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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number 1-7859
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IRT PROPERTY COMPANY
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(Exact name of registrant as specified in its charter)
Georgia 58-1366611
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 955-4406
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Shares of Common Stock New York Stock Exchange
$1 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate market value of the common stock of the registrant held by
nonaffiliates of the registrant at February 25, 1998 was $380,745,957.
32,452,962 shares of Common Stock, $1 Par Value, were outstanding at February
25, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III (Items 10, 11, 12 and 13) is incorporated
by reference to the registrant's definitive proxy statement for the 1998 Annual
Meeting of Shareholders of the Company to be filed pursuant to Regulation 14A.
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CERTAIN MATTERS DISCUSSED UNDER "ITEM 1. BUSINESS," "ITEM 5. MARKET FOR THE
REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS," "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA--NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS" CONTAIN FORWARD-LOOKING STATEMENTS, WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, TAX
CONSIDERATIONS, COMPETITIVE CONDITIONS, REGULATION, DISTRIBUTIONS TO
SHAREHOLDERS, DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND LIQUIDITY
OF THE COMPANY AND CERTAIN OTHER MATTERS. READERS OF THIS REPORT SHOULD BE AWARE
THAT THERE ARE VARIOUS FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS MADE IN THIS REPORT, WHICH
INCLUDE, WITHOUT LIMITATION, CHANGES IN TAX LAWS OR REGULATIONS; VACANCIES AND
LEASE RENEWALS; TENANT CLOSINGS; THE FINANCIAL CONDITION (INCLUDING POSSIBLE
MERGERS OR BANKRUPTCIES) OF TENANTS; COMPETITION; CHANGES IN NATIONAL AND LOCAL
ECONOMIC CONDITIONS AND POSSIBLE ENVIRONMENTAL LIABILITIES.
PART I
Item 1. Business.
General Development of Business. IRT Property Company (the "Company"),
founded in 1969, is an owner, operator and redeveloper of neighborhood and
community shopping centers located primarily in the Southeastern United States
and anchored by necessity-oriented retailers such as supermarkets, drug stores
and/or discount variety stores. The Company is a self-administered and
self-managed equity real estate investment trust with acquisition,
redevelopment, financing, property management and leasing capabilities. IRT
Property Company was incorporated under the laws of Georgia in June 1979. It was
organized in order to accommodate a merger of Investors Realty Trust, a
Tennessee business trust organized in 1969, and Summit Properties, an Ohio
business trust organized in 1965. That merger was accomplished effective June
20, 1979, and the Company then succeeded to all of the assets and liabilities of
both trusts.
The Company, like its predecessor, Investors Realty Trust, has elected
since inception to be treated as a "Real Estate Investment Trust" ("REIT") under
the Internal Revenue Code (the "Code"). The Company intends to continue such
election, although it is not required to do so. For the special provisions
applicable to REITs, reference is made to Sections 856-860 of the Code, as
amended.
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The Company has three wholly-owned subsidiaries. IRT Management Company
("IRTMC") was formed in 1990. The only business conducted thus far by IRTMC has
been the purchase of a portion of the Company's 2% convertible subordinated
debentures, which were redeemed in 1992, although it may engage in other
activities in the future. VW Mall, Inc. ("VWM") was formed in July 1994. Upon
its formation, VWM purchased the land underlying Valley West Mall and held the
purchase-money mortgage taken back on the sale of Valley West Mall in 1996. This
purchase-money mortgage was prepaid in September 1997. IRT Alabama, Inc.
("IRTAL") was formed in August 1997. Upon its formation, IRTAL purchased Madison
Centre in Huntsville, Alabama.
IRT Capital Corporation ("IRTCC"), a taxable subsidiary of the Company,
was formed under the laws of Georgia in 1996. IRTCC has the ability to develop
properties, buy and sell properties, provide equity to developers who are
merchant builders and perform third-party management, leasing and brokerage. The
Company holds 96% of the non-voting common stock and 1% of the voting common
stock of IRTCC. The remaining voting common stock is currently held by a member
of the Board of Directors and an executive officer of the Company. IRTCC is
included in the Company's consolidated financial statements but is taxed as a
regular corporation and not as a REIT.
Financial Information and Description of Business. The Company's sole
business is the ownership of real estate investments which consist principally
of equity investments in income-producing properties, with primary emphasis on
neighborhood and community shopping centers in the Southeastern United States.
The Company's investment portfolio also includes some industrial and other
properties, and to a lesser extent various purchase-money mortgages taken back
on the sales of former equity investments. In addition, the Company has
authority to make other types of equity and mortgage investments in real estate.
The Company considers its investment activity to consist of a single industry
segment.
For a description of the Company's individual investments and of
material developments during 1997 regarding these investments and the Company as
a whole, reference is made to Items 2 and 7 hereof. For information regarding
the Company's 1997 common stock offering and repurchase of a portion of the 7.3%
convertible subordinated debentures, reference is made to Item 7 and to Notes 2
and 8 to the consolidated financial statements. For financial information
regarding the Company's 1997 senior note offering, reference is made to Items 6
and 7 and to Notes 2 and 9 to the
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consolidated financial statements. Readers are also urged to review the
Company's Annual Report to Shareholders for the year ended December 31, 1997.
In making new real estate investments, the Company intends to continue
to place primary emphasis on obtaining equity interests in well-located
income-producing properties with attractive yields and potential for increases
in income and capital appreciation. The Company focuses on neighborhood and
community shopping centers, primarily in the Southeastern United States;
however, the Company will consider portfolio acquisitions in other regions under
circumstances which will allow it to establish and maintain a regional presence.
Such focus allows and will allow the Company to establish and maintain strong
working relationships with major national and regional retailers which serve
such present and future regional markets. The Company also from time to time
considers the disposition or exchange of existing investments in order to
improve its investment portfolio or increase its funds from operations. Existing
investments are continuously reviewed by Company management, and appropriate
programs to renovate and modernize properties are designed and implemented in
order to improve leasing arrangements, thereby increasing funds from operations
and property values. The Company's investment and portfolio management
philosophy is designed to implement its overall objective of maximizing funds
from operations and distributions to shareholders.
The Company directly provides property management and leasing services
for most of its operating properties. Self-management enables the Company to
emphasize and more closely control leasing and property management. Internal
property management also provides the Company opportunities for operating
efficiencies by enabling it to acquire additional properties without
proportionate increases in property management expenses. The Company's property
management program is implemented by property management and leasing
professionals located in offices in Atlanta, Charlotte, Orlando, Ft. Lauderdale
and New Orleans.
The results of the Company's operations depend upon the performance of
its existing investment portfolio, the availability of suitable opportunities
for new investments and the yields then available on such investments and the
Company's cost of capital. Yields will vary with the type of investment
involved, the condition of the financial and real estate markets, the nature and
geographic location of the investment, competition and other factors. The
performance of a real estate investment company is
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strongly influenced by the cycles of the real estate industry. As financial
intermediaries providing equity funds for real estate projects, real estate
investment companies are generally subject to the same market and economic
forces as other real estate investors.
Competitive Conditions. In seeking new investment opportunities, the
Company competes with other real estate investors, including pension funds,
foreign investors, real estate partnerships, other real estate investment trusts
and other domestic real estate companies. On properties presently owned by the
Company or in which it has investments, the Company and its tenants and
borrowers compete with other owners of like properties for tenants and/or
customers depending on the nature of the investment. Management believes that
the Company is well positioned to compete effectively for new investments and
tenants.
For any borrowed funds that may be used in new investment activity, the
Company would be in competition with other borrowers seeking both secured and
unsecured borrowings in the banking, real estate lending and public debt
markets. For a description of the Company's mortgage debt, reference is made to
Table V in Item 2 hereof, to Item 7 and to Note 7 to the consolidated financial
statements included as a part of this report. For a description of the Company's
7.3% convertible subordinated debentures, reference is made to Item 7 and to
Note 8 to the consolidated financial statements. For a description of the
Company's 7.45% senior notes and 7.25% senior notes, reference is made to Item 7
and to Note 9 to the consolidated financial statements. For a description of the
Company's $100,000,000 unsecured revolving term loan, reference is made to Item
7 and to Note 10 to the consolidated financial statements.
Regulation. Investments in real property create a potential for
environmental liability on the part of the owner of or any mortgage lender on
such real property. If hazardous substances are discovered on or emanating from
any of the Company's properties, the owner or operator of the property
(including the Company) may, in certain circumstances, be held strictly liable
for all costs and liabilities relating to such hazardous substances. In 1989,
the Company adopted a policy of obtaining a Phase I environmental study on each
property it seeks to acquire.
The Company's Charlotte, North Carolina industrial facility is among
the sites appearing on the Comprehensive Environmental Response, Compensation
and Liability Information System List
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("CERCLIS List") maintained by the United States Environmental Protection Agency
("EPA"). The CERCLIS List contains sites which have possible environmental
contamination. The EPA regularly requests that state environmental agencies
conduct screening site investigations ("SSI") at various sites appearing on the
CERCLIS List. At the request of the EPA, the North Carolina Department of
Environment, Health, and Natural Resources ("DEHNR") conducted an SSI at this
facility on May 28, 1991. Following receipt of results of such SSI, the DEHNR
advised the Company that it would not recommend further action to the EPA with
respect to this facility. The Company has been notified that the EPA has
determined that no further action is necessary at the site, and the site
currently appears in the CERCLIS List as a "delisted" site.
The Charlotte industrial facility contained underground petroleum and
used oil storage tanks ("USTs") believed to have been owned by the previous
owner of this property. The Company (through an environmental consulting firm)
removed the USTs in December 1993, and on March 2, 1994, DEHNR notified the
Company that certain investigative, corrective and/or remedial actions
("Corrective Actions") must be performed by the Company to, among other things,
determine the level of soil and/or groundwater contamination due to suspected
leakage from some of the USTs. The Company has investigated the property to the
satisfaction of DEHNR. The investigation confirmed the presence of petroleum
product-related substances in soil and groundwater at levels that exceed
applicable standards. The investigation also revealed the presence of free phase
liquids in one monitoring well at the property.
The Company has begun removing free phase liquids from the well on the
property. In addition, the Company has submitted to DEHNR a Corrective Action
Plan ("CAP") and schedule to address petroleum-impacted soil and groundwater at
the site. Soil excavation work has been completed, and the Company plans to
address petroleum-impacted groundwater in due course. According to the CAP, the
estimated remaining cost for site remediation ranges from $129,000 to $193,000
over a period of 3 to 6 years. Although the Company believes that certain of the
costs of Corrective Action are reimbursable under the North Carolina Commercial
Leaking Petroleum Underground Storage Tank Cleanup Fund, the Company accrued
$129,000 in 1995 based on these estimates. The CAP may be revised, and the
estimated costs may change, but based on the information presently available,
the Company believes any additional costs of any such Corrective Action would
not have a material adverse effect on the Company's results of operations,
financial position, or liquidity.
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During 1996, the Company discovered that additional releases of
petroleum products had occurred at and around a garage facility previously
operated by a former trucking company tenant. An investigation is being
conducted by the Company in order to determine the extent of the related
contamination, and Company management is negotiating with the former tenant to
obtain a contribution to potential clean-up costs. The Company does not believe
the cost of addressing these additional releases will have a material adverse
effect on the Company's results of operations, financial position, or liquidity.
During its soil and groundwater investigation at Bluebonnet Village
Shopping Center in Baton Rouge, Louisiana, the Company's environmental
consultant discovered concentrations of various chemicals in a groundwater
monitoring well (well BB-1) that exceeded the maximum contaminant levels
("MCLs") under the Federal Safe Drinking Water Act. The Company has notified the
Louisiana Department of Environmental Quality-Groundwater Protection Division
("LDEQ-GWPD") of such discovery. The Company has been advised that the
groundwater impact appears to be very localized, since six other groundwater
monitoring wells placed around the initial well did not exhibit any impact. At
the request of LDEQ-GWPD, the Company subsequently installed two additional
wells in the immediate area of well BB-1 and sampled them at different depths,
confirming concentrations of chemicals above MCLs at that location. There can be
no assurance that the LDEQ-GWPD will not require remediation, but based on
information presently available to the Company and discussions with the
Company's environmental consultant, the Company believes the cost of any such
remediation would not have a material adverse effect on the Company's results of
operations, financial position, or liquidity.
Leaking petroleum USTs formerly located at the Company's Venice Plaza
Shopping Center in Venice, Florida, have affected soil and groundwater at this
center. Kash n' Karry Food Stores, Inc., formerly the Florida food division of
Lucky Stores, Inc., operated such USTs at Venice Plaza Shopping Center and is
addressing the releases. As of the date of this report, no Corrective Action
concerning such leaking USTs has been requested or required of the Company by
any federal, state or local agency or any other party.
Solvents apparently relating to drycleaning activities have been
discovered in soil and groundwater in the immediate vicinity of the premises of
a current tenant operating a dry cleaning
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facility at the Company's Westgate Square Shopping Center in Sunrise, Florida.
The tenant has agreed to investigate this discovery, and the Company expects to
receive a report from the tenant. In addition, the Company has been informed
that costs of any necessary Corrective Action may be funded in part through a
program established by the State of Florida. No Corrective Action concerning the
solvents has been requested or required of the Company by any federal, state or
local agency or any other party. Certain other shopping center investments owned
by the Company have experienced releases of dry cleaning solvents in the past;
however, based upon either state "no-action" letters or consultation with
environmental experts, the Company does not believe the cost of addressing these
releases would not have a material adverse effect on the Company's results of
operations, financial position, or liquidity.
Based on information presently available to the Company, the Company
believes that Kash n' Karry Food Stores, Inc. and/or Lucky Stores, Inc. in the
case of Venice Plaza Shopping Center, or the drycleaning facility tenant in the
case of Westgate Square, have the primary responsibility for undertaking any
necessary Corrective Action at these properties. There can be no assurance that
the Company will not be required to undertake Corrective Action at these sites,
but based on the information presently available to the Company, the Company
believes that the costs of any such Corrective Action would not have a material
adverse effect on the Company's results of operations, financial position, or
liquidity.
Leaking petroleum USTs and other environmental concerns located on
property owned by third parties may affect certain properties of the Company.
Examples include Gulf Gate Plaza Shopping Center, Naples, Florida; Thomasville
Commons, Thomasville, North Carolina; Wesley Chapel Crossing, Decatur, Georgia;
Market Place Shopping Center, Norcross, Georgia and Chestnut Square, Brevard,
North Carolina. Based on information presently available to the Company, the
Company believes that the third party landowners or UST operators are
principally responsible for Corrective Action for any such matters. Accordingly,
the Company believes that the costs of any such Corrective Action would not have
a material adverse effect on the Company's results of operations, financial
position, or liquidity.
The Company has not commissioned independent environmental analyses
with respect to properties acquired prior to 1989, except as required pursuant
to a former secured revolving term loan.
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Phase I environmental site assessments (which generally did not include
environmental sampling, monitoring or laboratory analysis) were implemented by
the Company with respect to those properties which the Company acquired from
1989 to the present, prior to the acquisition of such properties. No assurance
can be given that hazardous substances are not located on any of the properties.
However, the Company has no reason to believe that any environmental
contamination has occurred nor any violation of any applicable environmental
law, statute, regulation or ordinance exists that would have a material adverse
effect on the Company's results of operations, financial position or liquidity.
The Company presently carries only limited insurance coverage for the types of
environmental risks described above.
The State of Florida has established a program covering part of the
cost of addressing releases of dry cleaning-related solvents from certain dry
cleaning facilities in the state. The Company has encouraged its dry cleaning
tenants at its Florida properties to enter this program and to investigate
whether their operations have resulted in the release of dry cleaning-related
solvents. These investigations are ongoing and have resulted in the discovery of
releases from dry cleaning tenants to the soil and groundwater at certain
Company properties. In addition, dry cleaning solvents are present in the soil
at Chastain Square in Atlanta, Georgia, acquired in December 1997. The State of
Georgia has issued a letter indicating that no action is contemplated at this
site. Based on the information provided to the Company to date, the Company
believes that the cost of addressing the releases discovered to date would not
have a material adverse effect on the Company's results of operations, financial
position, or liquidity.
Employees. The Company presently employs 52 persons, 2 of whom are
on-site maintenance personnel at two of the Company's real estate investments.
Item 2. Properties.
The following tables and notes thereto describe the properties in which
the Company had investments at December 31, 1997, as well as the mortgage
indebtedness to which the Company's investments were subject. Reference is made
to Note 3 to the consolidated financial statements included as a part of this
report for information on minimum base rentals on noncancellable operating
leases for the next five years and thereafter.
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I. EQUITY INVESTMENTS (LAND & BUILDINGS)
The Company had a fee or leasehold interest in land and improvements thereon
as follows:
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Area or Leased Year Company Cost FFO Net Income
Description Acquired Rental Units 12/31/97 Completed 12/31/97 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- --------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Abbeville Plaza 4/86 59,525 sq. ft. 50% 1970 $ 561,850 $ 297,303 $ 38,011 $ (18,166)
Abbeville, SC
Alafaya Commons 11/96 120,586 sq. ft. 99% 1987 10,272,577 10,144,635 1,088,748 970,648
Orlando, FL
Ambassador Row 12/94 193,982 sq. ft. 98% 1980 & 9,948,645 9,354,326 1,074,977 858,310
Lafayette, LA 1991
Ambassador Row Courtyard 12/94 155,483 sq. ft. 93% 1986 & 11,742,852 11,073,308 1,106,910 877,207
Lafayette, LA 1991
Asheville Plaza 4/86 49,800 sq. ft. 100% 1967 405,287 272,327 95,736 84,540
Asheville, NC
Bluebonnet Village 12/94 90,215 sq. ft. 100% 1983 8,120,564 7,692,907 856,637 713,118
Baton Rouge, LA
The Boulevard 12/94 68,012 sq. ft. 54% 1976 & 3,818,271 3,598,136 389,133 313,852
Lafayette, LA 1994
Carolina Place 5/89 36,560 sq. ft. 100% 1989 2,351,494 1,922,434 205,058 154,718
Hartsville, SC
Centre Pointe Plaza 12/92 & 163,642 sq. ft. 100% 1989 & 9,260,848 8,225,297 879,389 668,332
Smithfield, NC 12/93 1993
Chadwick Square 1/92 31,700 sq. ft. 95% 1985 1,472,827 1,298,309 187,135 157,639
Hendersonville, NC
Chastain Square 12/97 74,315 sq. ft. 87% 1981 6,757,684 6,753,532 25,646 21,494
Atlanta, GA
Chelsea Place 7/93 81,144 sq. ft. 100% 1992 6,942,585 6,323,131 763,695 624,106
New Port Richey, FL
Chester Plaza 4/86 & 71,443 sq. ft. 59% 1967 & 2,199,971 1,569,164 202,017 78,752
Chester, SC 2/92 1992
Chestnut Square 1/92 39,640 sq. ft. 100% 1985 1,432,107 1,258,959 250,437 218,821
Brevard, NC
Colony Square 2/88 50,000 sq. ft. 86% 1987 2,936,430 2,162,203 279,907 185,087
Fitzgerald, GA
Commerce Crossing 12/92 100,668 sq. ft. 100% 1988 4,501,943 3,983,944 403,184 297,907
Commerce, GA
Country Club Plaza 1/95 64,686 sq. ft. 83% 1982 4,217,057 3,969,923 438,807 343,211
Slidell, LA
Countryside Shops 6/94 173,161 sq. ft. 100% 1986,1988 16,756,609 15,767,236 1,879,228 1,588,247
Cooper City, FL & 1991
The Crossing 12/94 113,989 sq. ft. 100% 1988 & 4,604,816 4,337,271 554,762 462,780
Slidell, LA 1993
</TABLE>
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I. EQUITY INVESTMENTS (LAND & BUILDINGS), continued
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Area or Leased Year Company Cost FFO Net Income
Description Acquired Rental Units 12/31/97 Completed 12/31/97 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS,continued
Delchamps Plaza 4/88 66,857 sq. ft. 98% 1987 $ 4,566,446 $ 3,546,472 $ 442,297 $172,948
Pascagoula, MS
Douglas Commons 8/92 97,027 sq. ft. 97% 1988 8,641,598 7,783,419 783,349 617,975
Douglasville, GA
Eden Centre 11/94 56,355 sq. ft. 96% 1991 3,527,217 3,297,530 394,131 321,598
Eden, NC
Elmwood Oaks 1/92 130,284 sq. ft. 100% 1989 11,179,205 10,190,670 1,237,447 430,404
Harahan, LA
Fairview Oaks 6/97 77,052 sq. ft. 100% 1997 7,109,994 7,023,403 385,477 298,886
Ellenwood, GA
First Street Station 8/94 52,230 sq. ft. 95% 1989 3,065,440 2,825,999 296,227 223,173
Albemarle, NC
Forest Hills Centre 8/90 74,180 sq. ft. 100% 1990 & 5,534,021 4,754,361 635,152 506,448
Wilson, NC 1995
Forrest Gallery 12/92 214,450 sq. ft. 95% 1987 12,473,466 11,120,759 1,000,104 710,555
Tullahoma, TN
Ft. Walton Beach Plaza 7/86 48,248 sq. ft. 100% 1986 2,676,717 1,954,239 243,082 176,498
Ft. Walton Beach, FL
The Galleria 8/86 & 92,344 sq. ft. 99% 1986, 1990 8,523,501 6,765,261 667,533 450,222
Wrightsville Beach, NC 12/87 & 1996
Grassland Crossing 2/97 90,906 sq. ft. 99% 1996 9,906,655 9,704,332 858,535 169,740
Alpharetta, GA
Greenwood Shopping Center 7/97 134,132 sq. ft. 94% 1982 & 13,089,070 12,978,099 605,335 494,364
Palm Springs, FL 1994
Gulf Gate Plaza 6/79 174,566 sq. ft. 72% 1969 & 4,499,337 1,746,555 497,257 270,859
Naples, FL 1974
Harris Teeter 6/88 & 36,535 sq. ft. 100% 1981 & 2,600,657 1,884,837 298,249 221,209
Lexington, VA 6/89 1989
Heritage Walk 6/93 159,362 sq. ft. 100% 1991 & 8,757,752 7,847,922 928,032 728,863
Milledgeville, GA 1992
Hoffner Plaza 6/79 6,000 sq. ft. 53% 1972 561,464 442,220 31,933 1,529
Orlando, FL
Lancaster Plaza 4/86 77,400 sq. ft. 100% 1971 1,436,305 927,280 159,103 90,506
Lancaster, SC
Lancaster Shopping Center 8/86 & 29,047 sq. ft. 100% 1963 & 1,595,667 1,160,456 181,100 139,712
Lancaster, SC 12/87 1987
Lawrence Commons 8/92 52,295 sq. ft. 97% 1987 3,585,508 3,205,094 381,915 306,121
Lawrenceburg, TN
Litchfield Landing 8/86 42,201 sq. ft. 98% 1984 2,632,685 2,001,834 321,804 264,826
North Litchfield, SC
</TABLE>
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I. EQUITY INVESTMENTS (LAND & BUILDINGS), continued
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Area or Leased Year Company Cost FFO Net Income
Description Acquired Rental Units 12/31/97 Completed 12/31/97 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS,continued
Macland Pointe 1/93 79,699 sq. ft. 94% 1992 & $ 6,140,677 $ 5,537,602 $ 663,758 $250,494
Marietta, GA 1993
Madison Centre 8/97 64,837 sq. ft. 100% 1997 5,818,308 5,789,702 206,196 177,590
Huntsville, AL
Market Place 4/97 73,686 sq. ft. 97% 1976 7,073,526 7,015,962 570,779 513,215
Norcross, GA
McAlpin Square 12/97 176,807 sq. ft. 95% 1979 6,078,036 6,073,333 52,380 47,677
Savannah, GA
Millervillage Shopping Center 12/94 94,559 sq. ft. 97% 1983 & 7,666,185 7,221,878 794,210 643,404
Baton Rouge, LA 1992
New Smyrna Beach Regional 8/92 118,451 sq. ft. 98% 1987 10,434,233 9,446,598 963,653 750,817
New Smyrna Beach, FL
North River Village Center 12/92 & 177,128 sq. ft. 100% 1988 & 10,206,395 9,385,477 1,123,240 926,648
Ellenton, FL 12/93 1993
North Village Center (3) 8/86 60,356 sq. ft. 96% 1984 3,279,033 2,517,401 340,408 48,266
North Myrtle Beach, SC
Old Kings Commons 5/88 84,759 sq. ft. 98% 1988 6,130,573 4,959,848 543,982 411,323
Palm Coast, FL
Palm Gardens 6/79 52,670 sq. ft. 95% 1970 2,030,412 1,009,905 208,243 82,130
Largo, FL
Parkmore Plaza 12/92 159,067 sq. ft. 100% 1986 & 8,394,459 7,562,877 950,316 776,515
Milton, FL 1992
Paulding Commons 8/92 192,391 sq. ft. 99% 1991 13,059,667 11,608,348 1,298,398 664,573
Dallas, GA
Pensacola Plaza 7/86 56,098 sq. ft. 100% 1985 2,678,938 1,665,287 235,809 135,801
Pensacola, FL
Pinhook Plaza 12/94 190,319 sq. ft. 97% 1979 & 11,127,857 10,492,859 1,203,772 288,217
Lafayette, LA 1992
Plaza Acadienne (4) 12/94 105,419 sq. ft. 100% 1980 2,973,749 2,748,955 376,717 69,321
Eunice, LA
Plaza North 8/92 47,240 sq. ft. 92% 1986 2,460,095 2,214,883 263,879 218,243
Hendersonville, NC
Powers Ferry Plaza 5/97 82,676 sq. ft. 77% 1979 & 6,900,850 6,820,645 375,931 224,163
Marietta, GA 1983
Providence Square 12/71 85,930 sq. ft. 94% 1973 4,511,977 1,780,485 500,201 289,559
Charlotte, NC
Riverview Shopping Center 3/72 130,058 sq. ft. 89% 1973 & 6,581,470 4,436,883 600,723 280,467
Durham, NC 1994
Salisbury Marketplace 8/96 76,970 sq. ft. 94% 1987 4,611,151 4,481,903 521,481 424,545
Salisbury, NC
</TABLE>
11
<PAGE> 13
I. EQUITY INVESTMENTS (LAND & BUILDINGS), continued
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Area or Leased Year Company Cost FFO Net Income
Description Acquired Rental Units 12/31/97 Completed 12/31/97 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS,continued
Scottsville Square 8/92 38,450 sq. ft. 21% 1986 $ 2,453,793 $ 2,147,421 $ 57,847 ($51,598)
Bowling Green, KY
Seven Hills 7/93 64,590 sq. ft. 99% 1991 4,914,220 4,571,291 542,857 431,820
Spring Hill, FL
Shelby Plaza (4) 4/86 103,000 sq. ft. 85% 1972 1,345,705 781,001 97,716 1,102
Shelby, NC
Sherwood South 12/94 75,607 sq. ft. 99% 1972, 1988 2,035,263 1,913,782 326,006 280,365
Baton Rouge, LA & 1992
Shoppes of Silverlakes 11/97 126,638 sq. ft. 100% 1995 & 16,868,741 16,828,682 219,546 144,105
Pembroke Pines, FL 1996
Siegen Village 12/94 157,528 sq. ft. 100% 1988 & 8,656,883 8,264,414 976,452 803,355
Baton Rouge, LA 1996
Smyrna Village 8/92 83,334 sq. ft. 100% 1992 5,850,781 5,193,964 658,772 364,699
Smyrna, TN
Smyth Valley Crossing 12/92 126,841 sq. ft. 100% 1989 7,063,450 6,355,343 646,698 498,584
Marion, VA
South Beach Regional 8/92 289,319 sq. ft. 97% 1990 & 21,944,388 19,417,451 2,176,119 1,061,820
Jacksonville Beach, FL 1991
Spalding Village 8/92 235,318 sq. ft. 98% 1989 15,425,096 13,695,511 1,573,575 305,013
Griffin, GA
Stadium Plaza 8/92 70,475 sq. ft. 100% 1988 4,474,542 4,112,145 435,278 367,330
Phenix City, AL
Stanley Market Place 1/92 40,364 sq. ft. 100% 1980 & 1,867,232 1,630,092 222,300 182,220
Stanley, NC 1991
Tarpon Heights 1/95 56,605 sq. ft. 100% 1982 2,837,287 2,678,200 391,941 114,543
Galliano, LA
Taylorsville Shopping Center 8/86 & 48,537 sq. ft. 98% 1982 & 2,612,159 1,919,709 256,243 180,881
Taylorsville, NC 12/88 1988
Thomasville Commons 8/92 148,754 sq. ft. 99% 1991 7,196,681 6,341,635 798,362 109,358
Thomasville, NC
University Center 12/89 56,180 sq. ft. 93% 1989 3,970,972 3,304,789 384,953 296,105
Greenville, NC
Venice Plaza (3) 6/79 144,850 sq. ft. 99% 1971 & 2,909,417 1,175,390 403,478 283,556
Venice, FL 1979
Village at Northshore 12/94 144,373 sq. ft. 100% 1988 & 8,321,566 7,850,736 879,216 229,330
Slidell, LA 1993
Waterlick Plaza 10/89 98,694 sq. ft. 97% 1973 & 6,311,631 5,183,665 705,372 553,187
Lynchburg, VA 1988
Watson Central 12/92 & 227,747 sq. ft. 94% 1989 & 13,120,894 11,725,279 1,267,057 975,765
Warner Robins, GA 10/93 1993
</TABLE>
12
<PAGE> 14
I. EQUITY INVESTMENTS (LAND & BUILDINGS), continued
<TABLE>
<CAPTION>
Percent Cost to Depreciated Property Property
Date Area or Leased Year Company Cost FFO Net Income
Description Acquired Rental Units 12/31/97 Completed 12/31/97 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- --------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS,continued
Wesley Chapel Crossing 12/92 170,792 sq. ft. 100% 1989 $ 10,932,851 $ 10,034,497 $ 1,021,112 $ 839,855
Decatur, GA
West Gate Plaza 6/74 & 64,378 sq. ft. 99% 1974 & 4,743,395 3,702,836 408,849 249,654
Mobile, AL 1/85 1995
West Towne Square 3/90 89,596 sq. ft. 96% 1988 6,026,201 4,887,987 520,872 361,481
Rome, GA
Westgate Square 6/94 104,853 sq. ft. 95% 1984 & 9,223,899 8,599,714 1,022,777 836,717
Sunrise, FL 1988
Willowdaile Shopping Center 8/86 & 120,815 sq. ft. 98% 1986 8,586,624 6,487,741 1,081,000 869,103
Durham, NC 12/87 --------- -----------------------------------------------------
8,446,780 sq. ft $ 532,118,384 472,739,193 49,935,953 32,708,357
========= -----------------------------------------------------
INDUSTRIAL PROPERTIES
Industrial Buildings 6/79 188,513 sq. ft. 73% 1956 & 3,630,605 884,356 335,122 231,365
Charlotte, NC 1963
Plasti-Kote 6/79 41,000 sq. ft. 100% 1961 & 482,939 81,390 122,700 122,700
Medina, OH --------- 1966
-----------------------------------------------------
229,513 sq. ft. 4,113,544 965,746 457,822 354,065
========= -----------------------------------------------------
$ 536,231,928 $473,704,939 $50,393,775 $33,062,422
=====================================================
</TABLE>
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for the fiscal year ended December 31, 1997 or from the date of
acquisition (if acquired in 1997) through December 31, 1997. Property
FFO should not be considered an alternative to net income or other
measurements under generally accepted accounting principles as an
indicator of operating performance; or to cash flows from operating,
investing, or financing activities as a measure of liquidity. Property
FFO is presented as an additional measure in valuing and analyzing the
underlying real estate investments.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) The Company owns a 54.5% interest in North Village Center and a 75%
interest in Venice Plaza Shopping Center, which are consolidated for
financial reporting purposes and minority interests recorded.
(4) Subject to ground leases expiring in 2002 for Shelby Plaza and 1998 and
2008 for Plaza Acadienne. The Company has an option to purchase the
land at Shelby Plaza for $265,000 in 2002.
13
<PAGE> 15
II. EQUITY INVESTMENTS (DIRECT FINANCING LEASES)
The Company also had a fee interest in land and improvements thereon in the
following properties occupied by tenants under leases which are treated as
direct financing leases:
<TABLE>
<CAPTION>
Percent Cost to Property Property
Date Leased Year Company FFO Net Income
Description Acquired Square Feet 12/31/97 Completed 12/31/97 1997 (1) 1997 (2)
----------- -------- ------------ -------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
The Old Phoenix National Bank (3) 12/84 73,074 sq. ft. 100% Various $2,093,527 $313,049 $275,021
Medina County, OH ====== ---------- -------- --------
SHOPPING CENTERS
Wal-Mart Stores, Inc. (4) 6/85 54,223 sq. ft. 100% 1985 1,234,675 206,064 166,241
Mathews, LA
Wal-Mart Stores, Inc. (4) 7/85 53,571 sq. ft. 100% 1985 1,376,093 175,350 131,014
Marble Falls, TX
------- ---------- -------- --------
107,794 2,610,768 381,414 297,255
======= ---------- -------- --------
$4,704,295 $694,463 $572,276
========== ======== ========
</TABLE>
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for the fiscal year ended December 31, 1997 or from the date of
acquisition (if acquired in 1997) through December 31, 1997. Property
FFO should not be considered an alternative to net income or other
measurements under generally accepted accounting principles as an
indicator of operating performance; or to cash flows from operating,
investing or financing activities as a measure of liquidity. Property
FFO is presented as an additional measure in valuing and analyzing the
underlying real estate investments.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) This investment represents ten banking facilities leased to The Old
Phoenix National Bank at an annual rental of $313,049. The leases
expire March 2013 with no purchase or renewal options.
(4) These two retail facilities are leased to Wal-Mart Stores, Inc. at a
total annual rental of $332,850 plus percentage rentals of 1% of gross
sales in excess of fourth year sales. The leases expire January 2011,
with five 5-year renewal options. There are no purchase options.
Percentage rental of $48,564 was received during the fiscal year ended
December 31, 1997.
14
<PAGE> 16
III. EQUITY INVESTMENTS (LAND PURCHASE-LEASEBACKS)
The Company owned land under the following properties, all of which are net
leased back to lessees on terms summarized below. The improvements on such
properties are owned by others but will revert to the Company at the end of the
lease terms unless the purchase options of the lessees, as referred to below,
are exercised. The interest of the Company in one property is subordinate to a
first mortgage loan to the lessee having a balance of $18,014 as of December 31,
1997.
<TABLE>
<CAPTION>
Lease Cost to Property Property
Date Land Area Year Expiration Company FFO Net Income
Description Acquired In Acres Improvements Completed Date 12/31/97 1997 (1) 1997 (2)
----------- -------- -------- ------------- --------- ---- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Lawrence County Shopping Center 5/71 13.62 135,605 sq. ft. 1971 2069 (3) $435,994 $ 67,200 $ 67,200
Sybene, OH
Grand Marche Shopping Center 9/72 11.38 200,585 sq. ft. 1969 2012 250,500 27,500 27,500
Lafayette, LA
Manatee County Shopping Center 5/71 16.00 120,500 sq. ft. 1971 2069 (3) 241,798 30,000 30,000
Bradenton, FL -------- ---------------------------------
456,690 sq. ft. $928,292 $124,700 $124,700
======== =================================
</TABLE>
NOTES:
(1) Property FFO represents cash flows from operating activities before
interest expense excluding changes in accrued assets and liabilities
for the fiscal year ended December 31, 1997 or from the date of
acquisition (if acquired in 1997) through December 31, 1997. Property
FFO should not be considered an alternative to net income or other
measurements under generally accepted accounting principles as an
indicator of operating performance; or to cash flows from operating,
investing or financing activities as a measure of liquidity. Property
FFO is presented as an additional measure in valuing and analyzing the
underlying real estate investments.
(2) Property Net Income represents net income of the property calculated in
accordance with generally accepted accounting principles, excluding any
allocation of general and administrative expenses of the Company.
(3) Each lessee has a repurchase option exercisable at a specified price
(in each case higher than the cost to the Company of its investment)
which increases annually by a fixed amount.
15
<PAGE> 17
IV. MORTGAGE LOAN INVESTMENTS
The Company had mortgage loans receivable on the following properties:
<TABLE>
<CAPTION>
Security
------------------------ Principal Stated
Type of Land Area Outstanding Maturity Interest
Location Loan In Acres Improvements 12/31/97 Date Rate
-------- ---- -------- ------------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Walton Plaza Shopping Center 1st Mortgage 5.53 43,460 sq. ft. $3,163,285 08/98 (1) 10.25%
Augusta, GA
Wal-Mart - Kearney, NE 2nd Mortgage 8.491 83,249 sq. ft. 594,000 12/98 (2) 7.00%
Kearney, NE
Wal-Mart - Fremont, NE 2nd Mortgage 7.77 64,890 sq. ft. 406,000 12/98 (2) 7.00%
Fremont, NE
Spanish Quarter Apartments Wrap-Around 15.00 276 units 5,028,728 09/01 (3) (3)
Montgomery, AL Mortgage 183,980 09/01 (3) (3)
Mill Creek Club Condominiums 1st Mortgage --- 4 units 25,753 2006- (4) 8.63% -
Nashville, TN Participation 2007 12.38%
Cypress Chase "A" Condominiums 1st Mortgage 2.00 recreational 119,946 05/09 (5) 10.00%
Lauderdale Lakes, FL ----------
9,521,692
Less interest discounts and negative goodwill (200,487)
----------
$9,321,205
==========
</TABLE>
16
<PAGE> 18
IV. MORTGAGE LOAN INVESTMENTS, continued
NOTES:
(1) Monthly payments of $29,670 of principal and interest at an annual rate
of 10.25%, with a balloon payment at maturity August 1, 1998.
(2) Monthly payments of $3,465 and $2,368 interest only for Kearney and
Fremont, respectively, with the entire principal balance due at
maturity December 31, 1998. These purchase-money second mortgages are
subordinate to a first mortgage having a balance of $4,420,450 as of
December 31, 1997.
(3) Modified effective December 1, 1994 to extend the term for 3 years to
September 1, 2001 and to reduce the cash interest rate from 10% to 9.5%
prospectively, requiring monthly payments of $45,382 of principal and
interest for the remaining term, with a balloon payment at maturity.
Additional interest at an annual rate of 1% accrues for the periods
September 1, 1984 through August 31, 1989 and September 1, 1991 through
August 31, 2001 and is payable at maturity or on sale of the property.
In addition, during 1995 the Company funded additional principal of
$260,000 under this mortgage to make certain capital improvements,
requiring monthly payments of $4,703 of principal and interest. This
wrap-around mortgage is subject to a first mortgage having a balance of
$610,142 as of December 31, 1997. See Table V. Mortgage Indebtedness
for a summary of the terms of the first mortgages. The borrower under
this wrap-around mortgage was in default of the terms of the mortgage,
and the Company obtained title through foreclosure on February 18,
1998.
(4) Principal outstanding December 31, 1997 represents the Company's
46.154% participation in the total loan outstanding of $55,798.
(5) Monthly payments include principal and interest of $1,472.
17
<PAGE> 19
V. MORTGAGE INDEBTEDNESS
Indebtedness of the Company secured by its investments (not including
mortgage debt owed by lessees of its land purchase-leaseback investments)
was as follows:
<TABLE>
<CAPTION>
Principal Balance Annual
Investment 12/31/97 Maturity Date Interest Rate Constant Payment
---------- -------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Tarpon Heights $2,219,484 03/01/98 11.000% $262,180 (1)
Galliano, LA
Powers Ferry Plaza 1,250,000 01/31/99 (2) 9.000% 0 (2)
Marietta, GA
Pinhook Plaza Phase I 1,749,275 01/01/00 (3) 9.875% 250,320
Lafayette, LA Phase II 1,853,901 01/01/00 (3) 9.875% 258,504
Phase III 3,440,341 01/01/00 (3) 9.875% 396,072
Macland Pointe 3,693,039 02/01/00 (3) 7.750% 362,558
Marietta, GA
Plaza Acadienne 2,228,454 07/01/00 (3) 10.250% 317,420
Eunice, LA
Thomasville Commons 5,481,755 06/01/02 (3) 9.625% 583,303
Thomasville, NC
Spanish Quarter Apartments 610,142 07/15/02 8.250% 162,360
Montgomery, AL
Elmwood Oaks 7,500,000 06/01/05 8.375% 628,125 (1)
Harahan, LA
North Village Center 2,525,195 (4) 03/15/09 8.125% 343,171
North Myrtle Beach, SC
Spalding Village 11,376,691 09/01/10 (3) 8.194% 932,206 (5)
Griffin, GA
Village at Northshore 5,417,992 07/01/13 (6) 9.000% 647,803
Slidell, LA
Shoppes of Silverlakes 3,494,085 07/01/15 7.750% 364,500
Pembroke Pines, FL
Grassland Crossing 6,709,066 12/01/16 (3) 7.865% 622,524
Alpharetta, GA ------------ -----------
59,549,420 $ 6,131,046
===========
Interest Premium (7) 9,230
------------
$ 59,558,650
============
</TABLE>
NOTES:
(1) Interest only. Entire principal due at maturity.
(2) Accrued and unpaid interest and $625,000 of the outstanding principal
balance is due 1/31/98 and the remaining $625,000 of the outstanding
principal balance and accrued and unpaid interest is due 1/31/99.
(3) Balloon payment at maturity.
(4) Although the Company is a partner or joint venturer in this investment,
100% of the mortgage note payable is recorded for financial reporting
purposes.
(5) Interest only through 9/01/00; then principal and interest of
$1,158,448 annually for the last 10 years.
(6) Callable anytime after 7/30/03.
(7) For financial reporting purposes, mortgage indebtedness is valued
assuming current interest rates at the dates of acquisition.
18
<PAGE> 20
Rental Properties. On February 6, 1997, the Company acquired Grassland
Crossing in Alpharetta, Georgia for a total cost of $9,907,000, consisting of
the initial purchase price of $9,890,000 and approximately $17,000 of
acquisition costs. This acquisition was funded by cash of $3,114,000 and the
assumption of the $6,793,000 existing mortgage debt with an interest rate of
7.865% maturing December 1, 2016. This center contains approximately 91,000
square feet of retail space and is anchored by Kroger.
On April 16, 1997, the Company acquired Market Place in Norcross,
Georgia for $7,074,000 cash, consisting of the initial purchase price of
$6,800,000, $250,000 of capital expenditures and approximately $24,000 of
acquisition costs. This center contains approximately 74,000 square feet of
retail space and is anchored by Regal Cinemas and CVS Drugs.
On May 13, 1997, the Company acquired Powers Ferry Plaza in Marietta,
Georgia for a total cost of $6,901,000, consisting of the initial purchase price
of $6,800,000 and approximately $101,000 of acquisition costs. This acquisition
was funded by cash of $5,651,000 and a $1,250,000 purchase-money mortgage with
an annual interest rate of 9% maturing January 31, 1999. This center contains
approximately 83,000 square feet of retail space and is anchored by Micro Center
and CVS Drugs.
On June 17, 1997, the Company acquired Fairview Oaks in Ellenwood,
Georgia for $7,110,000 cash, consisting of the initial purchase price of
$7,100,000 and approximately $10,000 of acquisition costs. This center contains
approximately 77,000 square feet of retail space and is anchored by Kroger.
On July 1, 1997, the Company acquired Greenwood Shopping Center in Palm
Springs, Florida for $13,083,000 cash, consisting of the initial purchase price
of $12,950,000 and approximately $133,000 of acquisition costs. This center
contains approximately 134,000 square feet and is anchored by Publix and
Walgreens.
On August 18, 1997, the Company acquired Madison Centre in Huntsville,
Alabama for $5,818,000 cash, consisting of the initial purchase price of
$5,765,000 and approximately $53,000 of acquisition costs. This center contains
approximately 65,000 square feet of retail space and is anchored by Publix and
Rite Aid.
On November 14, 1997, the Company acquired Shoppes of Silverlakes in
Pembroke Pines, Florida for a total cost of
19
<PAGE> 21
$16,869,000, consisting of the initial purchase price of $16,650,000 and
approximately $219,000 of acquisition costs. This acquisition was funded by cash
of $13,367,000 and the assumption of the $3,502,000 existing mortgage debt with
an interest rate of 7.75%, maturing July 1, 2015. This center contains
approximately 127,000 square feet of retail space and is anchored by Publix.
On December 11, 1997, the Company acquired McAlpin Square in Savannah,
Georgia for $6,078,000 cash, consisting of the initial purchase price of
$5,700,000 and approximately $378,000 of acquisition costs. This center contains
approximately 177,000 square feet of retail space and is anchored by Kroger and
Wal-Mart.
On December 18, 1997, the Company acquired Chastain Square in Atlanta,
Georgia for $6,758,000 cash, consisting of the initial purchase price of
$6,200,000, $500,000 of capital expenditures and approximately $58,000 of
acquisition costs. This center contains approximately 74,000 square feet of
retail space and is anchored by A & P.
Investment in Joint Ventures. During 1997, IRTCC entered into a
co-development agreement for the development of a Kroger anchored shopping
center in Decatur, Georgia. The project will be developed in two phases totaling
approximately 140,000 square feet, not including two outparcels, at a total
anticipated cost of approximately $14,100,000. The venture may require the
Company to purchase the shopping center upon the completion of Phase I at cost
or upon the completion of Phase II at the greater of cost or a 10.75%
capitalization rate. It is anticipated that the Company will ultimately acquire
the project upon completion.
IRTCC is a 50% owner of a joint venture which purchased a 1.31 acre
parcel of land located in Savannah, Georgia for development or sale. The Company
had approximately $356,000 invested in this joint venture as of December 31,
1997.
Mortgage Investments. During 1997, the purchase-money mortgage secured
by Valley West Mall in Glendale, Arizona was prepaid. The Company received cash
proceeds from this prepayment of approximately $3,587,000.
The borrower under the wrap-around mortgage secured by Spanish Quarter
Apartments was in default of the terms of the mortgage, and the Company obtained
title through foreclosure on February 18, 1998. The net carrying value of this
mortgage is approximately $4,478,000 as of December 31, 1997.
20
<PAGE> 22
Mortgage Indebtedness. During 1997, the Company a) repaid at maturity a
$3,800,000 mortgage bearing interest at 9.75%, b) repaid at maturity three
mortgages aggregating $27,721,000 bearing interest at 7.6% and, c) repaid at
maturity a $3,155,000 mortgage bearing interest at 9.375%.
Item 3. Legal Proceedings.
There are no material pending legal proceedings of which the Company is
aware involving the Company, its subsidiaries or its properties.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
21
<PAGE> 23
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.
a) The following table shows the high and low sale prices for the
Company's common stock, as reported on the New York Stock Exchange for
the periods indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997
First Quarter $12.13 $10.63
Second Quarter 12.00 10.63
Third Quarter 13.00 11.63
Fourth Quarter 12.94 11.13
1996
First Quarter $ 9.88 $ 9.00
Second Quarter 9.63 9.13
Third Quarter 9.63 9.25
Fourth Quarter 11.75 9.38
</TABLE>
b) Approximate number of Equity Security Holders.
<TABLE>
<CAPTION>
Approximate Number of Record
Title of Class Holders at February 25, 1998
-------------- ----------------------------
<S> <C>
Shares of Common Stock 3,000
$1 Par Value
</TABLE>
c) IRT Property Company paid quarterly cash dividends per share
of common stock during the years 1997 and 1996 as follows:
<TABLE>
<CAPTION>
Cash Dividends Paid
--------------------
<S> <C>
1997
First Quarter $ .225
Second Quarter .225
Third Quarter .225
Fourth Quarter .225
1996
First Quarter $ .225
Second Quarter .225
Third Quarter .225
Fourth Quarter .225
</TABLE>
22
<PAGE> 24
IRT has paid 80 consecutive quarterly dividends. The current annualized
dividend rate is $.90. The Company does not foresee any restrictions upon its
ability to continue its dividend payment policy of distributing at least the 95%
of its otherwise taxable ordinary income required for qualification as a REIT.
23
<PAGE> 25
Item 6. Selected Consolidated Financial Data
The following table sets forth selected consolidated financial data for the
Company and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------
As of or for the years ended 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross revenues $ 67,117,835 $ 60,233,422 $ 60,196,247 $ 49,202,144 $ 45,062,911
============= ============= ============= ============= =============
Earnings from operations $ 22,215,863 $ 15,602,112 $ 15,550,026 $ 12,788,923 $ 11,772,265
Gain (loss) on real estate investments 3,896,817 1,232,092 173,025 (3,825,418) 4,556,511
------------- ------------- ------------- ------------- -------------
Earnings before extraordinary item 26,112,680 16,834,204 15,723,051 8,963,505 16,328,776
Extraordinary item:
Gain (loss) on extinguishment of debt - (16,500) (137,260) 3,748,095 (1,440,478)
------------- ------------- ------------- ------------- -------------
Net earnings $ 26,112,680 $ 16,817,704 $ 15,585,791 $ 12,711,600 $ 14,888,298
============= ============= ============= ============= =============
Per share (Basic and Diluted):
Earnings before extraordinary item $ .82 $ .65 $ .61 $ .35 $ .72
Extraordinary item - - - .15 (.06)
------------- ------------- ------------- ------------- -------------
Net earnings $ .82 $ .65 $ .61 $ .50 $ .66
============= ============= ============= ============= =============
Dividends paid $ .90 $ .90 $ .885 $ .84 $ .84
============= ============= ============= ============= =============
Federal income tax status of dividends
paid to shareholders:
Ordinary income $ .73 $ .47 $ .635 $ .72 $ .39
Capital gain .08 - - .04 .45
Return of capital .09 .43 .250 .08 -
------------- ------------- ------------- ------------- -------------
$ .90 $ .90 $ .885 $ .84 $ .84
============= ============= ============= ============= =============
Weighted average shares outstanding:
Basic 31,867,743 25,749,860 25,590,129 25,349,303 22,457,131
============= ============= ============= ============= =============
Diluted 31,921,212 25,754,941 25,595,130 25,351,936 22,477,652
============= ============= ============= ============= =============
Total assets $ 498,152,798 $ 437,694,691 $ 427,398,018 $ 428,579,355 $ 402,319,125
============= ============= ============= ============= =============
Indebtedness:
Mortgage notes payable $ 59,558,650 $ 84,000,628 $ 99,188,181 $ 105,107,084 $ 98,878,505
7.30% convertible subordinated debentures 28,453,000 84,905,000 84,905,000 86,250,000 86,250,000
7.45% senior notes 49,945,790 49,929,110 - - -
7.25% senior notes 74,589,975 - - - -
Indebtedness to banks 14,400,000 15,000,000 36,000,000 26,000,000 -
------------- ------------- ------------- ------------- -------------
$ 226,947,415 $ 233,834,738 $ 220,093,181 $ 217,357,084 $ 185,128,505
============= ============= ============= ============= =============
Shareholders' equity $ 259,676,155 $ 193,354,922 $ 198,630,147 $ 203,038,464 $ 210,335,167
============= ============= ============= ============= =============
Other Data:
Funds from operations (1) $ 34,079,239 $ 26,388,787 $ 26,406,099 $ 21,342,209 $ 19,768,618
Assuming conversion of 7.30% debentures: (1)
Funds from operations (1) $ 36,542,758 $ 32,952,612 $ 32,982,552
Weighted average shares 34,765,758 33,302,052 33,161,751
Net cash flows from (used in) -
Operating activities $ 34,792,210 $ 27,751,020 $ 25,946,987 $ 22,511,731 $ 19,116,142
Investing activities $ (60,273,355) $ (15,659,704) $ (7,769,022) $ (99,052,456) $ (16,990,558)
Financing activities $ 22,582,152 $ (8,933,374) $ (20,002,953) $ (247,587) $ 76,370,567
</TABLE>
(1) The Company defines funds from operations, consistent with the NAREIT
definition, as net income before gains (losses) on real estate
investments and extraordinary items plus depreciation and amortization
of capitalized leasing costs. Conversion of the 7.30% convertible
debentures is dilutive and therefore assumed for 1997, 1996 and 1995.
Management believes funds from operations should be considered along
with, but not as an alternative to, net income as defined by generally
accepted accounting principles as a measure of the Company's operating
performance. Funds from operations does not represent cash generated
from operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash
available to fund cash needs. See Item 7.
24
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Changes in Financial Condition. During 1997, the Company utilized funds
of:
a) $79,596,000 for the acquisition of nine shopping center
investments, consisting of cash of approximately
$68,051,000 and mortgage debt of approximately
$11,545,000 secured by three of the centers,
b) $54,799,000 to repurchase $54,799,000 of its 7.3%
convertible subordinated debentures due August 15, 2003,
consisting of cash of approximately $38,224,000 and the
issuance of 1,500,000 shares of common stock, valued for
the purposes of the exchange at $11.05 per share, and
c) $34,676,000 to repay five mortgage notes payable at
maturity.
These transactions were funded with approximately $49,534,000 of cash proceeds
from the issuance of 4,653,747 shares of its common stock at $11.25 per share,
net cash proceeds of approximately $73,817,000 from the issuance of $75,000,000
of senior notes due August 15, 2007, cash proceeds of approximately $6,077,000
on sales of a shopping center investment and an apartment complex, cash proceeds
of approximately $3,587,000 from the prepayment of a mortgage loan and
internally generated funds. Additionally, during 1997, $1,653,000 of the
Company's 7.3% convertible subordinated debentures were converted into 146,921
shares of common stock at $11.25 per share.
During 1996, the Company utilized funds of:
a) $14,861,000 for the acquisition of two shopping center
investments,
b) $3,215,000 to fund expansion or redevelopment costs of
four existing investments,
c) $13,949,000 to repay three mortgage notes payable at
maturity and prepay two mortgage notes payable,
d) $21,000,000 to paydown the balance outstanding on the
Company's $100,000,000 unsecured revolving term loan, and
25
<PAGE> 27
e) $356,000 for an equity contribution to a joint venture.
These transactions were funded with approximately $49,394,000 of net proceeds
from the issuance of the 7.45% senior notes due April 1, 2001, cash proceeds of
approximately $5,659,000 on sales of one shopping center investment and two
net-leased retail facilities, and internally generated funds.
Changes in Results of Operations. During 1997, rental income from the
Company's core portfolio of shopping center investments increased approximately
$1,634,000. This increase includes approximately $525,000 of additional income
earned from two property expansions completed during 1996 and is net of
approximately $112,000 less income earned during 1997 due to one tenant
bankruptcy during 1997. The increase in the Company's core portfolio income was
offset by approximately $257,000 less income earned on one investment sold
during the first quarter of 1996 and two investments sold during the fourth
quarter of 1997 and was supplemented by approximately $5,913,000 of income
earned from two shopping center investments acquired in August and November 1996
and nine shopping center investments acquired during 1997.
During 1996, rental income from the Company's core portfolio of
shopping center investments increased approximately $1,078,000. This increase
includes approximately $273,000 of additional income earned from four property
expansions completed during 1995 and 1996 and is net of approximately $159,000
less income earned during 1996 due to two tenant bankruptcies during 1995. The
increase in the Company's core portfolio income was offset by approximately
$62,000 less income earned on three investments sold during 1995 and
approximately $1,466,000 less income earned due to the sale of Valley West Mall
in March 1996 and was supplemented by approximately $367,000 of income earned
from two shopping center investments acquired in August and November 1996. The
decrease in income for Valley West Mall included approximately $127,000 of
property tax reimbursements due to the tenants as a result of a reduction in
property taxes for 1994 and 1995 awarded by the State of Arizona in 1996.
The percentage leased of the Company's shopping center investments
increased from 92% in 1995 to 94% in 1996 and to 96% in 1997. Percentage rentals
received from shopping center investments, excluding percentage rentals received
from the Wal-
26
<PAGE> 28
Mart investments classified as direct financing leases, totaled approximately
$576,000 in 1995, $586,000 in 1996 and $649,000 in 1997.
The decrease in interest income during 1997 was primarily due to
approximately $62,000 less income earned on short-term money market investments
and approximately $54,000 less income earned on the wrap-around mortgage secured
by Spanish Quarter Apartments. The borrower under this mortgage is in default of
the terms of the mortgage and the Company has initiated foreclosure proceedings.
These decreases were partially offset by interest income earned on
purchase-money mortgages taken back on the sales of two investments in December
1996.
The increase in interest income during 1996 was primarily due to
approximately $256,000 of income earned on the purchase-money mortgage taken
back on the sale of Valley West Mall in March 1996 and approximately $233,000 of
income earned on short-term money market investments during 1996.
The decrease in interest on direct financing leases in 1997 was due to
the sale of two Wal-Mart investments in December 1996.
The decrease in interest on direct financing leases in 1996 is due to a
decrease in percentage rentals received from the four Wal-Mart investments and
the sale of two of these investments in December 1996. The Company received
percentage rentals of approximately $347,000, $44,000 and $49,000 during 1995,
1996 and 1997, respectively. Wal-Mart had ceased operations in three of the four
Wal-Mart investments, from which the Company received approximately $305,000 of
percentage rentals during 1995. Two of the three closed Wal-Marts were sold in
December 1996. Wal-Mart remains liable under the lease which expires in January
2011 and continues to pay base rentals, but no further percentage rentals are
anticipated to be earned from the remaining vacant facility.
Operating expenses related to the Company's core portfolio of real
estate investments increased approximately $657,000 during 1997. This increase
was offset by approximately $5,000 less expenses incurred on three investments
sold during 1996 and 1997. Additionally, approximately $1,310,000 of operating
expenses were incurred during 1997 by the two shopping center investments
acquired in August and November 1996 and the nine shopping center investments
acquired during 1997.
27
<PAGE> 29
Operating expenses related to the Company's core portfolio of real
estate investments increased approximately $695,000 during 1996. This increase
was offset by approximately $18,000 less expenses incurred on three investments
sold during 1995. In addition, approximately $1,358,000 less expenses were
incurred due to the sale of Valley West Mall in March 1996. The decrease for
Valley West Mall included a property tax refund for 1994 and 1995 of
approximately $325,000 awarded by the State of Arizona during the first quarter
of 1996. Additionally, approximately $60,000 of operating expenses were incurred
by two shopping center investments acquired in August and November 1996.
The net decrease in interest expense on mortgages in 1997 was primarily
due to various mortgages repaid during 1996 and 1997, partially offset by the
assumption of a $6,793,000 mortgage bearing interest at 7.865% upon the
acquisition of Grassland Crossing in February 1997, the $1,250,000
purchase-money mortgage bearing interest at 9% taken upon the acquisition of
Powers Ferry Plaza in May 1997 and the assumption of a $3,502,000 mortgage
bearing interest at 7.75% upon the acquisition of Shoppes of Silverlakes in
November 1997. During 1997, the Company a) repaid at maturity a $3,800,000
mortgage bearing interest at 9.75%, b) repaid at maturity three mortgages
aggregating $27,721,000 bearing interest at 7.6% and, c) repaid at maturity a
$3,155,000 mortgage bearing interest at 9.375%.
The decrease in interest expense on mortgages in 1996 is due to the
repayment of five mortgages during 1996 and the repayment of four and
refinancing of two mortgages during 1995. During 1996, the Company (a) repaid at
maturity a $6,263,000 mortgage bearing interest at 9.78%, (b) repaid at maturity
a $1,052,000 mortgage bearing interest at 13.875% (discounted to 9.5% for
financial reporting purposes), (c) prepaid a $2,727,000 mortgage bearing
interest at 9.375%, resulting in a $16,500 loss on extinguishment of debt, (d)
prepaid a $57,000 mortgage bearing interest at 8.5% and (e) repaid at maturity a
$3,850,000 mortgage bearing interest at 9.5%.
Interest on debentures decreased in 1997 due to the repurchase of
$54,799,000 of the debentures in January 1997 and the conversion of $1,653,000
of the debentures during 1997.
Interest on 7.45% senior notes increased in 1997 due to the issuance in
March 1996 of $50 million of 7.45% senior notes due April 2001.
28
<PAGE> 30
The increase in interest on 7.25% senior notes in 1997 was due to the
issuance in August 1997 of $75 million of 7.25% senior notes due August 2007.
The Company had average borrowings under its revolving term loan of
approximately $14,165,000, $11,750,000 and $33,507,000 during 1997, 1996 and
1995, respectively, which resulted in increased interest on bank debt during
1997 and decreased interest on bank debt during 1996. In addition, the Company
incurred commitment fees of approximately $212,000, $221,000 and $21,000 during
1997, 1996 and 1995, respectively, based on the aggregate unused portion of the
commitment. The Company's revolving term loan commitment increased to
$100,000,000 from $50,000,000 in December 1995. The interest rate on the $50
million secured revolver was, at the option of the Company, either prime or
1.25% over adjusted LIBOR. The $50 million revolver was replaced December 15,
1995 with a $100 million unsecured revolver with an interest rate, at the option
of the Company, of either LIBOR plus an Applicable Margin or prime. The current
Applicable Margin for LIBOR borrowings is 1.25%. See Note 10 to the consolidated
financial statements for a description of the reduction in the Applicable Margin
charged on LIBOR borrowings and the change in the commitment fee payable under
the Company's unsecured revolving term loan effective July 1, 1997.
The increase in depreciation expense in 1997 was primarily due to the
eleven shopping center investments acquired during 1996 and 1997.
Amortization of debt costs associated with the Company's convertible
subordinated debentures decreased in 1997 due to the repurchase of $54,799,000
of these debentures in January 1997 and the conversion of $1,653,000 of these
debentures during 1997. This decrease was partially offset by the amortization
of costs associated with the issuance of $75 million of 7.25% senior notes in
August 1997.
The decrease in general and administrative expenses in 1997 was
primarily due to decreases in employee benefit costs and an increase in overhead
costs capitalized in connection with acquisitions. In addition, the Company has
a policy of allocating management fees to operating expenses of real estate
investments with a resultant offset in general and administrative expenses. The
management and leasing of the eleven centers acquired during
29
<PAGE> 31
1996 and 1997 is being accomplished without additions to the Company's
personnel, and, as such, the management fee allocation for these acquisitions
has resulted in a decrease in general and administrative expenses.
The increase in general and administrative expenses in 1996 was
primarily due to the costs of increased administrative and property management
personnel, increased shareholder relations costs, increased state franchise
taxes and director's fees, the appointment of a new President and Chief
Operating Officer in October 1995, as well as approximately $50,000 of costs
incurred in due diligence on potential mergers and acquisitions which were not
consummated during 1996.
The amount of gains recognized on sales of investments have fluctuated
and in the future may continue to fluctuate depending upon sales activity in any
given year. During 1997, 1996 and 1995, the Company recognized gains on sales of
properties of approximately $3,897,000, $1,232,000 and $173,000, respectively.
During 1996, the Company prepaid a $2,727,000 mortgage and recognized
an extraordinary loss of $16,500 on the early extinguishment of debt.
Funds From Operations. The Company defines funds from operations,
consistent with the NAREIT definition, as net income before gains (losses) on
real estate investments and extraordinary items plus depreciation and
amortization of capitalized leasing costs. Interest on debentures and
amortization of convertible debenture costs are added to funds from operations
when assumed conversion of the debentures is dilutive. Conversion of the
debentures is dilutive and therefore assumed for 1997, 1996 and 1995. Management
believes funds from operations should be considered along with, but not as an
alternative to, net income as defined by generally accepted accounting
principles as a measure of the Company's operating performance. Funds from
operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is not necessarily
indicative of cash available to fund cash needs.
30
<PAGE> 32
The following data is presented with respect to the calculation of
funds from operations under the NAREIT definition for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net earnings $26,112,680 $16,817,704 $15,585,791
Gain on real estate
investments (3,896,817) (1,232,092) (173,025)
Loss on extinguishment of debt -- 16,500 137,260
Depreciation 11,453,460 10,310,344 10,427,268
Amortization of capitalized
leasing fees 288,152 249,292 230,642
Amortization of capitalized
leasing income 121,764 227,039 198,163
----------- ----------- -----------
Funds from operations 34,079,239 26,388,787 26,406,099
Interest on convertible
debentures 2,325,020 6,198,065 6,210,062
Amortization of convertible
debenture costs 138,499 365,760 366,391
----------- ----------- -----------
Fully diluted funds from
operations $36,542,758 $32,952,612 $32,982,552
=========== =========== ===========
Applicable weighted average
shares 34,765,758 33,302,052 33,161,751
=========== =========== ===========
</TABLE>
31
<PAGE> 33
Additional Information. The following data is presented with respect to
amounts incurred for improvements to the Company's real estate investments and
for leasing fees during 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tenant improvements:
Shopping centers $ 974,024 $ 812,248 $ 812,919
Industrial 9,391 464,469 --
---------- ---------- ----------
Total tenant
improvements 983,415 1,276,717 812,919
---------- ---------- ----------
Capital expenditures:
Shopping centers 1,044,469 1,030,650 298,006
Apartment 97,338 537,616 89,075
Industrial 34,531 158,072 302
---------- ---------- ----------
Total capital
expenditures 1,176,338 1,726,338 387,383
---------- ---------- ----------
Total improvements $2,159,753 $3,003,055 $1,200,302
========== ========== ==========
Leasing fees $ 268,122 $ 350,989 $ 382,042
========== ========== ==========
</TABLE>
Liquidity and Capital Resources. In 1997 and 1996, the Company's
dividends, mortgage amortization payments and capital improvements were funded
primarily by funds from operations and also through supplemental funding from
available cash investments, bank borrowings and other sources. The Company
believes that dividends, mortgage amortization payments and necessary capital
improvements will continue to be funded primarily by funds from operations.
Other planned activities, including property acquisitions, certain capital
improvement programs and debt repayments are expected to be funded to the extent
necessary by bank borrowings, mortgage financing, periodic sales or exchanges of
existing properties and public or private offerings of stock or debt.
For a description of the Company's mortgage debt, reference is made to
Table V in Item 2 hereof and to Note 7 to the consolidated financial statements
included as a part of this report. For a description of commitments and
contingencies, reference is made to Notes 17 and 18 to the consolidated
financial statements included as a part of this report.
In 1995, the Company filed a shelf registration statement covering up
to $200 million of common stock, senior debt and
32
<PAGE> 34
subordinated debt. The Company intends to use the net proceeds of any offerings
under such shelf registration to repay debt; to improve, expand or redevelop its
properties; to acquire additional properties; and for working capital.
Approximately $194 million of capital has been raised by the Company under this
shelf registration, including $50 million of senior debt issued in March 1996,
approximately $52 million in the issuance of 4,653,747 shares of common stock in
a January 1997 public offering, approximately $17 million in the issuance of
1,500,000 shares of common stock in January 1997 in connection with the
repurchase by the Company of $54,799,000 of its 7.3% convertible subordinated
debentures and $75 million of senior debt issued in August 1997.
On March 26, 1996, the Company issued $50,000,000 of 7.45% senior notes
due April 1, 2001. The senior notes were issued at a discount of $83,500 which
is being amortized over the life of the notes for financial reporting purposes.
Net proceeds from the issuance totaled approximately $49,394,000. For more
information regarding these senior notes, reference is made to Note 9 to the
consolidated financial statements.
On January 14 and 22, 1997, the Company completed the offering of
4,653,747 shares of its common stock at $11.25 per share. The net proceeds from
the offering totaled approximately $49,534,000.
The Company's 7.3% convertible subordinated debentures are convertible
into common stock of the Company at any time prior to maturity on August 15,
2003 at $11.25 per share, subject to adjustment in certain events. On January
17, 1997, the Company completed the repurchase of $54,799,000 of its 7.3%
convertible subordinated debentures due August 15, 2003 in a private transaction
with a single debenture holder. The debentures were repurchased by the Company
at par plus $1,689,000 of accrued interest. The seller had informed the Company
that the seller had both $54,799,000 par value of the debentures and a short
position of 1,500,000 shares in the Company's common stock. The consideration
paid by the Company was comprised of 1,500,000 shares of common stock, valued
for purposes of the exchange at $11.05 per share, and cash in the amount of
$38,224,000. The debentures repurchased were canceled by the Company.
Additionally, during 1997, $1,653,000 of the Company's 7.3% convertible
subordinated debentures were converted into 146,921 shares of common stock at
$11.25 per share. As of December 31, 1997 and 1996, $28,453,000 and $84,905,000,
respectively, of the debentures were outstanding.
33
<PAGE> 35
For additional information on the debentures, reference is made to Note 8 to the
consolidated financial statements.
On August 15, 1997, the Company issued $75,000,000 of 7.25% senior
notes due August 15, 2007. The senior notes were issued at a discount of
$426,000 which is being amortized over the life of the notes for financial
reporting purposes. Net proceeds from the offering totaled approximately
$73,817,000. For more information regarding the senior notes, reference is made
to Note 9 to the consolidated financial statements.
On November 1, 1990, the Company obtained a $25,000,000 secured
revolving term loan maturing November 1, 1995. On July 31, 1992, the loan
agreement was modified to increase the commitment from $25,000,000 to
$50,000,000 and to extend the maturity from November 1, 1995 to August 1, 1997.
The interest rate on this loan was either prime or 1.25% over adjusted LIBOR, at
the option of the Company. On December 15, 1995, the Company terminated this
$50,000,000 secured revolving term loan.
On December 15, 1995, the Company obtained a $100,000,000 unsecured
revolving term loan maturing January 4, 1999. Not later than June 30 of each
year commencing June 30, 1996, the Company may request to extend the maturity
date for an additional twelve-month period beyond the existing maturity date. In
accordance with the terms of the agreement, during 1996 and 1997 the Company
extended the maturity date for two additional twelve-month periods to January 4,
2001. The interest rate is, at the option of the Company, either prime,
fluctuating daily or LIBOR plus the "Applicable Margin" (currently 1.25%), which
is subject to adjustment based upon the rating of the senior unsecured long-term
debt obligations of the Company. The Company may borrow, repay and/or reborrow
under this loan at any time. As of December 31, 1997 and 1996, the borrowings
under this credit facility totaled $14,400,000 and $15,000,000, respectively.
For additional information on this revolving term loan, reference is made to
Note 10 to the consolidated financial statements.
The Company's Dividend Reinvestment Plan allows shareholders to elect
to reinvest all or a portion of their distributions in newly issued shares of
common stock of the Company at 95% of the market price of the shares. During
1997, 1996 and 1995, the Company received net proceeds under this plan of
$2,864,000, $1,024,000 and $1,107,000, respectively. For additional information
on the Dividend Reinvestment Plan, reference is made to Note 14 to the
consolidated financial statements.
34
<PAGE> 36
Inflationary and Economic Factors. The effects of inflation upon the
Company's results of operations and investment portfolio are varied. From the
standpoint of revenues, inflation has the dual effect of both increasing the
tenant revenues upon which percentage rentals are based and allowing increased
fixed rentals as rental rates rise generally to reflect higher construction
costs on new properties. This positive effect is partially offset by increasing
operating expenses, but usually not to the extent of the increases in revenues.
Environmental Factors. On March 2, 1994, the Company was advised by the
North Carolina Department of Environment, Health and Natural Resources that
certain Corrective Actions must be performed at the Company's Charlotte, North
Carolina industrial facility. According to the CAP, the estimated remaining cost
for site remediation ranges from $129,000 to $193,000 over a period of 3 to 6
years. Although the Company believes that certain of the costs of Corrective
Action are reimburseable under the North Carolina Leaking Petroleum Underground
Storage Tank Cleanup Fund, the Company accrued $129,000 in 1995 based on these
estimates. The CAP may be revised, and the estimated costs may change, but based
on the information presently available, the Company believes any additional
costs of any such Corrective Action would not have a material adverse effect on
the Company's results of operations, financial position or liquidity.
During 1996, the Company discovered that additional releases of
petroleum products had occurred at and around a garage facility previously
operated by a former trucking company tenant. An investigation is being
conducted by the Company in order to determine the extent of the related
contamination, and Company management is negotiating with the former tenant to
obtain a contribution to potential clean-up costs. The Company does not believe
the cost of addressing these additional releases will have a material adverse
effect on the Company's results of operations, financial position or liquidity.
During its soil and groundwater investigation at the Bluebonnet Village
Shopping Center in Baton Rouge, Louisiana, the Company's environmental
consultant discovered concentrations of various chemicals in groundwater that
exceeded the maximum contaminant levels under the Federal Safe Drinking Water
Act. For additional information, see "Regulation" under Item 1 and Note 18 to
the consolidated financial statements included as a part of this
35
<PAGE> 37
report. Based on the information presently available, the Company believes the
costs of any corrective action would not have a material adverse effect on the
Company's results of operations, financial position or liquidity.
Recent Accounting Pronouncements. Effective December 1997, the Company
adopted Statement of Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share." SFAS 128 establishes standards for computing and presenting earnings per
share. This standard had no material impact on the earnings per share
calculation. Reference is made to Note 13 to the consolidated financial
statements for the required disclosures.
Year 2000 Compliance. The Company has been assessing the possible
effects of the Year 2000 computer problem in connection with its technology
investments and operations, and management currently believes the Company has
limited exposure and expects the cost of addressing all Year 2000 issues to be
less than $20,000 in each of 1998 and 1999. As part of its assessment, Company
management has been evaluating Year 2000 compliance by those with whom it does
business and to date has not discovered any Year 2000 problem with significant
counterparties that it believes are reasonably likely to have a material adverse
effect upon the Company. However, no assurance can be given that potential Year
2000 problems at those with whom the Company does business will not occur, and
if these occur, consequences to the Company will not be material. Many of the
Company's technology systems have already been certified as Year 2000 compliant.
36
<PAGE> 38
Item 8. Financial Statements and Supplementary Data.
IRT PROPERTY COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants 38
Consolidated Balance Sheets -
December 31, 1997 and 1996 39
Consolidated Statements of Earnings -
For the Years Ended December 31, 1997,
1996 and 1995 40
Consolidated Statements of Changes
in Shareholders' Equity - For the Years Ended
December 31, 1997, 1996 and 1995 41
Consolidated Statements of Cash Flows -
For the Years Ended December 31, 1997,
1996 and 1995 42
Notes to Consolidated Financial Statements -
December 31, 1997, 1996 and 1995 44
Schedules:
III Real Estate and Accumulated Depreciation 69
IV Mortgage Loans on Real Estate 82
</TABLE>
37
<PAGE> 39
Report of Independent Public Accountants
To The Shareholders of
IRT Property Company:
We have audited the accompanying consolidated balance sheets of IRT
PROPERTY COMPANY (a Georgia corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of earnings, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IRT Property Company
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
consolidated financial statements are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 1998
38
<PAGE> 40
IRT PROPERTY COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties $ 537,160,220 $ 463,392,557
Accumulated depreciation (62,526,989) (56,881,888)
------------- -------------
474,633,231 406,510,669
Net investment in direct financing leases 4,704,295 4,826,059
Investment in joint venture 355,832 355,832
Mortgage loans, net 9,321,205 13,182,520
------------- -------------
Net real estate investments 489,014,563 424,875,080
Cash and cash equivalents 275,349 3,174,342
Accrued interest receivable 528,094 488,663
Prepaid expenses and other assets 8,334,792 9,156,606
------------- -------------
$ 498,152,798 $ 437,694,691
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable plus net interest premium of
$9,230 in 1997 and $34,928 in 1996 $ 59,558,650 $ 84,000,628
7.30% convertible subordinated debentures due August 15, 2003 28,453,000 84,905,000
7.45% senior notes due April 1, 2001, net of interest
discount of $54,210 in 1997 and $70,890 in 1996 49,945,790 49,929,110
7.25% senior notes due August 15, 2007, net of interest
discount of $410,025 74,589,975 -
Indebtedness to banks 14,400,000 15,000,000
Accrued interest on debentures 784,671 2,341,488
Accrued interest on senior notes 2,970,313 931,250
Accrued expenses and other liabilities 6,719,244 6,177,293
Deferred income taxes 1,055,000 1,055,000
------------- -------------
Total liabilities 238,476,643 244,339,769
------------- -------------
Commitments and Contingencies (Notes 17 and 18)
Shareholders' Equity:
Common stock, $1 par value, 75,000,000 shares authorized; 32,385,664 shares
issued and outstanding in 1997 and
25,807,302 shares in 1996 32,385,664 25,807,302
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued - -
Additional paid-in capital 263,786,165 201,273,343
Cumulative distributions in excess of net earnings (36,495,674) (33,725,723)
------------- -------------
Total shareholders' equity 259,676,155 193,354,922
------------- -------------
$ 498,152,798 $ 437,694,691
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
39
<PAGE> 41
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Income from rental properties $65,215,479 $ 57,925,659 $ 58,008,386
Interest, including $170,552 in 1997 and
$232,519 in 1996 on cash equivalents 1,330,080 1,388,733 899,454
Interest on direct financing leases 572,276 919,030 1,288,407
----------- ------------ ------------
67,117,835 60,233,422 60,196,247
----------- ------------ ------------
Expenses:
Operating expenses of rental properties 14,075,505 12,113,108 12,733,705
Interest on mortgages 6,249,412 7,750,389 9,150,400
Interest on debentures 2,325,020 6,198,065 6,210,062
Interest on 7.45% senior notes 3,741,680 2,798,433 -
Interest on 7.25% senior notes 2,055,038 - -
Interest on indebtedness to banks 1,216,204 1,003,331 2,211,980
Depreciation 11,453,460 10,310,344 10,427,268
Amortization of debt costs 422,606 595,604 445,907
General & administrative 3,363,047 3,862,036 3,466,899
----------- ------------ ------------
44,901,972 44,631,310 44,646,221
----------- ------------ ------------
Earnings before gain on real estate
investments and extraordinary item 22,215,863 15,602,112 15,550,026
Gain on real estate investments:
Gain on sales of properties 3,896,817 1,232,092 173,025
----------- ------------ ------------
Earnings before extraordinary item 26,112,680 16,834,204 15,723,051
Extraordinary item:
Loss on extinguishment of debt - (16,500) (137,260)
----------- ------------ ------------
Net earnings $26,112,680 $ 16,817,704 $ 15,585,791
=========== ============ ============
Per Share (Note 13):
Basic $ 0.82 $ 0.65 $ 0.61
=========== ============ ============
Diluted $ 0.82 $ 0.65 $ 0.61
=========== ============ ============
Weighted average number of shares outstanding:
Basic 31,867,743 25,749,860 25,590,129
=========== ============ ============
Diluted 31,921,212 25,754,941 25,595,130
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
40
<PAGE> 42
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Cumulative
Additional Distributions Total
Common Paid-In in Excess of Shareholders'
Stock Capital Net Earnings Equity
----- ------- ------------ --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $25,420,747 $197,937,465 $(20,319,748) $ 203,038,464
Net earnings - - 15,585,791 15,585,791
Cash dividends declared - $.885
per share - - (22,643,066) (22,643,066)
Issuance of shares under Dividend
Reinvestment Plan, net 121,831 985,430 - 1,107,261
Conversion of debentures, net 119,554 1,175,718 - 1,295,272
Exercise of stock options 7,000 46,375 - 53,375
Issuance of shares for the
acquisition of properties 19,870 173,180 - 193,050
----------- ------------ ------------ -------------
Balance at December 31, 1995 25,689,002 200,318,168 (27,377,023) 198,630,147
Net earnings - - 16,817,704 16,817,704
Cash dividends declared - $.90
per share - - (23,166,404) (23,166,404)
Issuance of shares under Dividend
Reinvestment Plan, net 112,561 911,734 - 1,024,295
Exercise of stock options 2,400 16,063 - 18,463
Issuance of shares for the
acquisition of properties 3,339 27,378 - 30,717
----------- ------------ ------------ -------------
Balance at December 31, 1996 25,807,302 201,273,343 (33,725,723) 193,354,922
Net Earnings - - 26,112,680 26,112,680
Cash dividends declared - $.90
per share - - (28,882,631) (28,882,631)
Issuance of shares under Dividend
Reinvestment Plan, net 259,991 2,603,840 - 2,863,831
Conversion of debentures, net 146,921 1,463,540 - 1,610,461
Exercise of stock options, net 17,703 87,548 - 105,251
Issuance of common stock, net 4,653,747 44,880,749 - 49,534,496
Issuance of shares for the
acquisition of convertible
debentures, net 1,500,000 13,477,145 - 14,977,145
----------- ------------ ------------ -------------
Balance at December 31, 1997 $32,385,664 $263,786,165 $(36,495,674) $ 259,676,155
=========== ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
41
<PAGE> 43
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 26,112,680 $ 16,817,704 $ 15,585,791
Adjustments to reconcile earnings to net cash from
operating activities:
Depreciation 11,453,460 10,310,344 10,427,268
Gain on real estate investments (3,896,817) (1,232,092) (173,025)
Extraordinary loss on extinguishment of debt - 16,500 137,260
Amortization of debt costs and discount 455,261 608,016 445,907
Amortization of capital leasing income 121,764 227,039 198,163
------------ ------------ ------------
34,246,348 26,747,511 26,621,364
Changes in accrued assets and liabilities:
Decrease in accrued interest on debentures (1,556,817) - (37,095)
Increase in accrued interest on senior notes 2,039,063 931,250 -
Increase in interest receivable, prepaid
expenses and other assets (478,335) (839,832) (1,187,639)
Increase in accrued expenses and other
liabilities 541,951 912,091 550,357
------------ ------------ ------------
Net cash flows from operating activities 34,792,210 27,751,020 25,946,987
------------ ------------ ------------
Cash flows from (used in) investing activities:
Proceeds from sales of properties, net 6,076,520 5,658,531 1,310,531
Additions to real estate investments, net -
Acquisitions, expansions and renovations (68,051,437) (18,076,038) (7,672,184)
Improvements (2,159,753) (3,003,055) (1,200,302)
Collections of mortgage loans, net 3,861,315 116,690 52,933
Additions to mortgage loans - - (260,000)
Contributions to joint venture - (355,832) -
------------ ------------ ------------
Net cash flows used in investing activities (60,273,355) (15,659,704) (7,769,022)
------------ ------------ ------------
Cash flows from (used in) financing activities:
Cash dividends paid, net (26,018,800) (22,142,109) (21,535,805)
Issuance of common stock, net 49,534,496 - -
Exercise of stock options 105,251 18,463 53,375
Principal amortization of mortgage notes payable,
net (1,146,359) (1,238,802) (1,546,572)
Repayment of mortgage notes payable, net (34,840,154) (13,948,751) (6,836,676)
Increase (decrease) in bank indebtedness, net (600,000) (21,000,000) 10,000,000
Issuance of 7.45% senior notes, net - 49,394,325 -
Issuance of 7.25% senior notes, net 73,817,209 - -
Repurchase of 7.3% convertible subordinated
debentures, net (38,269,338) - -
Cash in lieu of fractional shares on conversion of
debentures (153) - (15)
Extraordinary loss on extinguishment of debt - (16,500) (137,260)
------------ ------------ ------------
Net cash flows from (used in) financing
activities 22,582,152 (8,933,374) (20,002,953)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (2,898,993) 3,157,942 (1,824,988)
Cash and cash equivalents at beginning of year 3,174,342 16,400 1,841,388
------------ ------------ ------------
Cash and cash equivalents at end of year $ 275,349 $ 3,174,342 $ 16,400
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
42
<PAGE> 44
IRT PROPERTY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for interest related to:
Mortgage notes payable $ 6,174,193 $ 7,868,231 $ 9,207,974
Convertible subordinated debentures 3,881,837 6,198,065 6,247,157
7.45% Senior notes, including $59,663 capitalized
in 1996 3,725,000 1,997,736 -
7.25% Senior notes 426,000 - -
Indebtedness to banks, including $2,853
capitalized in 1996 and $93,591 in 1995 1,310,758 1,013,961 2,449,034
------------ ------------ ------------
Total cash paid during the year for interest $ 15,517,788 $ 17,077,993 $ 17,904,165
============ ============ ============
Supplemental schedule of noncash investing and
financing activities:
Acquisitions, expansions and renovations:
Cost of acquisitions, expansions and renovations $ 79,595,972 $ 18,106,755 $ 10,329,579
Additions to mortgage notes payable (11,544,535) - (2,464,345)
Issuance of common stock - (30,717) (193,050)
------------ ------------ ------------
Cash paid for acquisitions, expansions and
renovations of real estate investments $ 68,051,437 $ 18,076,038 $ 7,672,184
============ ============ ============
Sales of Properties:
Gross proceeds from sales of properties $ 6,076,520 $ 10,458,531 $ 1,310,531
Additions to mortgage loans - (4,800,000) -
------------ ------------ ------------
Cash proceeds from sales of properties, net $ 6,076,520 $ 5,658,531 $ 1,310,531
============ ============ ============
Repurchase of convertible debentures:
Convertible debentures repurchased $ 54,799,000 $ - $ -
Issuance of common stock, net (16,529,662) - -
------------ ------------ ------------
Cash paid for repurchase of convertible debentures $ 38,269,338 $ - $ -
============ ============ ============
Issuance of common stock, net $ 16,529,662 $ - $ -
Associated unamortized debenture costs (1,552,517) - -
------------ ------------ ------------
Net increase in shareholders' equity $ 14,977,145 $ - $ -
============ ============ ============
Conversion of debentures:
Debentures converted $ 1,653,000 $ - $ 1,345,000
Associated unamortized debenture costs (42,386) - (49,713)
Equity issued on conversion (1,610,461) - (1,295,272)
------------ ------------ ------------
Cash paid in lieu of fractional shares $ 153 $ - $ 15
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
43
<PAGE> 45
IRT PROPERTY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation-
The accompanying consolidated financial statements include the
accounts of IRT Property Company and its wholly-owned subsidiaries, IRT
Management Company, VW Mall, Inc. and IRT Alabama, Inc., and IRT
Capital Corporation, its taxable subsidiary, (collectively, the
"Company"). Intercompany transactions and balances have been eliminated
in consolidation.
Business-
IRT Property Company, founded in 1969, is a self- administered
and self-managed equity real estate investment trust which invests
primarily in neighborhood and community shopping centers which are
located in the Southeastern United States and are anchored by
necessity-oriented retailers such as supermarkets, drug stores and/or
discount variety stores. No one retailer accounts for more than 6.5% of
the Company's gross revenues.
In 1997, IRT Alabama, Inc. ("IRTAL"), a wholly-owned
subsidiary of the Company, was formed under the laws of Alabama. Upon
its formation, IRTAL purchased Madison Centre in Huntsville, Alabama.
See Note 3 for additional information regarding this acquisition.
In 1996, IRT Capital Corporation ("IRTCC"), a taxable
subsidiary of the Company, was formed under the laws of Georgia. This
taxable subsidiary will have the ability to develop properties, buy and
sell properties, provide equity to developers who are merchant builders
and perform third-party management, leasing and brokerage. The Company
holds 96% of
44
<PAGE> 46
the non-voting common stock and 1% of the voting common stock of IRTCC.
The remaining voting common stock is currently held by a member of the
Board of Directors and an executive officer of the Company. IRTCC is
included in the Company's consolidated financial statements but is
taxed as a regular corporation and not as a REIT.
Income Taxes-
The Company has in past years elected to qualify, and intends
to continue such election, to be taxed as a "Real Estate Investment
Trust" ("REIT") under Sections 856-860 of the Internal Revenue Code, as
amended. In general terms, under such Code provisions a trust or
corporation which, in any taxable year, meets certain requirements and
distributes to its shareholders at least 95% of its taxable income will
not be subject to Federal income tax to the extent of the income which
it distributes.
The Company computes taxable income on a basis different from
that used for financial reporting purposes due to differences in the
estimated useful lives used to compute depreciation, timing differences
in the recognition of loan commitment fees, and certain interest
discounts which are not recognized for tax purposes. The Company also
reports certain gains on sales of properties on the installment basis
for tax purposes.
Income Recognition-
The Company follows the policy of suspending the accrual of
income on any investments where interest or rental payments are
delinquent 60 days or more. Percentage rental income is recorded upon
collection.
Gains from the sale of real estate are deferred until such
time as minimum down payment and loan amortization requirements are met
in conformity with the provisions of Statement of Financial Accounting
Standards No. 66. Interest discounts are imputed on financed sales and
acquisitions when the contractual interest rates are less than
prevailing market rates at the time of sale or acquisition.
45
<PAGE> 47
Depreciation-
The Company provides depreciation on buildings and other
improvements on the straight-line basis over their estimated useful
lives. Such lives are from 16 to 40 years for buildings and 6 years for
improvements. Maintenance and repairs are charged to expense as
incurred, while significant improvements are capitalized. The profit or
loss on assets retired or otherwise disposed of is credited or charged
to operations and the cost and related accumulated depreciation are
removed from the asset and accumulated depreciation accounts.
Valuation Loss-
Effective January 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 establishes standards for determining when
impairment losses on long-lived assets have occurred and how impairment
losses should be measured. Rental properties are carried at the lower
of depreciated cost or net realizable value.
Use of Estimates-
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash Equivalents-
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Earnings Per Share-
Earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding
46
<PAGE> 48
consistent with the guidelines of Statement of Accounting Standards No.
128, "Earnings Per Share." The effect on earnings per share assuming
conversion of the 7.3% convertible subordinated debentures would be
anti-dilutive. Exercise of the outstanding stock options does not have
a material dilutive effect on earnings per share. See Note 13 for the
required disclosures.
Reclassification of Prior Year Amounts-
Certain items in the consolidated financial statements have
been reclassified to conform with the 1997 presentation.
Recent Accounting Pronouncements-
Effective December 1997, the Company adopted Statement of
Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share." SFAS
128 establishes standards for computing and presenting earnings per
share. This standard had no material impact on the earnings per share
calculation. See Note 13 for the required disclosures.
2. PUBLIC OFFERINGS:
On January 14 and 22, 1997, the Company completed the offering
of 4,653,747 shares of its common stock at $11.25 per share. The net
proceeds from the offering totaled approximately $49,534,000.
On August 15, 1997, the Company issued $75,000,000 of 7.25%
senior notes due August 15, 2007. The senior notes were issued at a
discount of $426,000 which is being amortized over the life of the
notes for financial reporting purposes. Net proceeds from the issuance
totaled approximately $73,817,000. For more information regarding these
senior notes, see Note 9.
47
<PAGE> 49
3. RENTAL PROPERTIES:
Rental properties are comprised of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
Land covered by purchase-
leaseback agreements $ 928,292 $ 928,292
Land related to buildings
and improvements 118,374,360 97,319,967
Buildings & improvements 417,857,568 365,144,298
------------ ------------
$537,160,220 $463,392,557
============ ============
</TABLE>
Upon expiration of the leases for land covered by
purchase-leaseback agreements, all improvements on the land will become
the property of the Company.
On October 6, 1997, the Company sold Masonova Plaza in Daytona
Beach, Florida for a total sales price of $1,000,000. The Company
received net cash proceeds from this sale of approximately $912,000 and
recognized a gain of approximately $524,000 for financial reporting
purposes.
On October 29, 1997, the Company sold Whitehall Kent
Apartments in Kent, Ohio for a total sales price of $5,400,000. The
Company received net cash proceeds from this sale of approximately
$5,165,000 and recognized a gain of approximately $3,373,000 for
financial reporting purposes.
On February 6, 1997, the Company acquired Grassland Crossing
in Alpharetta, Georgia for a total cost of $9,907,000, consisting of
the initial purchase price of $9,890,000 and approximately $17,000 of
acquisition costs. This acquisition was funded by cash of $3,114,000
and the assumption of the $6,793,000 existing mortgage debt with an
interest rate of 7.865% maturing December 1, 2016.
On April 16, 1997, the Company acquired Market Place in
Norcross, Georgia for $7,074,000 cash, consisting of the initial
purchase price of $6,800,000, $250,000 of capital expenditures and
approximately $24,000 of acquisition costs.
48
<PAGE> 50
On May 13, 1997, the Company acquired Powers Ferry Plaza in
Marietta, Georgia for a total cost of $6,901,000, consisting of the
initial purchase price of $6,800,000 and approximately $101,000 of
acquisition costs. This acquisition was funded by cash of $5,651,000
and a $1,250,000 purchase- money mortgage with an annual interest rate
of 9% maturing January 31, 1999.
On June 17, 1997, the Company acquired Fairview Oaks in
Ellenwood, Georgia for $7,110,000 cash, consisting of the initial
purchase price of $7,100,000 and approximately $10,000 of acquisition
costs.
On July 1, 1997, the Company acquired Greenwood Shopping
Center in Palm Springs, Florida for $13,083,000 cash, consisting of the
initial purchase price of $12,950,000 and approximately $133,000 of
acquisition costs.
On August 18, 1997, the Company acquired Madison Centre in
Huntsville, Alabama for $5,818,000 cash, consisting of the initial
purchase price of $5,765,000 and approximately $53,000 of acquisition
costs.
On November 14, 1997, the Company acquired Shoppes of
Silverlakes in Pembroke Pines, Florida for a total cost of $16,869,000,
consisting of the initial purchase price of $16,650,000 and
approximately $219,000 of acquisition costs. This acquisition was
funded by cash of $13,367,000 and the assumption of the $3,502,000
existing mortgage debt with an interest rate of 7.75%, maturing July 1,
2015.
On December 11, 1997, the Company acquired McAlpin Square in
Savannah, Georgia for $6,078,000 cash, consisting of the initial
purchase price of $5,700,000 and approximately $378,000 of acquisition
costs.
On December 18, 1997, the Company acquired Chastain Square in
Atlanta, Georgia for $6,758,000 cash, consisting of the initial
purchase price of $6,200,000, $500,000 of capital expenditures and
approximately $58,000 of acquisition costs.
At December 31, 1997, land covered by one purchase- leaseback
agreement with a cost of $435,994 is subordinate to a first mortgage
lien of approximately $18,000 which is on both land and improvements
but is not an obligation of the
49
<PAGE> 51
Company. In addition, the lessees of two of these properties have the
option, subject to certain conditions, to repurchase the land. Such
option prices are for amounts greater than the Company's carrying value
of the related land.
Minimum base rentals on noncancellable operating leases for
the Company's shopping center, industrial and land purchase-leaseback
investments for the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 57,610,000
1999 52,936,000
2000 46,854,000
2001 41,163,000
2002 35,653,000
Thereafter 245,672,000
------------
$479,888,000
============
</TABLE>
4. NET INVESTMENT IN DIRECT FINANCING LEASES:
On December 24, 1996, the Company sold two of the four retail
facilities leased to Wal-Mart Stores, Inc. for a total sales price of
$5,350,000. The Company received net cash proceeds from this sale of
approximately $4,269,000 and took back purchase-money second mortgages
totaling $1,000,000. The purchase-money second mortgages, which mature
December 31, 1998, bear interest at an annual rate of 7%. Interest is
payable monthly with the entire principal due at maturity.
As of December 31, 1997, two retail facilities are leased to
Wal-Mart Stores, Inc. at a total annual rental of $332,850 plus
percentage rentals of 1% of gross sales in excess of the tenant's
actual sales for its fiscal year ended January 31, 1990. Rental income
from these leases totaled $381,414 (including $48,564 of percentage
rentals) in 1997. Rental income from these leases and the two
facilities sold in December 1996 totaled $871,714 (including $43,789 of
percentage rentals) in 1996 and $1,175,284 (including $347,359 of
percentage rentals) in 1995.
50
<PAGE> 52
The Company acquired ten branch bank buildings in a 1984
merger. These facilities are leased to The Old Phoenix National Bank at
a total annual rental of $313,049.
Of the total rental income on direct financing leases,
$121,764, $227,039 and $198,163 were recorded as amortization of
capitalized leasing income in 1997, 1996 and 1995, respectively.
The Company is to receive minimum lease payments of $645,899
per year during 1998 through 2002 and a total of $5,899,285 thereafter
through the remaining lease terms. The estimated residual values of the
leased properties included in net investment in direct financing leases
totaled $292,900 as of December 31, 1997 and 1996, respectively.
5. INVESTMENT IN JOINT VENTURE:
IRTCC is a 50% owner of a joint venture which purchased a 1.31
acre parcel of land located in Savannah, Georgia, for development or
sale.
51
<PAGE> 53
6. MORTGAGE LOANS:
The Company's investments in mortgage loans, all of which are
secured by real estate investments, are summarized by type of loan at
December 31, 1997 and 1996, as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------------
Number Amount Number Amount
of Loans Outstanding of Loans Outstanding
--------- ------------ -------- ------------
<S> <C> <C> <C> <C>
First mortgage 2 $ 3,283,231 3 $ 7,099,459
Mortgage
participation 1 25,753 1 27,785
Wrap-around
mortgage 1 5,212,708 1 5,297,165
Second mortgage 2 1,000,000 2 1,000,000
- ----------- - ------------
6 9,521,692 7 13,424,409
Less-Interest
discounts and
negative
goodwill - (200,487) - (241,889)
- ----------- - ------------
Mortgage
loans, net 6 $ 9,321,205 7 $ 13,182,520
= =========== = ============
</TABLE>
During 1996, the Company took back a $3,800,000 purchase-
money first mortgage on the sale of one shopping center investment in
Glendale, Arizona. During 1997, this purchase- money mortgage was
prepaid. The company received net cash proceeds from this prepayment of
approximately $3,587,000. During 1996, the Company took back two
purchase-money second mortgages totaling $1,000,000 on the sale of two
net-leased retail facilities. See Note 4 for additional information.
During April 1994, the borrower under the Spanish Quarter
Apartments wrap-around mortgage loan filed Chapter 11 bankruptcy. In
December 1994, the Bankruptcy Court approved the plan of reorganization
which amended the loan effective December 1, 1994 to extend the term
for 3 years to September 1, 2001 and to reduce the cash interest rate
from 10% to 9.5% prospectively. Additional interest at an annual rate
of 1% continues to accrue through the remainder of the term. In
addition, during 1995, the Company funded additional principal of
$260,000 under this mortgage for capital improvements. The terms of the
restructured debt call for total proceeds over the remaining term of
the mortgage in excess of the carrying value of the indebtedness at the
time of the restructuring. Therefore, no loss was recorded related to
the restructuring in accordance with SFAS No. 15. The borrower under
this wrap-around mortgage is currently in default of the terms of the
mortgage, and the Company has initiated foreclosure
52
<PAGE> 54
proceedings. The net carrying value of this mortgage is approximately
$4,478,000 as of December 31, 1997. See Note 20 for additional
information regarding this mortgage loan.
Annual principal payments applicable to mortgage loan
investments in the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $9,225,021
1999 6,805
2000 7,719
2001 8,724
2002 9,828
Thereafter 63,108
----------
$9,321,205
==========
</TABLE>
Based on current rates at which similar loans would be made,
the estimated fair value of mortgage loans was approximately $9,394,000
and $13,698,000 at December 31, 1997 and 1996, respectively.
7. MORTGAGE NOTES PAYABLE:
Mortgage notes payable are collateralized by various real
estate investments having a net carrying value of approximately
$100,463,000 as of December 31, 1997. These notes have stated interest
rates ranging from 7.75% to 11.0% and are due in monthly installments
with maturity dates ranging from 1998 to 2016.
During 1997, the Company a) repaid at maturity a $3,800,000
mortgage bearing interest at 9.75%, b) repaid at maturity three
mortgages aggregating $27,721,000 bearing interest at 7.6% and, c)
repaid at maturity a $3,155,000 mortgage bearing interest at 9.375%.
53
<PAGE> 55
Principal amortization and balloon payments applicable to
mortgage notes payable in the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
BALLOON
YEAR AMORTIZATION PAYMENTS TOTAL
---- ------------ -------- -----
<S> <C> <C> <C>
1998 $1,080,982 $ 2,844,484 $ 3,925,466
1999 1,170,166 625,000 1,795,166
2000 924,366 12,079,779 13,004,145
2001 1,114,292 -- 1,114,292
2002 1,080,055 5,176,774 6,256,829
Thereafter 15,428,966 18,033,786 33,462,752
----------- ----------- -----------
$20,798,827 $38,759,823 $59,558,650
=========== =========== ===========
</TABLE>
Based on the borrowing rates currently available to the
Company for mortgages with similar terms and maturities, the estimated
fair value of mortgage notes payable was approximately $64,229,000 and
$85,213,000 at December 31, 1997 and 1996, respectively.
8. CONVERTIBLE SUBORDINATED DEBENTURES:
Effective August 31, 1993, the Company issued $86,250,000 of
7.3% convertible subordinated debentures due August 15, 2003,
$28,453,000 of which is outstanding as of December 31, 1997. Interest
on the debentures is payable semi-annually on February 15 and August
15. The debentures are convertible at any time prior to maturity into
common stock of the Company at $11.25 per share, subject to adjustment
in certain events. The Company has the option to redeem the debentures
at par at any time after August 15, 1996. Costs associated with the
issuance of the debentures were approximately $3,701,000 and are being
amortized over the life of the debentures.
In March 1995, $1,345,000 of the Company's 7.3% convertible
subordinated debentures were converted into 119,554 shares of common
stock at $11.25 per share. On January 17, 1997, the Company completed
the repurchase of $54,799,000 of these debentures in a private
transaction with a single debenture holder. The debentures were
repurchased by the Company at par plus $1,689,000 of accrued interest.
The seller had informed the Company that the seller had both
$54,799,000 par value of the debentures and a short position
54
<PAGE> 56
of 1,500,000 shares in the Company's common stock. The consideration
paid by the Company was comprised of 1,500,000 shares of common stock,
valued for purposes of the exchange at $11.05 per share, and cash in
the amount of $38,224,000. Additional paid-in-capital was reduced by
approximately $1,553,000 of unamortized issuance costs associated with
the debentures repurchased and canceled and by approximately $45,000 of
costs associated with the transaction.
The repurchase of the debentures was transacted pursuant to a
Purchase and Standstill Agreement under which the seller agreed to
eliminate its short position in Company common stock, after which the
seller did not own any Company securities. The seller further agreed
not to take any position with respect to any Company securities or to
attempt to influence Company policies or management in the future.
During 1997, $1,653,000 of these debentures were converted
into 146,921 shares of common stock at $11.25 per share. Based upon the
conversion price, 2,529,156 authorized but unissued common shares have
been reserved for possible issuance if the $28,453,000 debentures
outstanding at December 31, 1997 are converted.
Based on the closing market price at year end, the estimated
fair value of the 7.3% debentures was approximately $29,307,000 and
$84,905,000 at December 31, 1997 and 1996, respectively.
9. SENIOR NOTES:
On March 26, 1996, the Company issued $50,000,000 of 7.45%
senior notes due April 1, 2001. These senior notes were issued at a
discount of $83,500 which is being amortized over the life of the notes
for financial reporting purposes. Net proceeds from the issuance
totaled approximately $49,394,000.
Interest on the 7.45% senior notes is payable semi-annually on
April 1 and October 1. Costs associated with the issuance of these
senior notes totaled approximately $522,000 and are being amortized
over the life of the notes.
On August 15, 1997, the Company issued $75,000,000 of 7.25%
senior notes due August 15, 2007. These senior notes were issued at a
discount of $426,000 which is being amortized
55
<PAGE> 57
over the life of the notes for financial reporting purposes. Net
proceeds from the issuance totaled $73,817,000.
Interest on the 7.25% senior notes is payable semi-annually on
February 15 and August 15. Costs associated with the issuance of these
senior notes totaled approximately $757,000 and are being amortized
over the life of the notes.
10. INDEBTEDNESS TO BANKS:
On December 15, 1995, the Company terminated its $50,000,000
secured revolving term loan and obtained a $100,000,000 unsecured
revolving term loan maturing January 4, 1999. Not later than June 30th
of each year commencing June 30, 1996, the Company may request to
extend the maturity date for an additional twelve-month period beyond
the existing maturity date. In accordance with the terms of the
agreement, during 1996 and 1997 the Company extended the maturity date
for two additional twelve-month periods to January 4, 2001.
The interest rate is, at the option of the Company, either a)
prime, fluctuating daily, or b) the adjusted London Interbank Offered
Rates ("LIBOR"), plus the "Applicable Margin" based upon the rating of
the senior unsecured long-term debt obligations of the Company.
Effective June 30, 1997, the Applicable Margin was reduced from a range
of 1.3% to 1.5% to a range of .95% to 1.4%. LIBOR borrowings may be set
for periods of one, two, three, six or twelve months at the option of
the Company. The Applicable Margin based on the Company's current
rating is 1.25%.
Prepayments may be made on prime rate and LIBOR advances
provided that the Company will reimburse the lenders for any loss or
out-of-pocket expense incurred in connection with any LIBOR prepayment.
The Company pays a fee of 0.25% per annum of the aggregate unused
portion of the commitment. Effective July 1, 1997, this fee was reduced
to 0.15% per annum whenever the unused portion is less than fifty
percent of the total commitment.
The loan agreement contains restrictive covenants pertaining
to net worth, the ratio of debt to equity, interest coverage, debt
service coverage, net operating losses, and the ratio of total
liabilities to total assets. The Company has agreed not to encumber
certain properties ("Negative Pledge Properties"). The commitment may
fluctuate up to a maximum of $100,000,000 based on 65% of the value of
the Negative Pledge Properties and as of December 31, 1997, the Company
may borrow the maximum commitment amount.
56
<PAGE> 58
The previous $50,000,000 revolving term loan which was
terminated in December 1995 bore interest at either prime or 1.25% over
LIBOR and was secured.
The following data is presented with respect to the revolving
term loan agreement in 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Unused at year-end $85,600,000 $85,000,000
Average borrowing for
the period 14,165,000 11,750,000
Maximum amount outstanding
during the period 64,700,000 48,000,000
Average interest rate for
the period 7.09% 7.04%
Interest rate at
year-end 7.45% 7.06%
</TABLE>
The Company incurred commitment fees of approximately $212,000
and $221,000 for the years ended December 31, 1997 and 1996,
respectively, based on the aggregate unused portion of the commitment.
11. DEFERRED INCOME TAXES, GAIN ON SALES AND VALUATION LOSS:
During 1984, the Company recognized a gain on sale for
financial reporting purposes, net of a deferred tax provision of
$1,122,000, which reflected the timing differences arising from the
Company's election to recognize the gain on this property sale on the
installment basis for tax purposes. Installment gains are recognized
for tax purposes based on the principal payments received in each year
under the purchase- money financing taken back on the sales.
The purchase-money financing on this sale commenced principal
amortization in 1987 based on a 25-year amortization period, with a
balloon payment in 2001. The Company had a deferred tax liability
related to this sale of $1,055,000 at December 31, 1997 and 1996.
Should the Company elect to
57
<PAGE> 59
distribute the taxable installment gain recognized in future years to
its shareholders as capital gain distributions, the reversal of this
previously recorded tax liability would be reflected in income for
financial reporting purposes in the periods in which the distributions
are elected. The borrower under this wrap-around mortgage is in default
of the terms of the mortgage, and the Company has initiated foreclosure
proceedings. The net carrying value of this mortgage is approximately
$4,478,000 as of December 31, 1997. See Note 20 for additional
information regarding this mortgage loan.
During 1997, the Company sold one shopping center investment
and one apartment complex for gains totaling approximately $3,897,000.
During 1996, the Company sold one shopping center investment and two
net leased facilities for gains totaling approximately $1,232,000.
During 1995, the Company sold three shopping center investments and two
parcels of land for gains totaling approximately $160,000. In addition,
the Company recorded gains of approximately $2,000 on the condemnation
of 2,814 square feet of land at two of the Company's shopping center
investments.
12. EXTRAORDINARY ITEM:
During 1996, the Company prepaid a $2,727,000 mortgage and
recognized an extraordinary loss of $16,500 on the early extinguishment
of debt.
During 1995, the Company recognized an extraordinary loss of
approximately $137,000 on the early extinguishment of debt. This
extraordinary loss represented the unamortized portion of loan costs on
the $50 million secured revolver terminated in December 1995.
58
<PAGE> 60
13. EARNINGS PER SHARE:
<TABLE>
<CAPTION>
Per-Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
For the year ended December 31, 1997
Basic Earnings Per Share
Net Earnings available to
shareholders $26,112,680 31,867,743 $0.82
=====
Options outstanding (See Note 15) - 53,469
----------- ----------
Diluted Earnings per Share
Net Earnings available to
shareholders $26,112,680 31,921,212 $0.82
=========== ========== =====
For the year ended December 31, 1996
Basic Earnings Per Share
Net Earnings available to
shareholders $16,817,704 25,749,860 $0.65
=====
Options outstanding (See Note 15) - 5,081
----------- ----------
Diluted Earnings per Share
Net Earnings available to
shareholders $16,817,704 25,754,941 $0.65
=========== ========== =====
For the year ended December 31, 1995
Basic Earnings Per Share
Net Earnings available to
shareholders $15,585,791 25,590,129 $0.61
=====
Options outstanding (See Note 15) - 5,001
----------- ----------
Diluted Earnings per Share
Net Earnings available to
shareholders $15,585,791 25,595,130 $0.61
=========== ========== =====
</TABLE>
Basic earnings per share were computed by dividing net
earnings by the weighted average number of shares of common stock
outstanding during the year. The effect on basic earnings per share
assuming conversion of the 7.3% convertible subordinated debentures
would be anti-dilutive. Dilution for options issued to executives and
directors for the years ended
59
<PAGE> 61
December 31, 1997, 1996 and 1995 were determined using the treasury
stock method. Options issued to executives and directors with option
prices less than the average share price for the respective year were
considered dilutive. The Company adopted SFAS No. 128, "Earnings Per
Share", effective December 15, 1997. The effect of this accounting
change on previously reported earnings per share (EPS) data was as
follows:
<TABLE>
<CAPTION>
Per Share Amounts 1996 1995
---- ----
<S> <C> <C>
Primary EPS as reported $0.65 $0.61
Effect of SFAS No. 128 - -
----- -----
Basic EPS as restated $0.65 $0.61
===== =====
</TABLE>
The impact of extraordinary items on earnings per share is not
material.
14. CASH DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN:
The taxability of per share distributions paid to shareholders
during the years ended December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- -----
<S> <C> <C> <C>
Ordinary income $ .73 $ .47 $.635
Capital gains .08 - -
Return of capital .09 .43 .250
----- ----- -----
$ .90 90 $.885
===== ===== =====
</TABLE>
In addition, the 5% discount received upon purchase of shares
under the Dividend Reinvestment Plan is taxable as ordinary income to
the participant.
In 1984, the Company implemented a Dividend Reinvestment Plan
(the "Plan") under which shareholders of the Company may elect to
reinvest all or a portion of their dividends in the purchase of newly
issued shares of common stock of the Company. The price of shares so
purchased is 95% of the average high and low sales prices of the
Company's common stock on the applicable dividend payment date. During
1997, 1996 and 1995, shares issued under the Plan totaled 260,000,
60
<PAGE> 62
113,000 and 122,000, respectively, and dividends totaling $2,864,000,
$1,024,000, and $1,107,000, respectively, were reinvested to purchase
these shares.
15. STOCK OPTIONS:
Effective May 8, 1989, the Company adopted and its
shareholders approved the 1989 Stock Option Plan (the "1989 Plan"). In
May 1993, the shareholders approved a 750,000 share increase in the
number of shares authorized to be granted under the 1989 Plan. The 1989
Plan, which expires on May 8, 1999, replaces the prior Key Employee
Stock Option Plan (the "Prior Plan"), except that options granted under
the Prior Plan and unexercised as of the date of the 1989 Plan shall
remain in full force and effect.
The 1989 Plan includes provisions for a) the granting of both
Incentive Stock Options ("ISOs") (as defined in Section 422A of the
Internal Revenue Code) and nonqualified options to officers and
employees and b) the automatic granting of nonqualified options for
1,250 shares to each non-employee director upon the election and each
annual re-election of each non-employee director. Under the terms of
the 1989 Plan, the option price shall be no less than the fair market
value of the optioned shares at the date of grant. The options are
automatically vested and expire after ten years.
The Company accounts for these plans under APB 25, under which
no compensation cost has been recognized.
Had compensation cost for these plans been determined
consistent with SFAS 123, the Company's net income and earnings per
share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Net Earnings: As Reported $26,112,680 $16,817,704
Pro Forma $26,006,756 $16,749,336
EPS (Basic and Diluted): As Reported $ 0.82 $ 0.65
Pro Forma $ 0.82 $ 0.65
</TABLE>
Because the SFAS 123 method of accounting has not been applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
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<PAGE> 63
The weighted average fair value of options granted is $1.11
and $0.72 for 1997 and 1996, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions
used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.28% and 5.38% for qualified employee options, 6.50% and
6.66% for director options; expected dividend yields of 7.91% and 9.62%
for qualified employee options, 7.74% and 9.47% for director options;
expected lives of 5 years; expected volatility of 20%.
62
<PAGE> 64
Details of the stock option activity during 1997, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------- Option Price
Employees Directors Per Share
--------- --------- --------------
<S> <C> <C> <C>
Options outstanding,
December 31, 1994 224,655 47,500 $ 7.63-$15.10
Granted, 1995 80,500 - $ 10.13
Granted, 1995 - 7,500 $ 9.75
Granted, 1995 50,000 - $ 9.63
Exercised, 1995 (7,000) - $ 7.63
Expired unexercised,
1995 (12,000) - $10.13-$12.00
------- ------
Options outstanding,
December 31, 1995 336,155 55,000 $ 7.63-$15.10
Granted, 1996 89,000 - $ 9.25
Granted, 1996 - 6,250 $ 9.75
Exercised, 1996 (2,400) - $ 7.63-$9.25
Expired unexercised,
1996 (25,562) - $9.25-$14.90
------- ------
Options outstanding,
December 31, 1996 397,193 61,250 $ 7.63-$15.10
Granted, 1997 90,000 - $ 11.375
Granted, 1997 - 5,000 $ 11.625
Exercised, 1997 (44,200) - $ 9.25-$10.75
Exercised, 1997 - (6,250) $ 9.50-$10.25
Expired unexercised,
1997 (60,000) - $ 9.25-$15.10
-------- -------
Options outstanding,
December 31, 1997 382,993 60,000 $ 7.63-$14.90
======== =======
</TABLE>
There are currently ISOs outstanding on 470,418 shares
(including 8,750 shares granted under the Prior Plan), non-qualified
options outstanding on 110,000 shares, and 403,000 unoptioned shares
remaining in the 1989 Plan after the granting of ISOs for 144,300
additional shares at $11.6875 per share on January 7, 1998 and the
expiration of options on 6,875 shares at $12.60 per share on January 3,
1998. All outstanding options are fully exercisable.
63
<PAGE> 65
16. EMPLOYEE RETIREMENT BENEFITS:
Effective June 30, 1990, the Board of Directors terminated a
defined contribution pension plan which had been adopted in 1980 and
implemented a program of year-end cash payments to certain employees of
the Company ("Cash in Lieu of Pension"). The Cash in Lieu of Pension
program was terminated upon the adoption of the Company's 401(k) Plan
effective August 1, 1996.
Under the Company's 401(k) Plan, employees who have completed
one year of service and are at least 18 years of age are eligible for
participation in the plan. Employees may elect to make contributions to
the plan, and the Company matches 100% of such contributions up to 6%
of the individual participant's compensation, based on the length of
service. The Company contributed approximately $131,000 and $56,000 to
the 401(k) Plan in 1997 and 1996, respectively. The Company accrued
approximately $179,000 and $200,000 under the Cash in Lieu of Pension
program in 1996 and 1995, respectively.
The Company's Chairman was provided with an employment
contract during 1980. This contract provides for deferred compensation
amounts which commenced upon the employee's retirement in July 1997.
The Company accrued approximately $23,000 for this contract in each of
1996 and 1995 and paid approximately $15,000 in 1997.
17. COMMITMENTS AND CONTINGENCIES:
IRTCC has entered into a co-development agreement for the
development of a Kroger anchored shopping center in Decatur, Georgia.
The project will be developed in two phases totaling approximately
140,000 square feet, not including two outparcels, at a total
anticipated cost of approximately $14,100,000. The venture may require
the Company to purchase the shopping center upon the completion of
Phase I at cost or upon the completion of Phase II at the greater of
cost or a 10.75% capitalization rate. It is anticipated that the
Company will ultimately acquire the project upon completion.
Effective July 1, 1997, the Company entered into a consulting
agreement with the Chairman for the period July 1, 1997 through June
30, 1998. In consideration for such consulting work, the Chairman will
receive $168,000.
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<PAGE> 66
As of November 11, 1997, the Company entered into an Amended
and Restated Employment Agreement with its President and Chief
Executive Officer. 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. It is automatically renewable each year unless sooner
terminated. Following a "Change In Control" as defined therein, the
President may, for good reason, terminate his employment and receive
the sum of 2.99 times the executive's annual base salary and 2.99 times
his most recent bonus. Following a Change in Control and termination of
employment, the Company will continue to provide benefits to the
executive consistent with what he received prior to such termination.
As of November 11, 1997, the Company also entered into Change
In Control Employment Agreements with its three Executive Vice
Presidents. These are generally similar to the Change In Control
provisions contained in the President's Employment Agreement. However,
the Executive Vice President and CFO's agreement provides for payment
of two times the sum of the executive's base salary and the most recent
annual bonus in the event of a Change in Control and termination of
employment. The provisions of the other Executive Vice Presidents'
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 the
Executive Vice President and CFO and one year in the case of each of
the other two Executive Vice Presidents.
The Company has entered into a contract to purchase a shopping
center investment for a purchase price of approximately $6.1 million.
The purchase of this center is contingent on the fulfillment of certain
requirements by the seller.
18. ENVIRONMENTAL INVESTIGATIONS:
The Charlotte industrial facility contained underground
petroleum and used oil storage tanks ("USTs") believed to have been
owned by the previous owner of this property. The Company (through an
environmental consulting firm) removed the USTs in December 1993, and
on March 2, 1994, DEHNR notified
65
<PAGE> 67
the Company that certain investigative, corrective and/or remedial
actions ("Corrective Actions") must be performed by the Company to,
among other things, determine the level of soil and/or groundwater
contamination due to suspected leakage from some of the USTs. The
Company has investigated the property to the satisfaction of DEHNR.
The investigation confirmed the presence of petroleum product-related
substances in soil and groundwater at levels that exceed applicable
standards. The investigation also revealed the presence of free phase
liquids in one monitoring well at the property.
The Company has begun removing free phase liquids from the
well on the property. In addition, the Company has submitted to DEHNR a
Corrective Action Plan ("CAP") and schedule to address
petroleum-impacted soil and groundwater at the site. Soil excavation
work has been completed, and the Company plans to address
petroleum-impacted groundwater in due course. According to the CAP, the
estimated remaining cost for site remediation ranges from $129,000 to
$193,000 over a period of 3 to 6 years. Although the Company believes
that certain of the costs of Corrective Action are reimbursable under
the North Carolina Commercial Leaking Petroleum Underground Storage
Tank Cleanup Fund, the Company accrued $129,000 in 1995 based on these
estimates. The CAP may be revised, and the estimated costs may change,
but based on the information presently available, the Company believes
any additional costs of any such Corrective Action would not have a
material adverse effect on the Company's results of operations,
financial position or liquidity.
During 1996, the Company discovered that additional releases
of petroleum products had occurred at and around a garage facility
previously operated by a former trucking company tenant. An
investigation is being conducted by the Company in order to determine
the extent of the related contamination, and Company management is
negotiating with the former tenant to obtain a contribution to
potential clean-up costs. The Company does not believe the cost of
addressing these additional releases will have a material adverse
effect on the Company's results of operations, financial position or
liquidity.
During its soil and groundwater investigation at Bluebonnet
Village Shopping Center in Baton Rouge, Louisiana, the Company's
environmental consultant discovered
66
<PAGE> 68
concentrations of various chemicals in a single groundwater monitoring
well that exceeded the maximum contaminant levels under the Federal
Safe Drinking Water Act. The Company has notified the Louisiana
Department of Environmental Quality- Groundwater Protection Division
("LDEQ-GWPD") of such discovery. The Company has been advised that the
groundwater impact appears to be very localized, since six other
groundwater monitoring wells placed around the initial well did not
exhibit any impact. There can be no assurance that the LDEQ-GWPD will
not require remediation, but based on information presently available
to the Company and discussions with the Company's environmental
consultant, the Company believes the cost of any such remediation would
not have a material adverse effect on the Company's results of
operations, financial position or liquidity.
19. SUBSEQUENT EVENT:
On January 13, 1998, the Company acquired Town and Country
Shopping Center in Kissimmee, Florida for a total cost of $4,261,000,
consisting of the initial purchase price of $4,200,000 and
approximately $61,000 of acquisition costs. This acquisition was funded
by cash of $2,029,000 and the assumption of the $2,232,000 existing
mortgage debt with an interest rate of 7.65% maturing December 1, 2002.
20. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITOR'S REPORT:
On February 18, 1998, the Company obtained title to Spanish
Quarter Apartments through foreclosure. At the time of the foreclosure,
management believes that the market value of the property equals or
exceeds the net carrying value of the wrap-around mortgage as of
December 31, 1997.
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<PAGE> 69
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $16,032,212 $16,543,840 $17,188,894 $17,352,889
=========== =========== =========== ===========
Earnings before gain on real estate
investments and extraordinary item $ 5,458,274 $ 5,658,714 $ 5,483,826 $ 5,615,049
Gain on real estate investments - - - 3,896,817
----------- ----------- ----------- -----------
Earnings before extraordinary
item 5,458,274 5,658,714 5,483,826 9,511,866
Extraordinary item - - - -
----------- ----------- ----------- -----------
Net earnings $ 5,458,274 $ 5,658,714 $ 5,483,826 $ 9,511,866
=========== =========== =========== ===========
Per Share:
Basic $ .18 $ .17 $ .17 $ .29
=========== =========== =========== ===========
Diluted $ .18 $ .17 $ .17 $ .29
=========== ============ =========== ===========
<CAPTION>
1996
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $14,863,553 $ 15,030,256 $15,146,092 $15,193,521
=========== ============ =========== ===========
Earnings before gain (loss) on real
estate investments and extraordinary
item $ 3,902,526 $ 3,987,558 $ 4,095,170 $ 3,616,858
Gain (loss) on real estate investments 207,496 (12,874) - 1,037,470
----------- ------------ ----------- -----------
Earnings before extraordinary
item 4,110,022 3,974,684 4,095,170 4,654,328
Extraordinary item - (16,500) - -
----------- ------------ ----------- -----------
Net earnings $ 4,110,022 $ 3,958,184 $ 4,095,170 $ 4,654,328
=========== ============ =========== ===========
Per Share:
Basic $ .16 $ .15 $ .16 $ .18
=========== ============ =========== ===========
Diluted $ .16 $ .15 $ .16 $ .18
=========== ============ =========== ===========
</TABLE>
68
<PAGE> 70
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Abbeville Plaza
Abbeville, SC
Land $ - $ 48,066 $ - $ 48,066 $ - 21
Buildings 458,062 55,722 513,784 264,547
Alafaya Commons
Orlando, FL
Land - 5,525,976 - 5,525,976 - 40
Buildings 4,723,994 22,607 4,746,601 127,942
Ambassador Row
Lafayette, LA
Land - 2,451,860 - 2,451,860 - 40
Buildings 7,244,580 252,205 7,496,785 594,319
Ambassador Row Courtyard
Lafayette, LA
Land - 2,899,438 - 2,899,438 - 40
Buildings 8,698,313 145,101 8,843,414 669,544
Asheville Plaza
Asheville, NC
Land - 52,710 15,000 67,710 - 30
Buildings 335,717 1,860 337,577 132,960
Bluebonnet Village
Baton Rouge, LA
Land - 2,540,594 (4,802) 2,535,792 - 40
Buildings 5,509,995 74,777 5,584,772 427,657
The Boulevard
Lafayette, LA
Land - 948,334 - 948,334 - 40
Buildings 2,845,003 24,934 2,869,937 220,135
Carolina Place
Hartsville, SC
Land - 345,000 - 345,000 - 40
Buildings 2,006,494 - 2,006,494 429,060
<CAPTION>
Date Year
Description Acquired Completed
----------- ---------- -----------
<S> <C> <C>
Abbeville Plaza
Abbeville, SC
Land April, 1986 1970
Buildings
Alafaya Commons
Orlando, FL
Land November, 1996 1987
Buildings
Ambassador Row
Lafayette, LA
Land December, 1994 1980 &
Buildings 1991
Ambassador Row Courtyard
Lafayette, LA
Land December, 1994 1986 &
Buildings 1991
Asheville Plaza
Asheville, NC
Land April, 1986 1967
Buildings
Bluebonnet Village
Baton Rouge, LA
Land December, 1994 1983
Buildings
The Boulevard
Lafayette, LA
Land December, 1994 1976 &
Buildings 1994
Carolina Place
Hartsville, SC
Land May, 1989 1989
Buildings
</TABLE>
69
<PAGE> 71
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Centre Pointe Plaza
Smithfield, NC
Land $ - $ 983,612 $ 12,583 $ 996,195 $ - 40
Buildings 8,002,885 261,768 8,264,653 1,035,551
Chadwick Square
Hendersonville, NC
Land - 276,778 - 276,778 - 40
Buildings 1,179,949 16,100 1,196,049 174,518
Chastain Square
Atlanta, GA
Land - 1,689,421 - 1,689,421 - 40
Buildings 5,068,263 - 5,068,263 4,152
Chelsea Place
New Port Richey, FL
Land - 1,387,517 - 1,387,517 - 40
Buildings 5,550,068 5,000 5,555,068 619,454
Chester Plaza
Chester, SC
Land - 68,649 143,504 212,153 - 16
Buildings 414,117 1,573,701 1,987,818 630,807
Chestnut Square
Brevard, NC
Land - 295,984 - 295,984 - 40
Buildings 1,113,464 22,659 1,136,123 173,148
Colony Square
Fitzgerald, GA
Land - 272,833 - 272,833 - 40
Buildings 2,455,826 207,771 2,663,597 774,227
Commerce Crossing
Commerce, GA
Land - 379,648 889 380,537 - 40
Buildings 4,089,737 31,669 4,121,406 517,999
<CAPTION>
Date Year
Description Acquired Completed
----------- -------- ---------
<S> <C> <C>
Centre Pointe Plaza
Smithfield, NC
Land December, 1992 & 1989 &
Buildings December, 1993 1993
Chadwick Square
Hendersonville, NC
Land January, 1992 1985
Buildings
Chastain Square
Atlanta, GA
Land December, 1997 1981
Buildings
Chelsea Place
New Port Richey, FL
Land July, 1993 1992
Buildings
Chester Plaza
Chester, SC
Land April, 1986 & 1967 &
Buildings February, 1992 1992
Chestnut Square
Brevard, NC
Land
Buildings
January, 1992 1985
Colony Square
Fitzgerald, GA
Land
Buildings
February, 1988 1987
Commerce Crossing
Commerce, GA
Land
Buildings
December, 1992 1988
</TABLE>
70
<PAGE> 72
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Country Club Plaza
Slidell, LA
Land $ - $ 1,068,686 $ $ 1,068,686 $ - 40
Buildings 3,010,039 138,332 3,148,371 247,134
Countryside Shops
Cooper City, FL
Land - 5,675,614 - 5,675,614 - 40
Buildings 10,954,065 126,930 11,080,995 989,373
The Crossing
Slidell, LA
Land - 1,282,036 - 1,282,036 - 40
Buildings 3,213,616 109,164 3,322,780 267,545
Delchamps Plaza
Pascagoula, MS
Land - 359,000 - 359,000 - 40
Buildings 4,130,247 77,199 4,207,446 1,019,974
Douglas Commons
Douglasville, GA
Land - 2,543,385 2,951 2,546,336 - 40
Buildings 5,958,475 136,787 6,095,262 858,179
Eden Centre
Eden, NC
Land - 625,901 - 625,901 - 40
Buildings 2,901,316 - 2,901,316 229,687
Elmwood Oaks
Harahan, LA
Land 7,500,000 4,558,654 - 4,558,654 - 40
Buildings 6,560,014 60,537 6,620,551 988,535
Fariview Oaks
Ellenwood, GA
Land - 713,978 - 713,978 - 40
Buildings 6,396,016 - 6,396,016 86,591
<CAPTION>
Date Year
Description Acquired Completed
----------- ---------- -----------
<S> <C> <C>
Country Club Plaza
Slidell, LA
Land January, 1995 1982
Buildings
Countryside Shops
Cooper City, FL
Land June, 1994 1986, 1988
Buildings & 1991
The Crossing
Slidell, LA
Land December, 1994 1988 &
Buildings 1993
Delchamps Plaza
Pascagoula, MS
Land April, 1988 1987
Buildings
Douglas Commons
Douglasville, GA
Land August, 1992 1988
Buildings
Eden Centre
Eden, NC
Land November, 1994 1991
Buildings
Elmwood Oaks
Harahan, LA
Land January, 1992 1989
Buildings
Fariview Oaks
Ellenwood, GA
Land June, 1997 1997
Buildings
</TABLE>
71
<PAGE> 73
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ---------- ------------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
First Street Station
Albemarle, NC
Land $ -- $ 202,578 $ -- $ 202,578 $ -- 40
Buildings 2,832,092 30,770 2,862,862 239,441
Forest Hills Centre
Wilson, NC
Land -- 869,981 (9,160) 860,821 -- 40
Buildings 4,120,606 552,594 4,673,200 779,660
Forrest Gallery
Tullahoma, TN
Land -- 2,137,692 10,639 2,148,331 -- 40
Buildings 9,977,044 348,091 10,325,135 1,352,707
Ft. Walton Beach Plaza
Ft. Walton Beach, FL
Land -- 787,583 -- 787,583 -- 30
Buildings 1,860,360 28,774 1,889,134 722,478
The Galleria
Wrightsville Beach, NC
Land -- 1,069,672 -- 1,069,672 -- 40
Buildings 6,138,818 1,315,011 7,453,829 1,758,240
Grassland Crossing
Alpharetta, GA
Land 6,709,066 1,075,000 -- 1,075,000 -- 40
Buildings 8,831,655 -- 8,831,655 202,323
Greenwood Shopping Center
Palm Springs, FL
Land -- 4,129,000 -- 4,129,000 -- 40
Buildings 8,953,855 6,215 8,960,070 110,971
Gulf Gate Plaza
Naples, FL
Land -- 277,562 -- 277,562 -- 28
Buildings 1,857,532 2,364,243 4,221,775 2,752,782
</TABLE>
<TABLE>
<CAPTION>
Date Year
Acquired Completed
----------- -----------
<S> <C> <C>
First Street Station
Albemarle, NC
Land August, 1994 1989
Buildings
Forest Hills Centre
Wilson, NC
Land August, 1990 1990 &
Buildings 1995
Forrest Gallery
Tullahoma, TN
Land December, 1992 1987
Buildings
Ft. Walton Beach Plaza
Ft. Walton Beach, FL
Land July, 1986 1986
Buildings
The Galleria
Wrightsville Beach, NC
Land August, 1986 & 1986, 1990
Buildings December, 1987 &1996
Grassland Crossing
Alpharetta, GA
Land February, 1997 1996
Buildings
Greenwood Shopping Center
Palm Springs, FL
Land July, 1997 1982 &
Buildings 1994
Gulf Gate Plaza
Naples, FL
Land June, 1979 1969 &
Buildings 1974
</TABLE>
72
<PAGE> 74
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ---------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Harris Teeter
Lexington, VA
Land $ - $ 312,105 $ - $ 312,105 $ - 30
Buildings 1,638,552 650,000 2,288,552 715,820
Heritage Walk
Milledgeville, GA
Land - 810,292 - 810,292 - 40
Buildings 7,944,260 3,200 7,947,460 909,830
Hoffner Plaza
Orlando, FL
Land - 337,182 77,728 414,910 - 28
Buildings 146,554 - 146,554 119,244
Lancaster Plaza
Lancaster, SC
Land - 120,790 - 120,790 - 30
Buildings 743,852 571,663 1,315,515 509,025
Lancaster Shopping Center
Lancaster, SC
Land - 338,355 - 338,355 - 30
Buildings 1,227,552 29,760 1,257,312 435,211
Lawrence Commons
Lawrenceburg, TN
Land - 815,653 829 816,482 - 40
Buildings 2,728,692 40,334 2,769,026 380,414
Litchfield Landing
North Litchfield, SC
Land - 475,000 - 475,000 - 40
Buildings 2,118,429 39,256 2,157,685 630,851
Macland Pointe
Marietta, GA
Land 3,693,039 1,252,098 (5,875) 1,246,223 - 40
Buildings 4,317,234 577,220 4,894,454 603,075
<CAPTION>
Date Year
Description Acquired Completed
----------- ------------ ---------
<S> <C> <C>
Harris Teeter
Lexington, VA
Land June, 1988 & 1981 &
Buildings June, 1989 1989
Heritage Walk
Milledgeville, GA
Land June,1993 1991 &
Buildings 1992
Hoffner Plaza
Orlando, FL
Land June, 1979 1972
Buildings
Lancaster Plaza
Lancaster, SC
Land April, 1986 1971
Buildings
Lancaster Shopping Center
Lancaster, SC
Land August, 1986 & 1963 &
Buildings December, 1987 1987
Lawrence Commons
Lawrenceburg, TN
Land August, 1992 1987
Buildings
Litchfield Landing
North Litchfield, SC
Land August, 1986 1984
Buildings
Macland Pointe
Marietta, GA
Land January, 1993 1992 &
Buildings 1993
</TABLE>
73
<PAGE> 75
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------- ---------- ------------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Madison Centre
Huntsville, AL
Land $ -- $2,772,000 $ -- $ 2,772,000 $ -- 40
Buildings 3,046,308 -- 3,046,308 28,606
Market Place
Norcross, GA
Land -- 3,819,704 -- 3,819,704 -- 40
Buildings 3,253,822 -- 3,253,822 57,564
McAlpin Square
Savannah, GA
Land -- 1,519,509 -- 1,519,509 -- 40
Buildings 4,558,527 -- 4,558,527 4,703
Millervillage Shopping Center
Baton Rouge, LA
Land -- 1,926,535 -- 1,926,535 -- 40
Buildings 5,661,992 77,658 5,739,650 444,307
New Smyrna Beach Regional
New Smyrna Beach, FL
Land -- 3,704,368 6,757 3,711,125 -- 40
Buildings 6,400,556 322,552 6,723,108 987,635
North River Village
Ellenton, FL
Land -- 2,949,031 -- 2,949,031 -- 40
Buildings 7,161,093 96,271 7,257,364 820,918
North Village Center
North Myrtle Beach, SC
Land 2,525,195 483,400 -- 483,400 -- 37
Buildings 2,785,154 10,479 2,795,633 761,632
Old Kings Commons
Palm Coast, FL
Land -- 1,491,458 -- 1,491,458 -- 40
Buildings 4,474,372 164,743 4,639,115 1,170,725
</TABLE>
<TABLE>
<CAPTION>
Date Year
Acquired Completed
----------- -----------
<S> <C> <C>
Madison Centre
Huntsville, AL
Land August, 1997 1997
Buildings
Market Place
Norcross, GA
Land April, 1997 1976
Buildings
McAlpin Square
Savannah, GA
Land December, 1997 1979
Buildings
Millervillage Shopping Center
Baton Rouge, LA
Land December, 1994 1983 &
Buildings 1992
New Smyrna Beach Regional
New Smyrna Beach, FL
Land August, 1992 1987
Buildings
North River Village
Ellenton, FL
Land December, 1992 & 1988 &
Buildings December, 1993 1993
North Village Center
North Myrtle Beach, SC
Land August, 1986 1984
Buildings
Old Kings Commons
Palm Coast, FL
Land May, 1988 1988
Buildings
</TABLE>
74
<PAGE> 76
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Palm Gardens
Largo, FL
Land $ - $ 98,279 $ - $ 98,279 $ - 26
Buildings 657,716 1,274,417 1,932,133 1,020,507
Parkmore Plaza
Milton, FL
Land - 1,799,419 8,141 1,807,560 - 40
Buildings 6,454,261 132,638 6,586,899 831,582
Paulding Commons
Dallas, GA
Land - 2,312,372 2,687 2,315,059 - 40
Buildings 10,606,781 137,827 10,744,608 1,451,319
Pensacola Plaza
Pensacola, FL
Land - 130,688 - 130,688 - 30
Buildings 2,392,249 156,001 2,548,250 1,013,651
Pinhook Plaza
Lafayette, LA
Land 7,043,517 2,768,151 - 2,768,151 - 40
Buildings 8,304,453 55,253 8,359,706 634,998
Plaza Acadienne
Eunice, LA
Land 2,228,454 - - - - 40
Buildings 2,917,925 55,824 2,973,749 224,794
Plaza North
Hendersonville, NC
Land - 657,797 121 657,918 - 40
Buildings 1,795,992 6,185 1,802,177 245,212
Powers Ferry Plaza
Marietta, GA
Land 1,250,000 1,725,213 - 1,725,213 - 40
Buildings 5,175,637 - 5,175,637 80,205
<CAPTION>
Date Year
Description Acquired Completed
----------- ---------- -----------
<S> <C> <C>
Palm Gardens
Largo, FL
Land June, 1979 1970 &
Buildings 1993
Parkmore Plaza
Milton, FL
Land December, 1992 1986 &
Buildings 1992
Paulding Commons
Dallas, GA
Land August, 1992 1991
Buildings
Pensacola Plaza
Pensacola, FL
Land July, 1986 1985
Buildings
Pinhook Plaza
Lafayette, LA
Land December, 1994 1979 &
Buildings 1992
Plaza Acadienne
Eunice, LA
Land December, 1994 1980
Buildings
Plaza North
Hendersonville, NC
Land August, 1992 1986
Buildings
Powers Ferry Plaza
Marietta, GA
Land May, 1997 1979 &
Buildings 1983
</TABLE>
75
<PAGE> 77
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ----------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Providence Square
Charlotte, NC
Land $ - $ 450,000 $ 300 $ 450,300 $ - 35
Buildings 1,895,606 2,166,071 4,061,677 2,731,492
Riverview Shopping Center
Durham, NC
Land - 400,000 322 400,322 - 35
Buildings 1,822,918 4,358,230 6,181,148 2,144,586
Salisbury Marketplace
Salisbury, NC
Land - 733,599 - 733,599 - 40
Buildings 3,877,552 - 3,877,552 129,248
Scottsville Square
Bowling Green, KY
Land - 653,010 765 653,775 - 20
Buildings 1,782,340 17,678 1,800,018 306,372
Seven Hills
Spring Hill, FL
Land - 1,903,090 - 1,903,090 - 40
Buildings 2,976,628 34,502 3,011,130 342,929
Shelby Plaza
Shelby, NC
Land - - - - - 21
Buildings 937,483 408,222 1,345,705 564,704
Sherwood South
Baton Rouge, LA
Land - 496,174 - 496,174 - 40
Buildings 1,488,521 50,568 1,539,089 121,481
Shoppes of Silverlakes
Pembroke Pines, FL
Land 3,494,085 4,042,613 - 4,042,613 - 40
Buildings 12,826,128 - 12,826,128 40,059
<CAPTION>
Date Year
Description Acquired Completed
----------- -------------- ---------
<S> <C> <C>
Providence Square
Charlotte, NC
Land December, 1971 1973
Buildings
Riverview Shopping Center
Durham, NC
Land March, 1972 1973 &
Buildings 1994
Salisbury Marketplace
Salisbury, NC
Land August, 1996 1987
Buildings
Scottsville Square
Bowling Green, KY
Land August, 1992 1986
Buildings
Seven Hills
Spring Hill, FL
Land July, 1993 1991
Buildings
Shelby Plaza
Shelby, NC
Land April, 1986 1972
Buildings
Sherwood South
Baton Rouge, LA
Land December, 1994 1972, 1988
Buildings & 1992
Shoppes of Silverlakes
Pembroke Pines, FL
Land November, 1997 1995 &
Buildings 1996
</TABLE>
76
<PAGE> 78
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ----------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Siegen Village
Baton Rouge, LA
Land $ - $ 2,375,168 $ (325,000) $ 2,050,168 $ - 40
Buildings 6,513,078 93,637 6,606,715 392,469
Smyrna Village
Smyrna, TN
Land - 968,358 20,601 988,959 - 40
Buildings 4,743,708 118,114 4,861,822 656,817
Smyth Valley Crossing
Marion, VA
Land - 1,693,137 6,523 1,699,660 - 40
Buildings 5,231,283 132,507 5,363,790 708,107
South Beach Regional
Jacksonville Beach, FL
Land - 3,972,815 19,710 3,992,525 - 40
Buildings 17,115,106 836,757 17,951,863 2,526,937
Spalding Village
Griffin, GA
Land 11,376,691 2,813,854 3,281 2,817,135 - 40
Buildings 12,470,446 137,515 12,607,961 1,729,585
Stadium Plaza
Phenix City, AL
Land - 1,828,942 2,130 1,831,072 - 40
Buildings 2,614,155 29,315 2,643,470 362,397
Stanley Market Place
Stanley, NC
Land - 198,103 - 198,103 - 35
Buildings 1,602,832 66,297 1,669,129 237,140
Tarpon Heights
Galliano, LA
Land 2,219,484 705,570 705,570 - 40
Buildings 2,116,712 15,005 2,131,717 159,087
<CAPTION>
Date Year
Description Acquired Completed
----------- -------------- ---------
<S> <C> <C>
Siegen Village
Baton Rouge, LA
Land December, 1994 1988 &
Buildings 1996
Smyrna Village
Smyrna, TN
Land August, 1992 1992
Buildings
Smyth Valley Crossing
Marion, VA
Land December, 1992 1989
Buildings
South Beach Regional
Jacksonville Beach, FL
Land August, 1992 1990 &
Buildings 1991
Spalding Village
Griffin, GA
Land August, 1992 1989
Buildings
Stadium Plaza
Phenix City, AL
Land August, 1992 1988
Buildings
Stanley Market Place
Stanley, NC
Land January, 1992 1980 &
Buildings 1991
Tarpon Heights
Galliano, LA
Land January, 1995 1982
Buildings
</TABLE>
77
<PAGE> 79
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ----------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Taylorsville Shopping Center
Taylorsville, NC
Land $ - $ 89,689 $ - $ 89,689 $ - 40
Buildings 1,443,704 1,078,766 2,522,470 692,450
Thomasville Commons
Thomasville, NC
Land 5,481,755 963,333 - 963,333 - 40
Buildings 6,183,052 50,296 6,233,348 855,046
University Center
Greenville, NC
Land - 750,000 - 750,000 - 40
Buildings 3,159,065 61,907 3,220,972 666,183
Venice Plaza
Venice, FL
Land - 333,127 - 333,127 - 27
Buildings 1,887,721 688,569 2,576,290 1,734,027
Village at Northshore
Slidell, LA
Land 5,417,992 2,065,633 - 2,065,633 - 40
Buildings 6,196,900 59,033 6,255,933 470,830
Waterlick Plaza
Lynchburg, VA
Land - 1,071,000 - 1,071,000 - 40
Buildings 5,091,222 149,409 5,240,631 1,127,966
Watson Central
Warner Robins, GA
Land - 1,645,548 12,478 1,658,026 - 40
Buildings 11,316,940 145,928 11,462,868 1,395,615
Wesley Chapel Crossing
Decatur, GA
Land - 3,828,806 9,154 3,837,960 - 40
Buildings 7,031,767 63,124 7,094,891 898,354
<CAPTION>
Date Year
Description Acquired Completed
----------- -------------- ---------
<S> <C> <C>
Taylorsville Shopping Center
Taylorsville, NC
Land August, 1986 & 1982 &
Buildings December, 1988 1988
Thomasville Commons
Thomasville, NC
Land August, 1992 1991
Buildings
University Center
Greenville, NC
Land December, 1989 1989
Buildings
Venice Plaza
Venice, FL
Land June, 1979 1971 &
Buildings 1979
Village at Northshore
Slidell, LA
Land December, 1994 1988 &
Buildings 1993
Waterlick Plaza
Lynchburg, VA
Land October, 1989 1973 &
Buildings 1988
Watson Central
Warner Robins, GA
Land December, 1992 & 1989 &
Buildings October, 1993 1993
Wesley Chapel Crossing
Decatur, GA
Land December, 1992 1989
Buildings
</TABLE>
78
<PAGE> 80
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
West Gate Plaza
Mobile, AL
Land $ - $ 475,270 $ - $ 475,270 $ - 25
Buildings 3,771,825 496,300 4,268,125 1,040,559
West Towne Square
Rome, GA
Land - 324,800 - 324,800 - 40
Buildings 5,580,776 120,625 5,701,401 1,138,214
Westgate Square
Sunrise, FL
Land - 2,238,886 - 2,238,886 - 40
Buildings 6,839,969 145,044 6,985,013 624,185
Willowdaile Shopping Center
Durham, NC
Land - 936,977 (60,579) 876,398 - 40
Buildings 7,351,612 358,614 7,710,226 2,098,884
Industrial Buildings
Charlotte, NC - Industrial
Land - 143,160 178,490 321,650 - 14
Buildings 2,170,057 1,138,898 3,308,955 2,746,249
Plasti-Kote
Medina, OH - Industrial
Land - 81,390 - 81,390 - 14
Buildings 346,979 54,570 401,549 401,549
Lawrence County
Shopping Center
Sybene, OH
Land - 435,994 - 435,994 -
Grand Marche
Shopping Center
Lafayette, LA
Land - 250,000 500 250,500 -
<CAPTION>
Date Year
Description Acquired Completed
----------- --------------- ----------
<S> <C> <C>
West Gate Plaza June, 1974 & 1974 &
Mobile, AL January, 1985 1995
Land
Buildings
West Towne Square March, 1990 1988
Rome, GA
Land
Buildings
Westgate Square June, 1994 1984 &
Sunrise, FL 1988
Land
Buildings
Willowdaile Shopping Center August, 1986 & 1986
Durham, NC December, 1987
Land
Buildings
Industrial Buildings June, 1979 1956 &
Charlotte, NC - Industrial 1963
Land
Buildings
Plasti-Kote June, 1979 1961 &
Medina, OH - Industrial 1966
Land
Buildings
Lawrence County
Shopping Center May, 1971 1971
Sybene, OH
Land
Grand Marche
Shopping Center September, 1972 1969
Lafayette, LA
Land
</TABLE>
79
<PAGE> 81
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Estimated
Costs Gross Amount Accumulated Useful
Initial Capitalized at Which Depreciation Life of
Cost to Subsequent to Carried at at Close Buildings
Description Encumbrances Company Acquisition Close of Year of Year (Years)
----------- ------------ ---- ------- ------------- -------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Manatee County
Shopping Center
Bradenton, FL
Land $ - $ 241,798 $ - $ 241,798 $ -
------------ ------------- ------------- -------------- ------------
$ 58,939,278 $ 511,562,250 $ 25,597,970 $ 537,160,220 $ 62,526,989
============ ============= ============= ============== =============
<CAPTION>
Date Year
Description Acquired Completed
----------- ---------- ----------
<S> <C> <C>
Manatee County
Shopping Center
Bradenton, FL
Land May, 1971 1971
</TABLE>
80
<PAGE> 82
IRT PROPERTY COMPANY SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
NOTE:
Real estate activity is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
RENTAL PROPERTIES:
Cost -
Balance at beginning of year $ 463,392,557 $ 452,508,601 $ 442,642,705
Acquisitions and improvements 81,755,725 21,109,810 11,518,502
Retirements (663,197) -- --
Reduction in carrying value -- -- --
------------- ------------- -------------
544,485,085 473,618,411 454,161,207
Cost of properties sold (7,324,865) (10,225,854) (1,652,606)
------------- ------------- -------------
Balance at end of year $ 537,160,220 $ 463,392,557 $ 452,508,601
============= ============= =============
Accumulated depreciation -
Balance at beginning of year $ 56,881,888 $ 51,600,890 $ 41,677,722
Depreciation 11,453,460 10,310,344 10,427,268
Retirements (663,197) -- --
------------- ------------- -------------
67,672,151 61,911,234 52,104,990
Accumulated depreciation related to
rental properties sold (5,145,162) (5,029,346) (504,100)
------------- ------------- -------------
Balance at end of year $ 62,526,989 $ 56,881,888 $ 51,600,890
============= ============= =============
</TABLE>
81
<PAGE> 83
IRT PROPERTY COMPANY SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
<TABLE>
<CAPTION>
Final Periodic
Type of Type of Interest Maturity Payment
Location of Property Loan Property Rate Date Terms
- -------------------- ---- -------- ---- ---- -----
(See Notes) (See Notes)
<S> <C> <C> <C> <C> <C>
Augusta, GA First Mortgage Shopping Center 10.25% August, 1998 (1)
Kearney, NE Second Mortgage Shopping Center 7.00% December, 1998 (2)
Fremont, NE Second Mortgage Shopping Center 7.00% December, 1998 (2)
Montgomery, AL Wrap-Around Apartments (3) September, 2001 (3)
Lauderdale Lakes, FL First Mortgage Condominiums 10.00% May, 2009 (4)
Nashville, TN First Mortgage Condominiums 8.63% - 2006-2007 (4)
Participation 12.38%
<CAPTION>
Principal
Amount of
Face Amount Loans Subject
and Carrying to Delinquent
Amount of Principal
Location of Property Prior Liens Mortgages or Interest
- -------------------- ----------- --------- -----------
<S> <C> <C> <C>
Augusta, GA $ - $3,163,285 -
Kearney, NE 2,625,900 594,000 -
Fremont, NE 1,794,800 406,000 -
Montgomery, AL - 5,212,708 5,212,708
Lauderdale Lakes, FL - 119,946 -
Nashville, TN - 25,753 -
---------- ----------
4,420,700 9,521,692
Less interest discounts
and negative goodwill - (200,487)
---------- ----------
$4,420,700 $9,321,205
========== ==========
</TABLE>
NOTES:
(1) Monthly payments of principal and interest, with balloon payments at
maturity.
(2) Monthly payments are interest only; principal due at maturity.
(3) Modified effective, December 1, 1994 to extend the term for 3 years to
September 1, 2001 and to reduce the cash interest rate from 10% to 9.5%
prospectively, requiring monthly payments of $45,382 of principal and
interest for the remaining term, with a balloon payment at maturity.
Additional interest at an annual rate of 1% accrues for the periods
September 1,1984 through August 31, 1989 and September 1,1991 through
August 31, 2001 and is payable at maturity or on sale of the property.
In addition, the Company funded additional principal of $260,000 under
this mortgage during 1995 to make certain capital improvements. This
wrap-around mortgage is subject to a first mortgage having a balance of
$610,142 as of December 31, 1997. The borrower under this wrap-around
mortgage is currently in default of the terms of the mortgage, and the
Company has initiated foreclosure proceedings. See Note 20 for
additional information.
(4) Monthly payments include principal and interest.
82
<PAGE> 84
IRT PROPERTY COMPANY
MORTGAGE LOANS ON REAL ESTATE SCHEDULE IV
December 31, 1997
NOTE:
Mortgage loan activity is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 13,182,520 $ 8,499,210 $ 8,292,143
New mortgage loans - - -
Additions to mortgage loans - 4,800,000 260,000
Amortization of interest discounts and negative
goodwill 41,402 45,998 45,193
Collections of principal (3,902,717) (162,688) (98,126)
------------ ------------ -----------
Balance at end of year $ 9,321,205 $ 13,182,520 $ 8,499,210
============ ============ ===========
</TABLE>
83
<PAGE> 85
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable
84
<PAGE> 86
PART III
The information called for by Part III (Items 10, 11, 12, and 13) is
incorporated herein by reference to the Company's definitive proxy statement for
the Company's 1998 Annual Meeting of Shareholders of the Company, to be filed
pursuant to Regulation 14A, pursuant to General Instruction G(3) to the Report
on Form 10-K.
85
<PAGE> 87
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements and Schedules. Included in Part II of this Report
are the following:
Report of Independent Public Accountants
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Earnings for the Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
Exhibits.
3.1 The Company's Amended and Restated Articles of
Incorporation were filed as Exhibit (3)(a) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, which is incorporated by
reference herein.
3.2 The Company's By-Laws, as amended, were filed as
Exhibit 3 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, which is
incorporated by reference herein.
4.1 The Indenture dated August 15, 1993 between the
Company and Trust Company Bank, as Trustee, relating
to the 7.3% Convertible Subordinated Debentures due
August 15, 2003 was filed as an exhibit to the
Company's Form 10-K for the year ended December 31,
1993, which is incorporated by reference herein.
86
<PAGE> 88
4.2 The form of 7.3% Convertible Subordinated Debenture
was included in 4.1 above.
4.3 The Indentures dated as of November 9, 1995 between
the Company and SunTrust Bank, Atlanta, as Trustee,
relating to Senior Debt Securities and Subordinated
Debt Securities were filed as an exhibit to the
Company's Form 10-K for the year ended December 31,
1995, which is incorporated by reference herein.
4.4 First Supplemental Indenture dated as of March 26,
1996 between IRT Property Company and SunTrust Bank,
Atlanta was filed as an exhibit to the Company's Form
8-K dated March 26, 1996, which is incorporated by
reference herein.
4.5 Supplemental Indenture No. 2, dated August 15, 1997,
between IRT Property Company and SunTrust Bank,
Atlanta was filed as an exhibit to the Company's Form
8-K dated August 15, 1997, which is incorporated by
reference herein.
10.1 The Deferred Compensation Agreement between the
Company and Donald W. MacLeod was filed as an exhibit
to the Company's Registration Statement on Form S-2
(No. 2-88716) dated January 4, 1984, which is
incorporated by reference herein.
10.2 The Company's 1989 Stock Option Plan was filed as an
exhibit to the Company's Form 8-K dated March 22,
1989, which is incorporated by reference herein.
10.3 Amendment No. 1 to the Company's 1989 Stock Option
Plan was filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1993, which is
incorporated by reference herein.
10.4 The Company's Key Employee Stock Option Plan was
filed as an exhibit to the Company's Registration
Statement on Form S-2 (No. 2-88716) dated January 4,
1984, which is incorporated by reference herein.
10.5 The Company's Deferred Compensation Plan for Outside
Directors dated December 22, 1995 was filed as an
exhibit to the Company's Form 10-K for the year ended
December 31, 1995, which is incorporated by reference
herein.
10.6 Agreement between the Company and Donald W. MacLeod,
effective October 1, 1995 was filed as an exhibit to
the Company's Form 10-K for the year ended December
31, 1995, which is incorporated by reference herein.
87
<PAGE> 89
10.6.1 Consulting Agreement between the Company and Donald
W. MacLeod dated June 12, 1997, which amends the
Agreement contained in Exhibit 10.6, was filed as an
exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, which is
incorporated by reference herein.
10.7 Amended and Restated Employment Agreement between the
Company and Thomas H. McAuley dated as of November
11, 1997.
10.8 Change in Control Employment Agreement between the
Company and Mary M. Thomas dated as of November 11,
1997.
10.9 Change in Control Employment Agreement between the
Company and W. Benjamin Jones III dated as of
November 11, 1997.
10.10 Change in Control Employment Agreement between the
Company and Robert E. Mitzel dated as of November 11,
1997.
10.11 The Company's $100 million revolving term loan
agreement dated December 15, 1995 was filed as an
exhibit to the Company's Form 8-K dated January 2,
1996, which is incorporated by reference herein.
10.11.1 First Amendment to Loan Agreement dated June 30, 1997
amending the Company's $100 million revolving term
loan agreement dated December 15, 1995 was filed as
an exhibit to the Company's Quarter Report on Form
10-Q for the quarter ended June 30, 1997, which is
incorporated by reference herein.
10.11.2 Second Amendment to Loan Agreement dated July 1, 1997
amending the Company's $100 million revolving term
loan agreement dated December 15, 1995 was filed as
an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, which is
incorporated by reference herein.
88
<PAGE> 90
10.12 Form of Agreement for the Sale and Purchase of
Property dated October 30, 1992 and the letter
amendment thereto dated November 19, 1992 relative to
the Company's acquisition of the seven Dreyfus
Centers was filed as an exhibit to the Company's
report on Form 8-K dated January 6, 1993 (date of
event reported, December 23, 1992), which is
incorporated by reference herein.
11. Computation of Per Share Earnings.
21. Company Subsidiaries.
23. Consent of Arthur Andersen LLP to the incorporation
of their report included in this Form 10-K in the
Company's previously filed Registration Statements
File Nos. 33-65604, 33-66780, 33-59938, 33- 64628,
33-64741, 33-63523 and 333-38847.
27. Financial Data Schedule (for S.E.C. use only)
Reports on Form 8-K. No reports on Form 8-K were filed by the Company
during the fourth quarter of 1997.
89
<PAGE> 91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
March 3, 1998 IRT PROPERTY COMPANY
By: /s/ Thomas H. McAuley
--------------------------
Thomas H. McAuley
President &
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Thomas H. McAuley President, Chief March 3, 1998
- ---------------------------- Executive Officer
Thomas H. McAuley and Director
/s/ Mary M. Thomas Executive Vice March 3, 1998
- ---------------------------- President, Chief
Mary M. Thomas Financial Officer
and Director (Principal
Financial & Accounting
Officer)
/s/ Donald W. MacLeod Chairman of the March 3, 1998
- ---------------------------- Board and Director
Donald W. MacLeod
/s/ Patrick L. Flinn Director March 3, 1998
- ----------------------------
Patrick L. Flinn
/s/ Homer B. Gibbs, Jr. Director March 3, 1998
- ----------------------------
Homer B. Gibbs, Jr.
/s/ Samuel W. Kendrick Director March 3, 1998
- ----------------------------
Samuel W. Kendrick
/s/ Bruce A. Morrice Director March 3, 1998
- ----------------------------
Bruce A. Morrice
/s/ James H. Nobil Director March 3, 1998
- ----------------------------
James H. Nobil
</TABLE>
90
<PAGE> 1
EXHIBIT 10.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made as of the 11th day of November 1997, between IRT PROPERTY COMPANY, a
Georgia corporation ((herein, together with any successor or assigns to its
business and/or assets, and any person or entity that assumes and agrees to
perform this Agreement by operation of law or otherwise, the "Company"), and
THOMAS H. MCAULEY (the "Executive") and amends and restates the Agreement dated
as of October 1, 1995 between the parties related to the employment of the
Executive by the Company (the "1995 Agreement").
For good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties, intending to be legally bound, agree to
amend and restate the 1995 Agreement as follows:
1. Certain Definitions.
(a) "Affiliated Companies" shall mean any corporation,
partnership, limited liability company, trust and/or other entity controlled by,
controlling or under common control with, the Company. Unless the context
clearly requires otherwise, as used herein, the Company shall include all its
Affiliated Companies.
(b) "Board" shall mean the Company's Board of Directors.
(c) "Change of Control" shall mean:
(i) 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 Company common stock ("Outstanding Company Common Stock") and
(y) all outstanding voting securities of the Company 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 Company entitled to vote generally in the
election of directors (collectively with the Outstanding Voting Common
Stock, the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this subsection 1(b)(i), the following
acquisitions shall not constitute a Change of Control: (r) any
acquisition by a Person who was on November 1, 1997 the beneficial
owner of 25% or more of the Outstanding Company Voting Securities, (s)
any acquisition by the Company, provided no Change in Control has
previously occurred or would result therefrom under subsections
1(c)(ii) and 1(c)(iii) of this Agreement, (t) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Affiliated Company, or (u) any acquisition by any Person
pursuant to a transaction which complies with clauses (x), (y) and (z)
of subsection (iii) of this Section 1(c); or
<PAGE> 2
(ii) Individuals who, as of November 1, 1997,
constituted the Board (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the entire Board; provided, however,
that any individual becoming a director subsequent to November 1, 1997
whose election, or nomination for election by the Company's
stockholders, 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
(iii) 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 Company 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, (x) all or substantially
all of the Persons who were the beneficial owners, respectively, of the
outstanding Company Common Stock and Outstanding Company 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 combined
voting power of the then outstanding shares of Company Common Stock
and/or 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 Company or all or substantially all (e.g., 50% or
more) of the Company'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 Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (y) no Person (excluding
any corporation or other entity resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation or entity resulting from such Business
Combination) beneficially 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 (z) 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
-2-
<PAGE> 3
agreement, or of the action of the Board, providing for such Business
Combination.
(d) "Change of Control Period" shall mean the period of
three years ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall hereinafter be referred to as the "Renewal Date"), unless previously
terminated by a majority vote of the Incumbent Board, the Change of Control
Period shall be automatically extended so as to terminate three years from such
Renewal Date.
(e) "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company 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
Company or its insurers and acceptable to the Executive or the Executive's legal
representative.
(f) "Effective Date of a Change in Control" shall mean
the first date during the Change of Control Period (as defined in Section l(c))
on which a Change of Control (as defined in Section 1(c) occurs. Anything in
this Agreement to the contrary notwithstanding, if a Change of Control occurs
and if the Executive's employment with the Company is terminated prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with any discussion or negotiation
contemplating or in anticipation of a potential Change of Control, then for all
purposes of this Agreement, the "Effective Date of a Change in Control" shall
mean the date immediately prior to the date of such termination of employment.
(g) "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.
(h) "Good Reason" shall mean:
(i) the assignment or proposed
assignment to the Executive of any duties inconsistent in any respect
with the Executive's position (including status, offices, titles and
reporting relationships), authority, duties or responsibilities as
contemplated by Section 2.1(a) of this Agreement, or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company or any Affiliated Company promptly
after receipt of notice thereof given by the Executive;
-3-
<PAGE> 4
(ii) any failure by the Company and its
Affiliated Companies to comply with any of the provisions of Section 3
of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company or such Affiliated Companies promptly after receipt of
notice thereof given by the Executive;
(iii) the Company or any Affiliated
Company requiring the Executive to be based at any office or location
other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company or any Affiliated
Company's business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the
Company or any Affiliated Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company or any
Affiliated Company to comply with and satisfy Section 11(c) of this
Agreement.
(i) "Person" shall mean any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
2. Employment of the Executive.
2.1 Duties and Status.
(a) The Company has engaged the Executive as President and Chief
Executive Officer for the period specified in Section 4 hereof (the "Employment
Period"). The Executive has accepted such employment on the terms and conditions
set forth in this Agreement. During the Employment Period, the Executive shall
exercise such authority, have such responsibilities, status, offices, titles and
reporting relationships and perform such duties as are commensurate with the
office of president and chief executive officer of a public real estate
investment trust and its Affiliated Companies and also at least commensurate in
all material respects with the most significant of those responsibilities,
status, offices, titles, reporting relationships and duties held, exercised and
assigned at any time during the 120-day period immediately preceding the
Effective Date of a Change in Control. The Executive's services shall be
performed at the Company's principal executive offices in Atlanta, Georgia or at
any office or location not more than 35 miles from such offices.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully
-4-
<PAGE> 5
and efficiently such responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (x) serve on corporate,
civic or charitable boards or committees, (y) engage in other business
activities that do not represent a conflict of interest with his duties to the
Company, or (z) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date of a Change in Control,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date of a Change in
Control shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
3. Compensation.
3.1 Annual Salary. The Company shall pay the Executive an
annual salary (the "Annual Base Salary") in periodic equal installments in
accordance with the normal payroll practices of the Company. The initial Annual
Base Salary as of the date of this Agreement is Three Hundred Six Thousand
Dollars ($306,000). During the Employment Period, the Annual Base Salary shall
be reviewed not later than 12 months after the last salary increase awarded to
the Executive prior to the Effective Date and thereafter shall be reviewed at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation of the Company and its Affiliated Companies to the
Executive under this Agreement.
3.2 Cash Bonuses. In addition to the above, the Executive
shall be paid such additional annual and/or other incentive bonuses (the
"Bonus"), if any, as may be determined by the Board of the Company, and such
Bonus may be in addition to any bonuses generally granted to the employees
and/or executives of the Company and the Affiliated Companies.
3.3 Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year period immediately preceding the Effective Date of a
Change in Control or if more favorable to the Executive, those provided
generally at any time after the Effective Date of a Change in Control to other
executives of the Company and its Affiliated Companies.
-5-
<PAGE> 6
3.4 Welfare Benefit Plans. During the Employment Period
(and after termination of employment, except where prohibited by law or the
applicable plan, or the generally applicable practices, policies and programs of
the Company and its Affiliated Companies and their respective successors and
assigns), the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under such
welfare benefit plans, practices, policies and programs (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other executives of the Company, its Affiliated
Companies and their respective successors and assigns, but in no event shall
such plans, practices, policies and programs provide the Executive and his
family, as applicable, with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs in
effect for the Executive and his family, as applicable, at any time during the
one year period immediately preceding the Effective Date of a Change in Control
or, if more favorable to the Executive and his family, as applicable, those
provided generally at any time after the Effective Date of a Change in Control
to other executives (and their families) of the Company or its successors. In
the event that the Executive's and his family's participation in any such plan
or program, or other benefit provided under the generally applicable practices,
policies and programs of the Company and its Affiliated Companies and their
respective successors and assigns are prohibited by law or such applicable plan,
practices, policies or programs, the Company and its Affiliated Companies and
respective successors and assigns shall provide the Executive and his family,
without further cost or expense to the Executive and his family members,
benefits similar to those which the Executive and his family would otherwise
have been entitled to receive under such plans, programs, practices and policies
as if the Executive's employment had not ceased.
3.5 General Benefits. In addition to the cash
compensation and other benefits provided for in this Section 3, the Company will
provide the Executive with additional benefits as follows:
(a) The Company will reimburse the Executive for
such reasonable expenses as the Executive may incur in the rendition of the
services contemplated hereby in accordance with the most favorable policies,
practices and procedures of the Company and its Affiliated Companies in effect
for the Executive, and otherwise if the Executive had prior authorization for
said expenditures.
(b) The Executive will be entitled to a vacation
in accordance with the Company's vacation schedule in effect at the time the
vacation is to be taken, which schedule will not be less favorable to the
Executive than the vacation schedule for other executive employees of the
Company. During such vacation, the Executive shall be entitled to receive his
regular compensation pursuant to and in accordance with this Agreement.
-6-
<PAGE> 7
(c) The Company shall provide the Executive with
an automobile. The automobile furnished to the Executive shall be similar to
automobiles provided to other executives of the Company. In addition, the
Company shall pay for the insurance, maintenance, repairs, replacement of parts,
servicing, gasoline and oil necessary for the upkeep of the automobile and any
other necessary and proper expenses in connection with the operation by the
Executive of the automobile. In the event the Company discontinues providing
automobiles to executive officers generally, the Executive shall be entitled to
receive an automobile allowance and shall have the right and an option to
purchase the automobile at its then book value on the Company's books and
records (if the automobile is owned by the Company) or to assume the lease for
said automobile (if the automobile is leased by the Company).
(d) During the Employment Period (but not after
termination of employment, except as required by this Agreement, law and/or the
applicable plan, practices, policies and programs of the Company and its
Affiliated Companies and their respective successors and assigns), the Executive
shall be entitled to fringe benefits in accordance with the most favorable of
such plans, practices, programs and policies in effect for the Executive at any
time during the one year period immediately preceding the Effective Date of a
Change in Control or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other executives of the Company and its
Affiliated Companies.
(e) The Executive agrees that the respective
benefits of the Company and its Affiliated Companies, provided by this Section
3.5 may be modified and changed by the Company and/or it Affiliated Companies to
the extent such changes apply generally to the executive officers of the Company
and its Affiliated Companies.
3.6 Other Compensation. In addition to, and without
limiting, the compensation and benefits provided for in subsections 3.1 through
3.5 of this Agreement, nothing herein is intended to or shall limit the
participation or receipt by the Executive of any other compensation or benefit,
including stock options, other stock and stock-based awards and other incentive
compensation and any plan, program, practice or policy, and the receipt of the
compensation and benefits specified in subsections 3.1 through 3.5 of this
Agreement shall not reduce any other compensation or benefits which the
Executive may be granted or to which the Executive may be entitled under the
terms and conditions of such plans, practices, programs and policies.
Section 4. Employment Period. The Employment Period shall
continue until the first anniversary hereof and, unless sooner terminated, shall
be automatically renewed for an additional year on each anniversary date of this
Agreement; provided, that prior to the Effective Date of a Change in Control,
either party may terminate the employment of the Executive at any time upon
thirty (30) days prior written notice to the other party hereto. Notwithstanding
the foregoing, or any notice to terminate employment given by the Company or the
Executive, this Agreement shall continue in full force and effect until all
payments and benefits required to be made or provided by the Company to the
Executive under this Agreement or otherwise have been paid or provided in full.
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<PAGE> 8
5. Termination.
5.1 Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Board determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the Executive written
notice in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after his receipt of such notice, the Executive shall not have
returned to full-time performance of the Executive's duties.
5.2 Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure
of the Executive to perform substantially the Executive's duties with
the Company and/or its Affiliated Companies (other than any such
failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the
Executive by the Board of the Company which specifically identifies the
manner in which the Board believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the
Executive in illegal conduct or gross misconduct which is materially
and demonstrably injurious to the Company.
For purposes of this Section 5.2, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
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5.3 Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Section 5.3,
any good faith determination of Good Reason made by the Executive shall be
conclusive. Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the period beginning on the
Effective Date of a Change in Control and ending 30 days following the first
anniversary of the Effective Date of a Change in Control shall be deemed to be a
termination for Good Reason for all purposes hereunder.
5.4 Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 11(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
5.5 Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company and/or any Affiliated
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company and/or any Affiliated Company notifies the Executive of such
termination, and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
5.6 Improper Termination; Disputes. In the event that the
Company terminates or seeks to terminate this Agreement or the employment of the
Executive hereunder and disputes its obligation to pay or fails or refuses to
pay or provide, when due to the Executive, any portion of the amounts or
benefits due to the Executive pursuant to this Agreement and the Executive
prevails (without regard to amount of any recovery), the Company shall pay or
reimburse to the Executive all costs incurred by him in such dispute or
collection effort, including reasonable attorneys' fees and expenses (whether or
not suit is filed) and costs of litigation. The Executive shall not be required
to mitigate the amount of any payment or benefit provided herein by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided herein be reduced by any compensation earned by the Executive an a
result of employment by
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<PAGE> 10
another employer or by retirement or disability benefits after the date of
termination of employment or otherwise.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company and/or any Affiliated Company shall terminate
the Executive's employment other than for Cause or Disability, or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the
Executive in a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts, or if elected by
the Executive, the following aggregate amounts shall be paid in cash to
the Executive in equal monthly installments over the two years
following termination of employment:
A. the sum of (1) the
Executive's Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x) the average of the
Bonuses paid or payable, including any bonus or portion thereof which
has been earned but deferred, for the two most recently completed
fiscal years during the Employment Period, if any (such amount being
referred to as the "Most Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365,
and (3) any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations");
B. the amount equal to the
sum of (x) 2.99 times the Executive's Annual Base Salary, and (y) 2.99
times the Most Recent Bonus; and
(ii) for two (2) years after the
Executive's Date of Termination, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or
policy, the Company and its Affiliated Companies, shall continue to
provide benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 3 of this Agreement if the Executive's employment had not
been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other executives of
the Company and its affiliated companies and their families, provided,
however, that if the Executive becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other
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<PAGE> 11
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until two years after the Date of
Termination and to have retired on the last day of such period;
(iii) to the extent not theretofore paid
or provided, the Company shall timely pay or provide to the Executive
any other amounts or benefits required to be paid or provided or which
the Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its Affiliated
Companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the Employment
Period, this Agreement shall terminate without further obligations to
the Executive's legal representatives under this Agreement, other than
for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable provided by the Company and Affiliated Companies to
the estates and beneficiaries of executives of the Company.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in
this Section 6(c) shall include, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other
benefits at least equal to the most favorable such benefits provided by
the Company and its Affiliated Companies to other executives and their
families, provided the provision of such benefits are permissible under
law, and the plans and programs of the Company and its Affiliated
Companies.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than
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<PAGE> 12
the obligation to pay to the Executive (x) his Annual Base Salary
through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each
case to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and entities and for which the Executive may qualify. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Company or any of its Affiliated Companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice,
program, contract or agreement, except as explicitly modified by this Agreement.
In the event that the Company terminates or seeks to terminate this Agreement or
the employment of the Executive hereunder and/or disputes its obligation to pay
or fails or refuses to pay or provide timely to the Executive any portion of the
amounts or benefits due to the Executive pursuant to this Agreement, and the
Executive prevails without regard to amount, the Company shall pay or reimburse
to the Executive all costs incurred by him in such dispute or collection effort,
including reasonable attorneys' fees and expenses (whether or not suit is filed)
and costs of litigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided herein by seeking other employment or
otherwise.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
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<PAGE> 13
9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the
extent necessary to avoid the imposition of the Excise Tax. The Executive may
select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 8, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that a Payment is due to be
made, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Payments hereunder will
have been unnecessarily limited by this Section 8 ("Underpayment"), consistent
with the calculations required to be made hereunder. The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
10. Confidential Information; Nonsolicitation. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement. Executive agrees that, for a
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<PAGE> 14
period of one (1) year after termination, he will not solicit or hire any
Company employees for any business that is in direct competition with any
Company property.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, legatees, and personal and legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, as a result of a Business Combination, assignment,
assumption or otherwise) to all or substantially all (e.g., 50% or more) of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to
principles of conflict of laws. The captions and headings of this Agreement are
for convenience of reference only and are not intended to and shall not effect
the interpretation of this Agreement. This Agreement may not be amended or
modified other than by a written agreement executed by the parties hereto or
their respective successors and/or personal or legal representatives. As used
herein, the plural shall include the singular and vice versa, any reference to
gender shall include the other genders, and the term "include" and any
derivation thereof shall be without limitation by virtue of enumeration thereof
or otherwise. This Agreement is not intended to and shall not affect any
compensation, benefits and options previously earned by, or delivered or owing
to, the Executive.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, or by
reliable overnight courier service addressed as follows:
If to the Executive:
Thomas H. McAuley
3095 Brandy Station
Atlanta, Georgia 30339
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<PAGE> 15
If to the Company:
IRT Property Company
200 Galleria Parkway
Suite 1400
Atlanta Georgia 30339
Attention: Chairman of the Compensation Committee
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason under this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board upon recommendation of its
Compensation Committee, the Company has caused this Agreement to be executed in
its name on its behalf by its undersigned Chairman of the Compensation Committee
and its undersigned officer thereunto duly authorized, all as of the day and
year first above written.
COMPANY:
IRT PROPERTY COMPANY
By: /S/ Bruce A. Morrice
-----------------------------------
Bruce A. Morrice, Chairman
of the Compensation Committee
By: /S/ Mary M. Thomas
-----------------------------------
Name: Mary M. Thomas
Title: Executive Vice President and
Chief Financial Officer
EXECUTIVE:
/S/ Thomas H. McAuley
----------------------------------------
Thomas H. McAuley
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<PAGE> 1
EXHIBIT 10.8
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
THIS AGREEMENT is by and between IRT Property Company, a Georgia
corporation (herein, together with any successor or assigns to its business
and/or assets, and any person or entity that assumes and agrees to perform this
Agreement by operation of law or otherwise, the "Company") and Mary M. Thomas
(the "Executive"), dated as of the 11th day of November, 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations and entities. Therefore, in order to accomplish these objectives,
the Board has authorized and caused the Company to enter into this Agreement.
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by each
party hereto, the parties, intending to be legally bound, agree as follows:
1. Certain Definitions.
(a) "Affiliated Companies" shall mean any corporation,
partnership, limited liability company, trust and/or other entity controlled by,
controlling or under common control with, the Company. Unless the context
clearly requires otherwise, as used herein, the Company shall include all its
Affiliated Companies.
(b) "Change of Control Period" shall mean the period of
three years ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall hereinafter be referred to as the "Renewal Date"), unless previously
terminated by a majority vote of the Incumbent Board, the Change of Control
Period shall be automatically extended so as to terminate three years from such
Renewal Date.
(c) "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive days as a
<PAGE> 2
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(d) "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section l(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with any discussion or negotiation contemplating
or in anticipation of a potential Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination of employment.
(e) "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.
(f) "Person" shall mean any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
2. Change of Control. For the purposes of this Agreement, "Change
of Control" shall mean:
(a) 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 Company common
stock ("Outstanding Company Common Stock") and (y) all then outstanding
securities of the Company 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 Company entitled to
vote generally in the election of directors (collectively with the Outstanding
Company Common Stock, the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), 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
Company Voting Securities, (ii) any acquisition by the Company, provided no
Change in Control has previously occurred or would result therefrom under
subsections 2(b) and 2(c) of this Agreement, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
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 (c) of
this Section 2; or
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(b) 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 Company's stockholders, 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
(c) 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 Company 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 Company Common Stock and Outstanding
Company 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 Company or all or substantially all (e.g., 50% or more) of the Company'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 Company Common Stock and
Outstanding Company 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 Company or
such corporation or entity resulting from such Business Combination)
beneficially 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.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ as provided in Section 4 hereof, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this
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Agreement, for the period commencing on the Effective Date and ending on the
first anniversary of such date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive shall serve and have the responsibilities and duties of Executive Vice
President and Chief Financial Officer of the Company and its Affiliated
Companies, and her position (including status, offices, titles and reporting
relationships, authority, duties and responsibilities shall be not less than
those as Executive Vice President and Chief Financial Officer of the Company and
its Affiliated Companies and at least commensurate in all material respects with
such offices with a public real estate investment trust and with the most
significant of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date, and (B) the Executive's
services shall be performed at the Company's principal executive offices in
Atlanta, Georgia or at any location where the Executive was employed immediately
preceding the Effective Date or any office or location not more than 35 miles
from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with his duties to the Company, and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its Affiliated Companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period,
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the Annual Base Salary shall be reviewed not later than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter shall be reviewed at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus, excluding any payments of cash in lieu of
pension (the "Annual Bonus"), in cash at least equal to the Executive's highest
annual bonus for the last two full fiscal years prior to the Effective Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) Welfare Benefit Plans. During the Employment
Period (and after termination of employment, except where prohibited by law or
the applicable plan, or the generally applicable practices, policies and
programs of the Company and its Affiliated Companies and their respective
successors and assigns), the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under such welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company, its Affiliated Companies and their respective successors and assigns,
but in no event shall such plans, practices, policies and programs provide the
Executive and her family, as applicable, with benefits which are less favorable,
in the aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive and her family, as applicable, at any time
during the one year period immediately preceding the Effective Date or, if
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more favorable to the Executive and her family, as applicable, those provided
generally at any time after the Effective Date to other peer executives (and
their families) of the Company and its Affiliated Companies or their successors.
In the event that the Executive's and her family's participation in any such
plan, program or other benefit provided under the generally applicable
practices, policies and programs of, the Company and its Affiliated Companies
and their respective successors and assigns are prohibited by law or such
applicable plan, practices, policies or programs, the Company and its Affiliated
Companies and their respective successors and assigns shall provide the
Executive and her family, without further cost or expense to the Executive and
her family members, benefits similar to those which the Executive and her family
would otherwise have been entitled to receive under such plans, programs,
practices and policies as if the Executive's employment had not ceased.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its Affiliated Companies
in effect for the Executive at any time during the one-year period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company, the Affiliated Companies, and their respective successors and
assigns.
(vi) Fringe Benefits. During the Employment
Period (but not after termination of employment, except as required by this
Agreement, law and/or the applicable plan, practices, policies and programs of
the Company and its Affiliated Companies and their respective successors and
assigns), the Executive shall be entitled to fringe benefits in accordance with
the most favorable of such plans, practices, programs and policies in effect for
the Executive at any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Board determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties.
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(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes hereof, "Cause"
shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company
and/or its Affiliated Companies (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner in
which the Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment or proposed assignment to the
Executive of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting relationships),
authority, duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company or any Affiliated Company promptly after
receipt of notice thereof given by the Executive;
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(ii) any failure by the Company and its
Affiliated Companies to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and such
Affiliated Companies promptly after receipt of notice thereof given by the
Executive;
(iii) the Company or any Affiliated Company
requiring the Executive to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive
to travel on Company or any Affiliated Company's business to a substantially
greater extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company or
any Affiliated Company of the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company or any Affiliated
Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of Good
Reason made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the period beginning on the Effective Date and ending 30 days following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes hereunder.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company and/or any Affiliated
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of
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Termination or any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
and/or any Affiliated Company notifies the Executive of such termination, and
(iii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company and/or any Affiliated Company shall
terminate the Executive's employment other than for Cause or Disability, or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts, or if elected by the Executive, the following aggregate
amounts shall be paid in cash to the Executive in equal monthly installments
over the two years following termination of employment:
A. the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the average of the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned but deferred, for
the two most recently completed fiscal years during the Employment Period, if
any (such amount being referred to as the "Most Recent Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations");
B. the amount equal to the sum of (x)
two (2) times the Executive's Annual Base Salary, and (y) two (2) times the Most
Recent Annual Bonus; and
(ii) for two (2) years after the Executive's Date
of Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and its Affiliated
Companies, shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes re-
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employed with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided under
such other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until two
years after the Date of Termination and to have retired on the last day of such
period;
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable provided by the Company and Affiliated
Companies to the estates and beneficiaries of peer executives of the Company.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable such benefits provided by the Company and its
Affiliated Companies to other peer executives and their families, provided the
provision of such benefits are permissible under law, and the plans and programs
of the Company and its Affiliated Companies.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive
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voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7. Non-exclusivity of Rights; Disputes; etc. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its Affiliated Companies and entities and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its Affiliated Companies and entities. Amounts or
benefits which are vested or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract or
agreement with, the Company or any of its Affiliated Companies at or subsequent
to the Date of Termination, shall be payable in accordance with such plan,
policy, practice, program, contract or agreement, except as explicitly modified
by this Agreement. In the event that the Company terminates or seeks to
terminate this Agreement or the employment of the Executive hereunder and/or
disputes its obligation to pay or fails or refuses to pay or provide timely to
the Executive any portion of the amounts or benefits due to the Executive
pursuant to this Agreement, and the Executive prevails without regard to amount,
the Company shall pay or reimburse to the Executive all costs incurred by her in
such dispute or collection effort, including reasonable attorneys' fees and
expenses (whether or not suit is filed) and costs of litigation.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. The Executive shall not be required to mitigate the amount
of any payment or benefit provided herein by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided herein be
reduced by any compensation earned by the Executive an a result of employment by
another employer or by retirement or disability benefits after the date of
termination of employment or otherwise. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
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9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the
extent necessary to avoid the imposition of the Excise Tax. The Executive may
select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that a Payment is due to be
made, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Payments hereunder will
have been unnecessarily limited by this Section 9 ("Underpayment"), consistent
with the calculations required to be made hereunder. The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its Affiliated
Companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Affiliated Companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. Executive
agrees that, for a period of one (1) year after termination, he will not solicit
or hire any Company employees for any business that is in direct competition
with any Company property.
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11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, and personal and legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company, the Affiliated Companies and their respective
successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, as a result of a Business Combination, assignment,
assumption, or otherwise) to all or substantially all (e.g. more than 50%) of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to conflicts
of laws principles. The captions and headings of this Agreement are for
convenience of reference only and are not intended to and shall not effect the
interpretation of this Agreement. This Agreement may not be amended or modified
other than by a written agreement executed by the parties hereto or their
respective successors and/or personal or legal representatives. As used herein,
the plural shall include the singular and vice versa, any reference to gender
shall include the other genders, and the term "include" and any derivation
thereof shall be without limitation by virtue of enumeration thereof or
otherwise.
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(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, or by
reliable overnight courier service addressed as follows:
If to the Executive:
Mary M. Thomas
3011 Greenwood Trail
Marietta, Georgia 30067
If to the Company:
IRT Property Company
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
Attention: Chairman of the Compensation Committee
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, subject however to subsections 1.(b) and 1.(c) hereof, prior to
the commencement of any discussion or negotiation that contemplate or are in
anticipation of a potential Change in Control, the Executive's employment and
this Agreement may be terminated by either the Executive or the Company at any
time prior to the Effective Date, in which case the
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Executive shall have no further rights under this Agreement. From and after the
Effective Date, this Agreement shall supersede any other agreement between the
parties with respect to the subject matter hereof.
(g) This Agreement constitutes the complete understanding
and agreement of the Executive and the Company with respect to the matters
covered hereby and supersedes all prior agreements with respect to such matters,
including the Agreement dated as of October 1, 1995 between the Executive and
the Company, which October 1, 1995 Agreement is hereby terminated.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
EXECUTIVE:
/S/ Mary M. Thomas
-----------------------------
Mary M. Thomas
COMPANY:
IRT PROPERTY COMPANY
By: /S/ Thomas H. McAuley
-------------------------
Thomas H. McAuley
President
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EXHIBIT 10.9
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
THIS AGREEMENT is by and between IRT Property Company, a Georgia
corporation (herein, together with any successor or assigns to its business
and/or assets, and any person or entity that assumes and agrees to perform this
Agreement by operation of law or otherwise, the "Company") and W. Benjamin
Jones, III (the "Executive"), dated as of the 11th day of November, 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations and entities. Therefore, in order to accomplish these objectives,
the Board has authorized and caused the Company to enter into this Agreement.
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by each
party hereto, the parties, intending to be legally bound, agree as follows:
1. Certain Definitions.
(a) "Affiliated Companies" shall mean any corporation,
partnership, limited liability company, trust and/or other entity controlled by,
controlling or under common control with, the Company. Unless the context
clearly requires otherwise, as used herein, the Company shall include all its
Affiliated Companies.
(b) "Change of Control Period" shall mean the period of
three years ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall hereinafter be referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date.
(c) "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company 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
<PAGE> 2
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative.
(d) "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section l(c)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with any discussion or negotiation contemplating
or in anticipation of a potential Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination of employment.
(e) "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.
(f) "Person" shall mean any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) 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 Company common
stock ("Outstanding Company Common Stock") and (y) all then outstanding
securities of the Company 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 Company entitled to
vote generally in the election of directors (collectively with the Outstanding
Company Common Stock, the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), 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
Company Voting Securities, (ii) any acquisition by the Company, provided no
Change in Control has previously occurred or would result therefrom under
subsections 2(b) and 2(c) of this Agreement, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
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 (c) of
this Section 2; or
(b) 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;
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provided, however, that any individual becoming a director subsequent to
November 1, 1997 whose election, or nomination for election by the Company's
stockholders, 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
(c) 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 Company 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 Company Common Stock and Outstanding
Company 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 Company or all or substantially all (e.g., 50% or more) of the Company'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 Company Common Stock and
Outstanding Company 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 Company or
such corporation or entity resulting from such Business Combination)
beneficially 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.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ as provided in Section 4 hereof, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing on the Effective Date
and ending on the first anniversary of such date (the "Employment Period").
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<PAGE> 4
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date, and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately preceding
the Effective Date or any office or location not more than 35 miles from such
location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with his duties to the Company, and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its Affiliated Companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed not later than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date and thereafter shall be
reviewed at least annually. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation to the Executive under this Agreement.
The Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased.
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<PAGE> 5
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus, excluding any payments of cash in lieu of
pension (the "Annual Bonus"), in cash at least equal to the Executive's highest
annual bonus for the last two full fiscal years prior to the Effective Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) Welfare Benefit Plans. During the Employment
Period (and after termination of employment, except where prohibited by law or
the applicable plan, or the generally applicable practices, policies and
programs of the Company and its Affiliated Companies and their respective
successors and assigns), the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under such welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company, its Affiliated Companies and their respective successors and assigns,
but in no event shall such plans, practices, policies and programs provide the
Executive and his or her family, as applicable, with benefits which are less
favorable, in the aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive and his or her family, as
applicable, at any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive and his or her family, as
applicable, those provided generally at any time after the Effective Date to
other peer executives (and their families) of the Company and its Affiliated
Companies or their successors. In the event that the Executive's and his or her
family's participation in any such plan, program or other benefit provided under
the generally applicable practices, policies and programs of the Company and its
Affiliated Companies and their respective successors and assigns are prohibited,
the Company and its Affiliated Companies and
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<PAGE> 6
their respective successors and assigns shall provide the Executive and his or
her family, without further cost or expense to the Executive and his or her
family members, benefits similar to those which the Executive and his or her
family would otherwise have been entitled to receive under such plans, programs,
practices and policies as if the Executive's employment had not ceased.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its Affiliated Companies
in effect for the Executive at any time during the one-year period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company, the Affiliated Companies, and their respective successors and
assigns.
(vi) Fringe Benefits. During the Employment
Period (but not after termination of employment, except as required by this
Agreement, law and/or the applicable plan, practices, policies and programs of
the Company and its Affiliated Companies and their respective successors and
assigns), the Executive shall be entitled to fringe benefits in accordance with
the most favorable of such plans, practices, programs and policies in effect for
the Executive at any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Board determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company
and/or its Affiliated Companies (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the
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<PAGE> 7
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment or proposed assignment to the
Executive of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting relationships),
authority, duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company or any Affiliated Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company and its
Affiliated Companies to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and such
Affiliated Companies promptly after receipt of notice thereof given by the
Executive;
(iii) the Company or any Affiliated Company
requiring the Executive to be based at any office or location other than as
provided in Section
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<PAGE> 8
4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company
or any Affiliated Company's business to a substantially greater extent than
required immediately prior to the Effective Date;
(iv) any purported termination by the Company or
any Affiliated Company of the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company or any Affiliated
Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of Good
Reason made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the period beginning on the Effective Date and ending 30 days following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes hereunder.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company and/or any Affiliated
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company and/or any Affiliated Company notifies the Executive of such
termination, and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
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<PAGE> 9
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company and/or any Affiliated Company shall
terminate the Executive's employment other than for Cause or Disability, or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts, or if elected by the Executive, the following aggregate
amounts shall be paid in cash to the Executive in equal monthly installments
over the one year following termination of employment:
A. the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the average of the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned but deferred, for
the two most recently completed fiscal years during the Employment Period, if
any (such amount being referred to as the "Most Recent Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations");
B. the amount equal to the sum of (x)
one (1) times the Executive's Annual Base Salary, and (y) one (1) times the Most
Recent Annual Bonus; and
(ii) for one year after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and its Affiliated
Companies, shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
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<PAGE> 10
remained employed until two years after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable provided by the Company and Affiliated
Companies to the estates and beneficiaries of peer executives of the Company.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable such benefits provided by the Company and its
Affiliated Companies to other peer executives and their families, provided the
provision of such benefits are permissible under law, and the plans and programs
of the Company and its Affiliated Companies.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
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7. Non-exclusivity of Rights; Disputes; etc. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its Affiliated Companies and entities and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its Affiliated Companies and entities. Amounts or
benefits which are vested or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract or
agreement with, the Company or any of its Affiliated Companies at or subsequent
to the Date of Termination, shall be payable in accordance with such plan,
policy, practice, program, contract or agreement, except as explicitly modified
by this Agreement. In the event that the Company terminates or seeks to
terminate this Agreement or the employment of the Executive hereunder and/or
disputes its obligation to pay or fails or refuses to pay or provide timely to
the Executive any portion of the amounts or benefits due to the Executive
pursuant to this Agreement and the Executive prevails without regard to amount,
the Company shall pay or reimburse to the Executive all costs incurred by him in
such dispute or collection effort, including reasonable attorneys' fees and
expenses (whether or not suit is filed) and costs of litigation.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. The Executive shall not be required to mitigate the amount
of any payment or benefit provided herein by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided herein be
reduced by any compensation earned by the Executive an a result of employment by
another employer or by retirement or disability benefits after the date of
termination of employment or otherwise. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be
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reduced to the extent necessary to avoid the imposition of the Excise Tax. The
Executive may select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that a Payment is due to be
made, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Payments hereunder will
have been unnecessarily limited by this Section 9 ("Underpayment"), consistent
with the calculations required to be made hereunder. The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its Affiliated
Companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Affiliated Companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. Executive
agrees that, for a period of one (1) year after termination, he will not solicit
or hire any Company employees for any business that is in direct competition
with any Company property.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit
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of and be enforceable by the Executive's heirs, legatees, and personal and legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company, the Affiliated Companies and their respective
successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, as a result of a Business Combination, or otherwise) to all
or substantially all (e.g. 50% or more) of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to conflicts
of laws principles. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives. As used
herein, the plural shall include the singular and vice versa, any reference to
gender shall include the other genders, and the term "include" and any
derivation thereof shall be without limitation by virtue of enumeration thereof
or otherwise.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, or by
reliable overnight courier service addressed as follows:
If to the Executive:
W. Benjamin Jones, III
794 Old Paper Mill Drive
Marietta, Georgia 30067
If to the Company:
IRT Property Company
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, subject however to subsections 1.(b) and 1.(c) hereof, prior to
the commencement of any discussion or negotiation that contemplate or are in
anticipation of a potential Change in Control, the Executive's employment and
this Agreement may be terminated by either the Executive or the Company at any
time prior to the Effective Date, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
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<PAGE> 15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
EXECUTIVE:
/S/ W. Benjamin Jones, III
-----------------------------
W. Benjamin Jones, III
COMPANY:
IRT PROPERTY COMPANY
By: /S/ Thomas H. McAuley
-------------------------
Thomas H. McAuley
President
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<PAGE> 1
EXHIBIT 10.10
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
THIS AGREEMENT is by and between IRT Property Company, a Georgia
corporation (herein, together with any successor or assigns to its business
and/or assets, and any person or entity that assumes and agrees to perform this
Agreement by operation of law or otherwise, the "Company") and Robert E. Mitzel
(the "Executive"), dated as of the 11th day of November, 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations and entities. Therefore, in order to accomplish these objectives,
the Board has authorized and caused the Company to enter into this Agreement.
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by each
party hereto, the parties, intending to be legally bound, agree as follows:
1. Certain Definitions.
(a) "Affiliated Companies" shall mean any corporation,
partnership, limited liability company, trust and/or other entity controlled by,
controlling or under common control with, the Company. Unless the context
clearly requires otherwise, as used herein, the Company shall include all its
Affiliated Companies.
(b) "Change of Control Period" shall mean the period of
three years ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall hereinafter be referred to as the "Renewal Date"), unless previously
terminated by a majority vote of the Incumbent Board, the Change of Control
Period shall be automatically extended so as to terminate three years from such
Renewal Date.
(c) "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company 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
<PAGE> 2
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative.
(d) "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section l(c)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with any discussion or negotiation contemplating
or in anticipation of a potential Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination of employment.
(e) "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.
(f) "Person" shall mean any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) 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 the then outstanding shares of Company
common stock ("Outstanding Company Common Stock") and (y) all then outstanding
voting securities of the Company entitled to vote generally in the election of
directors and/or all outstanding securities and/or rights to acquire (whether by
conversion, exchange or otherwise) voting securities of the Company entitled to
vote generally in the election of directors (collectively with the Outstanding
Company Common Stock, the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), 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
Company Voting Securities, (ii) any acquisition by the Company, provided no
Change in Control has previously occurred or would result therefrom under
subsections 2(b) and 2(c) of this Agreement, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
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 (c) of
this Section 2; or
(b) 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;
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<PAGE> 3
provided, however, that any individual becoming a director subsequent to
November 1, 1997 whose election, or nomination for election by the Company's
stockholders, 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
(c) 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 Company 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 Company Common Stock and Outstanding
Company 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 Company or all or substantially all (e.g., 50% or more) of the Company'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 Company Common Stock and
Outstanding Company 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 Company or
such corporation or entity resulting from such Business Combination)
beneficially 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.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ as provided in Section 4 hereof, and the Executive
hereby agrees to remain in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing on the Effective Date
and ending on the first anniversary of such date (the "Employment Period").
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<PAGE> 4
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date, and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately preceding
the Effective Date or any office or location not more than 35 miles from such
location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with his duties to the Company, and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its Affiliated Companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed not later than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date and thereafter shall be
reviewed at least annually. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation to the Executive under this Agreement.
The Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased.
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<PAGE> 5
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus, excluding any payments of cash in lieu of
pension (the "Annual Bonus"), in cash at least equal to the Executive's highest
annual bonus for the last two full fiscal years prior to the Effective Date
(annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the one-year period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) Welfare Benefit Plans. During the Employment
Period (and after termination of employment, except where prohibited by law or
the applicable plan, or the generally applicable practices, policies and
programs of the Company and its Affiliated Companies and their respective
successors and assigns), the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under such welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company, its Affiliated Companies and their respective successors and assigns,
but in no event shall such plans, practices, policies and programs provide the
Executive and his family, as applicable, with benefits which are less favorable,
in the aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive and his family, as applicable, at any time
during the one year period immediately preceding the Effective Date or, if more
favorable to the Executive and his family, as applicable, those provided
generally at any time after the Effective Date to other peer executives (and
their families) of the Company and its Affiliated Companies or their successors.
In the event that the Executive's and his family's participation in any such
plan, program or other benefit provided under the generally applicable
practices, policies and programs of the Company and its Affiliated Companies and
their respective successors and assigns are prohibited, the Company and its
Affiliated Companies and their respective successors and assigns
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<PAGE> 6
shall provide the Executive and his family, without further cost or expense to
the Executive and his family members, benefits similar to those which the
Executive and his family would otherwise have been entitled to receive under
such plans, programs, practices and policies as if the Executive's employment
had not ceased.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its Affiliated Companies
in effect for the Executive at any time during the one-year period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company, the Affiliated Companies, and their respective successors and
assigns.
(vi) Fringe Benefits. During the Employment
Period (but not after termination of employment, except as required by this
Agreement, law and/or the applicable plan, practices, policies and programs of
the Company and its Affiliated Companies and their respective successors and
assigns), the Executive shall be entitled to fringe benefits in accordance with
the most favorable of such plans, practices, programs and policies in effect for
the Executive at any time during the one year period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Board determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company
and/or its Affiliated Companies (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
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<PAGE> 7
manner in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment or proposed assignment to the
Executive of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting relationships),
authority, duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company or any Affiliated Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company and its
Affiliated Companies to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and such
Affiliated Companies promptly after receipt of notice thereof given by the
Executive;
(iii) the Company or any Affiliated Company
requiring the Executive to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive
to travel on Company or any
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<PAGE> 8
Affiliated Company's business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company or
any Affiliated Company of the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company or any Affiliated
Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of Good
Reason made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the period beginning on the Effective Date and ending 30 days following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes hereunder.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company and/or any Affiliated
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company and/or any Affiliated Company notifies the Executive of such
termination, and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
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<PAGE> 9
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company and/or any Affiliated Company shall
terminate the Executive's employment other than for Cause or Disability, or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts, or if elected by the Executive, the following aggregate
amounts shall be paid in cash to the Executive in equal monthly installments
over the one year following termination of employment:
A. the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the average of the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned but deferred, for
the two most recently completed fiscal years during the Employment Period, if
any (such amount being referred to as the "Most Recent Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations");
B. the amount equal to the sum of (x)
one (1) times the Executive's Annual Base Salary, and (y) one (1) times the Most
Recent Annual Bonus; and
(ii) for one year after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company and its Affiliated
Companies, shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
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<PAGE> 10
remained employed until two years after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable provided by the Company and Affiliated
Companies to the estates and beneficiaries of peer executives of the Company.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable such benefits provided by the Company and its
Affiliated Companies to other peer executives and their families, provided the
provision of such benefits are permissible under law, and the plans and programs
of the Company and its Affiliated Companies.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
-10-
<PAGE> 11
7. Non-exclusivity of Rights; Disputes; etc.. Nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its Affiliated Companies and entities and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its Affiliated Companies and entities. Amounts or
benefits which are vested or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of, or any contract or
agreement with, the Company or any of its Affiliated Companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice, program, contract or agreement, except as explicitly modified
by this Agreement. In the event that the Company terminates or seeks to
terminate this Agreement or the employment of the Executive hereunder and/or
disputes its obligation to pay or fails or refuses to pay or provide timely to
the Executive any portion of the amounts or benefits due to the Executive
pursuant to this Agreement and the Executive prevails without regard to amount,
the Company shall pay or reimburse to the Executive all costs incurred by him in
such dispute or collection effort, including reasonable attorneys' fees and
expenses (whether or not suit is filed) and costs of litigation.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. The Executive shall not be required to mitigate the amount
of any payment or benefit provided herein by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided herein be
reduced by any compensation earned by the Executive an a result of employment by
another employer or by retirement or disability benefits after the date of
termination of employment or otherwise. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be
-11-
<PAGE> 12
reduced to the extent necessary to avoid the imposition of the Excise Tax. The
Executive may select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that a Payment is due to be
made, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Payments hereunder will
have been unnecessarily limited by this Section 9 ("Underpayment"), consistent
with the calculations required to be made hereunder. The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its Affiliated
Companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Affiliated Companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. Executive
agrees that, for a period of one (1) year after termination, he will not solicit
or hire any Company employees for any business that is in direct competition
with any Company property. Executive agrees that, for a period of one (1) year
after termination, he will not solicit or hire any Company employees for any
business that is in direct competition with any Company property.
-12-
<PAGE> 13
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
heirs, legatees and personal and legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company, the Affiliated Companies and their respective
successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, as a result of a Business Combination, or otherwise) to all
or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to conflicts
of laws principles. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives. As used
herein, the plural shall include the singular and vice versa, any reference to
gender shall include the other genders, and the term "include" and any
derivation thereof shall be without limitation by virtue of enumeration thereof
or otherwise.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, or by
reliable overnight courier service addressed as follows:
If to the Executive:
Robert E. Mitzel
971 Forest Pond Circle
Marietta, Georgia 30068
If to the Company:
IRT Property Company
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
Attention: President
-13-
<PAGE> 14
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, subject however to subsections 1.(b) and 1.(c) hereof, prior to
the commencement of any discussion or negotiation that contemplate or are in
anticipation of a potential Change in Control, the Executive's employment and
this Agreement may be terminated by either the Executive or the Company at any
time prior to the Effective Date, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
EXECUTIVE:
/S/ Robert E. Mitzel
-----------------------------
Robert E. Mitzel
COMPANY:
IRT PROPERTY COMPANY
By: /S/ Thomas H. McAuley
-------------------------
Thomas H. McAuley
President
-15-
<PAGE> 1
Item 14
Exhibit 11 Computation of Per Share Earnings
<TABLE>
<CAPTION>
1997 1996 1995
BASIC:
<S> <C> <C> <C>
Net earnings $26,112,680 $16,817,704 $15,585,791
----------- ----------- -----------
Net earnings available to common shareholders $26,112,680 $16,817,704 $15,585,791
=========== =========== ===========
Average common shares outstanding 31,867,743 25,749,860 25,590,129
=========== =========== ===========
Basic earnings per share $ 0.82 $ 0.65 $ 0.61
=========== =========== ===========
DILUTED:
Net earnings $26,112,680 $16,817,704 $15,585,791
----------- ----------- -----------
Net earnings available to common shareholders $26,112,680 $16,817,704 $15,585,791
=========== =========== ===========
Dilutive stock options 53,469 5,081 5,001
Average commons shares outstanding 31,867,743 25,749,860 25,590,129
----------- ----------- -----------
Average diluted common shares outstanding 31,921,212 25,754,941 25,595,130
=========== =========== ===========
Diluted earnings per share $ 0.82 $ 0.65 $ 0.61
=========== =========== ===========
</TABLE>
<PAGE> 1
Item 14
Exhibit 21 Company Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of Year
Name Organization Incorporated
---- ------------ ------------
<S> <C> <C>
IRT Management Company Georgia 1990
VW Mall, Inc. Georgia 1994
IRT Alabama, Inc. Alabama 1997
IRT Capital Corporation Georgia 1996
</TABLE>
All are wholly-owned subsidiaries of the Company except IRT Capital
Corporation ("IRTCC"). The Company owns 96% of IRTCC's non-voting common stock
and 1% of its voting stock.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated January 30, 1998 and to all
references to our firm, included in this Form 10-k, into the Company's
previously filed Registration Statement File Nos. 33-65604, 33-66780, 33-59938,
33-64628, 33-64741, 33-63523 and 333-38847.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 3, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IRT PROPERTY COMPANY AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.<F1>
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 275
<SECURITIES> 0
<RECEIVABLES> 528
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,138
<PP&E> 541,865
<DEPRECIATION> 62,527
<TOTAL-ASSETS> 498,153
<CURRENT-LIABILITIES> 10,474
<BONDS> 226,947
0
0
<COMMON> 32,386
<OTHER-SE> 227,290
<TOTAL-LIABILITY-AND-EQUITY> 498,153
<SALES> 0
<TOTAL-REVENUES> 67,118
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 28,892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,010
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,113
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.82
<FN>
<F1>SFAS 128 HAD NO EFFECT ON EPS-PRIMARY FOR THE YEARS ENDED DECEMBER 31, 1996
AND 1995 OR THE INTERIM PERIODS IN 1997 AND 1996. EPS-DILUTED, CALCULATED IN
ACCORDANCE WITH SFAS 128, IS EQUAL TO EPS-PRIMARY AS REPORTED IN PREVIOUS
FINANCIAL DATA SCHEDULES. ACCORDINGLY, NO RESTATED FINANCIAL DATA SCHEDULES
ARE FILED HEREIN.
</FN>
</TABLE>
