EXHIBIT 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
OF
IRT PROPERTY COMPANY
WITH AND INTO
EQUITY ONE, INC.
OCTOBER 28, 2002
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.1 Effective Time of the Merger.......................................2
SECTION 1.2 Closing............................................................2
SECTION 1.3 Effects of the Merger..............................................2
SECTION 1.4 Organizational Instruments.........................................3
SECTION 1.5 Directors..........................................................3
SECTION 1.6 Officers...........................................................3
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK; CONVERSION AND
EXCHANGE OF CAPITAL STOCK
SECTION 2.1 Effect on Capital Stock............................................3
SECTION 2.2 Election Procedure.................................................4
SECTION 2.3 Rights As Shareholders; Stock Transfers............................6
SECTION 2.4 Fractional Shares..................................................6
SECTION 2.5 Exchange Procedures................................................6
SECTION 2.6 Final Dividends....................................................8
SECTION 2.7 Adjustment of Exchange Ratio.......................................9
SECTION 2.8 Stock Options......................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of IRT.............................10
SECTION 3.2 Representations and Warranties of the Company.....................22
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Covenants of the Company and IRT..................................31
SECTION 4.2 Affiliates........................................................37
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Joint Proxy Statement.............37
SECTION 5.2 Access to Information.............................................40
SECTION 5.3 Consents and Approvals............................................41
(i)
Page
----
SECTION 5.4 Validity of Shares................................................41
SECTION 5.5 Employee Benefit Plans and Employment Matters.....................41
SECTION 5.6 Expenses..........................................................42
SECTION 5.7 Indemnification; Directors' and Officers' Insurance...............42
SECTION 5.8 Additional Agreements; Reasonable Efforts.........................45
SECTION 5.9 Conveyance Taxes..................................................45
SECTION 5.10 Public Announcements..............................................45
SECTION 5.11 Notification of Certain Matters...................................45
SECTION 5.12 New York Stock Exchange Listing...................................46
SECTION 5.13 Declaration of Dividends and Distributions........................46
SECTION 5.14 Assumption of Employment Agreements...............................46
SECTION 5.15 Tax Treatment.....................................................46
SECTION 5.16 Election of New Director..........................................47
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation To Effect The Merger........47
SECTION 6.2 Conditions of Obligations of IRT..................................48
SECTION 6.3 Conditions of Obligations of the Company..........................49
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION 7.1 Termination.......................................................51
SECTION 7.2 Effect of Termination.............................................52
SECTION 7.3 Amendment.........................................................54
SECTION 7.4 Extension; Waiver.................................................55
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations, Warranties and Agreements.........55
SECTION 8.2 Notices...........................................................55
SECTION 8.3 Interpretation....................................................56
SECTION 8.4 Counterparts......................................................56
SECTION 8.5 Entire Agreement; No Third Party Beneficiaries....................56
SECTION 8.6 Governing Law.....................................................56
SECTION 8.7 Waiver of Jury Trials.............................................56
SECTION 8.8 No Remedy in Certain Circumstances................................57
SECTION 8.9 Assignment........................................................57
SECTION 8.10 Gender and Number Classification..................................57
SECTION 8.11 Knowledge.........................................................57
SECTION 8.12 Enforcement.......................................................57
SECTION 8.13 Construction......................................................57
(ii)
SCHEDULES AND EXHIBITS
IRT DISCLOSURE MEMORANDUM
Schedule 2.8 IRT Options and IRT Restrictive Stock
Schedule 3.1(a)(ii) IRT Subsidiaries and Ownership in Other Persons
Schedule 3.1(a)(iii) IRT Minority Ownership; Liens and Restrictions Agreements
Schedule 3.1(b) IRT Redemption Obligations
Schedule 3.1(c) IRT Breaches of Agreements, Violations and Obligations
Schedule 3.1(d) IRT Undisclosed Liabilities
Schedule 3.1(f) IRT Compliance with Laws
Schedule 3.1(g) IRT Litigation
Schedule 3.1(h) IRT Tax Matters
Schedule 3.1(i) IRT Properties, Developments and Capital Expenditures
Schedule 3.1(j) IRT Plans
Schedule 3.1(k) IRT Payments to Employees, Officers and Directors
Schedule 3.1(l) IRT Absence of Certain Changes or Events
Schedule 3.1(p) IRT Environmental Matters
Schedule 3.1(q) IRT Material Contracts and Defaults
Schedule 4.1(d) IRT Incurrence of Indebtedness
Schedule 4.1(g) IRT Pending Acquisitions and Sales
Schedule 5.14 IRT Assumption of Agreements
COMPANY DISCLOSURE MEMORANDUM
Schedule 3.2(a)(ii) Company Ownership in Other Persons
Schedule 3.2(a)(iii) Company Minority Ownership; Liens and Restrictive
Agreements
Schedule 3.2(b) Company Obligation to Purchase, Redeem or Acquire
Capital Stock
Schedule 3.2(c) Company Breaches of Agreements, Violations and Obligations
Schedule 3.2(d) Company Undisclosed Liabilities
Schedule 3.2(g) Company Litigation
Schedule 3.2(h) Company Tax Matters
Schedule 3.2(i) Company Properties, Developments and Capital Expenditures
Schedule 3.2(j) Company Plans
Schedule 3.2(l) Company Absence of Certain Changes or Events
Schedule 3.2(p) Company Material Contracts and Defaults
Schedule 3.2(q) Company Compliance with Company Plans
Schedule 4.1(d) Company Incurrence of Indebtedness
Schedule 4.1(g) Company Pending Acquisitions and Sales
Exhibit A Form of Claim Letter
Exhibit B 145 Affiliate Letter
(iii)
INDEX OF DEFINED TERMS
30-Day Average Trading Price.......................39
3-Day Average Trading Price........................39
Acquisition Proposal...............................33
Acquisition Proposal Agreement.....................53
Action.............................................42
Aggregate Cash Amount...............................6
Aggregate Consideration.............................6
Agreement...........................................1
Articles of Incorporation...........................3
Articles of Merger..................................2
Assumed Option......................................9
Base Amount........................................53
Break-Up Expenses..................................54
Break-Up Fee.......................................53
Bylaws..............................................3
Cash Consideration..................................4
Cash Election.......................................4
Cash Election Number................................4
Cash Election Shares................................4
Cash Fraction.......................................4
CERCLA.............................................20
Closing.............................................2
Closing Date........................................2
Code................................................1
Company.............................................1
Company Board......................................24
Company Closing Price...............................6
Company Common Stock................................3
Company Insiders...................................42
Company Material Adverse Effect....................22
Company OPUs.......................................23
Company Plan.......................................31
Company Properties.................................28
Company SEC Documents..............................24
Company Stockholder Approvals......................40
Company Stockholders' Meeting......................40
Confidentiality Agreement..........................40
Corresponding Final Dividend........................9
Counter Proposal...................................35
Effective Time......................................2
Election Deadline...................................5
Elections...........................................4
Environmental Law..................................20
Environmental Permits..............................21
Equity Right.......................................12
ERISA..............................................18
Exchange Act.......................................13
Exchange Agent......................................5
Exchange Fund.......................................6
Exchange Ratio......................................4
Final Company Dividend..............................8
Form of Election....................................4
Form S-4...........................................38
Fractional Shares...................................4
GAAP...............................................13
GBCC................................................2
Governmental Entity................................13
Hazardous Materials................................21
Holder Representative...............................5
Indemnified Parties................................42
Indemnifying Parties...............................42
Investment Company Act.............................22
IRT.................................................1
IRT Board..........................................13
IRT Common Stock....................................3
IRT Development Properties.....................18, 29
IRT Disclosure Memorandum......................11, 23
IRT Future Development Properties..............18, 29
IRT Material Adverse Effect........................10
IRT Option..........................................9
IRT OPUs...........................................12
IRT Partners.......................................11
IRT Partners Agreement.............................12
IRT Permits....................................14, 26
IRT Plans..........................................18
IRT Preferred Stock................................11
IRT Properties.....................................17
IRT Rights Agreement................................3
IRT SEC Documents..................................13
IRT Shareholders' Meeting..........................39
Joint Proxy Statement..............................38
knowledge..........................................57
Liabilities.........................................2
Lien...............................................11
LLC Interests......................................10
Mailing Date........................................5
Merger..............................................1
Merger Consideration................................4
MGCL................................................2
Mixed Consideration.................................4
(iv)
Mixed Election......................................4
NAREIT.............................................10
New Certificates....................................6
No Election Shares..................................5
Non-Employee Directors.............................42
North Port.........................................23
North Port Agreement...............................23
Old Certificates....................................5
Other Investment Interests.........................11
Partnership Interests..............................10
Payor..............................................54
Person..............................................4
Preferred Stock....................................23
Private Placement..................................40
Proceeding.........................................15
Property Restrictions..............................17
Qualifying Income..................................54
Recipient..........................................54
REIT Income Requirements...........................54
REITs..............................................10
Representative.....................................34
Restrictive Agreements.............................11
Rights..............................................3
Rule 145 Affiliates................................37
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.................................13
SDAT................................................2
SEC................................................13
Section 16 Information.............................42
Securities Act.....................................13
Stock Consideration.................................4
Stock Election......................................4
Subsidiary..........................................4
Surviving Corporation...............................2
Takeover Laws......................................22
Tax Adjustment......................................6
Transfer...........................................33
Trust Indenture Act................................13
Violation..........................................12
Withdrawal Date....................................39
(ii)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated October 28, 2002 (this
"Agreement"), by and between IRT PROPERTY COMPANY, a Georgia corporation
("IRT"), and EQUITY ONE, INC., a Maryland corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of IRT and the Company
have determined that it is in the best interests of their respective
shareholders or stockholders for the Company to acquire IRT by means of the
merger of IRT with and into the Company, upon the terms and subject to the
conditions set forth herein (the "Merger");
WHEREAS, the respective boards of directors of IRT and the Company
have approved the Merger and this Agreement and all of the transactions
contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a purchase of IRT by the Company;
WHEREAS, concurrently with the execution of this Agreement certain
stockholders of the Company have executed a Voting Agreement, dated as of the
date of this Agreement, whereby they agree, among other things, to vote the
shares of Company Common Stock and IRT Common Stock beneficially owned by them
in favor of the Company Stockholder Approvals at the Company Stockholders'
Meeting and in favor of the IRT Shareholder Approval at the IRT Shareholders'
Meeting, as applicable;
WHEREAS, concurrently with the execution of this Agreement certain
shareholders of IRT have executed a Voting Agreement, dated as of the date of
this Agreement, whereby they agree, among other things, to vote the shares of
Company Common Stock and IRT Common Stock beneficially owned by them in favor
of the Company Stockholder Approvals at the Company Stockholders' Meeting and
in favor of the IRT Shareholder Approval at the IRT Shareholders' Meeting, as
applicable; and
WHEREAS, IRT and the Company desire to make certain representations,
warranties and agreements in respect of the Merger and also prescribe various
conditions thereto.
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties and agreements herein contained, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 EFFECTIVE TIME OF THE MERGER. Upon the terms and
subject to the conditions of this Agreement, articles of merger (the "Articles
of Merger") shall be duly prepared, executed and acknowledged by the Surviving
Corporation (as defined in Section 1.3(a)) and delivered to the State
Department of Assessments and Taxation of Maryland (the "SDAT") for filing as
provided in Section 3-107 of the Maryland General Corporation Law, as amended
(the "MGCL"), and the Secretary of State of the State of Georgia for filing as
provided in Section 14-2-1105 of the Georgia Business Corporation Code, as
amended (the "GBCC"), as soon as practicable on or after the Closing Date (as
defined in Section 1.2). The Merger shall become effective upon the filing and
acceptance for record of the Articles of Merger with the SDAT and the Georgia
Secretary of State, or at such other date and time subsequent thereto as
expressly provided in the Articles of Merger (the "Effective Time").
SECTION 1.2 CLOSING. The closing of the Merger (the "Closing")
shall occur at 10:00 a.m., Eastern time, no later than the third business day
next following the waiver or satisfaction, as applicable, of the last to occur
of the conditions set forth in Article VI (the "Closing Date"), at such date,
time and place as is mutually agreed to by the parties hereto.
SECTION 1.3 EFFECTS OF THE MERGER.
(a) At the Effective Time, IRT shall be merged with and
into the Company, and thereupon, the separate corporate existence of IRT shall
cease and the Company shall survive and continue to exist as a Maryland
corporation (the Company, as the surviving corporation in the Merger, sometimes
being referred to herein as the "Surviving Corporation").
(b) At the Effective Time, the effect of the Merger
shall be as provided in the MGCL and GBCC; to wit, without limiting the
generality of the foregoing and subject thereto, at the Effective Time, all of
the property, assets, businesses, rights, interests, privileges, powers,
licenses and franchises of IRT thereupon shall vest in the Surviving
Corporation, and all of the debts, liabilities, obligations, restrictions,
disabilities and duties of IRT ("Liabilities") thereupon shall become the
Liabilities of the Surviving Corporation.
(c) Notwithstanding the foregoing, the Company and IRT
may, upon mutual agreement, at any time prior to the Effective Time, change the
method of effecting the combination of the Company and IRT (including, without
limitation, the provisions of this Article I) if and to the extent they deem
such change to be desirable, including, without limitation, to provide for a
merger of IRT directly with and into a wholly owned subsidiary of the Company,
in which either IRT or such subsidiary is the surviving corporation; PROVIDED,
HOWEVER, that no such change shall (i) alter or change the amount, method of
calculating or kind of Merger Consideration (as defined below) to be issued to
holders of IRT Common Stock (as defined below) as provided for in this
Agreement, (ii) adversely affect the tax treatment of IRT's shareholders as a
result of receiving the Merger Consideration, or (iii) materially impede or
delay consummation of the transactions contemplated by this Agreement.
2
SECTION 1.4 ORGANIZATIONAL INSTRUMENTS. The charter of the
Company, as amended, shall be the "Articles of Incorporation" of the Surviving
Corporation from and after the Effective Time until thereafter duly amended or
restated in accordance with the MGCL. The Amended and Restated Bylaws of the
Company shall be the "Bylaws" of the Surviving Corporation from and after the
Effective Time until thereafter duly amended or restated in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation and the MGCL.
SECTION 1.5 DIRECTORS. All of the directors of the Company plus
one director of IRT who shall be elected to the Company's board of directors in
accordance with Section 5.16 below shall constitute the entire board of
directors of the Surviving Corporation. Each such director shall hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
SECTION 1.6 OFFICERS. The officers of the Company shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation until
such officer's successor is duly elected or appointed and qualified.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK; CONVERSION
AND EXCHANGE OF CAPITAL STOCK
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any further action on the part of the holder
of any shares of capital stock of the Company or IRT:
(a) Common Stock of the Company. Each share of common
stock of the Company, par value $0.01 per share ("Company Common Stock"),
outstanding immediately prior to the Effective Time, shall remain issued and
outstanding and unaffected by the Merger, and, together with the securities
converted into Company Common Stock pursuant to Section 2.1(c) and the shares
of Company Common Stock issued in the Private Placement, shall constitute all
of the then-issued and outstanding shares of capital stock of the Surviving
Corporation.
(b) Cancellation of Certain Stock. All shares of common
stock of IRT, par value $1.00 per share (the "IRT Common Stock"), together with
all associated "Rights" issued under that certain IRT Shareholders Protection
Rights Agreement dated as of August 21, 1998, as amended to the Effective Time
(the "IRT Rights Agreement"), between IRT and SunTrust Bank, Atlanta, as rights
agent, that are owned or held by IRT as treasury stock and all shares of IRT
Common Stock owned by the Company or any Subsidiary of IRT or the Company
(collectively, "Treasury Stock"), shall automatically be canceled and retired
and shall cease to exist and no capital stock or other interests of the Company
or any Subsidiary of the Company or any other consideration (whether consisting
of cash, property, or any combination thereof) shall be delivered in exchange
therefor.
3
As used in this Agreement, a "Subsidiary" of any Person (as
defined herein) means any corporation, partnership, limited liability company,
joint venture, trust or other legal entity of which such Person owns or holds
(either directly or through or together with another Subsidiary of such Person)
either (i) a general partner, managing member or other similar interest, or
(ii)(A) 10% or more of the voting power of the voting capital stock or other
voting equity interests, or (B) 10% or more of the outstanding voting capital
stock or other voting equity interests of such Person. As used in this
Agreement, "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(c) Conversion Of IRT Common Stock; Merger
Consideration. Subject to the provisions of this Article II, each share of IRT
Common Stock, other than Treasury Stock, issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive (i)
$12.15 in cash (the "Cash Consideration") or (ii) 0.9 (the "Exchange Ratio")
validly issued, fully paid and nonassessable shares of Company Common Stock
(the "Stock Consideration") or (iii) the right to receive a combination of cash
and shares of Company Common Stock determined in accordance with Section 2.2
(the "Mixed Consideration"). The Cash Consideration, the Stock Consideration
and the Mixed Consideration, together with any cash in lieu of fractional
shares of Company Common Stock to which a holder of IRT Common Stock has the
right to receive pursuant to Section 2.4 ("Fractional Shares"), is referred to
collectively herein as the "Merger Consideration."
SECTION 2.2 ELECTION PROCEDURE.
(a) Election. Subject to Sections 2.2(b) and (f), each
record holder of shares of IRT Common Stock immediately prior to the Effective
Time shall be entitled to elect to receive Cash Consideration (a "Cash
Election"), Stock Consideration (a "Stock Election") or Mixed Consideration (a
"Mixed Election"; Cash Elections, Stock Elections and Mixed Elections are
collectively referred to as "Elections") for such holder's shares of IRT Common
Stock. Elections shall be made in accordance with Section 2.2(c) below on a
form designed for that purpose (a "Form of Election"), which Form of Election
shall be in such form as IRT and the Company shall mutually agree.
(b) Proration. Notwithstanding the provisions of Section
2.2(a) and subject to Section 2.2(f), the aggregate number of shares of IRT
Common Stock that may be converted into Cash Consideration in the Merger (the
"Cash Election Shares"), whether by Cash Elections or Mixed Elections, together
with any Fractional Shares, shall not exceed 50% of the total number of shares
of IRT Common Stock issued and outstanding as of the Effective Time (the "Cash
Election Number"). If the sum of the Cash Election Shares and the Fractional
Shares exceeds the Cash Election Number, each Cash Election Share shall be
converted into (i) the right to receive an amount in cash, without interest,
equal to the product of (A) the Cash Consideration and (B) a fraction (the
"Cash Fraction"), the numerator of which shall be the Cash Election Number and
the denominator of which shall be the total number of Cash Election Shares, and
(ii) a number of shares of Company Common Stock equal to the product of (A) the
Exchange Ratio and (B) a fraction equal to one minus the Cash Fraction.
4
(c) Form of Election. To be effective, a Form of
Election must be properly completed, signed and submitted to such paying and
exchange agent (which shall be a commercial bank or trust company) as IRT and
the Company shall mutually agree (the "Exchange Agent"), and accompanied by the
certificates representing the shares of IRT Common Stock ("Old Certificates")
as to which an Election is being made (or by an appropriate guarantee of
delivery of such Old Certificate signed by a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing of
the Securities Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program).
A holder of record of shares of IRT Common Stock who holds such shares as
nominee, trustee or in another representative capacity (a "Holder
Representative") may submit multiple Forms of Election, provided that such
Holder Representative certifies that each such Form of Election covers all the
shares of IRT Common Stock held by such Holder Representative for a particular
beneficial owner. The Company shall have the discretion, which it may delegate
in whole or in part to the Exchange Agent, to determine whether Forms of
Election have been properly completed, signed and submitted or revoked and to
disregard immaterial defects in Forms of Election. Any good faith decision of
the Company (or the Exchange Agent) in such matters shall be conclusive and
binding. The Company (or the Exchange Agent) shall, to the extent commercially
practicable, promptly notify IRT of any defect in a Form of Election other than
an immaterial defect disregarded in good faith by the Company (or the Exchange
Agent). Neither the Company nor the Exchange Agent shall be under any
obligation to notify any person of any defect in a Form of Election submitted
to the Exchange Agent. The Exchange Agent shall also make all computations
contemplated by this Section 2.2, and all such computations shall be conclusive
and binding on the holders of shares of IRT Common Stock.
(d) No Election Shares. For the purposes hereof, a
holder of shares of IRT Common Stock (the "No Election Shares") who does not
submit a Form of Election that is received by the Exchange Agent prior to the
Election Deadline (as defined below) shall be deemed not to have made a Cash
Election, Stock Election or Mixed Election. In addition, if the Company or the
Exchange Agent shall determine that any purported Election was not properly
made, the holder of shares IRT Common Stock subject to such improperly made
Election shall also be treated as No Election Shares. No Election Shares may be
treated by the Company in its sole discretion as Cash Election Shares or Stock
Election Shares, or a combination thereof.
(e) Election Deadline. IRT and the Company shall each
use its reasonable best efforts to cause copies of the Form of Election to be
mailed on the Mailing Date (as defined below) to each holder of record of
shares of IRT Common Stock (other than holders of Treasury Stock) as of a
record date which shall be the same date as the record date for eligibility to
vote on the Merger and to make the Form of Election available to all persons
who become record holders of shares of IRT Common Stock subsequent to the date
of such mailing. The "Mailing Date" shall be the date on which proxy materials
relating to the Merger are mailed to holders of shares of IRT Common Stock. In
order to be effective, a Form of Election must be received by the Exchange
Agent by 5:00 p.m., Eastern time, on the date immediately prior to the IRT
Shareholders' Meeting, or such other time and date as IRT and the Company may
mutually agree (the "Election Deadline"). All Elections may be revoked in
writing by the record holders submitting Forms of Election at any time prior to
the Election Deadline.
5
(f) Tax Adjustment. Notwithstanding anything in this
Article II to the contrary, the sum of (i) the aggregate amount of cash that
will be paid in the Merger as Cash Consideration, (ii) any cash amounts to be
paid pursuant to Section 2.4 for Fractional Shares, (iii) any other amounts
paid by the Company or IRT to or on behalf of any shareholder of IRT in
connection with the sale, redemption or other disposition of any shares of
capital stock of IRT in connection with the Merger for purposes of Treasury
Regulation Sections 1.368-1(e) and 1.368-1T(e), and (iv) the amount of any
extraordinary dividend, including any Final IRT Dividend (as defined below),
distributed by IRT prior to and in connection with the Merger for purposes of
Treasury Regulation Section 1.368-1T(e) (the sum of such amounts in (i) --
(iv), the "Aggregate Cash Amount") shall not exceed 60% of the Aggregate
Consideration. The "Aggregate Consideration" shall be equal to the sum of (i)
the number of shares of Company Common Stock to be issued in the Merger times
the Company Closing Price, plus (ii) the Aggregate Cash Amount. The "Company
Closing Price" means the weighted average trading price per share of the
Company Common Stock on the New York Stock Exchange (composite transactions
list) for all transactions occurring on the Closing Date. If the Aggregate Cash
Amount as so calculated would exceed 60% of the Aggregate Consideration, the
Company shall decrease the Cash Election Number thereby increasing the
aggregate number of shares of IRT Common Stock to be exchanged for Company
Common Stock in the Merger at the Exchange Ratio on a proportionate basis such
that the Aggregate Cash Amount would not exceed 60% of the Aggregate
Consideration (the "Tax Adjustment").
SECTION 2.3 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS. At the
Effective Time, holders of IRT Common Stock shall cease to be, and shall have
no rights as, shareholders of IRT, other than to receive any dividend or other
distribution with respect to IRT Common Stock with a record date occurring
prior to the Effective Date and the Merger Consideration provided in this
Article II. After the Effective Time, there shall be no transfers on the stock
transfer books of IRT or the Surviving Corporation of shares of IRT Common
Stock.
SECTION 2.4 FRACTIONAL SHARES. Notwithstanding any other
provision hereof, no certificates for Fractional Shares, or other evidence of
ownership thereof, will be issued in the Merger; instead, the Company shall pay
to each holder of IRT Common Stock who would otherwise be entitled to a
Fractional Share (after taking into account all of the shares of IRT Common
Stock represented by all of the Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying such fraction by
the Company Closing Price.
SECTION 2.5 EXCHANGE PROCEDURES.
(a) Deposit of Exchange Fund. At or prior to the
Effective Time, the Company shall deposit, or shall cause to be deposited, with
the Exchange Agent, for the benefit of the holders of shares of IRT Common
Stock, for exchange in accordance with this Article II, an amount of cash and
certificates or book-entry securities representing shares of Company Common
Stock ("New Certificates") required to effect the conversion of IRT Common
Stock into Company Common Stock and cash in accordance with Sections 2.1(c),
2.3, 2.5(b) and 2.6 (such cash and New Certificates, together with any
dividends or distributions with a record date occurring after the Effective
Date with respect thereto (without any interest on any such cash, dividends or
distributions) being hereinafter referred to as the "Exchange Fund").
6
(b) Exchange of Certificates. As promptly as practicable
after the Effective Date, the Company shall send or cause to be sent to each
former holder of record of shares of IRT Common Stock that did not otherwise
make an Election (other than Treasury Stock) immediately prior to the Effective
Time transmittal materials for use in exchanging such shareholder's Old
Certificates for the Merger Consideration set forth in this Article II. The
Company shall cause the New Certificates representing Company Common Stock into
which shares of a holder's IRT Common Stock are converted on the Effective Date
and/or a check in respect of the Cash Consideration into which shares of a
holder's IRT Common Stock are converted at the Effective Time and any
Fractional Shares or dividends or distributions which such Person shall be
entitled to receive (including any Final IRT Dividend) to be delivered to such
holder who shall have delivered to the Exchange Agent Old Certificates (whether
in connection with the Form of Election or with the above described transmittal
materials) representing such shares of IRT Common Stock (or indemnity
reasonably satisfactory to the Company and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned of record immediately prior
to the Effective Time by such holder. No interest will be paid on any such Cash
Consideration, cash to be paid in lieu of Fractional Shares or dividends or
distributions which any such Person shall be entitled to receive pursuant to
this Article II upon such delivery.
(c) Unclaimed Certificates. If Old Certificates are not
surrendered or consideration therefor is not claimed prior to the date on which
such consideration would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed consideration and any unpaid
dividends or distributions thereon shall, to the extent permitted by abandoned
property and any other applicable law, become the property of the Company (and
to the extent not in its possession shall be paid over to the Company), free
and clear of all claims or interest of any Person previously entitled to such
claims. Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to any former holder of IRT Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) Distributions in Respect of Unclaimed Certificates.
No dividends or other distributions with respect to Company Common Stock with a
record date occurring after the Effective Time shall be paid to the holder of
any unsurrendered Old Certificate representing shares of IRT Common Stock
converted in the Merger into the right to receive shares of such Company Common
Stock until the holder thereof shall be entitled to receive New Certificates in
exchange therefor after having complied with the procedures set forth in this
Section 2.5, and no such shares of Company Common Stock shall be eligible to
vote until the holder of Old Certificates is entitled to receive New
Certificates after having complied with the procedures set forth in this
Section 2.5. After becoming so entitled and after having complied with this
Section 2.5, the record holder thereof also shall be entitled to receive any
such dividends or other distributions, without any interest thereon, which
theretofore had otherwise become payable with respect to shares of Company
Common Stock such holder had the right to receive upon surrender of the Old
Certificate.
(e) Disposition of Unclaimed Exchange Fund. Any portion
of the Exchange Fund that remains unclaimed by the shareholders of IRT for
twelve months after the Effective Time shall be returned by the Exchange Agent
to the Company if the Company so requests. In
7
the event of the return of such Exchange Fund to the Company, subject to
Section 2.5(c), any shareholders of IRT who have not heretofore complied with
this Article II shall thereafter look only to the Company for payment of the
Merger Consideration, cash in lieu of any Fractional Shares, and unpaid
dividends and distributions on IRT Common Stock or Company Common Stock
deliverable in respect of each share of IRT Common Stock such shareholder holds
immediately prior to the Effective Time, as determined pursuant to this
Agreement, in each case, without any interest thereon.
(f) Investment of Exchange Fund. The Company may cause
the Exchange Agent to invest the cash included in the Exchange Fund in
short-term obligations of, or fully guaranteed by, the United States of
America, investment grade commercial paper or other similar investments, but in
any event the Company shall ensure that the terms and conditions of any such
investment shall be such as to permit the Exchange Agent to make prompt
payments of the Merger Consideration as contemplated by this Agreement. To the
extent that there are losses with respect to such investments, or the Exchange
Fund diminishes for other reasons below the level required to make prompt
payments of the Merger Consideration as contemplated hereby, the Company shall
promptly replace or restore the portion of the Exchange Fund lost through
investments or other events, so as to ensure that the Exchange Fund is, at all
times, maintained at a level sufficient to make such payments.
(g) Lost or Stolen Certificates. If any Old Certificate
shall have been lost, stolen or destroyed, then upon (i) the receipt of a duly
notarized affidavit of such fact by the person claiming such Old Certificate to
be lost, stolen or destroyed, (ii) the posting by such person of a bond or
similar surety instrument in such reasonable amount as the Surviving
Corporation or Exchange Agent may require as indemnity against any claim that
may be made against it with respect to such Old Certificate and (iii) the
receipt of any other documents or instruments necessary to evidence and effect
the exchange, the Exchange Agent shall issue and/or pay the Merger
Consideration in exchange for such lost, stolen or destroyed Old Certificate.
(h) Withholding Taxes. The Company shall be entitled to
deduct and withhold (or cause the Exchange Agent to deduct and withhold) from
the Merger Consideration payable to a holder of IRT Common Stock, all
withholding and stock transfer taxes. To the extent such amounts are so
withheld, they shall be treated for all purposes of this Agreement as having
been paid to the holder of IRT Common Stock in respect of whom such deduction
and withholding was made by the Company.
(i) Expenses of Exchange Agent. The Surviving
Corporation shall pay all charges and expenses of the Exchange Agent.
SECTION 2.6 FINAL DIVIDENDS. If and to the extent necessary for
IRT to satisfy the requirements of Section 857(a)(1) of the Code for the
taxable year of IRT ending at the Effective Time of the Merger (and to avoid
the payment of any tax with respect to undistributed income or gain), IRT shall
declare a dividend on each share of IRT Common Stock (the "Final IRT
Dividend"), the record date for which shall be the close of business on the
last business day prior to the Effective Time of the Merger, in an amount equal
to the minimum dividend sufficient to permit IRT to satisfy such requirements.
If IRT determines that it is necessary to declare the
8
Final IRT Dividend, IRT shall notify the Company at least 20 days prior to the
scheduled date for the IRT Shareholders' Meeting, and the Company shall be
entitled to declare a dividend per share payable to holders of shares of the
Company Common Stock, the record date for which shall be the close of business
on the last business day prior to the Effective Time, in an amount per share of
Company Common Stock equal to the quotient obtained by dividing (x) the Final
IRT Dividend paid by IRT with respect to each share of IRT Common Stock by (y)
the Exchange Ratio ("Corresponding Final Dividend"). The dividends payable
hereunder to the holders of IRT Common Stock shall be paid upon presentation of
the Old Certificates for exchange in accordance with this Article II. In
addition, notwithstanding anything in Section 2.1(c) to the contrary, following
the declaration of a Final IRT Dividend in connection with this Section 2.6,
the Cash Consideration shall be reduced by an amount equal to the per share
amount of the IRT Final Dividend.
SECTION 2.7 ADJUSTMENT OF EXCHANGE RATIO. In the event of any
stock split, combination, reclassification or stock dividend with respect to
Company Common Stock, any change or conversion of Company Common Stock into
other securities or any other dividend or distribution with respect to Company
Common Stock (other than quarterly cash dividends issued in the ordinary course
consistent with past practice, the Corresponding Final Dividend and any
dividend issued in accordance with Section 5.13(b)) and any distribution by the
Company of shares of capital stock of any of its affiliates, or if a record
date with respect to any of the foregoing should occur, prior to the Effective
Time, appropriate and proportionate adjustments shall be made to the Exchange
Ratio, and thereafter all references in this Agreement to the Exchange Ratio
shall be deemed to be the Exchange Ratio as so adjusted.
SECTION 2.8 STOCK OPTIONS. (a) Immediately prior to the Effective
Time, each outstanding and unexercised option to purchase shares of IRT Common
Stock (an "IRT Option") granted under any IRT Plan (as defined below) (other
than any "Stock Purchase Plan" within the meaning of Section 423 of the Code),
shall, whether or not then vested or exercisable, become and represent an
option to purchase the number of shares of Company Common Stock (an "Assumed
Option") rounded up to the nearest whole share, determined by multiplying: (x)
the number of shares of IRT Common Stock subject to such option immediately
prior to the Effective Time by (y) the Exchange Ratio, at an exercise price per
share of Company Common Stock (increased to the nearest whole cent) equal to
the exercise price per share of IRT Common Stock immediately prior to the
Effective Time divided by the Exchange Ratio; provided, however, that in the
case of any IRT Option to which Section 421 of the Code applies by reason of
its qualification as an incentive stock option under Section 422 of the Code,
the conversion formula shall be adjusted if necessary to comply with Section
424(a) of the Code. After the Effective Time, each Assumed Option shall vest
only to the extent required by the terms of the underlying IRT Option. If no
automatic vesting requirement is set forth in the underlying IRT Option or
other agreement, then the Assumed Option shall be subject to the same vesting
schedule and be exercisable upon the same terms and conditions as were
applicable to the related option immediately prior to the Effective Time. As
soon as reasonably practical, the Company shall register under the Securities
Act on Form S-8 or another appropriate SEC form (and use its commercially
reasonable efforts to maintain the effectiveness thereof and maintain the
current status of the prospectuses contained therein) all shares of Company
Common Stock issuable pursuant to all Assumed Options. At or prior to the
Effective Time, the Company shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Company
9
Common Stock for delivery in connection with the Assumed Options. Schedule 2.8
of the IRT Disclosure Memorandum contains a true and complete list of all IRT
Options and shares of restricted capital stock of IRT issued and outstanding on
the date of this Agreement and the vesting schedules and exercise prices of
such IRT Options and shares of restricted stock.
(b) The 1998 Long-Term Incentive Plan of IRT and the IRT
1989 Stock Option Plan (the "IRT Stock Option Plans") shall be amended, to the
extent necessary, to reflect the transactions contemplated by this Agreement,
including, but not limited to, the conversion of each share of IRT Common Stock
held or to be awarded or paid pursuant to such benefit plans, programs or
arrangements into shares of Company Common Stock on a basis consistent with the
transactions contemplated by this Agreement. The Company and IRT agree to
submit the amendments to the IRT Stock Option Plans to their respective
stockholders, if such submission is determined to be necessary by counsel to
the Company or IRT after consultation with one another; PROVIDED, HOWEVER, that
such approval shall not be a condition to the consummation of the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF IRT. IRT hereby
represents and warrants to the Company as follows:
(a) Organization, Standing and Power. (i) IRT is a
corporation duly organized, validly existing and in good standing under the
laws of Georgia, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified and in good standing to transact business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure to
be in good standing or so to qualify would not have an IRT Material Adverse
Effect. For the purposes of this Agreement, "IRT Material Adverse Effect" shall
mean an event, change or occurrence which, individually or together with any
other event, change or occurrence, has or would have a material adverse impact
on (A) the financial position, business or results of operations of IRT and its
Subsidiaries, taken as a whole, or (B) the ability of IRT to perform its
obligations under this Agreement and to consummate the Merger or the other
transactions contemplated by this Agreement; PROVIDED THAT an IRT Material
Adverse Effect shall not be deemed to include the effect of (a) changes in laws
of general applicability or interpretations thereof by courts or other
governmental authorities, (b) changes in generally accepted accounting
principles or accounting principles generally applicable to real estate
investment trusts ("REITs"), or any standard or customary calculation of funds
from operations specified by the National Association of Real Estate Investment
Trusts ("NAREIT"), (c) general economic conditions or conditions generally
affecting the REIT industry, which in the case of (a) - (c) do not have a
materially more adverse effect on IRT than that of similarly situated
companies.
(ii) Except for shares of common stock of, or
limited liability company member interests or other similar interests ("LLC
Interests") or partnership interests or limited partnership interests
("Partnership Interests") in, IRT's Subsidiaries, and except as set forth on
10
Schedule 3.1(a)(ii) of the disclosure memorandum, dated as of the date hereof,
delivered by IRT to the Company prior to the execution of this Agreement
setting forth certain matters referred to in this Agreement (the "IRT
Disclosure Memorandum"), IRT does not own as of the date of this Agreement of
record or beneficially, directly or indirectly, (A) any shares of outstanding
capital stock, LLC Interests, Partnership Interests or other securities
convertible into or exchangeable or exercisable for any capital stock or LLC
Interests or Partnership Interest of any other person or entity or (B) any
participating or economic interest in any partnership, joint venture, trust or
other non-corporate business enterprise ("Other Investment Interests"). Each
Subsidiary of IRT is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation or organization, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in good
standing to transact business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be in good standing or so qualified
would not have an IRT Material Adverse Effect. Each Subsidiary of IRT as of the
date of this Agreement and its jurisdiction of incorporation or organization is
set forth on Schedule 3.1(a)(ii) of the IRT Disclosure Memorandum.
(iii) All of the outstanding shares of capital
stock, all LLC Interests and all Partnership Interests of each Subsidiary of
IRT, as applicable, held by IRT or a Subsidiary of IRT have been duly
authorized, are validly issued, and in the case of shares of capital stock,
fully paid and nonassessable and, except as set forth on Schedule 3.1(a)(iii)
of the IRT Disclosure Memorandum, are owned by IRT or by a wholly owned
Subsidiary of IRT, free and clear of all Liens, and there are no proxies
outstanding, shareholder agreements, voting trusts or other agreements or
restrictions on the voting, holding or transfer ("Restrictive Agreements")
affecting any such shares, LLC Interests, Partnership Interests or Other
Investment Interests.
For the purposes of this Agreement, "Lien" shall mean
any conditional sale agreement, defect of title, easement, encroachment,
encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge, or claim of any nature whatsoever of,
on, or with respect to any property or property interest, other than (i) Liens
for current property taxes and charges not yet due and payable, and (ii)
mechanics', carriers', workmen's, repairmen's and materialmen's Liens and other
Liens, which individually or in the aggregate, do not materially detract from
the value of, or materially interfere with the present use of, any property or
asset subject thereto or thereby or materially reduce the marketability of any
property for such use, and do not otherwise have an IRT or Company Material
Adverse Effect (as defined below), as applicable.
(b) Capital Structure. The authorized capital stock of
IRT consists of 150,000,000 shares of IRT Common Stock, of which 34,197,736
shares were outstanding as of September 30, 2002, and 10,000,000 shares of
preferred stock, $1.00 par value (the "IRT Preferred Stock"), none of which are
outstanding. All of the outstanding shares of IRT Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable. Except for (i)
IRT Options to purchase an aggregate of 928,088 shares of IRT Common Stock
granted pursuant to the IRT Plans, and outstanding as of the date hereof, and
(ii) the right of the limited partners of IRT Partners, L.P., a Georgia limited
partnership ("IRT Partners"), to convert the
11
limited partnership units ("IRT OPUs") of IRT Partners, upon the terms and
subject to the satisfaction of certain conditions contained in the Limited
Partnership Agreement of IRT Partners dated August 12, 1998 (the "IRT Partners
Agreement"), into an aggregate of 816,000 shares of IRT Common Stock as of the
date hereof, no arrangement, subscription, warrant, call, commitment,
agreement, scrip, understanding, option, convertible security, stock
appreciation (or depreciation) or other right (contingent or otherwise) to
purchase or acquire, or any securities convertible into or exchangeable or
exercisable for, any shares of any class or series of capital stock ("Equity
Right") of IRT or any of its Subsidiaries is authorized or outstanding as of
the date of this Agreement and there is not outstanding or in effect as of the
date of this Agreement any commitment, agreement, plan, arrangement or
understanding (whether oral or written) of IRT or any of its Subsidiaries to
issue any such Equity Rights or to distribute to holders of any class or series
of its capital stock any evidences of indebtedness or assets. Neither IRT nor
any of its Subsidiaries has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof (other than as required by REITs generally under the Code or as
set forth on Schedule 3.1(b) of the IRT Disclosure Memorandum). As of the date
of this Agreement, the authorized capital stock, the authorized LLC Interests,
the authorized Partnership Interests and the authorized Other Investment
Interests, as applicable, of each Subsidiary of IRT consist in their entirety
of the shares, the LLC Interests, the Partnership Interests and the Other
Investment Interests described on Schedule 3.1(a)(ii) of the IRT Disclosure
Memorandum, all of which shares and interests are issued and outstanding and
owned beneficially and of record by IRT or through wholly owned Subsidiaries of
IRT. Schedule 3.1(b) of the IRT Disclosure Memorandum lists all Restrictive
Agreements affecting shares of IRT Common Stock or the holders thereof known to
IRT.
(c) Authority. IRT has all requisite power and authority
to enter into this Agreement and, subject to the IRT Shareholder Approval (as
defined below), to consummate the Merger and the other transactions
contemplated hereby. The execution and delivery of this Agreement has been duly
authorized by all necessary action on the part of IRT and the consummation by
IRT of the Merger and the other transactions contemplated hereby has been duly
authorized by all necessary action on the part of IRT, subject to the IRT
Shareholder Approval. This Agreement has been duly executed and delivered by
IRT and constitutes the valid and binding obligation of IRT enforceable against
it in accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation by IRT of the Merger and the transactions
contemplated by this Agreement will not, result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a material right, entitlement or benefit under, or the creation or
imposition of any Lien on or against any assets or properties of the Company or
any of its Subsidiaries (any such conflict, breach, violation, default, right
of termination, cancellation, acceleration, loss, creation or imposition,
hereafter a "Violation") of (i) any provision of the articles of incorporation,
bylaws or analogous instruments of governance, operation or formation of IRT or
any of its Subsidiaries presently in effect or, (ii) except as disclosed in
Section 3.1(c) of the IRT Disclosure Memorandum, any loan or credit agreement,
note, mortgage, indenture, lease, IRT Plan, or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, writ, order,
decree, pronouncement, edict, statute, law, ordinance, rule or regulation
applicable to IRT or any of its Subsidiaries or their respective properties or
assets, except in the case of this clause (ii) for any such Violation which
would not
12
reasonably be expected to have an IRT Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (each, a "Governmental Entity") is required by or with
respect to IRT or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by IRT or the consummation by IRT of the Merger or
the transactions contemplated hereby, the failure to obtain which would
reasonably be expected to have an IRT Material Adverse Effect, except for (i)
the filing with the Securities and Exchange Commission ("SEC") of the Form S-4
(as defined below) and the Joint Proxy Statement (as defined below) in
definitive form relating to the IRT Shareholders' Meeting to vote upon the
IRT Shareholder Approval, and such reports under the Exchange Act (as defined
below) as may be required in connection with this Agreement, the Merger and the
transactions contemplated hereby and thereby, and the obtaining from the SEC of
such effectiveness and other orders as may be required in respect of the Form
S-4, (ii) the filing of the Articles of Merger and such other appropriate
documents with the SDAT and the Georgia Secretary of State and other relevant
authorities of jurisdictions in which IRT is qualified to transact business,
and (iii) compliance with and filings required by the rules and regulations of
the New York Stock Exchange. The Board of Directors of IRT (the "IRT Board")
has unanimously approved this Agreement, the Merger and all of the transactions
contemplated hereby and thereby and, subject to Sections 4.1(f)(iii) and
5.1(c)(ii) below, has resolved unanimously to recommend that holders of IRT
Common Stock approve, adopt and vote in favor of the IRT Shareholder Approval.
(d) IRT SEC Documents. IRT has made available to the
Company a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by IRT and each of its
Subsidiaries with the SEC since January 1, 2000 (as such documents have been
amended to date, the "IRT SEC Documents") which are all the documents (other
than preliminary material) that IRT was required to file with the SEC since
such date. As of their respective dates, the IRT SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act"), and the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), as the case may be, and the rules and regulations
thereunder, and none of the IRT SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
(in the case of the IRT SEC Documents not constituting Securities Act
Registration Statements in light of the circumstances under which they were
made), not misleading. The consolidated financial statements of IRT included in
the IRT SEC Documents comply in all material respects with all applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") applied on a consistent basis during
the periods and at the dates involved (except as may be indicated in the notes
thereto or, in the case of the unaudited or interim statements, as permitted by
Form 10-Q under the Exchange Act) and fairly present (subject, in the case of
the unaudited or interim statements, to normal and recurring audit adjustments)
the consolidated financial position of IRT and its Subsidiaries as at the dates
thereof and the consolidated results of their operations, shareholders' equity
and cash flows for the periods then ended. Except as set forth on Schedule
3.1(d) of the IRT Disclosure Memorandum, since December 31, 2001, neither IRT
nor any of its
13
Subsidiaries has incurred any liabilities except for (i) liabilities or
obligations incurred in the ordinary course of business consistent with past
practice, (ii) liabilities incurred in connection with or as a result of the
Merger and the transactions contemplated thereby, (iii) liabilities of a type
that is the subject of any other representation of IRT, e.g., environmental or
litigation matters, etc., and (iv) liabilities and obligations which would not
reasonably be expected to, individually or in the aggregate, result in an IRT
Material Adverse Effect. Neither IRT nor any of its Subsidiaries has directly
or indirectly guaranteed any obligation or other liability of any third-party
(other than any affiliate of IRT as described in the IRT SEC Documents).
(e) Information Supplied. None of the information
supplied by IRT for inclusion or (to the extent permitted by applicable rules
of the SEC) incorporation by reference in (i) the Form S-4 shall, at the time
the Form S-4 is declared effective by the SEC under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, not
misleading and (ii) the Joint Proxy Statement shall, at the date first mailed
to holders of IRT Common Stock through and including the date of the IRT
Shareholders' Meeting, contain any untrue statement of a material fact about
IRT or omit to state any material fact about IRT required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the
Effective Time any event with respect to IRT or any of its affiliates or
Subsidiaries occurs which is required to be described in any amendment of or
supplement to the Form S-4 or the Joint Proxy Statement, such event promptly
shall be so described and such amendment or supplement promptly shall be filed
with the SEC and, as required by applicable law (including applicable rules and
regulations of the SEC and New York Stock Exchange), delivered to the holders
of IRT Common Stock. The Joint Proxy Statement shall, on the date first mailed
to holders of IRT Common Stock through and including the date of the IRT
Shareholders' Meeting, comply as to form in all material respects with all
applicable rules and regulations under the Securities Act and the Exchange Act.
All applications, filing and documents that IRT or any of its Subsidiaries or
any of their affiliates is responsible for filing with any Governmental Entity
in connection with this Agreement or the transaction contemplated hereby shall
comply as to form in all material respects with all applicable laws and
regulations.
(f) Compliance with Applicable Laws. IRT and its
Subsidiaries hold all consents, permits, licenses, franchises, variances,
exemptions, registrations qualifications, dispensations concessions, orders,
permissions, authorizations and approvals of all Governmental Entities which
are material to the operation of their respective businesses (the "IRT
Permits"). IRT and its Subsidiaries are in compliance with the terms of the IRT
Permits, except where the failure so to comply would not reasonably be expected
to have an IRT Material Adverse Effect. Except as set forth on Schedule 3.1(f)
of the IRT Disclosure Memorandum, the respective businesses of IRT and its
Subsidiaries are not being conducted in violation of any statute, judgment,
writ, order, decree, edict, pronouncement, law, ordinance or regulation of any
Governmental Entity, except for violations which do not, and would not
reasonably be expected to have an IRT Material Adverse Effect. No investigation
or review by any Governmental Entity with respect to IRT or any of its
Subsidiaries is pending or, to the knowledge of IRT, threatened, nor has any
Governmental Entity indicated an intention to conduct the same.
14
(g) Litigation. Except as set forth on Schedule 3.1(g)
of the IRT Disclosure Memorandum, there is no investigation, suit, action,
arbitration, complaint or proceeding (each, a "Proceeding") pending or, to the
knowledge of IRT, threatened against or affecting IRT or any of its
Subsidiaries or their respective assets, which, if determined adversely to IRT
or any of the Subsidiaries would reasonably be expected to have an IRT Material
Adverse Effect; nor is there any judgment, decree, writ, order, edict,
pronouncement, injunction, rule or order of any Governmental Entity or arbitral
authority outstanding against IRT or any of its Subsidiaries having, or which
would reasonably be expected to have an IRT Material Adverse Effect.
(h) Taxes.
(i) IRT and each of its Subsidiaries has timely
filed all material tax returns required to be filed by it and has paid (or IRT
has paid on its behalf) all taxes required to be paid as shown on such returns.
The most recent financial statements contained in the IRT SEC Documents reflect
an adequate reserve for all taxes payable by IRT and its Subsidiaries accrued
through the date of such financial statements. Since January 1, 1997, neither
IRT nor any of its Subsidiaries has incurred any liability for taxes under
Sections 857(b), 860(c) or 4981 of the Code. No event has occurred and no
condition exists which presents a risk that any material tax liability
described in the preceding sentence could be imposed upon IRT and its
Subsidiaries. No material deficiencies for any taxes have been proposed,
asserted or assessed by any taxing jurisdiction against IRT or any of its
Subsidiaries. No requests for waivers of the time to assess taxes are pending
and no tax returns of IRT or any of its Subsidiaries have been or are currently
being audited by any taxing jurisdiction. There are no tax Liens on any asset
of IRT or any of its Subsidiaries other than Liens for current taxes not past
due and payable. None of IRT's federal income tax returns has been the subject
of an audit by the IRS.
(ii) IRT (A) for all taxable years commencing
with 1997, has been subject to taxation as a REIT within the meaning of Section
856 of the Code and has qualified as a REIT for all such years, (B) has
operated since December 31, 2001 to the date of this representation, and
intends to continue to operate, in such a manner as to qualify as a REIT for
each taxable year ending before or on the later of December 31, 2002 and the
Closing Date, and (C) has not taken or omitted to take any action which would
reasonably be expected to result in a challenge to its status as a REIT and, to
IRT's knowledge, no such challenge is pending or threatened. Each Subsidiary of
IRT which is a partnership, joint venture or limited liability company either
(1)(x) has been treated since the later of its formation and the acquisition by
IRT of a direct or indirect interest therein and continues to be treated for
federal income tax purposes either as a partnership or as an entity that is
disregarded for federal income tax purposes and not as a corporation or as an
association taxable as a corporation and (y) has not since the later of its
formation and the acquisition by IRT of a direct or indirect interest therein,
owned any assets (including, without limitation, securities) that would cause
IRT to violate Section 856(c)(4) of the Code or (2)(x) met the conditions set
forth in clause (1)(x) and (1)(y) as of December 31, 2001 and (y) as of
December 31, 2002, will be treated for federal income tax purposes as a
corporation and will qualify as a taxable REIT Subsidiary under Section 856(l)
of the Code. Each Subsidiary of IRT which is a corporation (aa) has been since
its formation (or, if later, since its acquisition by IRT) a qualified REIT
subsidiary under Section 856(i) of the Code or (bb) as of December 31, 2002,
will qualify as a taxable REIT subsidiary under Section 856(l) of the Code.
Except as set forth in Schedule 3.1(h) hereto, neither IRT nor any Subsidiary
of IRT holds any
15
asset (xx) the disposition of which would be subject to rules similar to
Section 1374 of the Code as a result of an election under IRS Notice 88-19 or
Temporary Treas. Reg. ss.1.337(d)-5T or (yy) which is subject to a consent
filed pursuant to Section 341(f) of the Code and the regulations thereunder.
(iii) To the knowledge of IRT, as of the date
hereof, IRT is a "domestically-controlled REIT" within the meaning of Section
897(h)(4)(B) of the Code.
(iv) IRT and its Subsidiaries have complied in
all material respects with all applicable laws, rules and regulations relating
to the withholding of taxes and the payment thereof to appropriate authorities,
including taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee or independent contractor, and taxes
required to be withheld and paid pursuant to Section 1441 or 1442 of the Code
or similar provisions under foreign law.
(v) Neither IRT nor any of its Subsidiaries is
a party to any tax allocation or sharing agreement, is or has been a member of
an affiliated group filing a consolidated federal income tax return (on a
consolidated, combined, unitary or other similar state, local or foreign tax
return) or has any tax liability of any Person under Treasury Regulation
Section 1.1502-6 or any similar provision of state, local or foreign law, or as
a transferee or successor, by contract or otherwise.
(vi) During the five-year period ending on the
date hereof, IRT has not been a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the
Code.
(vii) IRT does not have and has not had a
permanent establishment in any foreign country as defined in any applicable
income tax treaty or convention between the United States and such foreign
country.
(viii) IRT has not taken or agreed to take any
action, and does not have any knowledge of any fact or circumstance, that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(ix) For purposes of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes" and "taxable")
includes all federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, windfall profits, ad valorem, stamp, severance,
occupation, premium, customs duties, commercial rent, capital stock, paid-up
capital, value added, unemployment, disability, alternative or add-on minimum,
single business, social security, registration, estimated, environmental,
employment, use, real or personal property, withholding, excise and other
taxes, imposts, duties or assessments of any kind and nature whatsoever,
together with all interest, penalties, charges and additions to taxes imposed
with respect to such amounts.
(i) Properties.
(i) Schedule 3.1(i) of the IRT Disclosure
Memorandum contains a true and complete list of all of the real properties in
which IRT has an interest (the "IRT
16
Properties"). Except as set forth on Schedule 3.1(i) of the IRT Disclosure
Memorandum, either IRT or one of its Subsidiaries owns fee simple title to each
of the IRT Properties, except where the failure to own such title would not
have an IRT Material Adverse Effect.
(ii) The IRT Properties are not subject to any
Liens or Property Restrictions. For the purposes of this Agreement, "Property
Restrictions" shall mean any rights of way, agreements, laws, ordinances and
regulations affecting building use, occupancy or access, or reservations of an
interest in title, except for Property Restrictions and other limitations of
any kind, if any, which, individually or in the aggregate, are not material in
amount, do not materially detract from the value of or materially interfere
with the present use of any of the Company Properties or the IRT Properties, as
applicable, subject thereto or affected thereby, and do not otherwise have a
Company Material Adverse Effect or IRT Material Adverse Effect, as applicable.
(iii) Valid policies of title insurance (or fully
paid and enforceable commitments therefor) have been issued insuring IRT's or
its applicable Subsidiary's fee simple title or leasehold estate, as the case
may be, to the IRT Properties in amounts which are approximately equal to the
purchase price thereof paid by IRT or the applicable Subsidiary of IRT
therefor, except where the failure to obtain such title insurance would not
reasonably be expected to have an IRT Material Adverse Effect.
(iv) IRT has:
(A) not failed to obtain a
certificate, permit or license from any Governmental Entity having
jurisdiction over any of the IRT Properties where such failure would
reasonably be expected to have an IRT Material Adverse Effect and no
knowledge of any pending threat of modification or cancellation of any
of the same which would reasonably be expected to have an IRT Material
Adverse Effect,
(B) not received any written notice of
any violation of any federal, state or municipal law, ordinance,
order, rule, regulation or requirement affecting any of the IRT
Properties issued by any Governmental Entity which would reasonably be
expected to have an IRT Material Adverse Effect, and
(C) no knowledge of (1) any structural
defects relating to any of the IRT Properties, (2) any IRT Properties
the building systems of which are not in working order, (3) physical
damage to any IRT Property for which there is not insurance in effect
covering the cost of the restoration and the lost revenue (subject to
a commercially reasonable deduction or retention limit) or zoning or
building code violations, except such structural defects, building
systems not in working order, physical damage and violations, which,
singly or in the aggregate, would not reasonably be expected to have
an IRT Material Adverse Effect.
(v) Except as set forth in Schedule 3.1(i) of
the IRT Disclosure Memorandum, neither IRT nor any of the Subsidiaries of IRT
has received any written or published notice to the effect that (A) any
condemnation or involuntary rezoning proceedings are pending or threatened with
respect to any of the IRT Properties or (B) any zoning, building or
17
similar law, code, ordinance, order or regulation is or will be violated by the
continued maintenance, operation or use of any buildings or other improvements
on any of the IRT Properties or by the continued maintenance, operation or use
of the parking areas, other than such notices which, singly or in the
aggregate, would not reasonably be expected to have an IRT Material Adverse
Effect.
(vi) All properties under development or
construction by IRT or its Subsidiaries as of the date hereof (the "IRT
Development Properties") and all properties proposed for acquisition,
development or commencement of construction prior to the Effective Time by IRT
and its Subsidiaries as of the date hereof (the "IRT Future Development
Properties") are listed in Schedule 3.1(i) of the IRT Disclosure Memorandum.
All material executory agreements entered into by IRT or any of its
Subsidiaries relating to the development or construction of the IRT Development
Properties or the IRT Future Development Properties are listed in Schedule
3.1(i) of the IRT Disclosure Memorandum.
(vii) Schedule 3.1(i) of the IRT Disclosure
Memorandum contains a list of all scheduled capital expenditures in excess of
$100,000 for required or planned improvements, repairs or replacements as of
the date hereof with respect to any IRT Property.
(viii) Prior to the date hereof, IRT has
contributed IRT Properties with an aggregate value in excess of the amount
required by Section 16.3 of the Contribution Agreement dated June 26, 1998
between IRT, IRT Partners, and MIBEF Corporate Services, Inc. on behalf of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇ Trust, Trust ▇▇. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇.
(j) Benefit Plans. (i) Schedule 3.1(j) of the IRT
Disclosure Memorandum contains a true and complete list of each bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance
or termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement, and each other employee benefit plan,
program agreement or arrangement, sponsored, maintained or contributed to or
required to be contributed to by IRT or its Subsidiaries or by any trade or
business, whether or not incorporated, that together with IRT would be deemed a
"single employer" within the meaning of Section 4001(b)(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA"), for the benefit of any employee
or former employee of IRT or its Subsidiaries, whether formal or informal and
whether legally binding or not (the "IRT Plans"). Schedule 3.1(j) of the IRT
Disclosure Memorandum identifies each of the IRT Plans that is an "employee
welfare benefit plan," or "employee pension benefit plan" as such terms are
defined in Sections 3(1) and 3(2) of ERISA.
(ii) Except as set forth on Schedule 3.1(j) of
the IRT Disclosure Memorandum or as would not reasonably expected to have an
IRT Material Adverse Effect, (A) IRT is in compliance with the terms of all IRT
Plans, including any such plan that is an "employee benefit plan" as defined in
Section 3(3) of ERISA, and such IRT Plans are in compliance with all applicable
requirements of law, including ERISA and the Code and, without limitation, the
requirements of ERISA and all tax rules for which favorable tax treatment is
intended, and (B) there are no liabilities (including unfunded pension or
healthcare liabilities) or
18
obligations with respect to any such IRT Plan, whether accrued, contingent or
otherwise (other than obligations by IRT and its Subsidiaries to make
contributions, and for such plan to pay benefits and administrative costs,
incurred in the ordinary course), nor to the knowledge of IRT are any such
liabilities or obligations expected to be incurred.
(iii) Without limiting the foregoing, each IRT
Plan which is intended to be tax-qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified and such
determination has not been modified, revoked or limited, and no circumstances
have occurred that would adversely affect the tax-qualified status of any such
plan and each such IRT Plan has been administered in accordance with its terms
and the requirements of the Code and the regulations and rules of the IRS and
the U.S. Department of Labor except as would not have an IRT Material Adverse
Effect. No IRT Plan is or has ever been subject to Part III of Subtitle B of
Title I of ERISA or Title IV of ERISA or Section 412 of the Code. None of IRT
or any of its Subsidiary or any "party in interest" (as defined in Section
3(14) of ERISA) or any "disqualified person" (as defined in Section 4975 of the
Code) with respect to any IRT Plan, has engaged in a non-exempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA that would have an IRT Material Adverse Effect.
(k) No Payments to Employees, Officers or Directors.
Schedule 3.1(k) of the IRT Disclosure Memorandum contains a true and complete
list of all arrangements, agreements or plans pursuant to which cash and
non-cash payments will or may become payable to each employee, officer or
director of IRT or any Subsidiary of IRT as a result of the Merger or a
termination of service subsequent to the consummation of the Merger and the
respective amounts of such payments. Except as provided in the agreements
listed on Schedule 3.1(k) of the IRT Disclosure Memorandum, or as otherwise
provided for in this Agreement, there is no employment or severance contract,
or other agreement requiring payments, cancellation of indebtedness or other
obligation to be made on a change of control or otherwise as a result of the
consummation of any of the transactions contemplated by this Agreement or as a
result of a termination of service subsequent to the consummation of any of the
transactions contemplated by this Agreement, with respect to any employee,
officer or director of IRT or any Subsidiary of IRT. Except for the agreements
listed on Schedule 3.1(k) of the IRT Disclosure Memorandum, there is no
agreement or arrangement with any employee, officer or other service provider
under which IRT or any Subsidiary of IRT has agreed to pay any tax that might
be owed under Section 4999 of the Code with respect to payments to such
individuals. Since July 29, 2002, no extension of credit in the nature of a
personal loan has been made by IRT, directly or indirectly, to or for the
benefit of any IRT director or executive officer.
(l) Absence of Certain Changes or Events. Except as
disclosed in the IRT SEC Documents or set forth on Schedule 3.1(l) of the IRT
Disclosure Memorandum, since December 31, 2001, IRT and its Subsidiaries have
conducted their respective businesses in the ordinary course (taking into
account prior practices, including the acquisition and disposition of
properties and issuance of securities) and there has not been (i) any
circumstance, event, occurrence, change or effect in regard to IRT that has had
an IRT Material Adverse Effect, nor has there been any circumstance, event,
occurrence, change or effect in regards to IRT that with the passage of time
would reasonably be expected to result in an IRT Material Adverse Effect, (ii)
except for regular quarterly distributions not in excess of $0.235 per share of
IRT Common
19
Stock (subject to the payment of any IRT Final Dividend, if any, or the payment
of any dividends pursuant to Section 5.13) with customary record and payment
dates, any authorization, declaration, setting aside or payment of any dividend
or other distribution (whether in cash, shares or property) with respect to IRT
Common Stock, (iii) any split, combination or reclassification of IRT Common
Stock, (iv) any damage, destruction or loss, whether or not covered by
insurance, that has had or would reasonably be expected to have an IRT Material
Adverse Effect or (v) any change made prior to the date of this Agreement in
accounting methods (whether for financial accounting or tax purposes),
principles or practices by IRT or any of its Subsidiaries materially affecting
its assets, liabilities or business, except as required by a change in GAAP.
(m) Opinion of Financial Advisor. The IRT Board has
received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. dated the date hereof,
a true and correct copy of which will be delivered (but not addressed) to the
Company solely for informational purposes after receipt thereof by IRT, to the
effect that as of such date the financial terms of the Merger are fair to IRT,
from a financial point of view.
(n) Brokers; Schedule of Fees and Expense. No broker,
investment banker, financial advisor or other Person, other than ▇▇▇▇▇▇▇ ▇▇▇▇▇
& Associates, Inc., the fees and expenses of which are described in the
engagement letter dated March 8, 2001, between ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
and IRT, a true, correct and complete copy of which has previously been given
to the Company, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of IRT or any
of its Subsidiaries.
(o) Vote Required. The affirmative vote of the holders
of a majority of the outstanding shares of IRT Common Stock is necessary to
adopt this Agreement, the Merger and the transactions contemplated hereby and
thereby.
(p) Environmental Matters.
(i) "Environmental Law" mean all codes, laws
(including, without limitation, common law), ordinances, regulations, reporting
or licensing requirements, rules, or statutes relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata), including, without
limitation (i) the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C.ss.ss.9601 et seq. ("CERCLA"); (ii) the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C.ss.ss.6901 et seq., ("RCRA"); (iii) the Emergency Planning and Community
Right to Know Act (42 U.S.C.ss.ss.11001 et seq.); (iv) the Clean Air Act (42
U.S.C.ss.ss.7401 et seq.); (v) the Clean Water Act (33 U.S.C.ss.ss.1251 et
seq.); (vi) the Toxic Substances Control Act (15 U.S.C.ss.ss.2601 et seq.);
(vii) the Hazardous Materials Transportation Act (49 U.S.C.ss.ss.5101 et seq.);
(viii) the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C.ss.ss.136 et seq.); (ix) the Safe Drinking Water Act (41 U.S.C.ss.ss.300f
et seq.); (x) any state, county, municipal or local statues, laws or ordinances
similar or analogous to the federal statutes listed in parts (i) - (ix) of this
subparagraph, (xi) any amendments to the statutes, laws or ordinances listed in
parts (i) - (x) of this subparagraph, (xii) any rules, regulations, guidelines,
directives, orders or the like adopted pursuant to or implementing the
20
statutes, laws, ordinances and amendments listed in parts (i) - (xi) of this
subparagraph; and (xiii) any other law, statute, ordinance, amendment, rule,
regulation, guideline, directive, order or the like in effect now or in the
future relating to environmental matters. "Hazardous Materials" means any
chemical, substance, waste, material, pollutant, contaminant, equipment or
fixture defined as or deemed hazardous or toxic or otherwise regulated under
any Environmental Law, including, without limitation, RCRA hazardous wastes,
CERCLA hazardous substances, pesticides and other agricultural chemicals, oil
and petroleum products or byproducts and any constituents thereof, asbestos,
and polychlorinated biphenyls.
(ii) Except as set forth on Schedule 3.1(p) of
the IRT Disclosure Memorandum,
(A) none of IRT, any of its
Subsidiaries and, to the knowledge of IRT, any other Person has caused or
permitted the presence of any Hazardous Materials at, on or under any of IRT
Properties, such that the presence of such Hazardous Materials (including the
presence of asbestos in any buildings or improvements at IRT Properties) would,
individually or in the aggregate, reasonably be expected to have an IRT
Material Adverse Effect;
(B) there have been no releases of
Hazardous Materials at, on, under or from (1) IRT Properties, or (2) any real
property formerly owned, operated or leased by IRT or IRT Subsidiaries during
the period of such ownership, operation or tenancy, which would, individually
or in the aggregate, reasonably be expected to have an IRT Material Adverse
Effect after giving effect to the receipt by IRT of proceeds from any existing
insurance policy;
(C) (1) IRT and its Subsidiaries have
complied with all Environmental Laws, and (2) neither IRT nor any of its
Subsidiaries has any liability under the Environmental Laws, except in each of
cases (1) and (2) to the extent a failure to comply or any such liability,
individually or in the aggregate, would not reasonably be expected to have an
IRT Material Adverse Effect; and
(D) IRT and its Subsidiaries have been
duly issued, and currently have and will maintain through the Closing Date, all
permits, licenses, certificates and approvals required under any Environmental
Law (collectively, "Environmental Permits") except where the failure to obtain
and maintain such Environmental Permits would not, individually or in the
aggregate, reasonably be expected to have an IRT Material Adverse Effect. IRT
and IRT Subsidiaries have timely filed applications for all Environmental
Permits.
(q) Material Contracts; Defaults.
(i) Schedule 3.1(q) of the IRT Disclosure
Memorandum sets forth all "Material Contracts" of IRT as of the date hereof as
required to be disclosed or to be filed with the SEC as an exhibit to its
Annual Report on Form 10-K in accordance with Item 601(b)(10) of Regulation
S-X, as amended, as promulgated by the SEC.
(ii) Except as set forth on Schedule 3.1(q) of
the IRT Disclosure Memorandum, neither IRT nor any Subsidiary of IRT has
received a written notice that IRT or any of its Subsidiaries is in violation
of or in default under (nor to the knowledge of IRT does there exist any
condition which upon the passage of time or the giving of notice or both would
21
cause such a violation of or default under) any Material Contract, to which it
is a party or by which it or any of its properties or assets is bound, nor to
the knowledge of IRT does such a violation or default exist, except to the
extent such violation or default, individually or in the aggregate, would not
reasonably be expected to have an IRT Material Adverse Effect.
(r) Investment Company Act. IRT is not (and immediately
after consummation of the Merger and the other transactions contemplated by
this Agreement shall not be) an investment company, a company controlled by an
investment company within the meaning of, or otherwise subject to any
provisions of, the Investment Company Act of 1940, as amended (the "Investment
Company Act") and the rules and regulations of the SEC thereunder.
(s) State Takeover Laws. IRT has taken all necessary
action to exempt the transactions contemplated by this Agreement from the
operation of any applicable "moratorium," "fair price," "business combination,"
"control share," or other anti-takeover laws (collectively, "Takeover Laws")
provided under the GBCC or its articles of incorporation.
(t) Shareholder Rights Agreement. Prior to the date
hereof, the IRT Rights Agreement has been amended to provide that neither the
execution, delivery or performance of this Agreement nor the consummation of
the Merger or any other transaction contemplated by this Agreement will cause
the Rights issued pursuant to the terms of the IRT Rights Agreement to be
exercisable under the IRT Rights Agreement.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to IRT as follows:
(a) Organization, Standing and Power. (i) The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to transact business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be in good standing or so to qualify would not have a Company
Material Adverse Effect. For the purposes of this Agreement, "Company Material
Adverse Effect" shall mean an event, change or occurrence which, individually
or together with any other event, change or occurrence, has or would have a
material adverse impact on (A) the financial position, business or results of
operations of the Company and its Subsidiaries, taken as a whole, or (B) the
ability of the Company to perform its obligations under this Agreement and to
consummate the Merger or the other transactions contemplated by this Agreement;
PROVIDED THAT a Company Material Adverse Effect shall not be deemed to include
the effect of (a) changes in laws of general applicability or interpretations
thereof by courts or other governmental authorities, (b) changes in generally
accepted accounting principles or accounting principles generally applicable to
REITs, or any standard or customary calculation of funds from operations
specified by NAREIT, or (c) general economic conditions or other conditions
generally affecting the REIT industry, which in the case of (a) - (c) do not
have a materially more adverse effect on the Company than that of similarly
situated companies.
(ii) Except for shares of common stock of, or
LLC Interests or Partnership Interests in, the Company's Subsidiaries, and
except as set forth on Schedule
22
3.2(a)(ii) of the disclosure memorandum, dated as of the date hereof, delivered
by the Company to IRT prior to the execution of this Agreement setting forth
certain matters referred to in this Agreement (the "Company Disclosure
Memorandum"), the Company does not own as of the date of this Agreement of
record or beneficially, directly or indirectly, (A) any shares of outstanding
capital stock, LLC Interests, Partnership Interests or other securities
convertible into or exchangeable or exercisable for any capital stock or LLC
Interests or Partnership Interest of any other person or entity or (B) any
Other Investment Interests. Each Subsidiary of the Company is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to transact business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be in good standing or so qualified would not have a Company
Material Adverse Effect.
(iii) All of the outstanding shares of capital
stock, all LLC Interests and all Partnership Interests of each Subsidiary of
the Company, as applicable, held by the Company or a Subsidiary of the Company
have been duly authorized, are validly issued, and in the case of shares of
capital stock, fully paid and nonassessable and, except as set forth on
Schedule 3.2(a)(iii) of the Company Disclosure Memorandum, are owned by the
Company or by a wholly owned Subsidiary of the Company, free and clear of all
Liens, and there are no Restrictive Agreements affecting any such shares, LLC
Interests, Partnership Interests or Other Investment Interests.
(b) Capital Structure. The authorized capital stock of
the Company consists of (i) 100,000,000 shares of Company Common Stock, of
which 34,468,609 shares were outstanding as of September 30, 2002, and (ii)
10,000,000 shares of preferred stock, $0.01 par value ("Company Preferred
Stock"), none of which are outstanding. All of the outstanding shares of
Company Common Stock have been duly authorized and are validly issued, fully
paid and nonassessable. Except for (i) options to purchase an aggregate of
956,750 shares of Company Common Stock granted pursuant to the Company's 1995
Stock Option Plan and 2000 Executive Incentive Compensation Plan, as amended,
and outstanding as the date hereof and (ii) the right of the limited partners
of the Company's Subsidiary, The Shoppes of North Port, Ltd., a Florida limited
partnership ("North Port"), to convert their limited partnership interests
("Company OPUs") in North Port, upon the terms and conditions contained in the
Limited Partnership Agreement of The Shoppes of North Port, Ltd, dated December
5, 2000 (the "North Port Agreement"), into an aggregate of 261,850 shares of
Company Common Stock as of the date hereof, no Equity Right of the Company or
any of its Subsidiaries is authorized or outstanding as of the date of this
Agreement and, other than pursuant to this Agreement or in connection with the
Private Placement, there is not outstanding or in effect as of the date of this
Agreement any commitment, agreement, plan, arrangement or understanding
(whether oral or written) of the Company or any of its Subsidiaries to issue
any such Equity Rights or to distribute to holders of any class or series of
its capital stock any evidences of indebtedness or assets. Except as set forth
on Schedule 3.2(b) of the Company Disclosure Memorandum, neither the Company
nor any of its Subsidiaries has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to
23
pay any dividend or make any other distribution in respect thereof (other than
pursuant to Section 5.13 and as required by REITs generally under the Code).
(c) Authority. The Company has all requisite power and
authority to enter into this Agreement and, subject to the Company Stockholder
Approvals (as defined below), to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
has been duly authorized by all necessary action on the part of the Company and
the consummation by the Company of the Merger and the other transactions
contemplated hereby has been duly authorized by all necessary action on the
part of the Company, subject to the Company Stockholder Approvals. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against it in
accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation by the Company of the Merger and the transactions
contemplated by this Agreement will not, conflict with, breach or result in any
Violation of (i) any provision of the articles of incorporation, bylaws or
analogous instruments of governance, operation or formation of the Company or
any of its Subsidiaries presently in effect, or (ii) except as disclosed in
Section 3.1(c) of the Company Disclosure Memorandum, any loan or credit
agreement, note, mortgage, indenture, lease, Company Plan (as defined below) or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, writ, order, decree, pronouncement, edict, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective properties or assets, except in the case of
this clause (ii) for any such Violation which would not reasonably be expected
to have a Company Material Adverse Effect. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery by the Company of this Agreement
or the consummation by the Company of the Merger or the transactions
contemplated hereby, the failure to obtain which would reasonably be expected
to have a Company Material Adverse Effect, except for (i) the filing with the
SEC of the Form S-4 and the Joint Proxy Statement in definitive form relating
to the Company Stockholders' Meeting to vote upon the Company Stockholder
Approvals and such reports under the Exchange Act as may be required in
connection with this Agreement, the Merger and the transactions contemplated
hereby and thereby, and the obtaining from the SEC of such effectiveness and
other orders as may be required in respect of the Form S-4, (ii) the filing of
the Articles of Merger and such other appropriate documents with the SDAT and
the Georgia Secretary of State and relevant authorities of other jurisdictions
in which the Company is qualified to transact business, and (iii) compliance
with and filings required by the rules and regulations of the New York Stock
Exchange. The Board of Directors of the Company (the "Company Board") has
unanimously approved this Agreement, the Merger and all of the transactions
contemplated hereby and thereby and has resolved unanimously to recommend that
holders of the Company Common Stock approve, adopt and vote in favor of the
Company Stockholder Approvals.
(d) Company SEC Documents. The Company has made
available to IRT a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by the Company and
each of its Subsidiaries with the SEC since January 1, 2000 (as such documents
have been amended to date, the "Company SEC Documents") which are all the
documents (other than preliminary material) that the Company was required to
file with the SEC since such date. As of their respective dates, the Company
SEC Documents complied in
24
form in all material respects with the requirements of the Securities Act, the
Exchange Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the Trust Indenture Act, as the case
may be, and the rules and regulations thereunder, and none of the Company SEC
Documents contained, at the time they were filed, any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein (in the case of Company SEC
Documents not constituting Securities Act Registration Statements, in light of
the circumstances under which they were made), not misleading. The consolidated
financial statements of the Company included in the Company SEC Documents
comply in all material respects with all applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP applied on a consistent basis during the
periods and at the dates involved (except as may be indicated in the notes
thereto or, in the case of unaudited or interim statements, as permitted by
Form 10-Q under the Exchange Act) and fairly present (subject, in the case of
the unaudited or interim statements, to normal and recurring audit adjustments)
the consolidated financial position of the Company and its Subsidiaries as at
the dates thereof and the consolidated results of their operations,
stockholders' equity and cash flows for the periods then ended. Except as set
forth on Schedule 3.2(d) of the Company Disclosure Memorandum, since December
31, 2001, neither the Company nor any of its Subsidiaries has incurred any
liabilities except for (i) liabilities or obligations incurred in the ordinary
course of business consistent with past practice, (ii) liabilities incurred in
connection with or as a result of the Merger and the transactions contemplated
thereby, (iii) liabilities of a type that is the subject of any other
representation of the Company, e.g., environmental or litigation matters, etc.,
and (iv) liabilities and obligations which would not reasonably be expected to,
individually or in the aggregate, result in a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has directly or indirectly
guaranteed any obligation or other liability of any third-party (other than any
affiliate of the Company as described in the Company SEC Documents).
(e) Information Supplied. None of the information
supplied or to be supplied by the Company expressly for inclusion or (to the
extent permitted by applicable Rules of the SEC) incorporation by reference in
(i) the Form S-4 shall, at the time the Form S-4 is declared effective by the
SEC under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, not misleading, and (ii) the Joint Proxy
Statement shall, at the date first mailed to holders of the Company Common
Stock through and including the date of the Company Stockholders' Meeting,
contain any untrue statement of a material fact about the Company or omit to
state any material fact about the Company required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Form S-4 shall, at the time it is
declared effective by order of the SEC through and including the Effective
Time, comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations of the SEC thereunder. If at any
time prior to the Effective Time any event with respect to the Company or any
of its affiliates or Subsidiaries occurs which is required to be described in
any amendment of or supplement to the Form S-4 or the Joint Proxy Statement,
such event promptly shall be so described and such amendment or supplement
promptly shall be filed with the SEC and, as required by applicable law
(including applicable rules and regulations of the SEC and the New York Stock
Exchange), delivered to the holders of Company Common Stock. The Joint Proxy
Statement shall, on the date first mailed to holders of Company Common Stock in
connection with the Company Stockholders' Meeting through and
25
including the date of the Company Stockholders' Meeting, comply as to form in
all material respects with all applicable rules and regulations under the
Securities Act and the Exchange Act. All applications, filing and documents
that the Company or any of its Subsidiaries is responsible for filing with any
Governmental Entity in connection with this Agreement or the transaction
contemplated hereby shall comply as to form in all material respects with all
applicable laws and regulations.
(f) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all consents, permits, licenses, franchises, variances,
exemptions, registrations qualifications, dispensations concessions, orders,
permissions, authorizations and approvals of all Governmental Entities which
are material to the operation of their respective businesses (the "Company
Permits"). The Company and its Subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply would not reasonably
be expected to have a Company Material Adverse Effect. The respective
businesses of the Company and its Subsidiaries are not being conducted in
violation of any statute, judgment, writ, order, decree, edict, pronouncement,
law, ordinance or regulation of any Governmental Entity, except for violations
which do not, and would not reasonably be expected to have a Company Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct the same.
(g) Litigation. Except as set forth on Schedule 3.2(g)
of the Company Disclosure Memorandum, there is no Proceeding pending or, to the
knowledge of the Company, threatened, against or affecting the Company or any
of its Subsidiaries or their respective assets, which, if determined adversely
to the Company or any of its Subsidiaries, would reasonably be expected to have
a Company Material Adverse Effect; nor is there any judgment, decree, writ,
order, edict, pronouncement, injunction, rule or order of any Governmental
Entity or arbitral authority outstanding against the Company or any of its
Subsidiaries having, or which would reasonably be expected to have, a Company
Material Adverse Effect.
(h) Taxes.
(i) The Company and each of its Subsidiaries
has timely filed all material tax returns required to be filed by it and has
paid (or the Company has paid on its behalf) all taxes required to be paid as
shown on such returns. The most recent financial statements contained in the
Company SEC Documents reflect an adequate reserve for all taxes payable by the
Company and its Subsidiaries accrued through the date of such financial
statements. Since January 1, 1997, neither the Company nor any of its
Subsidiaries has incurred any liability for taxes under Sections 857(b), 860(c)
or 4981 of the Code. No event has occurred and no condition exists which
presents a risk that any material tax liability described in the preceding
sentence could be imposed upon the Company and its Subsidiaries. No material
deficiencies for any taxes have been proposed, asserted or assessed by any
taxing jurisdiction against the Company or any of its Subsidiaries. No requests
for waivers of the time to assess taxes are pending and no tax returns of the
Company or any of its Subsidiaries have been or are currently being audited by
any taxing jurisdiction. There are no tax Liens on any asset of the Company or
any of its Subsidiaries other than Liens for current taxes not past due and
payable. None of the Company's federal income tax returns has been the subject
of an audit by the IRS.
26
(ii) The Company (A) for all taxable years
commencing with 1997, has been subject to taxation as a REIT within the meaning
of Section 856 of the Code and has qualified as a REIT for all such years, (B)
has operated since December 31, 2001 to the date of this representation, and
intends to continue to operate, in such a manner as to qualify as a REIT for
each taxable year ending before or on the later of December 31, 2002 and the
Closing Date, and (C) has not taken or omitted to take any action which would
reasonably be expected to result in a challenge to its status as a REIT and, to
the Company's knowledge, no such challenge is pending or threatened. Each
Subsidiary of the Company which is a partnership, joint venture or limited
liability company either (1)(x) has been treated since the later of its
formation and the acquisition by the Company of a direct or indirect interest
therein and continues to be treated for federal income tax purposes either as a
partnership or as an entity that is disregarded for federal income tax purposes
and not as a corporation or as an association taxable as a corporation and (y)
has not since the later of its formation and the acquisition by the Company of
a direct or indirect interest therein, owned any assets (including, without
limitation, securities) that would cause the Company to violate Section
856(c)(4) of the Code or (2)(x) met the conditions set forth in clause (1)(x)
and (1)(y) as of December 31, 2001 and (y) as of December 31, 2002, will be
treated for federal income tax purposes as a corporation and will qualify as a
taxable REIT Subsidiary under Section 856(l) of the Code. Each Subsidiary of
the Company which is a corporation (aa) has been since its formation (or, if
later, since its acquisition by the Company) a qualified REIT subsidiary under
Section 856(i) of the Code or (bb) as of December 31, 2002 will qualify as a
taxable REIT subsidiary under Section 856(l)of the Code. Except as set forth in
Schedule 3.2(h) hereto, neither the Company nor any Subsidiary of the Company
holds any asset (xx) the disposition of which would be subject to rules similar
to Section 1374 of the Code as a result of an election under IRS Notice 88-19
or Temporary Treas. Reg. ss.1.337(d)-5T or (yy) which is subject to a consent
filed pursuant to Section 341(f) of the Code and the regulations thereunder.
(iii) To the knowledge of the Company, as of the
date hereof, the Company is a "domestically-controlled REIT" within the meaning
of Section 897(h)(4)(B) of the Code.
(iv) The Company and its Subsidiaries have
complied in all material respects with all applicable laws, rules and
regulations relating to the withholding of taxes and the payment thereof to
appropriate authorities, including taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee or independent
contractor, and taxes required to be withheld and paid pursuant to Section 1441
or 1442 of the Code or similar provisions under foreign law.
(v) Neither the Company nor any of its
Subsidiaries is a party to any tax allocation or sharing agreement, is or has
been a member of an affiliated group filing a consolidated federal income tax
return (on a consolidated, combined, unitary or other similar state, local or
foreign tax return) or has any tax liability of any Person under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law, or as a transferee or successor, by contract or otherwise.
27
(vi) During the five-year period ending on the
date hereof, the Company has not been a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the Code.
(vii) The Company does not have and has not had a
permanent establishment in any foreign country as defined in any applicable
income tax treaty or convention between the United States and such foreign
country.
(viii) The Company has not taken or agreed to take
any action, and does not have any knowledge of any fact or circumstance, that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(i) Properties.
(i) Schedule 3.2(i) of the Company Disclosure
Memorandum contains a true and complete list of all of the real properties in
which the Company has an interest (the "Company Properties"). Except as set
forth on Schedule 3.2(i) of the Company Disclosure Memorandum, either the
Company or one of its Subsidiaries owns fee simple title to each of the Company
Properties, except where the failure to own such title would not have a Company
Material Adverse Effect.
(ii) Other than as set forth on Schedule 3.2(i)
of the Company Disclosure Memorandum, the Company Properties are not subject to
any Liens or Property Restrictions.
(iii) Valid policies of title insurance (or fully
paid and enforceable commitments therefor) have been issued insuring the
Company's or its applicable Subsidiary's fee simple title or leasehold estate,
as the case may be, to the Company Properties in amounts which are approximately
equal to the purchase price thereof paid by the Company or the applicable
Subsidiary of the Company therefor, except where the failure to obtain such
title insurance would not reasonably be expected to have a Company Material
Adverse Effect.
(iv) The Company has:
(A) not failed to obtain a certificate,
permit or license from any Governmental Entity having jurisdiction over
any of the Company Properties where such failure would reasonably be
expected to have a Company Material Adverse Effect and no knowledge of
any pending threat of modification or cancellation of any of the same
which would reasonably be expected to have a Company Material Adverse
Effect,
(B) not received any written notice of
any violation of any federal, state or municipal law, ordinance, order,
rule, regulation or requirement affecting any of the Company Properties
issued by any Governmental Entity which would reasonably be expected to
have a Company Material Adverse Effect, and
(C) no knowledge of (1) any structural
defects relating to the Company Properties, (2) Company Properties the
building systems of which are not in working order, (3) physical damage
to any Company Property for which there is not
28
insurance in effect covering the cost of the restoration and the lost
revenue (subject to a commercially reasonable deduction or retention
limit) or zoning or building code violations, except such structural
defects, building systems not in working order, physical damage and
violations, which, singly or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
(v) Neither the Company nor any of the
Subsidiaries of the Company has received any written or published notice to the
effect that (A) any condemnation or involuntary rezoning proceedings are pending
or threatened with respect to any of the Company Properties or (B) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the Company Properties or by the continued
maintenance, operation or use of the parking areas, other than such notices
which, singly or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect.
(vi) All properties under development or
construction by the Company or its Subsidiaries as of the date hereof (the
"Company Development Properties") and all properties proposed for acquisition,
development or commencement of construction prior to the Effective Time by the
Company and its Subsidiaries as of the date hereof (the "Company Future
Development Properties") are listed in Schedule 3.2(i) of the Company Disclosure
Memorandum. All material executory agreements entered into by the Company or any
of its Subsidiaries relating to the development or construction of the Company
Development Properties or the Company Future Development Properties are listed
in Schedule 3.2(i) of the Company Disclosure Memorandum.
(vii) As of the date hereof, the Company has no
capital expenditures in excess of $100,000 for required or planned improvements,
repairs or replacements with respect to any Company Property other than with
respect to Company Development Properties and Company Future Development
Properties.
(j) No Payments to Employees, Officers or Directors.
There are no arrangements, agreements or plans pursuant to which cash and
non-cash payments that will or may become payable to any employee, officer or
director of the Company or any Subsidiary of the Company as a result of the
Merger or a termination of service subsequent to the consummation of the Merger
and the respective amounts of such payments. Since July 29, 2002, no extension
of credit in the nature of a personal loan has been made by the Company,
directly or indirectly, to or for the benefit of any Company director or
executive officer.
(k) Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents or set forth on Schedule 3.2(k) of the
Company Disclosure Memorandum, since December 31, 2001, the Company and its
Subsidiaries have conducted their respective businesses in the ordinary course
(taking into account prior practices, including the acquisition and disposition
of properties and issuance of securities) and there has not been (i) any
circumstance, event, occurrence, change or effect in regard to the Company that
has had a Company Material Adverse Effect, nor has there been any circumstance,
event, occurrence, change or effect in regards to the Company that with the
passage of time would reasonably be expected to result in a Company Material
Adverse Effect, (ii) any damage, destruction or loss,
29
whether or not covered by insurance, that has had or would reasonably be
expected to have a Company Material Adverse Effect or (iii) any change made
prior to the date of this Agreement in accounting methods (whether for financial
accounting or tax purposes), principles or practices by the Company or any of
its Subsidiaries materially affecting its assets, liabilities or business,
except as required by a change in GAAP.
(l) Opinion of Financial Advisor. The Company Board has
received the opinion of CIBC World Markets Corp. dated the date of this
Agreement, a true and complete copy of which will be delivered (but not
addressed) to IRT solely for informational purposes after receipt thereof by the
Company, to the effect that as of such date the consideration to be paid by the
Company to the holders of the IRT Common Stock in the Merger is fair from a
financial point of view to the Company.
(m) Brokers; Schedule of Fees and Expense. No broker,
investment banker, financial advisor or other Person, other than CIBC Word
Markets Corp., the fees and expenses of which are described in the engagement
letter dated October 1, 2001, between CIBC World Markets Corp. and the Company
and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Incorporated, the fees and expenses of which are
described in the engagement letter dated October 24, 2002 between ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ Incorporated and the special committee of the Company Board formed
for the purpose of considering the terms and conditions of the Private
Placement, true, correct and complete copies of which have previously been given
to IRT, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries.
(n) Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of the Company Common Stock is the only
vote of the holders of any class or series of capital stock of the Company
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby and thereby (other than the Private Placement). Under
Section 312.07 of the New York Stock Exchange Listed Company Manual, an
affirmative vote of the holders of a majority of the votes cast at the Company
Stockholders' Meeting with respect to the issuance of the Company Common Stock
in the Private Placement is required for the approval of those shares for
listing on the New York Stock Exchange, provided that the total votes cast
represents over 50% in interest of all securities entitled to vote on the
Private Placement.
(o) Material Contracts; Defaults.
(i) Schedule 3.2(o) of the Company Disclosure
Memorandum sets forth all "Material Contracts" of the Company as of the date
hereof as required to be disclosed or to be filed with the SEC as an exhibit to
its Annual Report on Form 10-K in accordance with Item 601(b)(10) of Regulation
S-X, as amended, as promulgated by the SEC.
(ii) Except as set forth on Schedule 3.2(o) of
the Company Disclosure Memorandum, neither the Company nor any Subsidiary of the
Company has received a written notice that the Company or any of its
Subsidiaries is in violation of or in default under (nor to the knowledge of the
Company does there exist any condition which upon the passage of time or the
giving of notice or both would cause such a violation of or default under) any
Material Contract,
30
to which it is a party or by which it or any of its properties or assets is
bound, nor to the knowledge of the Company does such a violation or default
exist, except to the extent such violation or default, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
(p) Investment Company Act. The Company is not (and
immediately after consummation of the Merger and the other transactions
contemplated by this Agreement shall not be) an investment company or a company
controlled by an investment company within the meaning of, or otherwise subject
to any provisions of, the Investment Company Act and the rules and regulations
of the SEC thereunder.
(q) Benefit Plans. Except as set forth on Schedule 3.2(q)
of the Company Disclosure Memorandum or as would not reasonably expected to have
a Company Material Adverse Effect, (A) the company is in compliance with the
terms of all Company Plans, including any such plan that is an "employee benefit
plan" as defined in Section 3(3) of ERISA, and such Company Plans are in
compliance with all applicable requirements of law, including ERISA and the Code
and, without limitation, the requirements of ERISA and all tax rules for which
favorable tax treatment is intended, and (B) there are no liabilities (including
unfunded pension or healthcare liabilities) or obligations with respect to any
such Company Plan, whether accrued, contingent or otherwise (other than
obligations by the Company and its Subsidiaries to make contributions, and for
such plan to pay benefits and administrative costs, incurred in the ordinary
course), nor to the knowledge of the Company are any such liabilities or
obligations expected to be incurred. For purposes of this Section 3.2(q),
"Company Plan" shall include any bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program
agreement or arrangement, sponsored, maintained or contributed to or required to
be contributed to by the Company or its Subsidiaries or by any trade or
business, whether or not incorporated, that together with the Company would be
deemed a "single employer" within the meaning of Section 4001(b)(1) of ERISA,
for the benefit of any employee or former employee of the Company or its
Subsidiaries, whether formal or informal and whether legally binding or not.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 COVENANTS OF THE COMPANY AND IRT. During the period
from the date of this Agreement and continuing until the earlier of the
Effective Time and the termination of this Agreement, the Company and IRT each
agrees as to itself and its respective Subsidiaries that (except as otherwise
expressly contemplated or permitted by this Agreement, or to the extent that the
other party shall consent in writing):
(a) Ordinary Course. Each of the Company, IRT and their
respective Subsidiaries shall conduct its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted. Each
of the Company, IRT and their respective Subsidiaries shall use its commercially
reasonable efforts to preserve intact its present business
31
organizations and assets, keep available the services of its present officers
and employees and preserve satisfactory relationships with customers, suppliers,
vendors and others having business dealings with it to the end that its goodwill
and on-going businesses shall not be impaired in any material respect at the
Effective Time.
(b) Dividends; Changes in Stock. Neither the Company nor
IRT shall, nor shall the Company or IRT permit any of its Subsidiaries (other
than those Subsidiaries that are wholly owned) to, nor shall either such party
or any of their respective Subsidiaries propose to, (i) except as provided in
Sections 2.6 and 5.13, declare or pay any dividends (whether of cash, stock or
other property) on or make any other distributions in respect of its capital
stock, (ii) split, combine or reclassify, or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, any shares of its capital stock, or (iii) redeem, repurchase or otherwise
acquire for value, or permit any of its Subsidiaries to redeem, repurchase or
otherwise acquire for value, any shares of its capital stock, except for (A)
redemptions of Company Common Stock required under Article VII of its Articles
of Amendment and Restatement in order to preserve the status of the Company as a
REIT under the Code, (B) redemptions or conversions of the IRT OPUs under the
IRT Partners Agreement, (C) redemptions or conversions of the Company OPUs,
whether or not outstanding on the date of this Agreement, under the North Port
Agreement, and (D) redemptions or conversions of the limited partnership units
of the Company's Subsidiary, ▇▇▇▇▇▇ ▇▇▇▇▇ Village, Ltd., under the Agreement of
Limited Partnership of ▇▇▇▇▇▇ ▇▇▇▇▇ Village, Ltd. dated as of December 30, 1998.
(c) Issuance of Securities. Neither the Company nor IRT
shall, nor shall the Company or IRT permit any of their respective Subsidiaries
to, issue, deliver or sell any shares of any class or series of its capital
stock, any voting debt securities or any securities convertible into, or
exchangeable or exercisable for, any such shares of capital stock or voting debt
securities, other than:
(i) in the case of the Company, (A) shares of
Company Common Stock or securities convertible into, or exchangeable or
exercisable for, Company Common Stock, issued pursuant to any Company Plan or
dividend reinvestment or stock purchase plan presently in effect, (B) shares of
Company Common Stock issued upon conversion or redemption of Company OPUs
outstanding as of the date of this Agreement or issued upon conversion or
redemption of additional Company OPUs or similar securities issued pursuant to
the following clause (C) after the date hereof, (C) additional Company OPUs or
similar securities, provided that such securities are convertible into, or
redeemable for, Company Common Stock at a price per share of not less than
$13.30, (D) shares of Company Common Stock issued in connection with any
acquisition expressly permitted under Section 4.1(g) at a price per share of not
less than $13.30, (E) shares of Company Common Stock issued in connection with
the Private Placement at a price per share of not less than $13.30, (F) shares
of Company Common Stock issued to non-affiliates of the Company at a price per
share of not less than $13.30; and (G) shares of Company Common Stock issued to
affiliates (as that term is defined in Rule 405 under the Securities Act) of the
Company (other than issuances under Section 4.1(c)(i)(E)) at a price per share
equal to the greater of (x) the then fair market value of the Company Common
Stock (taking into account the then current market price and the terms
32
and conditions of the transaction, e.g., illiquidity discounts or commissions
payable) and (y) $13.30; or
(ii) in the case of IRT, (A) up to 200,000 shares
of IRT Common Stock or securities convertible into, or exchangeable or
exercisable for, 200,000 shares of IRT Common Stock pursuant to IRT Plans
presently in effect, (B) shares of IRT Common Stock issued upon exercise of the
IRT Options, and (C) shares of IRT Common Stock issued upon conversion or
redemption of IRT OPUs outstanding as of the date of this Agreement.
(d) Incurrence of Indebtedness. Other than, in the case
of the Company, in connection with the financing of the aggregate Cash
Consideration, and, in the case of both the Company and IRT, ordinary course
borrowings for working capital needs under existing lines of credit consistent
with past practices or as otherwise set forth on Schedule 4.1(d) of the Company
Disclosure Memorandum or IRT Disclosure Memorandum, as applicable, none of the
Company, IRT or any of their respective Subsidiaries shall incur, assume or
guarantee any additional indebtedness, nor secure any indebtedness by granting
or suffering to permit any Liens on any of their respective assets; PROVIDED,
HOWEVER, IRT and the Company may utilize its respective bank lines of credit,
incur other indebtedness and enter into interest rate protection agreements
consistent with its policies in connection with any asset acquisition or
disposition expressly permitted under Section 4.1(g), PROVIDED that any Liens
created thereby are secured solely by the assets so acquired.
(e) Governing Documents. None of the Company, IRT or any
of their respective Subsidiaries, shall amend or restate or propose to amend or
restate its articles of incorporation, bylaws or any analogous organizational or
constituent instruments, except to the extent necessary to facilitate
consummation of the Merger or as otherwise contemplated herein.
(f) No Solicitation and Standstill.
(i) On and after the date hereof and prior to
the Effective Time of the Merger, each of the Company and IRT agrees that,
except as expressly permitted herein:
(A) neither it nor any of its
Subsidiaries shall invite, initiate, solicit or encourage, directly or
indirectly, any inquiries, proposals, discussions or negotiations or
the making or implementation of any announcement, proposal or offer
(including, without limitation, any proposal or offer to its
stockholders or shareholders) with respect to any direct or indirect
(1) merger, consolidation, business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction, (2)
sale, acquisition, tender offer, exchange offer (or the filing of a
registration statement under the Securities Act in connection with such
an exchange offer), share exchange or other transaction or series of
related transactions that, if consummated, would result in the issuance
of securities representing, or the sale, exchange or transfer of, 15%
or more of its outstanding voting equity securities, or (3) sale,
lease, exchange, mortgage, pledge, transfer or other disposition
("Transfer") of any of its assets in one or a series of related
transactions that, if consummated, would result in the Transfer of more
than 20% of its assets, other than the Merger and, in the case of the
Company, the Private Placement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"), or
33
engage in any discussions or negotiations with or provide any
confidential or non-public information or data to, or afford access to
properties, books or records to, any Person relating to, or that may
reasonably be expected to lead to, an Acquisition Proposal, or enter
into any letter of intent, agreement in principle or agreement relating
to an Acquisition Proposal, or propose publicly to agree to do any of
the foregoing, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal (including, without limitation, by
amending or granting any waiver under, the IRT Rights Agreement);
(B) neither it nor any of its
Subsidiaries will permit any officer, director, employee, affiliate,
agent, investment banker, financial advisor, attorney, accountant,
broker, finder, consultant or other agent or representative of it
(each, a "Representative") to engage in any of the activities described
in Section 4.1(f)(i)(A);
(C) it will immediately cease and cause
to be terminated any existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any of the
foregoing (including, without limitation, any Acquisition Proposal) and
will take commercially reasonable actions to inform each of its
Representatives of the obligations undertaken in this Section 4.1(f)
and to cause each of its Representatives to comply with such
obligations; and
(D) it will (1) notify the other party
promptly (but in any event within 24 hours), orally and in writing, if
it or any of its Representatives receives (x) an Acquisition Proposal
or any amendment or change in any previously received Acquisition
Proposal, (y) any request for confidential or nonpublic information or
data relating to, or for access to its properties, books or records by
any Person that has made, or to such party's knowledge may be
considering making, an Acquisition Proposal, or (z) any oral or written
expression that any such activities, discussions or negotiations are
sought to be initiated or continued with it, and, as applicable,
include in such notice the identity of the Person making such
Acquisition Proposal, indication or request, the material terms of such
Acquisition Proposal, indication or request and, if in writing, shall
promptly deliver to the other party copies of any proposals,
indications of interest, indication or request along with all other
related documentation and correspondence; and (2) will keep the other
party informed of the status and material terms of (including all
changes to the status or material terms of) any such Acquisition
Proposal, indication or request.
(ii) Notwithstanding Section 4.1(f)(i), neither
the Company nor IRT shall be prohibited from furnishing information to or
entering into discussions or negotiations with, any Person that makes a bona
fide written Acquisition Proposal thereto after the date hereof which was not
invited, initiated, solicited or encouraged, directly or indirectly, by the
Company or IRT or any of its Representatives on or after the date hereof, if,
and only to the extent that (i) a majority of the Company Board or the IRT
Board, as applicable, determines in good faith, after consultation with its
outside legal counsel, that the failure to furnish such information or enter
into discussions or negotiations could cause the members of the Company Board or
the IRT Board to breach their fiduciary duties under applicable law, (ii) the
Company or IRT, as applicable, complies with all of its obligations under this
Agreement, (iii) prior to furnishing
34
such information to, or entering into discussions or negotiations with, such
Person, the Company or IRT, as applicable, provides written notice to the other
party to the effect that it is furnishing information to, or entering into
discussions with, such Person and (iv) the Company or IRT, as applicable, enters
into a customary confidentiality agreement with such Person the material terms
of which are typical for similar transactions.
(iii) Notwithstanding anything to the contrary set
forth in Sections 4.1(f)(i) or (ii), in order to comply with its fiduciary
duties under applicable law, nothing contained in this Section 4.1(f) shall
prohibit the IRT Board from withdrawing, modifying, amending or qualifying its
recommendation of this Agreement and the Merger and recommending an Acquisition
Proposal to its shareholders: (A) if, but only if, IRT: (1) complies fully with
this Section 4.1(f) and (2) provides the Company with at least three business
days' prior written notice of its intent to withdraw, modify, amend or qualify
its recommendation of this Agreement or the Merger, (B) if, in the event that
during such three business days the Company makes a counter proposal to such
Acquisition Proposal (any such counter proposal being referred to in this
Agreement as the "Counter Proposal"), the IRT Board in good faith, taking into
account the advice of its financial advisors, determines (A) that the Counter
Proposal is not at least as favorable to IRT's shareholders as the Acquisition
Proposal, from a financial point of view, and (B) the Counter Proposal is not at
least as favorable generally to IRT's shareholders (taking into account all
financial and strategic considerations and other relevant factors, including
relevant legal, financial, regulatory and other aspects of such proposals, and
the conditions, prospects and time required for completion of such proposal),
and (C) IRT shall have terminated this Agreement in accordance with Section 7.1
and complied with Section 7.2.
(iv) Any disclosure that the Company Board or the
IRT Board may be compelled to make with respect to the receipt of an Acquisition
Proposal in order to comply with its duties to its stockholders imposed by
applicable law or Rule 14d-9 or 14e-2 under the Exchange Act will not constitute
a violation of this Section.
(v) Nothing in this Section shall (i) permit
either party to terminate this Agreement (except as expressly provided in
Article VII) or (ii) affect any other obligations of such party under this
Agreement.
(vi) Prior to the Closing, the Company agrees
that neither it nor its Representatives will in any manner, directly or
indirectly, effect or seek, offer or propose (whether publicly or otherwise) to
effect, or cause or participate in or in any way assist any other person to
effect or seek, offer or propose (whether publicly or otherwise) to effect or
participate in any acquisition of more than 4.99% of the outstanding voting
securities (or beneficial ownership thereof) of IRT or any of its Subsidiaries.
(g) Limitation on Acquisitions and Dispositions. Other
than pending asset sales, acquisitions or financings as set forth in Schedule
4.1(g) of the IRT Disclosure Memorandum, from the date of this Agreement to the
earlier of the Effective Time or termination of this Agreement, neither IRT nor
its Subsidiaries shall, without the prior written consent of the Company, not to
be unreasonably withheld (taking into account the terms of the Merger and the
impact of any proposed transaction on the transactions contemplated hereby),
purchase or acquire or sell, lease, encumber or otherwise dispose of or agree to
acquire or
35
purchase or agree to sell, lease, encumber or otherwise dispose of, any assets
or properties, or otherwise make any proposal, enter into any negotiations or
discussions, solicit or purchase any shares of capital stock or other equity
and/or debt interests of any other Person, in any case where the consideration
therefor is in excess of $25 million in the aggregate. Other than pending asset
sales, acquisitions or financings as set forth in Schedule 4.2(g) of the Company
Disclosure Memorandum, from the date of this Agreement to the earlier of the
Effective Time or termination of this Agreement, neither the Company nor its
Subsidiaries shall, without the prior written consent of IRT, not to be
unreasonably withheld (taking into account the terms of the merger and the
impact of any proposed transaction on the transactions contemplated hereby),
purchase or acquire or sell, lease, encumber or otherwise dispose of or agree to
acquire or purchase or agree to sell, lease, encumber or otherwise dispose of,
any assets or properties, or otherwise make any proposal, enter into any
negotiations or discussions, solicit or purchase any shares of capital stock or
other equity and/or debt interests of any other Person, in any case where the
consideration therefor is in excess of $100 million in the aggregate; PROVIDED,
HOWEVER, that in the case of purchases and acquisitions of assets or properties
by the Company, the aggregate consideration paid by the Company in excess of $50
million shall not exceed an amount equal to 200% of the aggregate net proceeds
from sales of equity securities by the Company subsequent to the date hereof as
permitted by Section 4.1(c) (except for issuances of securities under Section
4.1(c)(i)(E)).
(h) Other Actions. Neither the Company nor IRT shall, nor
shall the Company or IRT permit any of its Subsidiaries to, take any action that
would or reasonably would be likely to result in any of its representations and
warranties set forth in this Agreement being untrue as of the date made (to the
extent so limited) or any of the conditions to the Merger set forth in Article
VI hereof not being satisfied.
(i) Advice of Changes; SEC Filings. Each of the Company
and IRT shall confer on a regular basis with the other, report on operational
matters and promptly advise the other orally, promptly confirmed in writing, of
any change or event having, or which would reasonably be expected to have, a
Company Material Adverse Effect or an IRT Material Adverse Effect. Each party
promptly shall provide the other party with true and complete copies of all
filings made by it with the SEC, all filings made by it with any other
Governmental Entity outside the ordinary course of business and any Forms 13D
and 13G or any amendments thereto received from third persons.
(j) Certain Other Actions.
(i) From time to time prior to the Closing Date,
each of the Company and IRT promptly shall supplement or amend the Schedules to
this Agreement theretofore prepared by it with respect to any matter which, if
existing as of the date hereof, would have been required to be set forth
therein. It is hereby agreed, however, that no such supplement or amendment
shall be deemed to or constitute a cure of any breach of any representation or
warranty by the applicable party, unless all of the non-breaching parties
expressly agree thereto in writing.
(ii) The Company and IRT shall, and shall cause
each of their Subsidiaries to, duly and timely file all reports, federal, state
and local tax returns and other
36
documents required to be filed with federal, state, local and other authorities,
subject to extensions permitted by applicable law.
(iii) The Company and IRT shall not and each of
the Company and IRT shall cause its Subsidiaries not to, make, change or rescind
any express or deemed election relative to taxes, accounting methods,
conventions or principles which relate to such party or its Subsidiaries that
could materially increase such party's or any of its subsidiaries' tax
liabilities (unless such election or rescission is required by law or is
necessary (1) to preserve such party's status as a REIT, or (2) to qualify or
preserve the status of any Subsidiary as a partnership or disregarded entity for
federal income tax purposes, as a qualified REIT subsidiary under Section 856(i)
of the Code, or as a taxable REIT subsidiary under Section 856(l) of the Code,
as the case may be, in which event such party or the applicable Subsidiary shall
not fail to make such election in a timely manner).
(iv) The Company and IRT promptly shall notify
the other party of any Proceeding or audit pending against or with respect to
such party or its Subsidiaries in respect of any federal, state or local taxes.
SECTION 4.2 AFFILIATES. Prior to the Effective Time of the
Merger, IRT shall cause to be prepared and delivered to the Company a list
(reasonably satisfactory to counsel for the Company) identifying all Persons
who, at the time of the Company Stockholders' Meeting and IRT Shareholders'
Meeting, may be deemed to be "affiliates" of IRT as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). IRT shall use its commercially reasonable efforts to cause each
Person who is identified as a Rule 145 Affiliate in such list to deliver to the
Company on or prior to the Effective Time a written agreement, in the form
attached hereto as Exhibit A, that such Rule 145 Affiliate will not sell,
pledge, transfer or otherwise dispose of any Company Common Stock issued to such
Rule 145 Affiliate pursuant to the Merger, except pursuant to an effective
registration statement under the Securities Act or in compliance with paragraph
(d) of Rule 145 or as otherwise permitted by the Securities Act. The Company
shall be entitled to place legends as specified in such written agreements on
the certificates representing any Company Common Stock to be received pursuant
to the terms of this Agreement by such Rule 145 Affiliates who have executed
such agreements and to issue appropriate stop transfer instructions to the
transfer agent for the Company Common Stock issued to such Rule 145 Affiliates,
consistent with the terms of such agreements. The Company shall timely file the
reports required to be filed by it under the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Rule 145 Affiliate may reasonably request, all to the extent required
from time to time to enable such Rule 145 Affiliate to sell shares of Company
Common Stock received by such Rule 145 Affiliate in the Merger without
registration under the Securities Act pursuant to (i) Rule 145(d)(1) under the
Securities Act, as such rule may be amended from to time, or (ii) any successor
rule or regulation hereafter adopted by the SEC.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Joint Proxy
Statement.
37
(a) As promptly as practicable after execution of this
Agreement, (i) each of the Company and IRT shall prepare and file with the SEC
under the Exchange Act, one or more joint proxy statements/prospectuses, forms
of proxies and information statements (such joint proxy statements/prospectuses
and information statements together with any amendments or supplements thereto,
the "Joint Proxy Statement") relating to the Company Stockholders' Meeting and
the IRT Shareholders' Meeting and (ii) the Company shall prepare and file with
the SEC under the Securities Act one or more registration statements on Form S-4
(such registration statements, together with any amendments or supplements
thereto, the "Form S-4"), in which the Joint Proxy Statement will be included,
as one or more prospectuses, in connection with the registration under the
Securities Act of the Company Common Stock to be distributed to the holders of
the IRT Common Stock in the Merger. The respective parties will cause the Joint
Proxy Statement and the Form S-4, to comply as to form in all material respects
with the applicable provisions of the Securities Act, the Exchange Act and the
rules and regulations thereunder. Each of the Company and IRT shall furnish all
information about itself and its business and operations and all necessary
financial information to the other as the other may reasonably request in
connection with the preparation of the Joint Proxy Statement and the Form S-4.
The Company shall use its commercially reasonable efforts, and IRT will
cooperate with the Company, to file and have the Form S-4 declared effective by
the SEC as promptly as practicable (including clearing the Joint Proxy Statement
with the SEC). Each of the Company and IRT agree promptly to inform the other
and to correct any information provided by it for use in the Joint Proxy
Statement and the Form S-4 if and to the extent that such information shall have
become false or misleading in any material respect, and each of the parties
hereto further agrees to take all steps necessary to amend or supplement the
Joint Proxy Statement and the Form S-4 and to cause the Joint Proxy Statement
and the Form S-4 as amended or supplemented to be filed with the SEC and to be
disseminated to their respective stockholders and shareholders, in each case as
and to the extent required by applicable federal and state securities laws. Each
of the Company and IRT agrees that the information provided by it for inclusion
in the Joint Proxy Statement or the Form S-4 and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the respective
meetings of stockholders and shareholders of the Company and IRT will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company will advise and deliver copies (if any) to IRT, promptly after it
receives notice thereof, of any request by the SEC for amendment of the Joint
Proxy Statement or the Form S-4 or comments thereon and responses thereto or
requests by the SEC for additional information (regardless of whether such
requests relate to IRT or the Company), and the Company shall promptly notify
IRT of (i) the time when the Form S-4 has become effective, (ii) the filing of
any supplement or amendment thereto, (iii) the issuance of any stop order, and
(iv) the suspension of the qualification and registration of the Company Common
Stock issuable in connection with the Merger.
(b) Each of the Company and IRT shall use its
commercially reasonable efforts to timely mail the Joint Proxy Statement
contained in the Form S-4 to its respective stockholders or shareholders. IRT
also shall use its commercially reasonable efforts to cause ▇▇▇▇▇▇ & Bird LLP or
other counsel reasonably satisfactory to the Company to have delivered an
opinion, which opinion shall be filed with the SEC as an exhibit to the Form
S-4, as to the federal income tax matters described in Sections 6.2(f) and
6.3(e) and such other federal income tax matters as are required to be addressed
in the Form S-4 and the Joint Proxy Statement under
38
the applicable rules of the SEC. The Company shall use commercially reasonable
efforts to cause ▇▇▇▇▇▇▇▇▇ Traurig, P.A. or other counsel reasonably
satisfactory to IRT to have delivered an opinion, which opinion shall be filed
with the SEC as an exhibit to the Form S-4, as to the federal income tax matters
described in Sections 6.2(e) and 6.3(f) and such other federal income tax
matters as are required to be addressed in the Form S-4 and the Joint Proxy
Statement under the applicable rules of the SEC. Such opinions shall contain
customary exceptions, assumptions and qualifications and be based upon customary
representations.
(c) (i) IRT will duly call and give notice of and, as
soon as practicable following the date of this Agreement (but in no event sooner
than 20 business days following the date the Joint Proxy Statement is mailed to
the shareholders of IRT), convene and hold a meeting of its shareholders (the
"IRT Shareholders' Meeting") for the purpose of approving and adopting this
Agreement, the Merger and the transactions contemplated by this Agreement. IRT
shall, through its Board of Directors, recommend to its shareholders approval of
the IRT Shareholder Approval and include such recommendation in the Joint Proxy
Statement. Except pursuant to Section 4.1(f)(iii) or subsection (ii) below, the
IRT Board shall not withdraw, qualify or modify, or propose publicly to
withdraw, qualify or modify, in a manner adverse to the Company, its approval of
this Agreement or the Merger or its recommendation that the IRT shareholders
vote in favor of the IRT Shareholder Approval.
(ii) Notwithstanding the foregoing or anything
else in this Agreement to the contrary, the IRT Board may, on the Withdrawal
Date, withdraw, qualify or modify, or propose publicly to withdraw, qualify or
modify its approval of this Agreement or the Merger or its recommendation that
the IRT shareholders vote in favor of the IRT Shareholder Approval if, either
(A) the 30-Day Average Trading Price is less than $12.06, or (B) the 3-Day
Average Trading Price is less than $11.00. For the purpose of this subsection,
the "30-Day Average Trading Price" shall mean the weighted average trading price
per share of the Company Common Stock as quoted on the New York Stock Exchange
for all transactions during the thirty (30) trading days ending on (and
inclusive of) the fourth business day immediately preceding the scheduled date
of the IRT Shareholders' Meeting (such fourth day, the "Withdrawal Date"). For
the purpose of this subsection, the "3-Day Average Trading Price" shall mean the
weighted average trading price per share of the Company Common Stock as quoted
on the New York Stock Exchange for all transactions during the three (3) trading
days ending on (and inclusive of) the Withdrawal Date.
(iii) If the IRT Board shall take any action set
forth in subsection (ii) above, IRT shall provide written notice thereof to the
Company not later than 9:00 a.m., Eastern time, on the next day. Following the
receipt by the Company of such notice, the Company may terminate this Agreement
pursuant to 7.1(h)(1) or otherwise request that IRT adjourn or postpone the IRT
Shareholders' Meeting for up to an additional thirty (30) days in order to
permit the Company to prepare, file and disseminate any amendments or
supplements to the Joint Proxy Statement reflecting such withdrawal,
modification, amendment or qualification, and IRT shall cooperate in the
preparation, filing and dissemination of such material in accordance with
Section 5.1 hereof.
(d) The Company will duly call and give notice of and, as
soon as practicable following the date of this Agreement (but in no event sooner
than 20 business days following the
39
date the Joint Proxy Statement is mailed to the stockholders of the Company),
convene and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") for the purpose of approving (i) this Agreement, the Merger and the
transactions contemplated by this Agreement including but not limited to the
authorization and issuance of the Company Common Stock pursuant to Section 2.1,
(ii) the authorization and issuance of up to 6,911,000 shares of Company Common
Stock in a private placement (the "Private Placement") to occur immediately
prior to the Effective Time and (iii) the election of the person appointed to
serve as a director pursuant to Section 5.16 of this Agreement (collectively,
the "Company Stockholder Approvals"). The Company shall, through its Board of
Directors, recommend to its stockholders approval of the Company Stockholder
Approvals and include such recommendation in the Joint Proxy Statement. The
Company Board shall not withdraw, qualify or modify, or propose publicly to
withdraw, qualify or modify, in a manner adverse to IRT, the approval of the
Company Board of this Agreement, the Merger or the Private Placement or the
recommendation of the Company Board to Company Stockholders that they vote in
favor of the Company Stockholder Approvals.
(e) IRT and the Company shall use their commercially
reasonable efforts to convene their respective shareholder and stockholder
meetings on the same day, which day, subject to the provisions of Sections
5.1(c) and 5.1(d), shall be a day not later than 30 business days after the date
the Joint Proxy Statement is mailed.
(f) If on the date for the IRT Shareholders' Meeting and
the Company Stockholders' Meeting established pursuant to Section 5.1(e) of this
Agreement, either IRT or the Company has not received duly executed proxies for
a sufficient number of votes to approve the Merger, then both parties shall
recommend the adjournment or postponement of their respective shareholders and
stockholders meetings until one or more dates not later than ten business days,
or the earliest practicable date if notice of the adjourned meeting is required
to be given under the Company's or IRT's charters or bylaws or under the MGCL or
the GBCC, respectively, after the originally scheduled date of the meetings.
SECTION 5.2 ACCESS TO INFORMATION. Upon reasonable notice, the
Company and IRT each shall (and shall cause each of its Subsidiaries to) afford
to the officers, employees, accountants, counsel and other agents and
representatives of the other, access, during normal business hours during the
period from the date hereof until the Effective Time, to all of its properties,
books, contracts, commitments and records and, during such period, the Company
and IRT each shall (and shall cause each of its Subsidiaries to) furnish
promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the Securities Act, the Exchange Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the Trust
Indenture Act and (b) all other information concerning its business, properties
and personnel as such other party reasonably may request. The parties shall hold
all such information in strict confidence pursuant to the confidentiality
provisions of that certain letter agreement between the Company and IRT dated
June 9, 2001 (the "Confidentiality Agreement"). In the event of termination of
this Agreement for any reason, each party promptly shall return all such
information obtained from any other party, and any copies made of (and destroy
other extrapolations from or work product or analyses based in whole or in part
on) such documents, to such other party. The provisions of the Confidentiality
Agreement currently in effect on the date hereof are hereby ratified and
affirmed and will continue in full force and effect in accordance with their
terms and survive any termination of this Agreement.
40
SECTION 5.3 CONSENTS AND APPROVALS. Each of the Company and IRT
shall take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger (including
furnishing all information in connection with approvals of or filings with any
Governmental Entity) and shall cooperate with and furnish information to each
other in connection with any such requirements imposed upon it or any of its
Subsidiaries in connection with the Merger. Each of the Company and IRT shall,
and shall cause its Subsidiaries to, take all reasonable actions necessary to
obtain (and shall cooperate with the other in obtaining) each consent,
authorization, order or approval of, and each exemption by, each Governmental
Entity and other person or entity, required to be obtained or made by the
parties hereto or any of their respective Subsidiaries in connection with this
Agreement and the Merger or the taking of any action contemplated hereby or
thereby where the failure to obtain such consent would reasonably be expected to
result in a Company Material Adverse Effect or an IRT Material Adverse Effect,
as applicable.
SECTION 5.4 VALIDITY OF SHARES. All shares of Company Common
Stock issued in the Merger, when so issued in accordance with Article II, shall
be duly and validly authorized, fully paid and non-assessable.
SECTION 5.5 EMPLOYEE BENEFIT PLANS AND EMPLOYMENT MATTERS.
(a) After the Effective Time, all employees of IRT who
are employed by the Company shall be eligible to participate in the same manner
as other similarly situated employees of the Company in any "employee benefit
plan," as defined in Section 3(3) of ERISA, sponsored or maintained by the
Company after the Effective Time or, if the Company determines it is not
practicable for such employees to do so immediately after the Effective Time,
then such employees shall continue to be eligible to participate in an employee
benefit plan of IRT which is continued by the Company until such time as the
Company determines it is practicable to include them in its employee benefit
plans for similarly situated employees of the Company as contemplated above.
With respect to each such employee benefit plan, service with IRT or any of its
Subsidiaries (as applicable) and the predecessor of any of them (to the extent
past service has been so recognized by IRT as of the Effective Time) shall be
included for purposes of determining eligibility to participate, vesting (if
applicable) and determination of the level of entitlement to benefits, under
such employee benefit plan. The Company shall, or shall cause its Subsidiaries
to, (i) waive, to the extent permitted by the related plans, third-party
providers and carriers, all limitations as to preexisting conditions, exclusions
and waiting periods with respect to participation and coverage requirements
applicable to all employees of IRT who are employed by the Company under any
welfare plan that such employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for such employees immediately
prior to the Effective Time, and (ii) provide each such employee of IRT who is
employed by the Company with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
(b) Subject to continuation as provided in clause (a)
above, the "employee benefit plans," as defined in Section 3(3) of ERISA, of IRT
shall be terminated and discontinued
41
effective as of the Effective Time. In addition, the IRT Property Company 2000
Employee Stock Purchase Plan and the IRT Property Company Deferred Compensation
Plan for Outside Directors shall be terminated and discontinued, and all account
balances shall be paid out in a lump sum to all participants, effective as of
the Effective Time.
(c) The Board of Directors of IRT or a committee of
"Non-Employee Directors" thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act) shall adopt a resolution in advance of the
Effective Time providing that the disposition by the officers and directors of
IRT Common Stock, IRT Options or other equity securities of IRT pursuant to the
Merger or the other transactions contemplated by this Agreement is intended to
be exempt from liability pursuant to Rule 16b-3 under the Exchange Act. The
Board of Directors of the Company or a committee of Non-Employee Directors
thereof shall adopt a resolution in advance of the Effective Time providing that
the receipt by IRT Insiders (as defined below) of Company Common Stock or other
equity securities of the Company pursuant to the Merger or the other
transactions contemplated by this Agreement (to the extent such equity
securities are listed in the Section 16 Information, as defined below) is
intended to be exempt from liability pursuant to Rule 16b-3 under the Exchange
Act. For purposes of this Section, the term "IRT Insiders" means those officers
and directors of IRT who will become subject to the reporting requirements of
Section 16(a) of the Exchange Act as insiders of the Company in conjunction with
the Merger, and the term "Section 16 Information" means information provided by
IRT that is accurate in all respects regarding IRT Insiders and the number of
shares of Company Common Stock or other Company equity securities to be acquired
by each such IRT Insider in connection with the Merger and other transactions
contemplated by this Agreement.
SECTION 5.6 EXPENSES. Except as hereafter provided in Section
7.2, all fees and expenses incurred in connection with the preparation,
execution and delivery of this Agreement (including all Exhibits hereto and
instruments and agreements prepared and delivered in connection herewith), the
Merger and the transactions contemplated hereby and thereby shall be paid by the
party incurring such fees or expenses, whether or not the Merger is consummated
or abandoned; PROVIDED, HOWEVER, that if the IRT Board withdraws, modifies,
amends or qualifies its approval or recommendation of the Merger or this
Agreement pursuant to Section 5.1(c)(ii) and this Agreement is not terminated
pursuant to either Section 7.1(g)(ii) or 7.1(h)(1), then the Company shall pay
the costs and expenses of IRT in connection with the IRT Shareholders' Meeting
incurred after the date of such withdrawal, modification, amendment or
qualification.
SECTION 5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, the Surviving Corporation or its
successors (the "Indemnifying Parties") shall, indemnify, defend and hold
harmless each person who is now, or at any time prior to the date hereof has
been or who prior to the Effective Time becomes, an officer, director, employee
or agent of IRT or any of its Subsidiaries (the "Indemnified Parties") from and
against (i) any and all losses, claims, damages, costs, expenses, liabilities,
judgments or amounts that are paid in settlement with the approval of the
Indemnifying Party (which approval shall not unreasonably be withheld) of or in
connection with any claim, action, suit, proceeding, case or investigation
("Action") based or arising, in whole or in part, out of or in connection with
the fact that such person is or was a director, officer or employee of IRT or
any of its Subsidiaries or arising as a result of this Agreement or the
transactions contemplated hereby, whether pertaining to any matter existing or
occurring prior to the Effective Time and whether asserted or claimed
42
prior to, at or after the Effective Time, in each case to the fullest extent IRT
would be permitted under the GBCC and its charter and bylaws to indemnify its
own directors, officers, employees and agents, as the case may be including
provisions relating to the advancement of expenses in advance of the final
disposition of any such Action to each Indemnified Party to the fullest extent
permitted under the GBCC and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act upon receipt of any
undertaking required by the GBCC and its charter and bylaws. Any Indemnified
Party electing to claim indemnification under this Section, upon learning of any
Action, shall promptly notify the Indemnifying Party of such election (but the
failure so to notify the Indemnifying Party shall not relieve it from any
liability which it may have under this Section, except to the extent such
failure materially prejudices it or if it otherwise forfeits substantive rights
and defenses as a result of such failure), and shall deliver to the Indemnifying
Party the undertaking required by the GBCC and its charter and bylaws. If any
such Action is brought against any of the Indemnified Parties and such
Indemnified Parties notify the Indemnifying Parties of its commencement, the
Indemnifying Parties will be entitled to participate in and, to the extent that
they elect by delivering written notice to such Indemnified Parties promptly
after receiving notice of the commencement of the Action from the Indemnified
Parties, to assume the defense of the action and after notice from the
Indemnifying Parties to the Indemnified Parties of their election to assume the
defense, the Indemnifying Parties will not be liable to the Indemnified Parties
for any legal or other expenses except as provided below. If the Indemnifying
Parties assume the defense, the Indemnifying Parties shall have the right to
settle such action without the consent of the Indemnified Parties; PROVIDED,
HOWEVER, that the Indemnifying Parties shall be required to obtain such consent
(which consent shall not be unreasonably withheld) if the settlement includes
any admission of wrongdoing on the part of the Indemnified Parties or any decree
or restriction on the Indemnified Parties; PROVIDED FURTHER, HOWEVER, that no
Indemnifying Parties, in the defense of any such action shall, except with the
consent of the Indemnified Parties (which consent shall not be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Parties of a release from all liability with
respect to such action. The Indemnified Parties will have the right to employ
their own counsel in any such action, but the fees, expenses and other charges
of such counsel will be at the expense of such Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) the Indemnified Parties have
reasonably concluded (based on written advise of counsel to the Indemnified
Parties) that there may be legal defenses available to them that are different
from or in addition to and inconsistent with those available to the Indemnifying
Parties, (iii) a conflict or potential conflict exists (based on written advice
of counsel to the Indemnified Parties) between the Indemnified Parties and the
Indemnifying Parties (in which case the Indemnifying Parties will not have the
right to direct the defense of such action on behalf of the Indemnified Parties)
or (iv) the Indemnifying Parties have not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action from the Indemnified Parties, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the Indemnifying Parties and shall, to the extent permitted by law,
promptly be paid by each Indemnifying Party as they become due and payable in
advance of the final disposition of the claim, action, suit, proceeding or
investigation to the fullest extent and in the manner permitted by law;
PROVIDED, HOWEVER, that in no event shall any contingent fee arrangement be
considered reasonable. Notwithstanding the foregoing, the Indemnifying Parties
shall not be
43
obligated to advance any expenses or costs prior to receipt of an undertaking by
or on behalf of each Indemnified Party to repay any expenses advanced if it
shall ultimately be determined that the Indemnified Party is not entitled to be
indemnified against such expense. It is understood that the Indemnifying Parties
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm admitted to practice in such jurisdiction at any
one time for all such Indemnified Parties, unless (a) the employment of more
than one counsel has been expressly authorized in writing by the Indemnifying
Parties, (b) any of the Indemnified Parties has reasonably concluded (based on
written advice of counsel to the Indemnified Parties) that there may be legal
defenses available to them that are different from or in addition to and
inconsistent with those available to the other Indemnified Parties or (c) a
conflict or potential conflict exists (based on written advice of counsel to the
Indemnified Parties) between any of the Indemnified Parties and the other
Indemnified Parties, in each case of which the Indemnifying Parties shall be
obligated to pay the reasonable fees and expenses of such additional counsel or
counsels. Notwithstanding anything to the contrary set forth in this Agreement,
the Indemnifying Parties (i) shall not be liable for any settlement effected
without their prior written consent (which shall not be unreasonably withheld)
and (ii) shall not have any obligation hereunder to any Indemnified Party to the
extent that a court of competent jurisdiction shall determine in a final and
non-appealable order that such indemnification is prohibited by applicable law.
In the event of a final and non-appealable determination by a court that any
payment of expenses is prohibited by applicable law, the Indemnified Parties
shall promptly refund to the Indemnifying Parties the amount of all such
expenses theretofore advanced pursuant hereto.
(b) For not less than six years after the Effective Time,
the Company shall maintain directors' and officers' liability insurance policies
with Royal Sun Alliance (or its successors) of at least the same coverage and
amounts containing terms and conditions which are no less advantageous than the
directors' and officers' liability insurance coverage provided by IRT's
directors' and officers' liability insurance on the date hereof, or if such
coverage is unavailable on commercially reasonable terms, the Company shall use
commercially reasonable efforts to obtain as much coverage as is reasonably
available, PROVIDED, the indemnified parties shall each provide the Company with
claim letters substantially in the form of Exhibit B.
(c) This section is intended for the irrevocable benefit
of, and to grant third-party rights to, the Indemnified Parties and their
respective successors, assigns and heirs and shall be binding on all successors
and assigns of the Company. Each of the Indemnified Parties shall be entitled to
enforce the covenants contained in this Section and the Company acknowledges and
agrees that each Indemnified Party would suffer irreparable harm and that no
adequate remedy at law exists for a breach of such covenants and such
Indemnified Party shall be entitled to injunctive relief and specific
performance in the event of any breach of any provision in this Section.
(d) If the Company or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each such case the successors and assigns of such entity
shall assume the obligations set forth in this Section, which obligations are
expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each director and officer covered hereby.
44
SECTION 5.8 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Upon the
terms and subject to the conditions of this Agreement, each of the Company and
IRT agrees to use its commercially reasonable efforts to take (or cause to be
taken or cause to be done), all things necessary, proper or advisable under
applicable law to consummate and make effective the transactions contemplated by
this Agreement at the earliest practicable time, including, without limitation,
cooperating fully with the other party, providing information and making all
necessary filings in connection with, among other things, any requisite approval
of any Governmental Entity and the issuance of shares of Company Common Stock in
the Merger. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the intent and purposes of this Agreement or
to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of the Company or IRT,
the proper officers and directors of each party to this Agreement promptly shall
take all such necessary action.
SECTION 5.9 CONVEYANCE TAXES. IRT and the Company shall cooperate
in the preparation, execution and filing of all tax returns, questionnaires,
applications or other documents regarding any conveyance taxes which become
payable in connection with the transactions contemplated by this Agreement that
are required to be filed prior to the Effective Time.
SECTION 5.10 PUBLIC ANNOUNCEMENTS. The Company and IRT shall
consult with each other prior to issuing any press release or making any public
statement or announcement (whether or not jointly made) with respect to this
Agreement and the transactions contemplated hereby and, except as may be
required by applicable law (including, without limitation, applicable
regulations of the New York Stock Exchange or U.S. inter-dealer quotation system
of a registered national securities association), the Company or IRT, as the
case may be, shall not issue any such press release or make any such public
statement or announcement prior to such consultation.
SECTION 5.11 NOTIFICATION OF CERTAIN MATTERS. The Company shall
provide prompt notice to IRT, and IRT shall provide prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
made by them and contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time, (ii) any material failure of
the Company or IRT, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice of, or other communication relating
to, a default (or an event which with notice, lapse of time, or both, would
become a default) received by it or any of its Subsidiaries subsequent to the
date hereof and prior to the Effective Time, under any agreement or instrument
to which it or any of its Subsidiaries is a party or by which any assets or
properties of it or its Subsidiaries are subject, which default if conclusively
established adversely to IRT or the Company would reasonably be expected to
result in an IRT Material Adverse Effect or Company Material Adverse Effect, as
applicable, (iv) any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with any of the transactions contemplated by this Agreement, or (v)
any Company Material Adverse Effect or IRT Material Adverse Effect shall have
occurred or is reasonably likely to occur; PROVIDED, HOWEVER that the delivery
of any notice pursuant to this Section 5.11 shall not cure any breach or
noncompliance
45
under this Agreement or limit or otherwise affect the remedies available
hereunder to the party receiving any such notice.
SECTION 5.12 NEW YORK STOCK EXCHANGE LISTING. The Company shall
use commercially reasonable efforts to cause the Company Common Stock to be
issued in the Merger to be approved for listing on the New York Stock Exchange,
subject to official notice of issuance, prior to the Effective Time.
SECTION 5.13 DECLARATIONS OF DIVIDENDS AND DISTRIBUTIONS.
(a) Each of IRT and the Company shall coordinate with the
other regarding the declaration and payment of quarterly dividends with respect
to IRT Common Stock and Company Common Stock and the record dates and payment
dates relating thereto such that each such dividend or distribution shall be
paid or made on the same date. Subject to increases as set forth below,
quarterly dividends with respect to the IRT Common Stock shall not exceed $0.235
per share, appropriately adjusted for partial or greater periods from the prior
record date. The foregoing limitations on dividends shall not apply, however, to
a Final IRT Dividend payable by IRT.
(b) On the first regular dividend record date following
the Effective Time, the Company Board shall declare a cash dividend of no less
than $0.27 per share of Company Common Stock subject to the Company's funds from
operations, available cash and any limitations imposed by the MGCL. In addition,
the Company Board shall establish prior to the Effective Time a dividend policy
that provides that the annual cash dividend per share of Company Common Stock
for the year following the Effective Time shall be not less than $1.08 payable
quarterly subject to the Company's funds from operations, available cash and any
limitations imposed by the MGCL.
SECTION 5.14 ASSUMPTION OF EMPLOYMENT AGREEMENTS. At the Closing,
IRT shall assign and the Company shall assume the obligations of IRT under each
of the employment agreements listed on Schedule 5.14 of the IRT Disclosure
Memorandum.
SECTION 5.15 TAX TREATMENT.
(a) This Agreement is a "plan of reorganization" within
the meaning of Section 1.368-2(g) of the Treasury regulations promulgated under
the Code. From and after the date of this Agreement and until the Effective
Time, each party hereto shall use its commercially reasonable efforts to cause
the Merger to qualify as a reorganization under the provisions of Section 368(a)
of the Code. Following the Effective Time, neither the Company nor any of its
affiliates shall knowingly take any action that could cause the Merger to fail
to qualify as a reorganization under Section 368(a) of the Code.
(b) IRT does not know of any reason why it will not be
able to deliver to ▇▇▇▇▇▇ & Bird LLP and ▇▇▇▇▇▇▇▇▇ Traurig, P.A., at the time
the Form S-4 or any amendment thereto is filed with the SEC and on or about the
Closing Date, certificates relating to the facts relevant to the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code, in a form that is substantially in compliance with IRS published advance
ruling guidelines, with customary exceptions and modifications (including, as
appropriate,
46
additions) thereto, to enable such firms to deliver the opinions contemplated by
Sections 6.2(f) and 6.3(f).
(c) The Company does not know of any reason why it will
not be able to deliver to ▇▇▇▇▇▇ & Bird LLP and ▇▇▇▇▇▇▇▇▇ Traurig, P.A., at the
time the Form S-4 or any amendment thereto is filed with the SEC and on or about
the Closing Date, certificates relating to the facts relevant to the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code, in a form that is substantially in compliance with IRS
published advance ruling guidelines, with customary exceptions and modifications
(including, as appropriate, additions) thereto, to enable such firms to deliver
the opinions contemplated by Sections 6.2(f) and 6.3(f).
SECTION 5.16 ELECTION OF NEW DIRECTOR. Prior to the Closing, the
Company Board shall adopt a resolution, effective as of the Effective Time,
increasing the size of the Company Board by one director and electing a new
"independent" director (as determined in accordance with the rules and
regulations of the New York Stock Exchange), selected by IRT and approved by the
Company in its reasonable discretion, to fill that position and to serve as a
Class A Director until the next annual meeting of the Company's stockholders at
which Class A Directors are being elected generally in accordance with the
Company's Articles of Amendment and Restatement and the MGCL.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to consummate the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger
shall have been approved or adopted by the affirmative vote of the requisite
holders of the Company Common Stock and the IRT Common Stock.
(b) Other Approvals. All authorizations, consents, orders
or approvals of, or declarations, registrations, submissions or filings with,
any Governmental Entity which if not obtained would have a Company Material
Adverse Effect or an IRT Material Adverse Effect, shall have been duly and
timely filed and obtained (without the imposition of any material conditions
thereto).
(c) Form S-4. The Form S-4 shall have become effective
under the Securities Act by order of the SEC and shall not be the subject of any
stop order or similar proceedings and the Company shall have received all state
securities law or "blue sky" permits and authorizations necessary to issue the
Merger Consideration in accordance with Article II of this Agreement.
(d) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other similar order,
or any statute, law, rule, regulation, executive order or decree, shall have
been issued, enacted, entered, promulgated or enforced by any court
47
of competent jurisdiction or Governmental Entity which remains in effect and
prohibits, prevents, materially delays or impairs consummation of the Merger.
(e) Listing of Company Common Stock. The New York Stock
Exchange shall have approved for listing the shares of Company Common Stock to
be issued in the Merger, subject to official notice of issuance, prior to the
Effective Time.
SECTION 6.2 CONDITIONS OF OBLIGATIONS OF IRT. The obligations of
IRT to consummate the Merger are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived (to the extent permitted
by applicable law) in writing by IRT:
(a) Representations and Warranties. All of the
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (except
for representations and warranties that (i) expressly speak only as of a
specific date or time which need only be true and correct as of such date and
time, and (ii) by their terms are qualified by materiality or any analogous
limitation on scope which, for purposes of this Section 6.2(a), shall be true
and correct in all respects and except that no representation or warranty shall
fail to be true and correct as a result of the incurrence or payment by the
Company of expenses incurred directly by the Company as a result of the
consummation of the transactions contemplated by this Agreement, including
attorneys fees, accounting expenses, printing costs, fees paid to financial
advisors, fees and expenses paid to regulatory agencies such as the SEC, the New
York Stock Exchange or various rating agencies or other similar direct
expenses), and IRT shall have received a certificate duly signed on behalf of
the Company by each of its chief executive officer and chief financial officer
to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed and complied with in all material respects all
obligations required to be performed and complied with by it under this
Agreement on or prior to the Closing Date, and IRT shall have received a
certificate duly signed on behalf of the Company by each of its chief executive
officer and chief financial officer to such effect.
(c) Consents. The Company shall have obtained the consent
or approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, deed of trust, or other agreement
or instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of IRT, individually or in the
aggregate, have a Company Material Adverse Effect or materially affect the
consummation of the Merger or any other transaction contemplated by this
Agreement.
(d) Material Adverse Effect. Since the date of this
Agreement, there shall have been no Company Material Adverse Effect and IRT
shall have received a certificate of the chief executive officer of the Company,
in such capacity, certifying to such effect.
(e) Tax Opinion Relating to REIT Status. IRT shall have
received an opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A. or other counsel to the Company
reasonably satisfactory to ▇▇▇,
▇▇
dated as of the Closing Date, that, commencing with its taxable year ended
December 31, 1997, the Company was organized and has operated in conformity with
the requirements for qualification as a REIT under the Code and that, after
giving effect to the Merger, the Company's proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code.
(f) Tax Opinion Relating to the Merger. IRT shall have
received an opinion dated the Closing Date from ▇▇▇▇▇▇ & Bird LLP or other
counsel reasonably satisfactory to the Company, based upon customary
certificates and letters, which letters and certificates are to be in a form to
be agreed upon by the parties and dated the Closing Date, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code.
(g) Exchange Agent Certification. The Exchange Agent
shall have delivered to IRT a certificate, dated as of the Effective Time, to
the effect that the Exchange Agent has received from the Company appropriate
instructions and authorization for the Exchange Agent to issue a sufficient
number of shares of Company Common Stock in exchange for outstanding shares of
IRT Common Stock and that the Company has deposited with the Exchange Agent
sufficient funds to pay the Aggregate Cash Amount required to be paid pursuant
to Article II.
(h) Company Voting Agreement. The Company Voting
Agreement shall be in full force and effect.
(i) Post Closing Capitalization. IRT shall have received
evidence to its reasonable satisfaction that not fewer than an aggregate of 22.3
million shares of Company Common Stock will be issued in the Merger and Private
Placement, and that the Private Placement, to the extent required to achieve
that number of shares, shall have been consummated at or before the Effective
Time.
SECTION 6.3 CONDITIONS OF OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the Merger is subject to the
satisfaction of the following conditions unless waived in writing by the
Company:
(a) Representations and Warranties. The representations
and warranties of IRT set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except for representations
and warranties that (i) expressly speak only as of a specific date or time which
need only be true and correct as of such date and time, and (ii) by their terms
are qualified by materiality or any analogous limitation on scope which, for
purposes of this Section 6.3 (a), shall be true and correct in all respects and
except that no representation or warranty shall fail to be true and correct as a
result of the incurrence or payment by IRT of expenses incurred directly by IRT
as a result of the consummation of the transactions contemplated by this
Agreement, including attorneys fees, accounting expenses, printing costs, fees
paid to financial advisors, fees and expenses paid to regulatory agencies such
as the SEC, the New York Stock Exchange or various rating agencies or other
similar direct expenses) and the Company shall have received a certificate duly
signed on behalf of IRT by each of its chief executive officer and the chief
financial officer to such effect.
49
(b) Performance of Obligations of IRT. IRT shall have
performed and complied with in all material respects all obligations required to
be performed and complied with by it under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate duly signed on
behalf of IRT by each of its chief executive officer and chief financial officer
to such effect.
(c) Consents. IRT shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, deed of trust, or other agreement
or instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of the Company, individually or
in the aggregate, have an IRT Material Adverse Effect, or materially affect the
consummation of the Merger or any other transaction contemplated by this
Agreement.
(d) Material Adverse Effect. Since the date of this
Agreement, there shall have been no IRT Material Adverse Effect and the Company
shall have received a certificate of the chief executive officer of IRT, in such
capacity, certifying to such effect.
(e) Tax Opinion Relating to REIT Status. The Company
shall have received (i) an opinion of ▇▇▇▇▇▇ & Bird LLP or other counsel to IRT
reasonably satisfactory to the Company, dated as of the Closing Date, to the
effect that, commencing with its taxable year ended December 31, 1997, IRT was
organized and has operated in conformity with the requirements for qualification
as a REIT under the Code, and (ii) an opinion of ▇▇▇▇▇▇▇▇▇ Traurig, P.A. or
other counsel to the Company reasonably satisfactory to IRT, dated as of the
Closing Date, to the effect that, after giving effect to the Merger, the
Company's proposed method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code.
(f) Tax Opinion Relating to the Merger. The Company shall
have received an opinion dated the Closing Date from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A. or
other counsel reasonably satisfactory to IRT, based upon customary certificates
and letters, which certificates and letters are to be in a form to be agreed
upon by the parties and dated the Closing Date, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code.
(g) IRT Voting Agreement. The IRT Voting Agreement shall
be in full force and effect.
(h) Required Consents. Prior to the Effective Time, IRT
shall obtain the following consents in form and substance that are reasonably
satisfactory to the Company: (i) the consent of ▇▇▇▇-▇▇▇▇ Enterprises, Ltd. to
this Agreement, the Merger and the transfer by IRT of its interest in the Venice
Plaza Joint Venture to the Company, (ii) the consent of S.T. ▇▇▇▇▇▇▇▇▇ to this
Agreement, the Merger and the transfer by IRT of its partnership interest in The
Rudderson Company Limited Partnership to the Company and (iii) the consent and
acknowledgement by Column Financial, Inc. to this Agreement, the Merger and the
amendment of the limited liability company agreements of each of IRT Coral
Springs, LLC, IRT Heritage Walk, LLC and IRT MacLand Pointe, LLC to reflect the
transfer of the membership interest to the Company and the appointment of the
Company as sole manager thereof.
50
(i) Termination of Management Agreements. Prior to the
Closing, IRT shall provide evidence to the reasonable satisfaction of the
Company that the following two agreements were properly terminated: (i) the
Property Management Agreement dated September 1, 2000 between Auburn Center
Associates, Ltd. and IRT, and (ii) the Property Management Agreement dated
September 1, 2000 between Stanford Station Partners, LP and IRT.
ARTICLE VII
TERMINATION AND AMENDMENT
SECTION 7.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the holders of Company Common
Stock or by the holders of IRT Common Stock:
(a) by the mutual written consent duly authorized by the
IRT Board and the Company Board;
(b) by (i) IRT if there shall have occurred a breach of
any representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement which would entitle IRT to not consummate the Merger
under Article VI, or a breach of any representation, warranty, covenant or
agreement on the part of any stockholder of the Company set forth in a Company
Voting Agreement, and, in each case, which has not been or cannot be permanently
cured within 30 days (but no later than 10 days following a vote at the later to
occur of the IRT Shareholders' Meeting or the Company Stockholders' Meeting)
next following receipt by the Company of notice of such breach, or (ii) the
Company if there shall have occurred a breach of any representation, warranty,
covenant or agreement on the part of IRT set forth in this Agreement which would
entitle the Company to not consummate the Merger under Article VI, or a breach
of any representation, warranty, covenant or agreement on the part of any
shareholder of IRT set forth in an IRT Voting Agreement, and, in each case,
which has not been or cannot be permanently cured within 30 days (but no later
than 10 days following a vote at the later to occur of the IRT Shareholders'
Meeting or the Company Stockholders' Meeting) next following receipt by IRT of
notice of such breach;
(c) by either IRT or the Company if any permanent
injunction or other order of a court, or any rule, decree, statute, law,
executive order or regulation shall be enacted or entered by any Governmental
Entity or other competent authority, preventing consummation of the Merger shall
have been issued; PROVIDED, HOWEVER, this right shall not be available to any
party whose failure to comply with the terms of this Agreement has been the
cause of, or has materially contributed to, such action;
(d) by either IRT or the Company if the Merger shall not
have been consummated at or prior to 5:00 p.m., Eastern time, on March 31, 2003;
PROVIDED, HOWEVER, this right shall not be available to any party whose failure
to comply with any provision of this Agreement has been the cause of, or
materially contributed to, the Merger not being consummated by such date;
(e) by either IRT or the Company (unless the Company is
in breach in any material respect of its obligations under Section 5.1) if, upon
a vote at a duly held Company
51
Stockholders' Meeting or any adjournment thereof, the Company Stockholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(f) by either the Company or IRT (unless IRT is in breach
in any material respect of its obligations under Section 5.1) if, upon a vote at
a duly held IRT Shareholders' Meeting or any adjournment thereof, the IRT
Shareholder Approvals shall not have been obtained as contemplated by Section
5.1;
(g) by IRT (i) if the Board of Directors of IRT shall
have withdrawn, modified, amended or qualified in any manner adverse to the
Company its approval or recommendation of either of the Merger or this Agreement
in connection with, or approved or recommended, any Acquisition Proposal (except
as expressly permitted by Section 5.1(c)(ii)), or (ii) if the Board of Directors
of IRT shall have withdrawn, modified, amended or qualified its approval or
recommendation of either the Merger or this Agreement pursuant to Section
5.1(c)(ii) and within 48 hours of such withdrawal, modification, amendment or
qualification, the Company has not advised IRT that it has elected to require
IRT to proceed with or otherwise adjourn the IRT Shareholders' Meeting pursuant
to Section 5.1(c)(iii), or (iii) in order to enter into a binding written
agreement with respect to an Acquisition Proposal, provided that, in each case,
IRT shall have complied with the terms of Section 4.1(f) and, simultaneously
with terminating pursuant to this Section, has paid to the Company the Break-Up
Fee (as defined herein) as provided by Section 7.2; and
(h) by the Company, if (i) the Board of Directors of IRT
shall have failed to recommend or withdrawn, modified, amended or qualified, or
proposed publicly not to recommend or to withdraw, modify, amend or qualify, in
any manner adverse to the Company its approval or recommendation of the Merger
or this Agreement or approved or recommended any Acquisition Proposal, or if the
Board of Directors of IRT or any committee thereof shall have resolved to do any
of the foregoing, or (ii) following the announcement or receipt of an
Acquisition Proposal, IRT shall have failed to call the IRT Shareholders'
Meeting in accordance with Section 5.1(a) or failed to prepare and mail to its
shareholders the Joint Proxy Statement in accordance with Section 5.1(a) or
5.1(b).
SECTION 7.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 7.1(g)(i), 7.1(g)(iii) or 7.1(h) (other than a
termination by the Company solely as a result of the withdrawal, modification,
amendment or qualification of the approval or recommendation by the IRT Board of
this Agreement or the Merger pursuant to Section 5.1(c)(ii)), then IRT
theretofore or thereupon shall pay to the Company a fee equal to the Break-Up
Fee. If this Agreement shall be terminated pursuant to Section 7.1(b)(i) or
Section 7.1(b)(ii), then the non-terminating party shall pay to the other
(provided that the non-terminating party was not entitled to terminate this
Agreement pursuant to Section 7.1(b) at the time of such termination) an amount
equal to the Break-Up Expenses. In addition, if this Agreement shall be
terminated by IRT pursuant to Sections 7.1(c), 7.1(d) (if primarily resulting
from any action or inaction of IRT or any of its Subsidiaries), 7.1(f) or
7.1(g)(ii) or by the Company pursuant to Section 7.1(f) or Section 7.1(h)
(solely as a result of the withdrawal, modification, amendment or qualification
of the approval or recommendation by the IRT Board of this Agreement or the
Merger pursuant to Section 5.1(c)(ii)) and prior to the time of such termination
an Acquisition Proposal has been received by IRT, and either prior to the
termination of this Agreement or
52
within twelve months thereafter, IRT enters into any written agreement to
consummate a transaction or series of transactions which, had such agreement
been proposed or negotiated during the term of this Agreement, would have
constituted an Acquisition Proposal pursuant to Section 4.1(f) (each, an
"Acquisition Proposal Agreement"), which is subsequently consummated (whether or
not any Acquisition Proposal Agreement relates to the same Acquisition Proposal
which had been received prior to the termination of this Agreement, unless at
least 60 days prior to the execution of the Acquisition Proposal Agreement IRT
shall have made a public announcement that the party to the initial Acquisition
Proposal has formally withdrawn its offer and that party has not made an
additional Acquisition Proposal prior to the execution of the Acquisition
Proposal Agreement), then IRT shall pay a fee equal to the Break-Up Fee to the
Company.
The payment of the Break-Up Fee to the Company or the Break-Up Expenses
to the Company or IRT, as the case may be, shall be the sole compensation for
the loss suffered by the party receiving such payment as a result of the failure
of the Merger to be consummated (including, without limitation, opportunity
costs and, in the case of the Break-up Fee, out-of-pocket costs and expenses)
and to avoid the difficulty of determining damages under the circumstances. The
Break-Up Fee shall be paid by IRT to the Company and the Break-up Expenses shall
be paid by the Company to IRT or IRT to the Company, as applicable, in
immediately available funds within two business days after the date the event
giving rise to the obligation to make such payment occurred (except as otherwise
provided in Section 7.1(g)). The Company and IRT acknowledge that the agreements
contained in this Section 7.2 are integral parts of this Agreement; accordingly,
if IRT fails to promptly pay the Break-Up Fee or if the Company or IRT fails to
promptly pay the Break-Up Expenses due pursuant to this Section 7.2 and, in
order to obtain payment, the Company or IRT commences a suit which results in a
judgment against the Company or IRT for any amounts owed pursuant to this
Section 7.2, the Company or IRT, as applicable, shall pay to the other party its
costs and expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amount owed at the rate
on six-month U.S. Treasury obligations in effect on the date such payment was
required to be made plus 300 basis points.
As used in this Agreement, "Break-Up Fee" shall be an amount equal to
$15,000,000 (the "Base Amount"), provided, however, that the maximum amount that
the Company can receive in its taxable year in which occurs the event giving
rise to liability for the Break-Up Fee shall be the maximum amount that the
Company can receive in that year without failing the REIT Income Requirements
(as defined below), determined as if the receipt of that amount does not
constitute Qualifying Income (as defined below), as determined by the
independent accountants of the Company. If the Company initially is unable to
receive the full Base Amount, IRT shall place the unpaid portion of the Base
Amount in escrow. The amount in escrow shall be distributed in full to the
Company at any time the Company receives a letter from outside counsel which
states that the Company has received a private letter ruling from the IRS which
holds that its receipt of a payment of the Base Amount constitutes Qualifying
Income or is excludible from gross income for purposes of the REIT Income
Requirements. The amount in escrow shall be distributed in full or in part to
the Company at any time the Company receives a letter from outside counsel which
states that the Company has received a private letter ruling from the IRS which
holds that its receipt of a payment of part or all of the Base Amount from the
escrow will not be includible in income by the Company prior to its actual
receipt by the Company, in which case the amount
53
distributable to the Company in any taxable year shall be the amount set forth
in a letter from the Company's independent accountants indicating the maximum
amount that the Company can receive at that time without causing the Company to
fail the REIT Income Requirements. Subject to satisfaction of the conditions set
forth in the immediately preceding sentence, there is no limitation on the
number of distributions that can be made from the escrow prior to the third
anniversary of the date of this Agreement. The obligation of the IRT to pay any
unpaid portion of the Break-Up Fee shall terminate three years from the date of
this Agreement. Income is "Qualifying Income" if it is described in any
subparagraph of Section 856(c)(2) of the Code and in any subparagraph of Section
856(c)(3) of the Code. The "REIT Income Requirements" are the requirements
imposed by Section 856(c)(2) and (3) on the income that an entity can receive
and qualify as a REIT for purposes of the Code.
As used in this Agreement, "Break-Up Expenses" shall be an amount equal
to the out-of-pocket expenses incurred by the Company or IRT, as the case may be
(the "Recipient") in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses), PROVIDED, HOWEVER, that the maximum
amount that the Recipient can receive in its taxable year in which occurs the
event giving rise to liability for the Break-Up Expenses shall be the maximum
amount that the Recipient can receive in that year without failing the REIT
Income Requirements, determined as if the receipt of that amount does not
constitute Qualifying Income, as determined by the independent accountants of
the Recipient. If the Recipient initially is unable to receive the full amount
of the Break-Up Expenses, the Company or IRT, as the case may be (the "Payor"),
shall place the unpaid portion of the Break-Up Expenses in escrow. The amount in
escrow shall be distributed in full to the Recipient at any time the Recipient
receives a letter from outside counsel which states that the Recipient has
received a private letter ruling from the IRS which holds that its receipt of a
payment of the Break-Up Expenses constitutes Qualifying Income or is excludible
from gross income for purposes of the REIT Income Requirements. The amount in
escrow shall be distributed in full or in part to the Recipient at any time the
Recipient receives a letter from outside counsel which states that the Recipient
has received a private letter ruling from the IRS which holds that its receipt
of a payment of part or all of the Break-Up Expenses from the escrow will not be
includible in income by the Recipient prior to its actual receipt by the
Recipient, in which case the amount distributable to the Recipient in any
taxable year shall be the amount set forth in a letter from the Recipient's
independent accountants indicating the maximum amount that the Recipient can
receive at that time without causing the Recipient to fail the REIT Income
Requirements. Subject to satisfaction of the conditions set forth in the
immediately preceding sentence, there is no limitation on the number of
distributions that can be made from the escrow prior to the third anniversary of
the date of this Agreement. The obligation of any Payor to pay any unpaid
portion of the Break-Up Expenses shall terminate three years from the date of
this Agreement. Notwithstanding the foregoing, the maximum amount of the
Break-Up Expenses that either party shall be obligated to reimburse the other
party shall not exceed $1.5 million.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after adoption of this Agreement or the Merger by the
holders of Company Common Stock or IRT Common Stock, but, after any such
approval, no amendment shall be made which pursuant to applicable law requires
further approval by such holders without obtaining such further approval.
54
This Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties hereto.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally permissible, (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 8.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt if
delivered personally, telecopied (with confirmation/answerback received) or
mailed by registered or certified mail (return receipt requested) or sent by
overnight delivery by a reliable service provider to the parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 8.2):
(a) if to IRT, to: IRT Property Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
with a copy (which shall not constitute ▇▇▇▇▇▇ & Bird LLP
notice pursuant to this Section 8.2) to: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to the Company, to: Equity One, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
55
with a copy (which shall not constitute ▇▇▇▇▇▇▇▇▇ Traurig, P.A.
notice pursuant to this Section 8.2) to: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
SECTION 8.3 INTERPRETATION. When a reference is made in this
Agreement to sections, such reference shall be to a section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of the terms of this Agreement. Whenever the words
"include," "includes" or "including" or other similar derivations are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date first written above.
SECTION 8.4 COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed to be an original and all of which,
taken together, shall constitute but one and the same agreement.
SECTION 8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein, which
are incorporated herein by this reference and made an integral part hereof as if
fully set forth herein) and the confidentiality provisions contained in the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, both oral and written, among the
parties hereto with respect to the subject matter hereof. Except as provided in
Section 5.7, this Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their permitted assigns and nothing herein,
express or implied, is intended to or shall confer upon any other person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, applicable
to contracts executed and performed entirely in such state and without regard to
the conflicts of law principles thereof, provided the Merger shall be effected
in accordance with and have the effect provided in the provisions of the GBCC
and MGCL applicable to mergers of domestic and foreign corporations.
SECTION 8.7 WAIVER OF JURY TRIALS. THE PARTIES HERETO VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY.
56
SECTION 8.8 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees
that, should any court, Governmental Entity or other competent authority hold
any provision of this Agreement or portion hereof to be null, void or
unenforceable, or order or direct any party to take any action inconsistent
herewith or not to take any action required herein, the other party shall not be
entitled to specific performance of such provision or part hereof or thereof or
to any other remedy, including, without limitation, money damages, for breach
hereof or thereof or of any other provision of this Agreement or portion hereof
as a result of such holding or order.
SECTION 8.9 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of all the other parties; PROVIDED that no such assignment shall
change the amount or nature of the Merger Consideration or relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
SECTION 8.10 GENDER AND NUMBER CLASSIFICATION. All words used
herein, irrespective of the number and gender specifically used, shall be deemed
and construed to include or mean any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.
SECTION 8.11 KNOWLEDGE. For purposes of this Agreement,
"knowledge", "to its knowledge" or analogous expressions, when used with
reference to the Company, IRT and/or any of their respective Subsidiaries, means
knowledge of a particular fact or set of circumstances, events or conditions by
any executive officer or director of the Company, IRT or any of their respective
Subsidiaries, as applicable, to the extent actually known by any one or more of
such persons.
SECTION 8.12 ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in federal court for the
Southern District of New York this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself (without making such submission exclusive)
to the personal jurisdiction of such federal court in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from such court.
SECTION 8.13 CONSTRUCTION. This Agreement and any documents or
instruments delivered pursuant hereto or in connection herewith shall be
construed without regard to the identity of the person who drafted the various
provisions of the same. Each and every provision of this Agreement and such
other documents and instruments shall be construed as though all of
57
the parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments
58
IN WITNESS WHEREOF, IRT and the Company have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of date first written above.
IRT PROPERTY COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
EQUITY ONE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
59
