<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 1-7859
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IRT PROPERTY COMPANY
--------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Georgia 58-1366611
- -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(770) 955-4406
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 15, 1999
- -------------------------- -----------------------------
Common Stock, $1 Par Value 33,234,206 Shares
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CERTAIN INFORMATION CONTAINED IN THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES ACT OF 1934. 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 HEREIN. THIS INFORMATION IS
FURTHER QUALIFIED BY THE SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING
STATEMENTS AND "RISK FACTORS" CONTAINED IN THE IRT PROPERTY COMPANY ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, WHICH ARE INCORPORATED
HEREIN BY REFERENCE.
2
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Item 1. Financial Statements.
IRT PROPERTY COMPANY
& SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate investments:
Rental properties $ 629,270 $ 622,117
Accumulated depreciation (82,720) (74,943)
--------- ---------
Net rental properties 546,550 547,174
Equity investment in subsidiary 6,708 0
Net investment in direct financing leases 4,456 4,572
Mortgage loans, net 93 1,097
--------- ---------
Net real estate investments 557,807 552,843
Cash and cash equivalents 1,385 344
Accrued interest receivable 32 59
Prepaid expenses and other assets 9,684 9,013
--------- ---------
Total Assets $ 568,908 $ 562,259
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 126,013 $ 82,215
7.3% convertible subordinated debentures, net 23,275 23,275
Senior notes, net 124,640 124,595
Indebtedness to banks 12,000 51,500
Accrued interest 2,759 3,612
Accrued expenses and other liabilities 11,985 7,204
--------- ---------
Total liabilities 300,672 292,401
Commitments and contingencies
Minority interest payable 7,181 7,085
Shareholders' Equity:
Common stock, $1 par value, authorized 150,000,000 shares; 33,234 33,252
33,234,206 shares issued and outstanding in 1999 and
33,251,763 shares in 1998
Preferred stock, $1 par value, authorized 10,000,000 shares; 0 0
none issued
Additional paid-in capital 272,737 272,975
Deferred compensation/stock loans (2,083) (2,386)
Cumulative distributions in excess of net earnings (42,833) (41,068)
--------- ---------
Total shareholders' equity 261,055 262,773
--------- ---------
Total Liabilities and Shareholders' Equity $ 568,908 $ 562,259
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
3
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IRT PROPERTY COMPANY
& SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Income from rental properties $ 20,533 $ 20,592 $ 62,649 $ 58,479
Interest income 116 98 206 328
Interest on direct financing leases 123 127 438 444
-------- -------- -------- --------
Total Revenues 20,772 20,817 63,293 59,251
Expenses:
Operating expenses of real estate investments 4,826 4,439 14,416 12,942
Interest expense 5,297 4,995 16,096 14,077
Depreciation 3,449 3,339 10,419 9,611
Amortization of debt costs 114 109 337 328
General & administrative 769 1,016 2,602 3,739
-------- -------- -------- --------
Total expenses 14,455 13,898 43,870 40,697
Equity in income of joint venture (2) 0 (2) 54
-------- -------- -------- --------
Income before minority interest, gain on
sales of properties and extraordinary item 6,315 6,919 19,421 18,608
Gain on sales of properties 0 469 2,483 1,213
Minority interest of unitholders in
operating partnership (147) (105) (571) (105)
-------- -------- -------- --------
Earnings before extraordinary item 6,168 7,283 21,333 19,716
Extraordinary item -
Loss on extinguishment of debt 0 (57) 0 (57)
-------- -------- -------- --------
Net earnings $ 6,168 $ 7,226 $ 21,333 $ 19,659
======== ======== ======== ========
Per Share: (Note 2 )
Earnings before extraordinary item - basic $ 0.19 $ 0.22 $ 0.64 $ 0.60
Extraordinary item - basic -- -- -- --
Net earnings - basic $ 0.19 $ 0.22 $ 0.64 $ 0.60
======== ======== ======== ========
Earnings before extraordinary item - diluted $ 0.19 $ 0.22 $ 0.64 $ 0.60
Extraordinary item - diluted -- -- -- --
Net earnings - diluted $ 0.19 $ 0.22 $ 0.64 $ 0.60
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic 33,148 33,132 33,147 32,876
======== ======== ======== ========
Diluted 33,967 33,141 33,149 32,907
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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IRT Property Company & Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
-------- --------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 21,333 $ 19,659
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 10,419 9,611
Gain on sale of properties (2,483) (1,213)
Minority interest of unitholders in partnership 29 105
Amortization of deferred compensation 77 83
Amortization of debt costs and discounts 380 372
Amortization of capitalized leasing income 116 97
Extraordinary loss - extinguishment of debt -- 57
Changes in assets and liabilities:
Decrease in accrued interest on debentures and senior notes (853) (996)
Increase in interest receivable, prepaid expenses
and other assets (377) (2,418)
Increase in accrued expenses and other liabilities 4,781 4,993
-------- --------
Net cash flows from operating activities 33,422 30,350
-------- --------
Cash flows used in investing activities:
Proceeds from sales of properties, net 12,411 5,783
Non-operating distributions from unconsolidated joint venture -- 356
Investment in affiliate (6,708) --
Additions to real estate investments, net (13,981) (37,676)
Collections of mortgage loans, net 1,004 23
-------- --------
Net cash flows used in investing activities (7,274) (31,514)
-------- --------
Cash flows (used in) from financing activities:
Cash dividends and distributions paid, net (23,098) (20,767)
Exercise of stock options 37 20
Repayment of mortgage notes payable (1,943) (9,880)
Payment of deferred financing costs (603) --
Proceeds from mortgage notes payable 40,000 4,401
(Decrease) increase in bank indebtedness (39,500) 28,600
Extraordinary item - loss on extinguishment of debt -- (57)
-------- --------
Net cash flows (used in) from financing activities (25,107) 2,317
-------- --------
Net increase in cash and cash equivalents 1,041 1,153
Cash and cash equivalents at beginning of period 344 275
-------- --------
Cash and cash equivalents at end of period $ 1,385 $ 1,428
======== ========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest $ 16,930 $ 14,721
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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IRT PROPERTY COMPANY
& SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
1. Unaudited Financial Statements
These consolidated financial statements for interim periods are
unaudited and should be read in conjunction with the Company's Annual Report to
Shareholders for the year ended December 31, 1998. 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 its majority-owned subsidiary IRT Partners LP. Intercompany
transactions and balances have been eliminated in the consolidation. The
Company's investments in IRT Capital Corporation ("IRTCC") and IRT Capital
Corporation II ("IRTCCII") have been accounted for under the equity method of
accounting. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to a fair presentation of the financial
statements as of September 30, 1999 and 1998 have been recorded. The results of
operations for the interim period are not necessarily indicative of the results
that may be expected for future interim periods or for the full year.
2. Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period consistent with
the guidelines of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share." The effects of the convertible debentures and certain stock options
and non-vested restricted stock, using the treasury stock method, have been
excluded from the calculation of dilutive earnings per share, as they are
anti-dilutive. The effect of the conversion of the Operating Partnership Units
held by the minority interest has been included in the calculation of earnings
per share for the quarter ended September 30, 1999. For all other periods
presented, the effects of the conversion are excluded as they are anti-dilutive.
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<TABLE>
<CAPTION>
Per Share
Income Shares Amount
------ ------ ----------
<S> <C> <C> <C>
(In thousands except per share data)
For the three months ended September 30, 1999
- ---------------------------------------------
Basic net earnings available to shareholders $ 6,168 33,148 $ 0.19
========
Options outstanding -- 3
Minority interest of unitholders in operating partnership 147 816
------- ------
Diluted net earnings available to shareholders $ 6,315 33,967 $ 0.19
======= ====== ========
For the three months ended September 30, 1998
- ---------------------------------------------
Basic net earnings available to shareholders $ 7,227 33,132 $ 0.22
========
Options outstanding -- 9
Minority interest of unitholders in operating partnership 104 --
------- ------
Diluted net earnings available to shareholders $ 7,331 33,141 $ 0.22
======= ====== ========
For the nine months ended September 30, 1999
- --------------------------------------------
Basic net earnings available to shareholders $21,333 33,147 $ 0.64
========
Options outstanding -- 2
Minority interest of unitholders in operating partnership -- --
------- ------
Diluted net earnings available to shareholders $21,333 33,149 $ 0.64
======= ====== ========
For the nine months ended September 30, 1998
- --------------------------------------------
Basic net earnings available to shareholders $19,659 32,876 $ 0.60
========
Options outstanding -- 31
Minority interest of unitholders in operating partnership 104 --
------- ------
Diluted net earnings available to shareholders $19,763 32,907 $ 0.60
======= ====== ========
</TABLE>
3. 7.3% Convertible Subordinated Debentures
During February and March 1998, $5,178,000 of the 7.3% convertible
subordinated debentures were converted into 460,263 shares of common stock at
$11.25 per share.
Based upon the $11.25 conversion price, 2,068,889 authorized but
unissued common shares have been reserved for possible issuance if the remaining
$23,275,000 of debentures outstanding on September 30, 1999 are converted.
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4. Rental Properties
Property Acquisitions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Year % Leased Total Cash Mortgage Principal
Acquired Property Name City, State Footage Built at Acquisition Cost Paid Assumed Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2/26/99 The Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $ 4,174 $5,742 Publix,
Blockbuster
3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602 0
------- ---------------------------
127,541 $15,518 $9,776 $5,742
======= ===========================
</TABLE>
Property Dispositions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Sales Cash Principal
Sold Property Name City, State Footage Price Proceeds Gain Tenants
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/01/99 Litchfield Landing Pawley's Island, SC 42,201 $ 3,190 $ 3,129 $1,191 Harris Teeter,
Eckerd
06/01/99 First Street Station Albemarle, NC 52,230 3,137 3,038 320 Harris Teeter,
Eckerd
06/01/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 Harris Teeter
06/01/99 University Center Greenville, NC 56,180 3,462 3,399 202 Harris Teeter,
Eckerd
Other 417 413 161
---------------------------------------------------
199,148 $12,777 $12,409 $2,483
===================================================
</TABLE>
5. Investment in Joint Venture
On May 24, 1999 IRT Capital Corporation II ("IRTCCII"), a taxable
subsidiary of the Company, was formed under the laws of Georgia. This taxable
subsidiary 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 IRTCCII. The remaining voting
common stock is held by the CEO and Chairman of the Company and an independent
director of the Company. The ownership of the common stock of IRTCCII entitles
the Company to substantially all of the economic benefits from the results of
operations of this subsidiary. IRTCCII is accounted for by the Company under the
equity method of accounting.
On June 1, 1999 the Company loaned IRTCCII $3.8 million to purchase 23
acres of undeveloped land in Miramar, Florida. On September 3, 1999, the Company
loaned IRTCCII $2.6 million to purchase a shopping center and two parcels of
undeveloped land covering 9.1 acres in Pasco County, Florida. The Company may
lend additional money to IRTCCII for the development of these properties.
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6. 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.
The Company's subsidiary, IRT Partners LP, cancelled a contract to
purchase a shopping center valued at $9,015,000 upon the completion of the due
diligence.
7. Subsequent Events
On October 4, 1999, the Company paid, at par, the remaining balance,
$3.3 million, of the mortgage on Pinhook Plaza. The property is currently
unencumbered.
On October 12, 1999, Jitney Jungle, one of the Company's anchor
tenants, filed for reorganization under Chapter 11 of the United States
Bankruptcy Code. At the time of filing, the Company leased ten stores to the
tenant covering 418,000 square feet. The rents from these leases accounted for
approximately 4.9% of the Company's gross revenues for the nine months ended
September 30, 1999. Two of the ten stores were closed at the time of filing and
one additional store has been closed subsequent to the filing. The leases on the
two previously closed stores have been rejected. Prior to the Jitney Jungle
bankruptcy, the Company was exploring opportunities to re-lease the two closed
stores. The timing, outcome and effects of the Jitney Jungle bankruptcy
proceeding on the Company are subject to the broad discretion of the bankruptcy
court and are uncertain.
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Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Material Changes in Financial Condition.
During the nine months ended September 30, 1999 the Company:
- - obtained a $40,000,000, 6.5% fixed rate, 25 year fully-amortizing loan
secured by first mortgages on eight properties, and
- - obtained cash proceeds of approximately $12,411,000 upon the sales of
properties and recognized a gain of approximately $2,483,000 for
financial reporting purposes.
During the nine months ended September 30, 1999, the Company utilized
funds of:
- - approximately $39,500,000 to pay down its unsecured revolving term
loan,
- - approximately $15,518,000 for the acquisition of two shopping center
investments, consisting of cash of approximately $9,776,000 and
mortgage debt of approximately $5,742,000 secured by one of the
centers,
- - approximately $6,400,000 for a loan to IRTCCII, consisting of
approximately $3,800,000 for the acquisition of 23 acres of undeveloped
land in Miramar, Florida, and approximately $2,600,000 for the
acquisition of a shopping center and 9.1 acres of undeveloped land in
Pasco County, Florida, and
- - $625,000 to repay at maturity a 9% purchase-money mortgage.
During the nine months ended September 30, 1998 the Company:
- - obtained cash proceeds of approximately $5,783,000 upon the sale of two
investments and the condemnation of a small strip of land,
- - obtained net cash proceeds of approximately $4,400,000 from the
financing of the Mableton Crossing shopping center, a 1998 acquisition,
and
- - borrowed $28,600,000 under its unsecured revolving term loan.
During the nine months ended September 30, 1998, the Company utilized
funds of:
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- - approximately $71,459,000 for the acquisition of eight shopping center
investments, consisting of cash of approximately $34,760,000, mortgage
debt of approximately $28,334,000 secured by five of the centers and
approximately $8,365,000 of operating partnership units,
- - $3,526,000 to prepay two mortgage notes payable bearing interest at
9.875%,
- - $2,175,000 to prepay a 10.25% mortgage,
- - $543,000 to prepay an 8.25% mortgage,
- - $2,224,000 to repay at maturity an 11% mortgage (discounted to 9.75%
for financial reporting purposes), and
- - $625,000 to make a scheduled principal payment under a 9%
purchase-money mortgage.
Additionally, in 1998, $5,178,000 of the Company's 7.3% convertible
subordinated debentures were converted into 460,263 shares of common stock at
$11.25 per share.
Material Changes in Results of Operations.
During the three months and nine months ended September 30, 1999,
rental income from the Company's portfolio of shopping center investments:
- increased approximately $416,000 and $1,160,000 respectively,
for the core portfolio,
- increased approximately $1,399,000 and $6,302,000
respectively, due to the acquisition of nine shopping centers
in 1998 and two in 1999,
- decreased approximately $509,000 and $833,000 respectively,
due to sales of two investments in 1998, five investments in
1999 and the foreclosure of the Spanish Quarter mortgage held
by the Company in 1998,
- decreased approximately $1,365,000 and $2,459,000
respectively, due to six centers under redevelopment, and
- included approximately $215,000 billed to the Jitney Jungle
stores for common area maintenance and tax reimbursements
for the third quarter of 1999.
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During the three months and nine months ended September 30, 1998,
rental income from the Company's portfolio of shopping center investments:
- decreased approximately $75,000 and increased approximately
$594,000 respectively, for the core portfolio,
- increased approximately $2,508,000 and $7,100,000
respectively, due to the acquisition of seventeen shopping
centers in 1998 and 1997,
- increased approximately $178,000 and $614,000 respectively,
due to the acquisition of an apartment investment, obtained by
the Company through foreclosure of the wrap-around mortgage
loan on the Spanish Quarter Apartments in February 1998 and
the shopping center acquired through foreclosure in August
1998,
- decreased approximately $378,000 and $1,076,000 respectively,
due to sales of three investments in 1998 and 1997, and
- the Company recognized approximately $2,092,000 of income upon
the termination of two anchor tenants' leases necessitated by
the redevelopment of two centers, one of which was acquired in
December 1997.
Percentage rentals received from shopping center investments, excluding
percentage rentals received from the two Wal-Mart investments classified as
direct financing leases, totaled approximately $189,000 and $118,000 during the
three months ended September 30, 1999 and 1998 respectively, and approximately
$931,000 and $717,000 during the nine months ended September 30, 1999 and 1998,
respectively. Percentage rental income is recorded upon collection based on the
tenants' lease years.
Interest income during the three months and nine months ended September
30, 1999, increased approximately $18,000 and decreased approximately $122,000,
respectively, due primarily to the foreclosure of the Walton Plaza mortgage loan
in the third quarter of 1998.
Interest income during the three months and nine months ended September
30, 1998:
- decreased approximately $234,000 and $668,000 primarily due to
the repayment of one purchase-money mortgage in the third
quarter 1997 and the foreclosure of the Spanish Quarter
Apartments mortgage loan and the Walton Plaza mortgage loan
during the first and third quarters of 1998, respectively, and
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- decreased approximately $3,000 and $53,000 respectively, due
to less interest being earned on short-term money market
investments compared to the same time periods in 1997.
IRTCC, which is accounted for by the Company under the equity method,
recognized $54,000 of income from a joint venture upon the sale during the first
quarter of 1998 of a 1.31 acre parcel of land held by the joint venture.
During the three months and nine months ended September 30, 1999
operating expenses related to the Company's portfolio of real estate
investments:
- increased approximately $307,000 and $353,000, respectively,
for the core portfolio,
- increased approximately $348,000 and $1,608,000 respectively,
due to the acquisition of nine shopping centers in 1998 and
two in 1999,
- decreased approximately $110,000 and $319,000 respectively,
due to the sale of the foreclosed Spanish Quarter Apartments
in 1998.
During the three months and nine months ended September 30, 1998
operating expenses related to the Company's portfolio of real estate
investments:
- decreased approximately $79,000 and increased approximately
$859,000 respectively, for the core portfolio,
- increased approximately $761,000 and $1,927,000 respectively,
due to the acquisition of seventeen shopping centers in 1998
and 1997,
- increased approximately $116,000 and $325,000 respectively,
due to the acquisition of the Spanish Quarter Apartments
obtained through the foreclosure of the Spanish Quarter
Apartments mortgage loan during the first quarter of 1998 and
the acquisition of the Walton Plaza shopping center obtained
through the foreclosure of the Walton Plaza mortgage loan
during the third quarter of 1998, and
- decreased by approximately $167,000 and $493,000 respectively,
due to three sales in 1998 and 1997.
During the three months and nine months ended September 30, 1999
interest expense on mortgages decreased approximately $29,000 and
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<PAGE> 14
$459,000, respectively, primarily due to five mortgages being repaid in 1998 and
one in 1999 and increased approximately $874,000 and $3,212,000 respectively,
due to:
- the assumption of a $2,232,000 mortgage bearing interest at
7.65% upon the acquisition of Town & Country shopping center
in January, 1998,
- the assumption of three mortgages aggregating approximately
$20,083,000 bearing interest at 9.1875% upon the acquisition
of Charlotte Square, Riverside Square and Tamarac Square in
August, 1998 (these mortgages were discounted to the then
current market rate of 8% for financial reporting purposes),
- the assumption of a $5,937,000 mortgage bearing interest at 8%
upon the acquisition of Treasure Coast shopping center in
August, 1998,
- the placement of a $4,500,000 mortgage, bearing interest at
6.85%, on Mableton Crossing in August, 1998 (Mableton was
acquired without debt in June, 1998),
- the assumption of a $5,742,000 mortgage bearing interest at 8%
upon the acquisition of Lago Mar shopping center in February,
1999, and
- the placement, in February 1999, of a 25 year fully-amortizing
$40,000,000 loan, secured by first mortgages on eight
properties, bearing fixed interest at 6.5%.
During the three months and nine months ended September 30, 1998
interest expense on mortgages increased approximately $136,000 and decreased
approximately $952,000, respectively, due to:
- the repayment of an aggregate of $43,933,000 of mortgage debt
bearing interest at an average rate of 8.44% during 1997 and
1998, and
- the assumption of an aggregate of $44,377,000 of mortgage debt
bearing interest at an average rate of 7.85% during 1998 and
1997.
Interest expense also decreased due to:
- the repurchase of $54,799,000 of 7.3% debentures in January
1997,
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- the conversion of $5,178,000 of 7.3% debentures during the
first quarter of 1998 and $1,653,000 during 1997, and
- the issuance in August 1997 of $75,000,000 of 7.25% senior
notes due August 2007.
Interest expense on bank indebtedness decreased approximately $601,000
and $688,000, respectively, for the three months and nine months ended September
30, 1999. The Company had average borrowings of approximately $7,373,000 and
$42,024,000 at effective interest rates of 6.55% and 6.96%, under its bank
credit facility during the three months ended September 30, 1999 and 1998,
respectively. The Company had average borrowings of approximately $19,960,000
and $31,724,000 at effective interest rates of 6.38% and 6.97%, under its
variable rate bank credit facility during the nine months ended September 30,
1999 and 1998, respectively. In addition, the Company incurred commitment fees
of approximately $149,000 and $128,000 in 1999 and 1998, respectively, based on
the aggregate unused portion of the commitment.
The net increase in depreciation expense in 1999 was primarily due to
the eleven shopping center investments acquired during 1998 and 1999, partially
offset by the six investments sold during 1998 and 1999.
The net decrease in general and administrative expense of approximately
$1,137,000 for the nine months ended September 30, 1999 was primarily due to:
- a reduction in incentive compensation expense of $363,000,
- capitalization of $430,000 of incremental compensation and
other personnel costs associated with leasing activity, and
- merger expenses of approximately $373,000, which were incurred
in 1998 and did not result in a merger.
Year 2000 readiness disclosure. The Company has assessed the possible
effects of the Year 2000 computer problem in connection with its technology
investments and operations. Management currently believes the Company has
limited exposure and expects the cost of addressing all Year 2000 issues to be
less than $30,000 in 1999 principally as part of the general upgrade of the
Company's voice mail and phone system. As part of its assessment, Company
management has evaluated Year 2000 compliance by those with which it does
business and to date has not discovered any Year 2000 problem with significant
counter parties that it believes are reasonably likely to have a material
adverse effect upon the Company. Due to the nature of Year 2000 issues, the
Company realizes that additional
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information may come to light at any time during the year and the Company
intends to continue to monitor significant counter parties in the future in the
event that circumstances change. Overall, however, even with Year 2000 related
failures at all major tenants, the Company believes that it can receive its rent
payments via alternative methods of payment. However, no assurance may be given
that potential Year 2000 problems at those companies with which the Company does
business will not occur, and if these occur, consequences to the Company will
not be material. Except for the voice mail and phone systems, which will be
replaced in November 1999, most of the Company's technology systems have already
been certified as Year 2000 compliant. The Company designates each of the
statements made by it herein as a Year 2000 Readiness Disclosure. Such
statements are made pursuant to the Year 2000 Information and Readiness
Disclosure Act.
Funds from Operations. The Company defines funds from operations,
consistent with the NAREIT definition, as net earnings on real estate
investments and extraordinary items plus depreciation and amortization of
capitalized leasing costs. Interest and amortization of issuance costs related
to convertible debentures are added back to funds from operations when assumed
conversion of the debentures is dilutive. Conversion of the debentures is
dilutive and therefore assumed for the three months and nine months ended
September 30, 1999 and 1998. 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.
16
<PAGE> 17
The following data is presented with respect to the calculation of funds
from operations under the NAREIT definition for the quarters ended September 30,
1999 and 1998 (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings $ 6,168 $ 7,226 $ 21,333 $ 19,659
Gain on sales 0 (469) (2,483) (1,213)
Depreciation (*) 3,434 3,299 10,309 9,571
Amortization of capitalized leasing fees (*) 134 78 343 209
Amortization of capitalized leasing income 34 32 116 97
Loss on extinguishment of debt 0 57 0 57
Nonrecurring merger expenses 0 0 0 373
------- -------- -------- --------
Funds From Operations 9,770 10,223 29,618 28,753
Interest on convertible debentures 424 425 1,274 1,321
Amortization of convertible debenture costs 25 25 75 78
Amounts attributable to minority interests 168 146 689 146
------- -------- -------- --------
Fully Diluted Funds From Operations $10,387 $ 10,819 $ 31,656 $ 30,298
======= ======== ======== ========
Per Share:
Fully Diluted Funds From Operations $ 0.29 $ 0.30 $ 0.88 $ 0.86
======= ======== ======== ========
Applicable weighted average shares 36,036 35,748 36,034 35,277
======= ======== ======== ========
</TABLE>
(*) Net of amounts attributable to minority interests
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 the quarters ended September 30, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1999 1998 1999 1998
------ ---- ------ ------
<S> <C> <C> <C> <C>
Tenant Improvements:
Shopping Centers $ 287 $209 $ 889 $ 781
Industrial 0 0 0 17
------ ---- ------ ------
Total Tenant Improvements 287 209 889 798
------ ---- ------ ------
Capital Expenditures:
Shopping Centers 1,691 335 3,228 1,428
Industrial 18 0 39 52
------ ---- ------ ------
Total Capital Expenditures 1,709 335 3,267 1,480
------ ---- ------ ------
Total Improvements $1,996 $544 $4,156 $2,278
====== ==== ====== ======
Leasing Fees Paid $ 375 $113 $ 880 $ 345
====== ==== ====== ======
Principal Amortization of Mortgage Notes Payable $ 511 $240 $1,318 $ 787
====== ==== ====== ======
</TABLE>
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<S> <C>
(4.5) Supplemental Indenture No. 2, dated as of November 1,
1999, among IRT Property Company, an issuer, IRT
Capital Corporation II, IRT Management Company, IRT
Alabama, Inc., and IRT Partners L.P., as guarantors,
and SunTurst Bank, Atlanta, as trustee (Registration
Statement No. 333-48571), incorporated by reference
to Exhibit No. 4.5 of the Company's report on Form
8-K dated November 12, 1999.
(4.7) Supplemental Indenture No. 4, dated as of November 1,
1999, among IRT Property Company, an issuer, IRT
Capital Corporation II, IRT Management Company, IRT
Alabama, Inc., and IRT Partners L.P., as guarantors,
and SunTurst Bank, Atlanta, as trustee (Registration
Statement No. 333-48571), incorporated by reference
to Exhibit No. 4.7 of the Company's report on Form
8-K dated November 12, 1999.
(10.12) $100,000,000 Credit Agreement dated as of November 1,
1999, among the Company, Wachovia Bank, N.A., First
Union National Bank, Wachovia Securities, Inc.,
AmSouth Bank, SouthTrust Bank, N.A., and SunTrust
Bank, Atlanta, incorporated by reference to Exhibit
No. 10.12 of the Company's report on Form 8-K dated
November 12, 1999.
(10.13) $5,000,000 Revolving Loan Credit Agreement dated as
of November 1, 1999, among the Company and Wachovia
Bank, N.A., incorporated by reference to Exhibit No.
10.13 of the Company's report on Form 8-K dated
November 12, 1999.
(10.30) Change in Control Agreement between the Company and
James G. Levy dated as of August 1, 1999.
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
(10.31) Change in Control Agreement between the Company and
Daniel F. Lovett dated August 1, 1999.
(21) Company Subsidiaries
(27) Financial Data Schedule (for S.E.C. use only)
(99) Unaudited Financial Statements of IRT Partners L.P.
for the three months ended September 30, 1999
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended September 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
IRT PROPERTY COMPANY
Date: November 15, 1999 /s/ Thomas H. McAuley
- ----------------------------- ---------------------------
Thomas H. McAuley
President & Chief Executive Officer
Date: November 15, 1999 /s/ James G. Levy
- ---------------------------- ---------------------------
James G. Levy
Senior Vice President &
Chief Accounting Officer
19
<PAGE> 1
EXHIBIT 10.30
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 James G. Levy
(the "Executive"), dated as of the 1st day of August, 1999.
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 permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
<PAGE> 2
(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 was at the request of a third party who has
taken steps reasonably calculated to effect a 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 July 1, 1999 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 July 1, 1999, 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 July 1, 1999 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
-2-
<PAGE> 3
(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").
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
-3-
<PAGE> 4
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 full 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 spend reasonable time not inconsistent with
his responsibilities to the Company 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 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.
(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
-4-
<PAGE> 5
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 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
-5-
<PAGE> 6
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 13(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 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,
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<PAGE> 7
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 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 13(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
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<PAGE> 8
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.
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
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<PAGE> 9
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
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
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<PAGE> 10
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; 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 13(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
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<PAGE> 11
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. No Contract of Employment. Nothing in this Agreement shall be
construed as a contract or guaranty of employment between the Executive and the
Company, or as a right of the Executive to continue to be employed by the
Company.
11. 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 11 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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<PAGE> 12
12. 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 (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.
13. 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:
James G. Levy
-------------------------
=========================
If to the Company:
IRT Property Company
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
Attention: President
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<PAGE> 13
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(d) hereof, prior to
a Change-in-Control, the Executive or the Company may terminate the Executive's
employment or this Agreement at any time prior to the Effective Date with or
without cause for any reason or for no reason at all, 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.
[Signatures on following page]
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<PAGE> 14
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:
By: /s/ James G. Levy
--------------------------------
James G. Levy
COMPANY:
IRT PROPERTY COMPANY
By: /s/ Thomas H. McAuley
--------------------------------
Thomas H. McAuley
President
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<PAGE> 1
EXHIBIT 10.31
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 Daniel F. Lovett
(the "Executive"), dated as of the 1st. day of August, 1999.
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 permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
<PAGE> 2
(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 was at the request of a third party who has
taken steps reasonably calculated to effect a 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 July 1, 1999 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 July 1, 1999, 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 July 1, 1999 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
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<PAGE> 3
(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").
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
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<PAGE> 4
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 full 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 spend reasonable time not inconsistent with
his responsibilities to the Company 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 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.
(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
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<PAGE> 5
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 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
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<PAGE> 6
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 13(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 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,
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<PAGE> 7
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 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 13(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
- 7 -
<PAGE> 8
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.
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
- 8 -
<PAGE> 9
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
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
- 9 -
<PAGE> 10
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; 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 13(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
- 10 -
<PAGE> 11
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. No Contract of Employment. Nothing in this Agreement shall be
construed as a contract or guaranty of employment between the Executive and the
Company, or as a right of the Executive to continue to be employed by the
Company.
11. 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 11 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 -
<PAGE> 12
12. 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 (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.
13. 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:
Daniel F. Lovett
If to the Company:
IRT Property Company
200 Galleria Parkway, Suite 1400
Atlanta, Georgia 30339
Attention: President
- 12 -
<PAGE> 13
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(d) hereof, prior to a
Change-in-Control, the Executive or the Company may terminate the Executive's
employment or this Agreement at any time prior to the Effective Date with or
without cause for any reason or for no reason at all, 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.
[Signatures on following page]
- 13 -
<PAGE> 14
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:
By: /s/ Daniel F. Lovett
----------------------------------
Daniel F. Lovett
COMPANY:
IRT PROPERTY COMPANY
By: /s/ Thomas H. McAuley
----------------------------------
Thomas H. McAuley
President
- 14 -
<PAGE> 1
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 Capital Corporation Georgia 1996
IRT Alabama, Inc. Alabama 1997
IRT Partners L.P. Georgia 1998
IRT Capital Corporation II Georgia 1999
</TABLE>
All are wholly-owned subsidiaries of the Company except IRT Capital
Corporation ("IRTCC"), IRT Capital Corporation II ("IRTCCII") and IRT Partners
L.P. ("LP"). The Company owns 96% of IRTCC's and IRTCCII's non-voting common
stock and 1% of its voting stock. The Company and IRT Management Company,
combined, own approximately 93.2% of IRT Partners L.P.
20
<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 NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,385
<SECURITIES> 0
<RECEIVABLES> 32
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,684
<PP&E> 629,270
<DEPRECIATION> (82,720)
<TOTAL-ASSETS> 568,908
<CURRENT-LIABILITIES> 14,744
<BONDS> 285,928
0
0
<COMMON> 33,234
<OTHER-SE> 227,821
<TOTAL-LIABILITY-AND-EQUITY> 568,908
<SALES> 0
<TOTAL-REVENUES> 63,293
<CGS> 14,416
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,433
<INCOME-PRETAX> 21,333
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,333
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.64
</TABLE>
<PAGE> 1
EXHIBIT 99
Unaudited Financial Statements of IRT Partners L.P. for the three and nine
months ended September 30, 1999
IRT PARTNERS L.P.
BALANCE SHEET
(In thousands except unit data )
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Rental properties $ 146,684 $ 139,936
Accumulated depreciation (19,692) (19,099)
--------- ---------
Net rental properties 126,992 120,837
Cash and cash equivalents 599 1,103
Advances to affiliate, net 10,091 0
Prepaid expenses and other assets 1,982 1,269
--------- ---------
Total Assets $ 139,664 $ 123,209
========= =========
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable, net $ 31,320 $ 25,963
Advances to affiliate, net 0 33
Accrued expenses and other liabilities 3,169 1,660
--------- ---------
Total liabilities 34,489 27,656
Limited partners' capital interest (779,385 OP Units at September 30, 7,015 7,794
1999 and December 31, 1998) at redemption value
Commitments and contingencies (Note 4)
Partners' Capital
General partner (114,249 OP Units at September 30, 1999 and
103,982 OP Units at December 31, 1998) 1,048 955
Limited partner (10,531,247 OP Units at September 30, 1999 and
9,514,844 OP Units at December 31, 1998) 97,112 86,804
--------- ---------
Total Partners' Capital 98,160 87,759
--------- ---------
Total Liabilities and Partners' Capital $ 139,664 $ 123,209
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
21
<PAGE> 2
IRT PARTNERS L.P.
STATEMENTS OF EARNINGS
For the Three and Nine Months Ended September 30, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1999 1999
------------- -------------
<S> <C> <C>
Revenues:
Income from rental properties $4,783 $14,788
Interest income from affiliate 120 192
------ -------
Total Revenues 4,903 14,980
Expenses:
Operating expenses of real estate investments 1,208 3,615
Interest expense 620 1,800
Depreciation 826 2,524
General & administrative 0 3
------ -------
Total expenses 2,654 7,942
------ -------
Income before gain on sales of properties 2,249 7,038
Gain on sales of properties 0 1,130
------ -------
Net earnings $2,249 $ 8,168
====== =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
22
<PAGE> 3
IRT Partners L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net earnings $ 8,168
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 2,524
Gain on sale of properties (1,131)
Changes in assets and liabilities:
Increase in prepaid expenses and other assets (713)
Increase in accrued expenses and other liabilities 1,509
--------
Net cash flows from operating activities 10,357
--------
Cash flows used in investing activities:
Proceeds from sales of properties, net 8,867
Additions to real estate investments, net (16,415)
--------
Net cash flows used in investing activities (7,548)
--------
Cash flows used in financing activities:
Cash distributions paid, net (7,805)
Net advances from affiliate (10,124)
Principal amortization of mortgage notes payable (385)
Proceeds from mortgage notes payable 5,742
Issuance of units for cash 9,259
--------
Net cash flows used in financing activities (3,313)
--------
Net decrease in cash and cash equivalents (504)
Cash and cash equivalents at beginning of period 1,103
--------
Cash and cash equivalents at end of period $ 599
========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest $ 1,767
========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
23
<PAGE> 4
IRT PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
1. Unaudited Financial Statements
These financial statements for interim periods are unaudited.
In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to a fair presentation of the
financial statements as of September 30, 1999 have been recorded. The
results of operations for the interim periods are not necessarily
indicative of the results that may be expected for future interim
periods or for a full year.
2. Organization and Nature of Operations
IRT Partners L.P. ("LP"), a Georgia limited partnership formed
July 15, 1998, is the entity through which IRT Property Company (the
"Company"), a self-administered and self-managed real estate investment
trust, conducts a portion of its business and owns (either directly or
through subsidiaries) a portion of its assets. LP was formed by the
Company in order to enhance acquisition opportunities by offering
potential sellers of properties the ability to engage in tax-deferred
sales in exchange for Operating Partnership Units ("OP Units") of LP
which are redeemable for shares of common stock of the Company. The
Company serves as general partner of LP and, on August 1, 1998,
contributed 20 of its shopping centers and related assets and cash to
LP in exchange for OP Units.
As a result of acquisitions and dispositions, as of September
30, 1999 LP owned 24 neighborhood and community shopping centers
located in Florida, Georgia, Tennessee and North Carolina. The Company
and IRT Management Company, one on the Company's wholly-owned
subsidiaries, own approximately 93.2% of LP as of September 30, 1999.
The shopping centers are anchored by necessity-oriented retailers such
as supermarkets, drug stores and/or discount variety stores.
LP currently has several unaffiliated limited partners
resulting from the acquisition of three Florida properties in August
1998. The unaffiliated limited partners have the option to require LP
to redeem their OP Units at any time, in which event LP has the option
to purchase the OP Units for cash or convert them into one share of the
Company's common stock for each OP Unit.
24
<PAGE> 5
3. Rental Properties
Property Acquisitions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Year % Leased Total Cash Mortgage Principal
Acquired Property Name City, State Footage Built at Acquisition Cost Paid Assumed Tenants
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2/26/99 The Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $4,174 $5,742 Publix,
Blockbuster
3/15/99 Williamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602 0
------- -------------------------
127,541 $15,518 $9,776 $5,742
======= =========================
</TABLE>
Property Dispositions
(in thousands, except square footage)
<TABLE>
<CAPTION>
Date Square Sales Cash Principal
Sold Property Name City, State Footage Price Proceeds Gain Tenants
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/01/99 First Street Station Albemarle, NC 52,230 $3,137 $3,038 $ 320 Harris Teeter,
Eckerd
06/01/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609 Harris Teeter
06/01/99 University Center Greenville, NC 56,180 3,462 3,399 202 Harris Teeter,
---------------------------------------------- Eckerd
156,947 $9,170 $8,867 $1,131
==============================================
</TABLE>
4. Commitments and Contingencies
LP has guaranteed the bank indebtedness and senior indebtedness of the
Company.
LP cancelled a contract to purchase a shopping center valued at
$9,015,000 upon the completion of the due diligence.
25
