to him after
retirement.
10
<PAGE> 14
STOCK OPTION PLAN
The following table sets forth (i) all individual grants of stock options
made by the Company during fiscal 1997 to each of the Named Executive Officers
(all of which are ISOs granted under the 1989 Plan and exercisable immediately
upon grant), (ii) the ratio that the number of options granted to each
individual bears to the total number of options granted to all employees of the
Company, (iii) the exercise price and expiration date of these options, and (iv)
estimated potential realizable values assuming the stock price appreciates over
a ten-year term at rates of 5% and 10% compounded annually.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION --------------------
NAME (#) 1997 ($/SH) DATE 5% 10%
- ---- ----------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. McAuley 8,750 9.72% $11.375 1/01/07 $62,595 $158,627
Mary M. Thomas 7,500 8.33 11.375 1/01/07 53,653 135,966
W. Benjamin Jones III 7,500 8.33 11.375 1/01/07 53,653 135,966
Robert E. Mitzel 7,500 8.33 11.375 1/01/07 53,653 135,966
Donald W. MacLeod 8,750(1) 9.72 11.375 1/01/07 62,595 158,627
</TABLE>
- ---------------
(1) Expired unexercised three months following Mr. MacLeod's retirement from
day-to-day operations on June 30, 1997.
The following table sets forth (i) the number of shares received and the
aggregate dollar value realized in connection with each exercise of outstanding
stock options during fiscal 1997 by each of the Named Executive Officers, (ii)
the total number and value of all outstanding, unexercised options (all of which
are exercisable) held by the Named Executive Officers as of the end of fiscal
1997, and (iii) the aggregate dollar value of all such unexercised options that
are in-the-money; that is, when the fair market value of the common stock that
is subject to the option exceeds the exercise price of the option.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
NUMBER OF SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT OPTIONS AT
NAME EXERCISE REALIZED(1) 12/31/97 12/31/97(1)
- ---- ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Thomas H. McAuley -- -- 72,500(2) $134,297
Mary M. Thomas -- -- 48,000 63,469
W. Benjamin Jones, III -- -- 45,918 51,571
Robert E. Mitzel -- -- 46,250 56,906
Donald W. MacLeod 37,500 $78,125 -- --
</TABLE>
- ---------------
(1) Value based on market value of the Company's Common Stock at the date of
exercise or the end of fiscal 1997 minus the exercise price.
(2) Includes NSOs totaling 8,750 shares, consisting of 1,250 shares each granted
during 1989 through 1995 as a non-employee director, an NSO for 50,000
shares granted upon acceptance of employment as President and Chief
Operating Officer in 1995, an ISO for 5,000 shares granted in 1996 and an
ISO for 8,750 shares granted in 1997.
11
<PAGE> 15
COMPARATIVE STOCK PERFORMANCE
The line graph below compares the cumulative total shareholder return on
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the NAREIT All REIT Total Return Index and the S&P 500 Index
over the same period. This comparison assumes that the value of the investment
in the Company Common Stock and each index was $100 on December 31, 1991 and
that all dividends were reinvested.
<TABLE>
<CAPTION>
NAREIT
ALL REIT
Measurement Period IRT Property Total Return S&P 500
(Fiscal Year Covered) Company Index(1) Index
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 178.07 118.55 109.99
12/31/94 184.39 119.50 111.43
12/31/95 182.20 141.38 153.13
12/31/96 248.47 191.93 188.29
12/31/97 275.44 228.13 251.13
</TABLE>
- ---------------
(1) The NAREIT All REIT Total Return Index is maintained by the National
Association of Real Estate Investment Trusts. It contained 210 tax-qualified
REITs with a total market capitalization of $140.5 billion as of December
31, 1997.
EMPLOYMENT AGREEMENTS
As of November 11, 1997, the Company entered into an Amended and Restated
Employment Agreement with Mr. McAuley. This Employment Agreement provides for an
initial annual salary of $306,000 with annual reviews and permits participation
in all other incentive, benefit, welfare and retirement plans offered by the
Company, and the use and maintenance costs of a Company automobile (or a
compatible automobile allowance). It is automatically renewable each year unless
sooner terminated. Following a "Change in Control" as defined therein, Mr.
McAuley may, for good reason, terminate his employment and receive the sum of
2.99 times the sum of his annual base salary and his most recent bonus.
Following a
12
<PAGE> 16
Change in Control and termination of employment, the Company will continue to
provide benefits to Mr. McAuley for three years, consistent with the benefits he
received prior to such termination.
As of November 11, 1997, the Company also entered into Change in Control
Employment Agreements with Mary M. Thomas, W. Benjamin Jones III, and Robert E.
Mitzel, its three Executive Vice Presidents. These are generally similar to the
Change in Control provisions contained in Mr. McAuley's Employment Agreement.
However, Ms. Thomas' agreement, which replaces an earlier agreement, provides
for payment of two times the sum of her base salary and the most recent annual
bonus in the event of a Change in Control and termination of employment. The
provisions of Mr. Jones and Mr. Mitzel's' agreements provide for payments of the
sum of one year's salary and bonus in the event of a Change in Control and
termination of employment. Benefits are payable for two years in the case of Ms.
Thomas and one year in the case of each of Mr. Jones and Mr. Mitzel.
Effective July 1, 1997, the Company entered into a consulting agreement
with Mr. MacLeod, Chairman of the Company's Board of Directors, for the period
July 1, 1997 through June 30, 1998. In consideration for such consulting work,
Mr. MacLeod will receive $168,000. In addition, pursuant to an agreement between
the Company and Mr. MacLeod, dated October 1, 1995, in the event of a "Change in
Control," as defined therein, between July 1, 1997 and June 30, 1999, Mr.
MacLeod will receive a $600,000 bonus.
PROPOSAL TO ADOPT THE IRT PROPERTY COMPANY 1998 LONG-TERM INCENTIVE PLAN (PROXY
ITEM NO. 2)
The Company currently maintains the IRT Property Company 1989 Stock Option
Plan (the "1989 Plan"), under which stock options may be awarded to employees,
officers and directors of the Company. There are currently 395,750 shares
remaining available for awards under the 1989 Plan. The 1989 Plan expires May
1999. Accordingly, the Board of Directors adopted the IRT Property Company 1998
Long-Term Incentive Plan (the "Incentive Plan"), subject to approval thereof by
the shareholders at the Annual Meeting. The Incentive Plan was adopted by the
Board as part of an incentive program recommended by the Company's outside
compensation consultant, FPL Associates. The Company has reserved 1,625,000
shares of its Common Stock for issuance in connection with options and awards
under the Incentive Plan. If approved by the shareholders at the Annual Meeting,
the Incentive Plan will be effective as of the date of such approval.
A summary of the Incentive Plan is set forth below. The summary is
qualified in its entirety by reference to the full text of the Incentive Plan,
which is attached to this Proxy Statement as Appendix A.
GENERAL
The purpose of the Incentive Plan is to promote the success, and enhance
the value, of the Company by linking the personal interests of employees,
officers and directors to those of the shareholders, and by providing such
persons with an incentive for outstanding performance. As of the Record Date,
there were approximately 56 persons eligible to participate in the Incentive
Plan.
The Incentive Plan authorizes the granting of awards ("Awards") to
employees, officers and directors of the Company or its affiliated companies in
the following forms: (i) options to purchase shares of Common Stock ("Options"),
which may be ISOs or NSOs, (ii) stock appreciation rights ("SARs"); (iii)
performance shares ("Performance Shares"); (iv) restricted stock ("Restricted
Stock"); (v) dividend equivalents ("Dividend Equivalents"); and (vi) other
stock-based Awards.
13
<PAGE> 17
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company may not deduct compensation in excess of $1 million
paid to the Chief Executive Officer and the four next most highly compensated
executive officers of the Company. The Incentive Plan is designed to comply with
Code Section 162(m) so that the grant of Options and SARs under the plan, and
other Awards, such as Performance Shares, that are conditioned on the
performance goals described in Section 13.11 of the Incentive Plan, will be
excluded from the calculation of annual compensation for purposes of Code
Section 162(m) and will be fully deductible by the Company.
Subject to adjustment as provided in the Incentive Plan, the aggregate
number of shares of Common Stock reserved and available for Awards or which may
be used to provide a basis of measurement for or to determine the value of an
Award (such as with a SAR or Performance Share) is 1,625,000, of which no more
than 20% may be granted in the form of Restricted Stock Awards or in
unrestricted stock Awards; provided that any grant of Restricted Stock in excess
of 10% of such total authorized shares shall vest over a period of not less than
three years. The maximum number of shares of Common Stock with respect to one or
more Options and/or SARs that may be granted during any one calendar year under
the Incentive Plan to any one participant is 500,000. The maximum fair market
value (measured as of the date of grant) of any Awards other than Options and
SARs that may be received by a participant (less any consideration paid by the
participant for such Award) during any one calendar year under the Incentive
Plan is $2,000,000.
ADMINISTRATION
The Incentive Plan will be administered by a committee appointed by the
Board of Directors of the Company, or by the Board itself (the "Committee"). The
Committee has the power, authority and discretion to, among other things,
designate participants; determine the type (or types) and number of Awards to be
granted to each participant and the terms and conditions thereof; establish,
adopt or revise any rules and regulations as it may deem necessary or advisable
to administer the Incentive Plan; and make all other decisions and
determinations that may be required under, or as the Committee deems necessary
or advisable to administer, the Incentive Plan.
AWARDS
Stock Options. The Committee is authorized to grant Options, which may be
ISOs or NSOs, to participants. All Options will be evidenced by a written Award
Agreement (as defined in the Incentive Plan) between the Company and the
participant, which will include such provisions as may be specified by the
Committee. The terms of any ISO must meet the requirements of Section 422 of the
Code.
Stock Appreciation Rights. The Committee may grant SARs to participants.
Upon the exercise of a SAR, the participant has the right to receive the excess,
if any, of: the fair market value of one share of Common Stock on the date of
exercise, over the grant price of the SAR as determined by the Committee, which
will not be less than the fair market value of one share of Common Stock on the
date of grant in the case of any SAR related to an ISO. All awards of SARs will
be evidenced by an Award Agreement, reflecting the terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and any
other terms and conditions of the SAR, as determined by the Committee at the
time of grant.
Performance Shares. The Committee may grant Performance Shares to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
Performance Shares granted to each participant and to set performance goals and
other terms or conditions to payment of the Performance Shares in its discretion
which, depending on the
14
<PAGE> 18
extent to which they are met, will determine the number and value of Performance
Shares that will be paid to the participant.
Restricted Stock Awards. The Committee may make awards of Restricted Stock
to participants, which will be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to
receive dividends, if any, on the Restricted Stock). All awards of Restricted
Stock will be evidenced by an Award Agreement.
Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend Equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Common Stock subject to an Award, as determined by the
Committee. The Committee may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Common Stock, or otherwise reinvested.
Other Stock-Based Awards. The Committee may, subject to limitations under
applicable law, grant to participants such other Awards that are payable in,
valued in whole or in part by reference to, or otherwise based on or related to
shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Incentive Plan, including without limitation shares of Common
Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Common Stock, and Awards valued by
reference to book value of shares of Common Stock or the value of securities of
or the performance of specified affiliated companies of the Company. The
Committee will determine the terms and conditions of any such Awards.
Performance Goals. The Committee may determine that any Award will be
determined solely on the basis of (a) the achievement by the Company or any
business unit of a specified target, or target growth in, funds from operations
("FFO"), FFO per share or net income per share or shareholder returns, or net
income or earnings per share, (b) the Company's stock price or any change
therein, or (c) any combination of the goals set forth in (a) through (b) above.
If an Award is made on such basis, the Committee must establish goals prior to
the beginning of the period for which such performance goal relates (or such
later date as may be permitted under Code Section 162(m)), and the Committee may
for any reason reduce (but not increase) any Award, notwithstanding the
achievement of a specified goal. Any payment of an Award granted with
performance goals will be conditioned on the written certification of the
Committee in each case that the performance goals and any other material
conditions were satisfied.
Limitations on Transfer; Beneficiaries. No unexercised or restricted Award
will be assignable or transferable by a participant other than by will or the
laws of descent and distribution or, except in the case of an ISO, pursuant to a
qualifying domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not result in accelerated taxation, (ii) does not cause
any Option intended to be an ISO to fail to be described in Code Section 422(b),
and (iii) is otherwise appropriate and desirable, taking into account any
factors deemed relevant, including any state or federal tax or securities laws
or regulations applicable to transferable Awards. A participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the participant and to receive any distribution with respect to any
Award upon the participant's death.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding Options, SARs, and other Awards in the nature of
rights that may be exercised will become fully exercisable and all restrictions
on outstanding Awards will lapse. Any Options or SARs will thereafter continue
or lapse in
15
<PAGE> 19
accordance with the other provisions of the Incentive Plan and the Award
Agreement. In the event of (i) the commencement of a public tender offer for all
or any portion of the Common Stock, or (ii) a proposal to merge, consolidate or
otherwise combine into and with another corporation is submitted to the
shareholders of the Company for approval, or (iii) a proposal to liquidate or
dissolve the Company is submitted to the shareholders of the Company for
approval, or (iv) any transaction or event that would be or result in a Change
in Control (as defined in the Incentive Plan), the Committee may in its sole
discretion declare all outstanding Options, SARs, and other Awards in the nature
of rights that may be exercised to become fully exercisable, and/or all
restrictions on all outstanding Awards to have lapsed, in each case as of such
date as the Committee or the Board may, in its sole discretion, declare, which
may be on or before the consummation of such tender offer or other transaction
or event.
Director Grants. The Incentive Plan provides for the automatic grant of
NSOs to purchase 1,250 shares of the Company's Common Stock to each non-employee
director upon his or her election and each annual re-election to the Board.
TERMINATION AND AMENDMENT
The Board or the Committee may, at any time and from time to time,
terminate, amend or modify the Incentive Plan without shareholder approval;
provided, however, that the Board or the Committee may condition any amendment
on the approval of shareholders of the Company if such approval is necessary or
deemed advisable with respect to tax, securities or other applicable laws,
policies or regulations. No termination, amendment, or modification of the
Incentive Plan may reduce or diminish the value of any Award previously granted
under the Incentive Plan, determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination,
without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Non-qualified Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of a non-discounted NSO. However, the participant
will realize ordinary income on the exercise of the NSO in an amount equal to
the excess of the fair market value of the Common Stock acquired upon the
exercise of such option over the exercise price, and the Company will receive a
corresponding deduction (subject to the provisions of Section 162(m) of the
Code). A subsequent sale or exchange of such shares will result in gain or loss
measured by the difference between (i) the exercise price, increased by any
compensation reported upon the participant's exercise of the option, and (ii)
the amount realized on such sale or exchange. Such gain or loss will be capital
in nature if the shares were held as a capital asset and will be long-term if
such shares were held for the applicable long-term capital gain holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of an ISO or the exercise thereof by the participant.
If the participant holds the shares of Common Stock for the greater of two years
after the date the Option was granted or one year after the acquisition of such
shares of Common Stock (the "required holding period"), the difference between
the aggregate exercise price and the amount realized upon disposition of the
shares of Common Stock will constitute a capital gain or loss, and the Company
will not be entitled to a federal income tax deduction. If the shares of Common
Stock are disposed of in a sale, exchange or other "disqualifying disposition"
during the required holding period, the participant will realize taxable
ordinary income in an amount equal to the excess (if any) of the fair market
value of the Common Stock
16
<PAGE> 20
purchased at the time of exercise (or, if less, the amount realized on the
disposition of the shares) over the aggregate exercise price, and the Company
will be entitled to a federal income tax deduction equal to such amount (subject
to the provisions of Section 162(m) of the Code). Upon exercise of an ISO, the
participant may be subject to alternative minimum tax on certain items of tax
preference. If an ISO is exercised at a time when it no longer qualifies as an
incentive stock option, the option will be treated as an NSO.
SARs. Under present federal income tax regulations, a participant
receiving a non-discounted SAR will not recognize income, and the Company will
not be allowed a tax deduction, at the time the Award is granted. When a
participant exercises the SAR, the amount of cash and the fair market value of
any shares of Common Stock received will be ordinary income to the participant
and will be allowed as a deduction for federal income tax purposes to the
Company.
Performance Shares. Under present federal income tax regulations, a
participant receiving Performance Shares will not recognize income and the
Company will not be allowed a tax deduction at the time the Award is granted.
When a participant receives payment of Performance Shares, the amount of cash
and the fair market value of any shares of Common Stock received will be
ordinary income to the participant and will be allowed as a deduction for
federal income tax purposes to the Company.
Restricted Stock. Under present federal income tax regulations, and unless
the participant makes an election to accelerate recognition of the income to the
date of grant, a participant receiving a Restricted Stock Award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the Award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Common Stock,
and the Company will be entitled to a corresponding tax deduction at that time.
17
<PAGE> 21
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
As of the date of this Proxy Statement, no awards had been granted under
the Incentive Plan. However, the Board has authorized the grant of restricted
stock awards under the Incentive Plan to Messrs. McAuley, Jones, and Mitzel, and
Ms. Thomas, upon approval of the Incentive Plan by the shareholders. The
following table shows the Incentive Plan awards approved by the Board for the
persons and groups indicated below. Any future awards will be made at the
discretion of the Committee.
<TABLE>
<CAPTION>
DOLLAR VALUE OF NO. OF SHARES OF
NAME AND POSITION RESTRICTED STOCK ($) RESTRICTED STOCK (#)
- ----------------- -------------------- --------------------
<S> <C> <C>
Thomas H. McAuley....................................... $ 500,000 (1)
President and Chief Executive Officer
Mary M. Thomas.......................................... $ 250,000 (1)
Executive Vice President and Chief Financial Officer
W. Benjamin Jones III................................... $ 250,000 (1)
Executive Vice President
Robert E. Mitzel........................................ $ 250,000 (1)
Executive Vice President
All current executive officers, as a group.............. $1,250,000 (1)
All non-executive directors, as a group................. $ 0 0
All non-executive officer employees, as a group......... $ 0 0
</TABLE>
- ---------------
(1) To be determined based on the fair market value of the Common Stock on the
date of award of the restricted stock.
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the New York Stock
Exchange on May 6, 1998 was $11.6875.
The affirmative vote of the holders of a majority of the shares present or
represented by proxy and entitled to vote at the meeting on this proposal will
constitute approval of the Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE 1998 LONG-TERM INCENTIVE PLAN.
TRANSACTIONS WITH RELATED PARTIES
During 1997, the Company paid a brokerage commission of $162,000 upon the
sale of Whitehall Kent Apartments in Kent, Ohio to an entity which is indirectly
owned and controlled by James H. Nobil, a director of the Company who is not
standing for reelection.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been appointed by the Board of Directors as the
independent public accountants for the Company for fiscal year 1998. It has
served as the independent public accountants for the Company since 1979.
18
<PAGE> 22
Representatives of the firm of Arthur Andersen LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and will be available to answer questions concerning the financial affairs of
the Company.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, officers, directors, and regular employees of the Company
may solicit proxies personally or by telephone, telegraph or other means without
additional compensation. The Company will reimburse brokers, fiduciaries, and
custodians for their costs in forwarding proxy materials to beneficial owners of
Common Stock held in their names.
SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the 1999 annual
meeting of shareholders must be received at the Company's principal executive
offices on or before January 23, 1999 to be eligible for inclusion in the
Company's proxy statement and proxy relating to that meeting.
OTHER MATTERS
The management of the Company does not know of any matters to be presented
at the meeting other than those mentioned in this Proxy Statement.
The management of the Company urges you to attend the Annual Meeting and to
vote your shares in person. Whether or not you plan to attend, please sign and
promptly return your proxy. Your proxy may be revoked at any time before it is
voted. Such proxy, if executed and returned, gives discretionary authority with
respect to any other matters that may come before the meeting.
IRT PROPERTY COMPANY
By: /s/ W. BENJAMIN JONES III
------------------------------------
Executive Vice President
19
<PAGE> 23
APPENDIX A
IRT PROPERTY COMPANY
1998 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 General. The purpose of the IRT Property Company 1998 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
IRT Property Company (the "Corporation"), by linking the personal interests of
the Corporation's employees, officers and directors to those of Corporation
shareholders and by providing its employees, officers and directors with an
incentive for outstanding performance. The Plan is further intended to provide
flexibility to the Corporation in its ability to motivate, attract, and retain
the services of employees, officers and directors upon whose judgment, interest,
and special effort the successful conduct of the Corporation's operation is
largely dependent. Accordingly, the Plan permits the grant of incentive awards
from time to time to selected employees, officers and directors.
ARTICLE 2
EFFECTIVE DATE
2.1 Effective Date. The Plan shall be effective as of the date upon which
it shall be approved by the shareholders of the Corporation.
ARTICLE 3
DEFINITIONS
3.1 Definitions. For purposes hereof, the singular shall include the
plural and vice versa, any reference to gender shall include all genders, and
the words "include", "including" and "included" shall mean including without
limitation, whether by enumeration, or otherwise. The following words and
phrases shall have the following meanings:
(a) "Affiliated Company" shall mean any corporation, partnership,
limited liability company, trust and/or other entity controlled by,
controlling or under common control with, the Corporation, and shall
include any Subsidiary and any other such entity included in the
Corporation's consolidated financial statements. Unless the context clearly
requires otherwise, as used herein, the Corporation shall include all its
Affiliated Companies.
(b) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award, or Other
Stock-Based Award, or any other right or interest relating to Stock or
cash, granted to a Participant under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Board" means the Board of Directors of the Corporation.
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(e) "Change in Control" means and includes each of the following:
(1) The acquisition by any Person of beneficial ownership (within
the meaning of SEC Rule 13d-3 under the Exchange Act) of 25% or more of
the combined voting power of (x) all then outstanding shares of
Corporation common stock ("Outstanding Corporation Common Stock") and
(y) all then outstanding securities of the Corporation entitled to vote
generally in the election of directors and all outstanding securities
and/or rights to acquire (whether by conversion, exchange or otherwise)
voting securities of the Corporation entitled to vote generally in the
election of directors (collectively with the Outstanding Corporation
Common Stock, the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this subsection (1), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition by a Person who was on November 1, 1997 the beneficial owner
of 25% or more of the Outstanding Corporation Voting Securities, (ii)
any acquisition by the Corporation, provided no Change in Control has
previously occurred or would result therefrom under subsections (2) and
(3) of this definition, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or
any Affiliated Company, or (iv) any acquisition by any Person pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (3) of this definition; or
(2) Individuals who, as of November 1, 1997, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to November 1, 1997 whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation, a
sale, liquidation or partial liquidation, or other disposition of all or
substantially all (e.g., 50% or more) of the assets of the Corporation
in one or a series of transactions, and/or any combination of the
foregoing (a "Business Combination"), in each case, unless, following
such Business Combination, (i) all or substantially all of the Persons
who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially owns (within
the meaning of SEC Rule 13d-3 under the Exchange Act), directly or
indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such
Business Combination (including, without limitation, an entity which as
a result of such transaction beneficially owns (within the meaning of
SEC Rule 13d-3 under the Exchange Act) the Corporation or all or
substantially all (e.g., 50% or more) of the Corporation's assets either
directly or through one or more subsidiaries, partnerships, limited
liability companies, trusts and/or other entities or Persons) in
substantially the same proportions as their beneficial ownership,
immediately prior to such Business Combination of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities,
as the case may be, (ii) no Person (excluding any corporation or other
entity resulting from such Business Combination or any employee benefit
plan (or related trust) of the Corporation or such corporation or entity
resulting from such Business Combination) beneficially
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owns (within the meaning of SEC Rule 13d-3 under the Exchange Act),
directly or indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation or entity except
to the extent that such ownership existed prior to the Business
Combination, and (iii) at least a majority of the members of the board
of directors or other governing body (including trustees and/or general
partners) of the corporation or entity resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee of the Board described in Article
4.
(h) "Corporation" means IRT Property Company, a Georgia corporation.
(i) "Covered Employee" means a covered employee as defined in Code
Section 162(m)(3).
(j) "Disability" shall mean the absence of the Participant from the
Participant's duties with the Corporation on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician
selected by the Corporation or its insurers and which physician is
acceptable to the Participant or the Participant's legal representative.
(k) "Dividend Equivalent" means a right granted to a Participant under
Article 11.
(l) "Effective Date" has the meaning assigned such term in Section
2.1.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations of the Securities and Exchange
Commission ("SEC") thereunder.
(n) "Fair Market Value", on any date, means (i) if the Stock is listed
on a securities exchange or is traded over the Nasdaq National Market, the
closing sales price reported on such exchange's composite tape or over such
system on such date or, in the absence of reported sales on such date, the
closing sales price on the immediately preceding date on which sales were
reported, or (ii) if the Stock is not listed on a securities exchange or
traded over the Nasdaq National Market, the mean between the bid and
offered prices as quoted by Nasdaq for such date, provided that if it is
determined that the fair market value is not properly reflected by such
Nasdaq quotations, Fair Market Value will be determined by such other
method as the Committee determines in good faith to be reasonable.
(o) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(p) "1933 Act" means the Securities Act of 1933, as amended from time
to time.
(q) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(r) "Option" means a right granted to a Participant under Article 7 of
this Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
(s) "Other Stock-Based Award" means a right, granted to a Participant
under Article 12, that relates to or is valued by reference to Stock or
other Awards relating to Stock.
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(t) "Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(u) "Participant" means a person who, as an employee, officer or
director of the Corporation, has been granted an Award under the Plan.
(v) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
(w) "Person" shall mean any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
(x) "Plan" means the IRT Property Company 1998 Long Term Incentive
Plan, as amended from time to time.
(y) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(z) "Retirement" means a Participant's termination of employment with
the Corporation after attaining any normal or early retirement age
specified in any pension, profit sharing or other retirement program
sponsored by the Corporation, or, in the event of the inapplicability
thereof with respect to the person in question, as determined by the
Committee in its reasonable judgment.
(aa) "Stock" means the $1.00 par value common stock of the Corporation
and such other securities of the Corporation as may be substituted for
Stock pursuant to Article 14.
(bb) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of a SAR over the grant price of the SAR with respect to one share
of Stock, all as determined pursuant to Article 8.
(cc) "Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Corporation. For Incentive Stock Options, the term shall have the meaning
set forth in Code Section 424(f).
ARTICLE 4
ADMINISTRATION
4.1 Committee. The Plan shall be administered by a committee (the
"Committee") appointed by the Board (which Committee shall consist of two or
more directors) or, at the discretion of the Board from time to time, the Plan
may be administered by the Board. It is intended that the directors appointed to
serve on the Committee shall be "non-employee directors" (within the meaning of
Rule 16b-3 promulgated under the Exchange Act) and "outside directors" (within
the meaning of Code Section 162(m) and the regulations thereunder). However, the
mere fact that a Committee member shall fail to qualify under either of the
foregoing requirements shall not invalidate any Award made by the Committee
which Award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time and from time to
time in the discretion of, the Board. During any time that the Board is acting
as
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administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section
4.1) shall include the Board.
4.2 Action by the Committee. For purposes of administering the Plan, the
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation,
the Corporation's independent certified public accountants, or any executive
compensation consultant or other professional retained by the Corporation to
assist in the administration of the Plan.
4.3 Authority of Committee. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including the exercise price, grant price, or purchase price, any
restrictions or limitations on the Award, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability of an Award,
and accelerations or waivers thereof, based in each case on such
considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any outstanding
Award, based in each case on such considerations as the Committee in its
sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in,
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
4.4. Decisions Binding. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
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ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. Number of Shares. Subject to adjustment as provided in Section 14.1,
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 1,625,000, of which not more than 20% may be granted as Awards
of Restricted Stock or in unrestricted Stock Awards, provided, however, that any
grant of Restricted Stock in excess of 10% of such total authorized shares shall
vest over a period of not less than 3 years.
5.2. Lapsed Awards. To the extent that an Award is canceled, terminates,
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. Stock Distributed. Any shares of Stock distributed pursuant to an
Award may consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
5.4. Limitation on Awards. Notwithstanding any provision in the Plan to
the contrary, the maximum number of shares of Stock with respect to one or more
Options and/or SARs that may be granted during any one calendar year under the
Plan to any Participant shall be 500,000. The maximum fair market value
(measured as of the date of grant) of any Awards other than Options and SARs
that may be received by a Covered Employee (less any consideration paid by the
Participant for such Award) during any one calendar year under the Plan shall be
$2,000,000.
ARTICLE 6
ELIGIBILITY
6.1. General. Awards may be granted only to individuals who are employees,
officers or directors of the Corporation, Subsidiary or other Affiliated
Company.
ARTICLE 7
STOCK OPTIONS
7.1. General. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock under an
Option shall be determined by the Committee.
(b) Time and Conditions of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised. The Committee may waive any exercise provisions at any time in
whole or in part based upon such factors as the Committee may determine in
its sole discretion so that the Option becomes exerciseable at an earlier
date.
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(c) Payment. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including,
cash, shares of Stock, or other property (including "cashless exercise"
arrangements), and the methods by which shares of Stock shall be delivered
or deemed to be delivered to Participants; provided, however, that if
shares of Stock are used to pay the exercise price of an Option, such
shares must have been held by the Participant for at least six months.
(d) Evidence of Grant. All Options shall be evidenced by a written
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions, not inconsistent with the Plan, as
may be specified by the Committee.
7.2. Incentive Stock Options. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) Exercise Price. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date of
the grant.
(b) Exercise. In no event may any Incentive Stock Option be
exercisable for more than 10 years from the date of its grant.
(c) Lapse of Option. An Incentive Stock Option shall lapse under the
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will be extended until a later date, but if an
Option is exercised after the dates specified in paragraphs (3), (4) and
(5) below, it will automatically become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse 10 years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason other
than as provided in paragraphs (4) or (5) below, the Incentive Stock
Option shall lapse, unless it is previously exercised, three months
after the Participant's termination of employment; provided, however,
that if the Participant's employment is terminated by the Corporation
for cause or by the Participant without the consent of the Corporation,
the Incentive Stock Option shall (to the extent not previously
exercised) lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination of
employment.
(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the one-year
period described in paragraph (4) and before the Option otherwise
lapses, the Option shall lapse one year after the Participant's death.
Upon the Participant's death, any exercisable Incentive Stock Options
may be exercised by the Participant's beneficiary, determined in
accordance with Section 13.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
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only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) Individual Dollar Limitation. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) Ten Percent Owners. No Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of
stock of the Corporation unless the exercise price per share of such
Option is at least 110% of the Fair Market Value per share of Stock at
the date of grant and the Option expires no later than five years after
the date of grant.
(f) Expiration of Incentive Stock Options. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) Right to Exercise. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative. Following death, an Incentive Stock Option may
be exercised as provided in Section 7.2(c)(5) above.
(h) Directors and Certain Other Persons. The Committee may not
grant an Incentive Stock Option to a non-employee director or to a
person in his or her capacity as an employee of a "non-qualified real
estate investment trust subsidiary" (as such term is used in the Code)
of the Corporation (an "Ineligible Employee"). The Committee may grant
an Incentive Stock Option to a director or to an Ineligible Employee who
is also an employee of the Corporation, but only in that individual's
position as an employee of the Corporation and not as a director or as
an employee of a "non-qualified real estate investment trust
subsidiary".
7.3 Stock Option Grants to Non-Employee Directors. Each director of the
Corporation who is not an employee of the Corporation ("Non-Employee Director")
who is elected or re-elected to the Board on or subsequent to the Effective Date
of this Plan shall automatically be granted, upon each such election or re-
election, a Non-Qualified Stock Option to purchase 1,250 shares of Stock. The
purchase price per share for the shares of Stock covered by the Non-Qualified
Stock Options granted pursuant to this Section 7.3 shall be equal to the Fair
Market Value of the Stock on the date the Option is granted. Each Option granted
under this Section 7.3 shall be immediately exercisable and shall terminate,
unless sooner exercised, on the tenth anniversary of the date of its grant or,
if earlier, the second anniversary of the optionee's death.
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ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. Grant of SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) Right to Payment. Upon the exercise of each Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as determined
by the Committee, which shall not be less than the Fair Market Value of
one share of Stock on the date of grant in the case of any SAR related
to an Incentive Stock Option.
(b) Other Terms. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. Grant of Performance Shares. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2. Right to Payment. A grant of Performance Shares gives the Participant
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Shares are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.
9.3. Other Terms. Performance Shares may be payable in cash, Stock, and/or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. Grant of Restricted Stock. The Committee is authorized to make
Restricted Stock Awards to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award Agreement.
10.2. Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including limitations on the right to vote Restricted Stock or the right
to receive dividends on the Restricted Stock). These restrictions may lapse
separately or in
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combination at such times, under such circumstances, in such installments, upon
the satisfaction of performance goals or otherwise, as the Committee determines
at the time of the grant of the Award or thereafter.
10.3. Forfeiture. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. Certificates for Restricted Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 Grant of Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the Participant
to receive payments equal to dividends with respect to all or a portion of the
number of shares of Stock subject to an Award, as determined by the Committee.
The Committee may provide that Dividend Equivalents be paid or distributed when
accrued or be deemed to have been reinvested in additional shares of Stock, or
otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. Grant of Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including shares of Stock awarded
purely as a "bonus" and not subject to any restrictions or conditions,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Stock, and Awards valued by reference to book value
of shares of Stock or the value of securities of or the performance of specified
Parents or Subsidiaries. The Committee shall determine the terms and conditions
of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. Stand-Alone, Tandem, and Substitute Awards. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for,
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any other Award granted under the Plan. If an Award is granted in substitution
for another Award, the Committee may require the surrender of such other Award
in consideration of the grant of the new Award. Awards granted in addition to or
in tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
13.2. Exchange Provisions. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 14.1), based on the terms and conditions the Committee
determines and communicates to the Participant at the time the offer is made.
13.3. Term of Award. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of 10 years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4. Form of Payment for Awards. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Corporation on the grant or exercise of an Award may be made in such form as the
Committee determines at or after the time of grant, including, cash, Stock,
other Awards, or other property, or any combination, and may be made in a single
payment or transfer, in installments, or on a deferred basis, in each case
determined in accordance with rules adopted by, and at the discretion of, the
Committee.
13.5. Limits on Transfer. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation, or shall be subject to any
lien, obligation, or liability of such Participant to any other party other than
the Corporation. No unexercised or restricted Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if
such Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an Incentive Stock Option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including state or
federal tax or securities laws applicable to transferable Awards.
13.6 Beneficiaries. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal or
personal representative, or other person claiming any rights under the Plan is
subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If no beneficiary has been designated or survives
the Participant, payment shall be made to the Participant's estate. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time, provided the change or revocation is filed with the
Committee. The Corporation shall be entitled to and may rely without further
investigation upon any revocation of or change in beneficiary designation
received by it, and shall have no liability therefor.
13.7. Stock Certificates. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation
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system on which the Stock is listed, quoted, or traded. The Committee may place
legends on any Stock certificate to reference restrictions applicable to the
Stock.
13.8 Acceleration Upon Death or Disability. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the contrary, upon
the Participant's death or Disability during his employment or service as a
director, all outstanding Options, Stock Appreciation Rights, and other Awards
in the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse. Any Option or Stock
Appreciation Rights Awards shall thereafter continue or lapse in accordance with
the other provisions of the Plan and the Award Agreement. To the extent that
this provision causes Incentive Stock Options to exceed the dollar limitation
set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.
13.9. Acceleration of Awards. The Committee may in its sole discretion at
any time determine that all or a portion of a Participant's Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully or partially exercisable, and/or that all or a part
of the restrictions on all or a portion of the outstanding Awards shall lapse,
in each case, as of such date as the Committee may, in its sole discretion,
declare. The Committee may discriminate among Participants and among Awards
granted to a Participant in exercising its discretion pursuant to this Section
13.9. Without limiting the generality of the foregoing, in the event of (i) the
commencement of a public tender offer for all or any portion of the Stock, (ii)
a proposal to merge, consolidate or otherwise combine with another corporation
is submitted to the Corporation's shareholders for consideration, (iii) a
proposal to liquidate or dissolve the Corporation is submitted to the
shareholders of the Corporation for approval, or (iv) any transaction or event
that would be or result in a Change in Control of the Corporation, the Committee
may in its sole discretion declare all outstanding Options, Stock Appreciation
Rights, and other Awards in the nature of rights that may be exercised to be
fully exercisable, and/or all restrictions on all outstanding Awards to have
lapsed, in each case as of such date as the Committee may, in its sole
discretion, declare, which may be on or before the consummation of such tender
offer or other transaction or event. To the extent that this provision causes
Incentive Stock Options to exceed the dollar limitation set forth in Section
7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options.
13.10 Effect of Acceleration. If an Award is accelerated under Section
13.9, the Committee may, in its sole discretion, provide (i) that the Award will
expire after a designated period of time after such acceleration to the extent
not then exercised, (ii) that the Award will be settled in cash rather than
Stock, (iii) that the Award will be assumed by another party to the transaction
giving rise to the acceleration or otherwise be equitably converted in
connection with such transaction, or (iv) any combination of the foregoing. The
Committee's determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.11. Performance Goals. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including Participants who are
Covered Employees) shall be determined solely on the basis of (a) the
achievement by the Corporation or any business unit of a specified target, or
target growth in, funds from operations ("FFO"), FFO per share or net income per
share or shareholder returns, or net income or earnings per share, (b) the
Corporation's Stock price or any change therein of a specified target, or target
growth or (c) any combination of the goals set forth in (a) through (b) above.
If an Award is made on such basis, the Committee has the right for any reason to
reduce (but not increase) the Award, notwithstanding the achievement of a
specified goal. If an Award is made on such basis, the Committee shall establish
goals prior to the beginning of the period for which such performance goal
relates (or such later date as may be permitted under Code Section 162(m) or the
regulations thereunder). Any payment of an Award granted with
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performance goals shall be conditioned on the written certification by the
Committee in each case that the performance goals and any other material
conditions were satisfied.
13.12. Termination of Employment. Military, government or other service or
other leave of absence permitted by Corporation policy or the Board, shall not
constitute a termination of employment. A termination of employment shall not
occur in a circumstance in which a Participant transfers from the Corporation to
one of its Parents or Subsidiaries, transfers from a Parent or Subsidiary to the
Corporation, or transfers from one Parent or Subsidiary to another Parent or
Subsidiary.
13.13. Loan Provisions. With the consent of the Committee, the Corporation
may make, guarantee or arrange for a loan or loans to a Participant with respect
to the exercise of any Option granted under this Plan and/or with respect to the
payment of the purchase price, if any, of any Award granted hereunder and/or
with respect to the payment by the Participant of any or all federal and/or
state income taxes due on account of the granting or exercise of any Award
hereunder. The Committee shall have full authority to decide whether to make a
loan or loans hereunder and to determine the amount, terms and provisions of any
such loan or loans, including the interest rate to be charged in respect of any
such loan or loans, whether the loan or loans are to be made with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which the loan or loans may be forgiven.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. General. In the event of a stock dividend or a stock split on or in
respect of the Stock, the shares of Stock then subject to each Award shall be
adjusted proportionately without any change in the aggregate purchase price
therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or securities of the Corporation or
of another corporation, whether through reorganization, recapitalization,
reclassification, stock split-up, combination of shares, merger or consolidation
or otherwise, there shall be substituted for each such share of Stock then
subject to each Award the number and class of shares into which each outstanding
share of Stock shall be so exchanged, all without any change in the aggregate
purchase price for the shares then subject to each Award.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. Amendment, Modification and Termination. The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the Plan
without shareholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of shareholders of the
Corporation if such approval is necessary or deemed advisable with respect to
tax, securities or other applicable laws, policies or regulations.
15.2 Awards Previously Granted. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without the
approval of any Participant; provided, however, that, subject to the terms of
the applicable award agreement, such amendment, modification or termination
shall not, without the Participant's consent, reduce or diminish the value of
such Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination and provided
further that, except as otherwise permitted in the Plan, the exercise price of
any Option may not be
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reduced and the original term of any Option may not be extended. No termination,
amendment, or modification of the Plan shall adversely affect any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1. No Rights to Awards. No Participant nor any person who may be
eligible to participate hereunder shall have any claim to be granted any Award
under the Plan, and neither the Corporation nor the Committee is obligated to
treat Participants or eligible participants uniformly.
16.2. No Shareholder Rights. No Award gives the Participant any of the
rights of a shareholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award and/or to the extent
the related Award expressly provides such rights.
16.3. Withholding. The Corporation shall have the authority and the right
to deduct or withhold, or require a Participant to remit to the Corporation, an
amount sufficient to satisfy federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the Plan. With respect to withholding
required upon any taxable event under the Plan, the Committee may, at the time
the Award is granted or thereafter, require that any such withholding
requirement be satisfied, in whole or in part, by withholding shares of Stock
having a Fair Market Value on the date of withholding equal to the amount to be
withheld for tax purposes, all in accordance with such procedures as the
Committee establishes.
16.4. No Right to Continued Service. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Corporation
or Affiliated Company to terminate any Participant's employment or status as an
officer or director at any time, nor confer upon any Participant any right to
continue as an employee, officer or director of the Corporation, or such
Subsidiary or Affiliated Company.
l6.5. Unfunded Status of Awards. The Plan is intended to be an "unfunded"
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation.
16.6. Indemnification. To the extent allowable under applicable law, each
member of the Committee shall be indemnified and held harmless by the
Corporation from any loss, cost, liability, or expense (including attorneys'
fees and charges) that may be imposed upon or reasonably incurred by such member
in connection with or resulting from any claim, action, suit, or proceeding to
which such member may be a party or in which he may be involved by reason of any
action or failure to act under the Plan and against and from any and all amounts
paid by such member in satisfaction of judgment in such action, suit, or
proceeding against him provided he gives the Corporation an opportunity, at its
own expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Articles of Incorporation or Bylaws, as a
matter of law, any contract or otherwise, or any power that the Corporation may
have to indemnify them or hold them harmless.
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<PAGE> 37
16.7. Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation, unless provided otherwise in such other plan.
16.8. Expenses. The expenses of administering the Plan shall be borne by
the Corporation.
16.9. Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.10. Fractional Shares. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.11. Government and Other Regulations. The obligation of the Corporation
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid or issuable under the Plan or any Award. The shares paid or issuable
under the Plan may in certain circumstances be exempt from registration under
the 1933 Act, and the Corporation may restrict the transfer of such shares in
such manner as it deems advisable for compliance with any such exemption.
16.12. Governing Law. To the extent not governed by federal law, the Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Georgia.
16.13 Additional Provisions. Each Award Agreement may contain such other
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
The foregoing is hereby acknowledged as being the IRT Property Company 1998
Long Term Incentive Plan as adopted by the Board of Directors of the Corporation
as of November 11, 1997.
IRT PROPERTY COMPANY
By: /s/ THOMAS H. MCAULEY
------------------------------------
Name: Thomas H. McAuley
Title: President
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APPENDIX B
[LOGO]
PROXY FORM I R T PROPERTY COMPANY PROXY FORM
- --------------------------------------------------------------------------------
This proxy when properly executed will be voted in the manner directed herein by
the shareholder whose signature appears below. If no direction is made, the
proxy will be voted FOR items 1 and 2.
When signing as attorney-in-fact, executor, administrator, trustee, guardian or
officer of a corporation, please give full title as such. On joint accounts,
each owner should sign.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM 1. Election of Directors: Nominees: D.W. MacLeod, T.H. McAuley, M.M. Thomas, P.L. Flinn, H.B. Gibbs, Jr.,
S.W. Kendrick and B.A. Morrice
VOTE FOR [ ] VOTE WITHHELD [ ] (INSTRUCTIONS: To withhold authority to vote for
all nominees listed above any individual nominee, write that nominee's name
(except as marked to the in the space provided below.)
contrary to the right)
-------------------------------------------------
ITEM 2. To Approve The IRT FOR AGAINST ABSTAIN
Property Company 1998 --- ------- -------
Long-Term Incentive Plan. [ ] [ ] [ ]
Please mark this box if you have any comments or [ ] Please mark this box if you plan to attend
changes to names or addresses. the Annual Meeting [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE MARK ALL
CHOICES LIKE THIS [X]
SIGNATURE DATE
----------------------- ----------------
SIGNATURE DATE
----------------------- ----------------
<PAGE> 39
- --------------------------------------------------------------------------------
[LOGO]
PROXY FORM I R T PROPERTY COMPANY PROXY FORM
- --------------------------------------------------------------------------------
Please date and sign this proxy on the reverse side and mail without delay in
the enclosed envelope.
IRT Property Company
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
Proxy For Annual Meeting of Shareholders Solicited By The Board of Directors
The undersigned hereby appoints Thomas H. McAuley and W. Benjamin Jones III, as
Proxies, each with the full power of substitution to represent the undersigned
and to vote all of the shares of IRT Property Company (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the Cobb Galleria Centre, Two Galleria Parkway, Room 105,
Atlanta, Georgia 30339 on Thursday, June 18, 1998 at 10:00 A.M. local time, and
any adjournments thereof (the "Meeting") (1) as hereinafter specified upon the
proposals listed on the reverse side and more particularly described in the
Company's proxy statement, receipt of which is hereby acknowledged, and (2) in
their discretion upon such other matters as may properly come before the
Meeting.
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
- 2 -
