TRANSACTIONS WITH PARKWAY PROPERTIES, INC.

On October 6, 2016, pursuant to the Agreement and Plan of Merger, dated April 28, 2016, (as amended or supplemented from time to time, the “Merger Agreement”), by and among Cousins, Parkway Properties, Inc. ("Parkway") and subsidiaries of Cousins and Parkway, Parkway merged with and into a wholly-owned subsidiary of the Company (the "Merger"), with this subsidiary continuing as the surviving corporation of the Merger. In accordance with the terms and conditions of the Merger Agreement, each outstanding share of Parkway common stock and each outstanding share of Parkway limited voting stock was converted into 1.63 shares of Cousins common stock or limited voting preferred stock, respectively.

On October 7, 2016, pursuant to the Merger Agreement and the Separation, Distribution and Transition Services Agreement, dated as of October 5, 2016 , by and among Cousins, Parkway, Parkway, Inc. ("New Parkway"), and certain other parties thereto, Cousins distributed pro rata to its common and limited voting preferred stockholders, including legacy Parkway common and limited voting stockholders, all of the outstanding shares of common and limited voting stock, respectively, of New Parkway, a newly-formed entity that included the combined businesses relating to the ownership of real properties in Houston, Texas and certain other businesses of Parkway (the "Spin-Off"). In the Spin-Off, Cousins distributed one share of New Parkway common or limited voting stock for every eight shares of common or limited voting preferred stock of Cousins held of record as of the close of business on October 6, 2016. New Parkway became an independent public company.

The acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, or ASC 805, "Business Combinations," with the Company as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair value. The total value of the transaction was based on the closing stock price of the Company's common stock on October 5, 2016, the day immediately prior to the closing of the Merger, of $10.19 per share. Based on the shares issued in the transaction and on the units of CPLP effectively issued to the outside unit holders in the transaction, the total fair value of the assets and liabilities assumed in the Merger was $2.0 billion. The Company incurred $1.7 million and $24.5 million in expenses related to the Merger during the years ended December 31, 2017 and 2016, respectively.

Management engaged a third party valuation specialist to assist with the fair value assessment, which included an allocation of the purchase price. The third party used cash flow analysis as well as an income approach and a cost approach to determine the fair value of assets acquired.

The final purchase price was allocated as follows (in thousands):



Real estate assets	$	3,429,895
Cash	63,193
Restricted cash	30,560
Notes and other receivables	35,945
Investment in unconsolidated joint ventures	68,432
Intangible assets	329,894
Other assets	10,491
	3,968,410

Notes payable	1,473,810
Accounts payable and accrued expenses	133,839
Intangible liabilities	106,480
Other liabilities	11,936
Nonredeemable noncontrolling interests (excluding CPLP)	292,337
	2,018,402

Total purchase price	$	1,950,008

The allocation of fair value of assets acquired and liabilities assumed has changed by an immaterial amount from the allocation previously reported. The changes were based on information about the assets and liabilities obtained subsequent to the prior reporting date through October 6, 2017, one year after the closing date of the Merger. The changes did not have a significant impact on the purchase price allocation, the consolidated balance sheet, or the consolidated results of operations.The Merger accounted for $68.7 million of consolidated revenue and $9.0 million in consolidated net income as reported for 2016.

The following unaudited supplemental pro forma information presented is based upon the Company's historical consolidated statements of operations, adjusted as if the Merger had occurred on January 1, 2015. This supplemental pro forma information is not necessarily indicative of future results, or of actual results, that would have been achieved had the transactions been consummated at the beginning of each period.



	2016		2015
	(unaudited, in thousands, except per share amounts)
Revenues	$	732,117	$	855,318
Income from continuing operations	179,625		237,909
Net income	174,117		237,323
Net income available to common stockholders	166,375		208,574
Per share information:
Basic	$	0.42	$	0.53
Diluted	$	0.41	$	0.53

As a result of the Spin-Off, the historical results of operations of the Company's properties that were contributed to New Parkway have been presented as discontinued operations in the consolidated statements of operations and comprehensive income. The above pro forma information is presented prior to the discontinued operations reclassification. Discontinued operations include transaction costs of $6.3 million incurred in 2016 as a result of the Spin-Off.

The following is a summary of the assets and liabilities transferred to New Parkway as part of the Spin-Off (in thousands):



Real estate assets	$	1,696,080
Cash	192,755
Notes and other receivables	43,752
Intangible assets	143,294
Other assets	6,669
	2,082,550

Notes payable	803,769
Accounts payable and accrued expenses	56,055
Intangible liabilities	59,424
Other liabilities	22,241
	941,489

Noncontrolling interest	22,821

Net assets in Spin-off to New Parkway	$	1,118,240

The following table includes a summary of discontinued operations of the Company for the years ended December 31, 2016 and 2015. There were no dispositions that met this criteria in 2017.



	2016			2015
Rental property revenues	$	136,927		$	176,828
Rental property operating expenses	(58,336		)	(73,630		)
Other revenues	288			450
Interest expense	(6,022		)	(7,988		)
Depreciation and amortization	(47,345		)	(63,791		)
Other expenses	(6,349		)	(21		)
Income from discontinued operations	$	19,163		$	31,848

Loss on sale of discontinued operations, net	$	—		$	(551	)

Cash provided by operating activities	$	42,604		$	76,395
Cash used in investing activities	$	(30,067	)	$	(55,085	)