-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WL8AnNgv99ppa2/QR+XGpHqtlBJ9O4lPjn2KV7AC9m1Zr1FWPHPay2X0lqfeQHuC C3w+8hrO1LN5ywQnzLDYEg== 0000950144-00-003454.txt : 20000322 0000950144-00-003454.hdr.sgml : 20000322 ACCESSION NUMBER: 0000950144-00-003454 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POST PROPERTIES INC CENTRAL INDEX KEY: 0000903127 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581550675 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12080 FILM NUMBER: 574759 BUSINESS ADDRESS: STREET 1: ONE RIVERSIDE STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: 4048465000 MAIL ADDRESS: STREET 1: ONE RIVERSIDE STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POST APARTMENT HOMES LP CENTRAL INDEX KEY: 0001012271 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 582053632 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-28226 FILM NUMBER: 574760 BUSINESS ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: 7708504400 MAIL ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 10-K 1 POST PROPERTIES, INC. / POST APARTMENT HOMES, L.P. 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSMISSION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-12080 COMMISSION FILE NUMBER 0-28226 ------------------------------- POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. (Exact name of registrants as specified in their charters) GEORGIA 58-1550675 GEORGIA 58-2053632 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 4401 NORTHSIDE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30327 (Address of principal executive offices -- zip code) (404) 846-5000 (Registrant's telephone number, including area code) ------------------------------- Securities registered pursuant to section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- Common Stock, $.01 par value New York Stock Exchange 8 1/2% Series A Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value 7 5/8% Series B Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value 7 5/8% Series C Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value Securities registered pursuant to Section 12(g) of the Act: None NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- Units of Limited Partnership None ------------------------------- Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Post Properties, Inc.: YES [x] NO [ ] Post Apartment Homes, L.P.: YES [x] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on March 10, 2000 was approximately $1,454,345,000. As of March 10, 2000, there were 39,042,806 shares of common stock, $.01 par value, outstanding. ------------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement in connection with its Annual Meeting of Shareholders to be held May 17, 2000 are incorporated by reference in Part III. =============================================================================== 2 POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. TABLE OF CONTENTS
ITEM FINANCIAL INFORMATION PAGE NO. NO. --- --- PART I 1. Business.............................................................................. 1 2. Properties............................................................................ 8 3. Legal Proceedings..................................................................... 10 4. Submission of Matters to a Vote of Security Holders................................... 10 X. Executive Officers of the Registrant.................................................. 10 PART II 5. Market Price of the Registrant's Common Stock and Related Stockholder Matters......... 14 6. Selected Financial Data............................................................... 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................... 19 7A. Quantitative and Qualitative Disclosures about Market Risk............................ 30 8. Financial Statements and Supplementary Data........................................... 32 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................................... 32 PART III 10. Directors and Executive Officers of the Registrant.................................... 33 11. Executive Compensation................................................................ 33 12. Security Ownership of Certain Beneficial Owners and Management........................ 33 13. Certain Relationships and Related Transactions........................................ 33 PART IV 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..................... 34
3 PART I ITEM 1. BUSINESS THE COMPANY Post Properties, Inc. (the "Company") is one of the largest developers and operators of upscale multifamily apartment communities in the Southeastern and Southwestern United States. The Company currently owns 86 stabilized communities (the "Communities") containing 29,720 apartment units located primarily in metropolitan Atlanta, Georgia; Dallas, Texas and Tampa, Florida. In addition, the Company currently has under construction or in initial lease-up 16 new communities and additions to three existing communities in the Atlanta, Georgia; Dallas, Houston and Austin, Texas; Tampa and Orlando, Florida; Denver, Colorado; Charlotte, North Carolina; Phoenix, Arizona and Washington D. C. metropolitan areas that will contain an aggregate of 6,018 apartment units upon completion. For the year ended December 31, 1999, the average economic occupancy rate (defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent) of the 76 Communities stabilized for the entire year was 96.4%. The average monthly rental rate per apartment unit at these Communities for December 1999 was $885. The Company also manages through affiliates 13,553 additional apartment units owned by third parties. The Company is a fully integrated organization with multifamily development, acquisition, operation and asset management expertise. The Company has approximately 2,035 employees, none of whom is a party to a collective bargaining agreement. Since its founding in 1971, the Company has pursued three distinctive core business strategies that have remained substantially unchanged: Investment Building Investment building means taking a long-term view of the assets the Company creates. The Company develops communities with the intention of operating them for periods that are relatively long by the standards of the apartment industry. Key elements of the Company's investment building strategy include instilling a disciplined team approach to development decisions, selecting sites in urban infill locations in strong primary markets, consistently constructing new apartment communities with a uniformly high quality, and conducting ongoing property improvements. Promotion of the Post(R) Brand Name The Post(R) brand name strategy has been integral to the success of the Company and, to the knowledge of the Company, has not been successfully duplicated within the multifamily real estate industry in any major U.S. market. For such a strategy to work, a company must develop and implement systems to achieve uniformly high quality and value throughout its operations. As a result of the Company's efforts in developing and maintaining its communities, the Company believes that the Post(R) brand name is synonymous with quality upscale apartment communities that are situated in desirable locations and provide superior resident service. Key elements in implementing the Company's brand name strategy include extensively utilizing the trademarked brand name, adhering to quality in all aspects of the Company's operations, developing and implementing leading edge training programs, and coordinating the Company's advertising programs to increase brand name recognition. Service Orientation The Company's mission statement is: "To provide the superior apartment living experience for our residents." By striving to provide a superior product and superior service, the Company believes that it will be able to achieve its long-term goals. The Company believes that it provides its residents with superior product and superior service through its uniformly high quality construction, selective urban infill locations, award winning landscaping and numerous amenities, including on site business centers, on site courtesy officers, urban vegetable gardens and state of the art fitness centers. The Company believes that with the implementation of these strategies, multifamily properties in its primary markets have the potential over the long term to provide investment returns that exceed national averages. According to recent market surveys, employment growth, population growth and household formation growth in the Company's primary markets have exceeded, and are forecasted to continue to exceed, national averages. 1 4 The Company is a self-administered and self-managed equity real estate investment trust (a "REIT"). In 1993, the Company completed an initial public offering of its Common Stock (the "Initial Offering") and a business combination involving entities under varying common ownership. Proceeds from the Initial Offering were used by the Company, in part, to acquire a controlling interest in Post Apartment Homes, L.P. (the "Operating Partnership"), the Company's principal operating subsidiary, which was formed to succeed to substantially all of the ownership interest in a portfolio of 40 Post(R) multifamily apartment communities, all of which were developed by the Company and owned by affiliates of the Company, and to the development, leasing, landscaping and management business of the Company and certain other affiliates. The Company, through wholly owned subsidiaries, is the sole general partner of, and controls a majority of the limited partnership interests in, the Operating Partnership. The Company conducts all of its business through the Operating Partnership and its subsidiaries. The Company's and the Operating Partnership's executive offices are located at 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and their telephone number is (404) 846-5000. Post Properties, Inc., a Georgia corporation, was incorporated on January 25, 1984, and is the successor by merger to the original Post Properties, Inc., a Georgia corporation, which was formed in 1971. The Operating Partnership is a Georgia limited partnership that was formed in July 1993 for the purpose of consolidating the operating and development businesses of the Company and the Post(R) apartment portfolio described herein. THE OPERATING PARTNERSHIP The Operating Partnership, through the operating divisions and subsidiaries described below, is the entity through which all of the Company's operations are conducted. At December 31, 1999, the Company, through wholly owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 88.2% of the common units in the Operating Partnership ("Units") and 64.1% of the preferred Units (the "Perpetual Preferred Units"). The other limited partners of the Operating Partnership, who hold units, are those persons (including certain officers and directors of the Company) who, at the time of the Initial Offering, elected to hold all or a portion of their interest in the form of Units rather than receiving shares of Common Stock. Each Unit may be redeemed by the holder thereof for either one share of Common Stock or cash equal to the fair market value thereof at the time of such redemption, at the option of the Operating Partnership. The Operating Partnership presently anticipates that it will cause shares of Common Stock to be issued in connection with each such redemption rather than paying cash (as has been done in all redemptions to date). With each redemption of outstanding Units for Common Stock, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues shares of stock, the Company will contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership will issue an equivalent number of Units or Perpetual Preferred Units, as appropriate, to the Company. As the sole shareholder of the Operating Partnership's sole general partner, the Company has the exclusive power under the agreement of limited partnership of the Operating Partnership to manage and conduct the business of the Operating Partnership, subject to the consent of the holders of the Units in connection with the sale of all or substantially all of the assets of the Operating Partnership or in connection with a dissolution of the Operating Partnership. The board of directors of the Company manages the affairs of the Operating Partnership by directing the affairs of the Company. The Operating Partnership cannot be terminated, except in connection with a sale of all or substantially all of the assets of the Company, for a period of 50 years without a vote of limited partners of the Operating Partnership. The Company's indirect limited and general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to the Company's percentage interest therein and indirectly entitle the Company to vote on all matters requiring a vote of the limited partners. As part of the formation of the Operating Partnership, a new holding company, Post Services, Inc. ("Post Services") was organized as a separate corporate subsidiary of the Operating Partnership. Post Services, in turn, owns all the outstanding stock of two operating subsidiaries, RAM Partners, Inc. ("RAM") and Post Landscape Services, Inc. ("Post Landscape"). Certain officers and directors of the Company received 99%, collectively, of the voting common stock of Post Services, and the Operating Partnership received 1% of the voting common stock and 100% 2 5 of the nonvoting common stock of Post Services. The voting and nonvoting common stock of Post Services held by the Operating Partnership represents 99% of the equity interests therein. The voting common stock held by officers and directors in Post Services is subject to an agreement that is designed to ensure that the stock will be held by one or more officers of Post Services. The by-laws of Post Services provide that a majority of the board of directors of Post Services must be persons who are not employees, members of management or affiliates of the Company or its subsidiaries. This by-law provision cannot be amended without the vote of 100% of the outstanding voting common stock of Post Services. Post Services currently has the same board of directors as the Company. OPERATING DIVISIONS The major operating divisions of the Operating Partnership include: Post Apartment Management Post Apartment Management is responsible for the day-to-day operations of all the Post(R) communities including community leasing, property management and personnel recruiting, training and development, maintenance and security. Post Apartment Management also conducts short-term corporate apartment leasing activities and is the largest division in the Company. Post Apartment Development Post Apartment Development conducts the development and construction activities of the Company. These activities include site selection, zoning and regulatory approvals, project design, and the full range of construction management services. Post Corporate Services Post Corporate Services provides executive direction and control to the Company's other divisions and subsidiaries and has responsibility for the creation and implementation of all Company financing and capital strategies. All accounting, management reporting, information systems, human resources, legal and insurance services required by the Company and all of its affiliates are centralized in Post Corporate Services. OPERATING SUBSIDIARIES The operating subsidiaries of the Operating Partnership, each of which is wholly owned by Post Services, include: RAM RAM provides third party asset management and leasing services for multifamily properties that do not operate under the Post(R) name. RAM's clients include pension funds, independent private investors, financial institutions and insurance companies. RAM's asset management contracts generally are subject to annual renewal or are terminable upon specified notice. As of December 31, 1999, RAM managed 67 properties (located in Georgia, Florida, Tennessee, Kansas, Missouri, North Carolina, Texas and Virginia) with 13,553 units under management. Post Landscape Group As a result of the reputation the Company developed in connection with the landscaping of Post(R) communities, in 1990, the Company began providing third party design landscape services for clients other than Post(R) communities. Projects with third parties include the design, installation and maintenance of the landscape for golf courses, office parks, commercial buildings and other commercial enterprises, and private residences. Post Landscape Group provides such third party landscape services. See Note 14 to the Company's Consolidated Financial Statements for information regarding the industry segments into which the Company organizes its operations. 3 6 HISTORY OF POST PROPERTIES, INC. During the five-year period from January 1, 1995 through December 31, 1999, the Company and affiliates have developed and completed 9,051 apartment units in 28 apartment communities, acquired 7,186 units in 28 apartment communities (26 communities containing 6,296 apartment units were as a result of the merger with Columbus Realty Trust (the "Merger") and sold six apartment communities containing an aggregate of 1,362 apartment units. Historically, the Company has primarily developed its apartment communities to the Company's specifications as opposed to buying or refurbishing existing properties built by others. The Company and its affiliates have sold apartment communities after holding them for investment periods that typically have been seven to twelve years after development. The following table shows the results of the Company's developments during this period:
1999 1998 1997 1996 1995 --------- ---------- ---------- --------- --------- Units completed ........................ 1,955 2,025 2,128 2,258 685 Units acquired(1) ...................... -- -- 6,296 890 -- Units sold ............................. (198) -- (416) (180) (568) Total units owned by Company affiliates ............................ 29,720 27,963 25,938 17,930 14,962 Total apartment rental income (in thousands) ............................ $ 318,697 $ 275,755 $ 185,732 $ 158,618 $ 133,817
(1) As part of the Merger, the Company acquired 26 communities containing 6,296 units. Of the communities acquired in the Merger, 14 communities containing 3,916 units were built by Columbus and 12 communities containing 2,380 units were acquired by Columbus. 4 7 CURRENT DEVELOPMENT ACTIVITY The Company currently has under construction or in initial lease-up 16 new communities and additions to three existing communities that will contain an aggregate of 6,018 units upon completion. The Company's communities under development or in initial lease-up are summarized in the following table:
ACTUAL OR ACTUAL OR ESTIMATED ESTIMATED QUARTER OF QUARTER QUARTER OF # OF CONSTRUCTION FIRST UNITS STABILIZED METROPOLITAN AREA UNITS COMMENCEMENT AVAILABLE OCCUPANCY - ----------------- ----- -------------- --------------- -------------- ATLANTA, GA Post Parkside(TM) .................. 188 1Q'99 4Q'99 2Q'00 Post Spring(TM) .................... 452 3Q'99 2Q'00 3Q'01 Post Stratford(TM) ................. 250 2Q'99 1Q'00 1Q'01 ----- 890 ----- CHARLOTTE, NC Post Uptown Place(TM) .............. 227 3Q'98 1Q'00 3Q'00 Post Gateway Place(TM) ............. 232 3Q'99 3Q'00 2Q'01 ----- 459 ----- DALLAS, TX Post Block 588(TM) ................. 127 4Q'98 1Q'00 2Q'00 Post Addison Circle(TM) II ......... 610 1Q'98 1Q'99 2Q'00 Post Addison Circle(TM) III ........ 264 3Q'99 3Q'00 2Q'01 Legacy Town Center City Apartment Homes by Post ......... 384 3Q'99 3Q'00 4Q'01 Uptown Village by Post(TM) II ...... 196 3Q'99 2Q'00 4Q'00 ----- 1,581 ----- HOUSTON, TX Post Midtown Square(TM) I .......... 479 1Q'98 2Q'99 3Q'00 Post Midtown Square(TM)Phase II .... 188 1Q'00 1Q'01 4Q'01 ----- 667 ----- TAMPA, FL Post Harbour Place(TM)Phase II ..... 319 4Q'98 1Q'00 1Q'01 ----- DENVER, CO Post Uptown Square(TM) I ........... 449 1Q'98 3Q'99 4Q'00 Post Uptown Square(TM)Phase II ..... 247 1Q'00 1Q'01 4Q'01 ----- 696 ----- PHOENIX, AZ Post Roosevelt Square(TM) .......... 410 4Q'98 1Q'00 1Q'01 ----- ORLANDO, FL Post Parkside(TM) .................. 244 1Q'99 2Q'99 3Q'00 ----- WASHINGTON, DC Post Pentagon Row .................. 504 2Q'99 4Q'00 1Q'02 ----- AUSTIN, TX Post West Avenue Lofts(TM) ......... 248 3Q'99 4Q'00 3Q'01 ----- TOTAL 6,018 =====
The Company is also currently conducting feasibility and other pre-development studies for possible new Post(R) communities in selected market areas. 5 8 COMPETITION All of the Communities are located in developed areas that include other upscale apartments. The number of competitive upscale apartment properties in a particular area could have a material effect on the Company's ability to lease apartment units at the Communities or at any newly developed or acquired communities and on the rents charged. The Company may be competing with others that have greater resources than the Company. In addition, other forms of residential properties, including single family housing, provide housing alternatives to potential residents of upscale apartment communities. AMERICANS WITH DISABILITIES ACT The Communities and any newly acquired apartment communities must comply with Title III of the Americans with Disabilities Act (the "ADA") to the extent that such properties are "public accommodations" and/or "commercial facilities" as defined by the ADA. Compliance with the ADA requirements could require removal of structural barriers to handicapped access in certain public areas of the Company's Communities where such removal is readily achievable. The ADA does not, however, consider residential properties, such as apartment communities, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public. The Company believes that its properties comply with all present requirements under the ADA and applicable state laws. Noncompliance could result in imposition of fines or an award of damages to private litigants. If required to make material additional changes, the Company's results of operations could be adversely affected. ENVIRONMENTAL REGULATIONS The Company is subject to Federal, state and local environmental regulations that apply to the development of real property, including construction activities, the ownership of real property, and the operation of multifamily apartment communities. In developing properties and constructing apartments, the Company utilizes environmental consultants to determine whether there are any flood plains, wetlands or environmentally sensitive areas that are part of the property to be developed. If flood plains are identified, development and construction is planned so that flood plain areas are preserved or alternative flood plain capacity is created in conformance with Federal and local flood plain management requirements. Storm water discharge from a construction facility is evaluated in connection with the requirements for storm water permits under the Clean Water Act. This is an evolving program in most states. The Company currently anticipates it will be able to obtain storm water permits for existing or new development. The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws subject the owner of real property to claims or liability for the costs of removal or remediation of hazardous substances that are disposed of on real property in amounts that require removal or remediation. Liability under CERCLA and applicable state superfund laws can be imposed on the owner of real property or the operator of a facility without regard to fault or even knowledge of the disposal of hazardous substances on the property or at the facility. The presence of hazardous substances in amounts requiring response action or the failure to undertake remediation where it is necessary may adversely affect the owner's ability to sell real estate or borrow money using such real estate as collateral. In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in a claim by a private party for personal injury or a claim by an adjacent property owner for property damage. The Company has instituted a policy that requires an environmental investigation of each property that it considers for purchase or that it owns and plans to develop. The environmental investigation is conducted by a qualified environmental consultant. If there is any indication of contamination, sampling of the property is performed by the environmental consultant. The environmental investigation report is reviewed by the Company and counsel prior to purchase of any property. If necessary, remediation of contamination, including underground storage tanks, is undertaken prior to development. 6 9 The Company has not been notified by any governmental authority of any noncompliance, claim, or liability in connection with any of the Communities. The Company has not been notified of a claim for personal injury or property damage by a private party in connection with any of the Communities in connection with environmental conditions. The Company is not aware of any other environmental condition with respect to any of the Communities that could be considered to be material. ITEM 2. PROPERTIES At February 10, 2000, the Communities consisted of 86 stabilized Post(R) multifamily apartment communities located in the following metropolitan areas:
METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL ----------------- ----------- ---------- ---------- Atlanta, GA............................ 41 16,298 54.8% Dallas, TX............................. 23 6,062 20.4% Houston, TX............................ 1 309 1.0% Tampa, FL.............................. 9 3,185 10.7% Jackson, MS............................ 3 983 3.3% Orlando, FL............................ 2 1,248 4.2% Fairfax, VA............................ 2 700 2.4% Nashville, TN.......................... 4 533 1.8% Charlotte, NC.......................... 1 402 1.4% --------- --------- --------- 86 29,720 100.0% ========= ========= =========
The Company or its predecessors developed all but 14 of the Post(R) Communities and currently manages all of the Communities. Fifty-one of the Communities have in excess of 300 apartment units, with the largest Community having a total of 916 apartment units. Seventy-seven of the eighty-six Communities, comprising approximately 91% of the Communities' apartment units, were completed after January 1, 1986. The average age of the Communities is approximately nine years. The average economic occupancy rate was 96.4% and 96.5%, respectively, and the average monthly rental rate per apartment unit was $851 and $826, respectively, for communities stabilized for each of the entire years ended December 31, 1999 and 1998. See "Selected Financial Information." 7 10 COMMUNITY INFORMATION
DECEMBER 1999 1999 AVERAGE NUMBER AVERAGE AVERAGE YEAR UNIT SIZE OF RENTAL RATES ECONOMIC COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2) - ----------- ----------- --------- ------------- ------ ----------- ------------ GEORGIA Post Ashford(R).................... Atlanta 1987 872 222 $ 824 96.4% Post Briarcliff(TM)................ Atlanta 1999 1,062 688 1,094 N/A (4) Post Bridge(R)..................... Atlanta 1986 847 354 725 97.3% Post Brookhaven(R)................. Atlanta 1990-92(3) 991 735 988 96.6% Post Canyon(R)..................... Atlanta 1986 899 494 741 98.0% Post Chase(R)...................... Atlanta 1987 938 410 734 94.1% Post Chastain(R)................... Atlanta 1990 965 558 1,050 95.4% Post Collier Hills(R).............. Atlanta 1997 967 396 1,047 96.0% Post Corners(R).................... Atlanta 1986 860 460 733 94.9% Post Court(R)...................... Atlanta 1988 838 446 701 95.7% Post Creek(TM)..................... Atlanta 1983(5) 1,180 810 934 95.5% Post Crest(R)...................... Atlanta 1996 1,073 410 1,050 98.3% Post Crossing(R)................... Atlanta 1995 1,067 354 1,096 96.0% Post Dunwoody(R)................... Atlanta 1989-96(3) 941 530 993 95.9% Post Gardens(R).................... Atlanta 1998 1,066 397 1,248 96.2% Post Glen(R)....................... Atlanta 1997 1,113 314 1,228 97.3% Post Lane(R)....................... Atlanta 1988 840 166 761 97.2% Post Lenox Park(TM)................ Atlanta 1995 1,030 206 1,137 96.9% Post Lindbergh(R).................. Atlanta 1998 960 396 1,098 N/A (4) Post Mill(R)....................... Atlanta 1985 952 398 765 97.6% Post Oak(TM)....................... Atlanta 1993 1,003 182 1,073 98.0% Post Oglethorpe(R)................. Atlanta 1994 1,205 250 1,317 96.3% Post Park(R)....................... Atlanta 1988-90(3) 904 770 817 96.2% Post Parkwood(R)................... Atlanta 1995 1,071 125 977 97.3% Post Peachtree Hills(R)............ Atlanta 1992-94(3) 982 300 1,072 95.7% Post Pointe(R)..................... Atlanta 1988 835 360 711 95.8% Post Renaissance(R)(6)............. Atlanta 1992-94(3) 890 342 1,016 95.6% Post Ridge(R)...................... Atlanta 1998 1,045 434 1,076 N/A (4) Post River(R)...................... Atlanta 1991-98(3) 1,015 213 1,256 95.7% Post Summit(R)..................... Atlanta 1990 957 148 914 97.4% Post Terrace(R).................... Atlanta 1996 1,144 296 1,137 95.8% Post Valley(R)..................... Atlanta 1988 854 496 716 97.6% Post Village(R).................... Atlanta 764 97.0% The Arbors........................ 1983 1,063 301 The Fountains..................... 1987 850 352 The Gardens....................... 1986 891 494 The Hills......................... 1984 953 241 The Meadows....................... 1988 817 350 Post Vinings(R).................... Atlanta 1989-91(3) 964 403 849 97.5% Post Walk(R)....................... Atlanta 1984-87(3) 932 476 852 97.3% Post Woods(R)...................... Atlanta 1977-83(3) 1,057 494 925 96.2% Riverside by Post(TM).............. Atlanta 1998 989 527 1,569 N/A (4) ------ ------ ------ ------ Subtotal/Average--Georgia......... 973 16,298 947 96.4% ------ ------ ------ ------ TEXAS Addison Circle Apartment Homes by Post(TM) - Phase I............. Dallas 1998 896 460 917 95.9% The American Beauty Mill by Post(TM) Dallas 1998 980 80 980 93.0% Cole's Corner(TM)................... Dallas 1998 796 186 982 94.8% Columbus Square by Post(TM)......... Dallas 1996 861 218 1,139 96.2% Post Parkwood(R).................... Dallas 1962-70(3) 1,042 96 975 97.1% Post Ascension(TM).................. Dallas 1985-95(3) 929 166 813 95.7% Post Hackberry Creek(TM)............ Dallas 1988-96(3) 865 432 798 95.3% Post Lakeside(TM)................... Dallas 1986 791 327 819 97.7% Post Townlake(TM)/Parks............. Dallas 1986-87(3) 869 398 750 96.9% Post White Rock(TM)................. Dallas 1988 659 207 736 96.8% Post Winsted(TM).................... Dallas 1996 728 314 778 96.0% The Shores by Post(TM).............. Dallas 1988-97(3) 874 907 924 96.0% The Abbey of State-Thomas by Post(TM) Dallas 1996 1,276 34 1,924 96.4% The Commons at Turtle Creek by Post(TM) Dallas 1985 645 158 781 97.4% The Heights of State-Thomas by Post(TM) Dallas 1998 813 198 1,013 96.6%
8 11
AVERAGE DECEMBER 1999 1999 UNIT SIZE NUMBER AVERAGE AVERAGE YEAR (SQUARE OF RENTAL RATES ECONOMIC COMMUNITIES LOCATION(1) COMPLETED FEET) UNITS PER UNIT OCCUPANCY(2) - ----------- ----------- --------- --------- ------ ------------- ------------ TEXAS CONTINUED Heights II.......................... Dallas 1999 894 170 1,074 N/A (4) The Meridian of State-Thomas by Post(TM)......................... Dallas 1991 798 132 1,089 96.1% The Residences on McKinney by Post(TM)......................... Dallas 1986 749 196 1,031 94.3% The Rice by Post(TM)................ Houston 1998 977 309 1,369 N/A (4) The Vineyard by Post(TM)............ Dallas 1996 728 116 949 97.4% The Vintage by Post(TM)............. Dallas 1993 781 161 937 96.3% The Worthington of State-Thomas by Post(TM)...................... Dallas 1993 818 332 1,143 96.2% Uptown Village by Post(TM).......... Dallas 1995 767 300 924 97.0% Post Windhaven(TM)(7)............... Dallas 1991 825 474 611 100.0% ----- ------ ------- ------ Subtotal/Average -- Texas.......... 848 6,371 919 96.3% ----- ------ ------- ------ FLORIDA Post Bay(R)......................... Tampa 1988 782 312 723 93.9% Post Court(R)....................... Tampa 1991 1,018 228 827 95.1% Post Fountains at Lee Vista(R)...... Orlando 1988 835 508 695 96.7% Post Harbour Place.................. Tampa 1999 1,037 206 1,279 N/A (4) Post Hyde Park(R)................... Tampa 1996 1,009 389 1,060 N/A (4) Post Lake(R)........................ Orlando 1988 850 740 677 96.1% Post Rocky Point(R)................. Tampa 1996-98 (3) 1,018 916 1,025 N/A (4) Post Village(R)..................... Tampa 768 94.8% The Arbors......................... 1991 967 304 The Lakes.......................... 1989 895 360 The Oaks........................... 1991 968 336 Post Walk(R) at Old Hyde Park Village.............. Tampa 1997 984 134 1,259 95.9% ----- ------ ------- ------ Subtotal/Average -- Florida........ 942 4,433 862 95.4% ----- ------ ------- ------ MISSISSIPPI Post Mark(TM)....................... Jackson 1984 988 256 625 95.9% Post Pointe(R)...................... Jackson 1997 812 241 621 93.2% Post Trace(R)....................... Jackson 1989-95 (3) 734 486 577 94.2% ----- ------ ------- ------ Subtotal/Average -- Mississippi 845 983 600 94.4% ----- ------ ------- ------ VIRGINIA Post Corners(R) at Trinity Centre... Fairfax 1996 1,030 336 1,022 99.4% Post Forest(R)...................... Fairfax 1990 889 364 989 99.8% ----- ------ ------- ------ Subtotal/Average -- Virginia....... 960 700 1,005 99.6% ----- ------ ------- ------ NORTH CAROLINA Post Park at Phillips Place(R)...... Charlotte 1998 912 402 1,238 96.7% ----- ------ ------- ------ TENNESSEE Post Hillsboro Village(R)........... Nashville 1998 910 201 1,054 96.7% Post Green Hills(R)................. Nashville 1996 1,056 166 1,121 97.8% Post Bennie Dillon(TM).............. Nashville 1999 719 86 1,061 N/A (4) The Lee Apartments ................. Nashville 1924 (8) 808 80 678 98.7% ----- ------ ------- ------ Subtotal/Average -- Tennessee...... 873 533 1,020 97.4% ----- ------ ------- ------ TOTAL............................ 908 29,720 $ 923 96.4% ===== ====== ======= ======
(1) Refers to greater metropolitan areas of cities indicated. (2) Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. (3) These dates represent the respective completion dates for multiple phases of a community. (4) During 1999, this community or a phase in this community was in lease-up and, therefore, is not included. (5) This community was completed by the Company in 1983, sold during 1986, managed by the Company through 1993 and reacquired by the Company in 1996. (6) The Company has a leasehold interest in the land underlying Post Renaissance pursuant to a ground lease that expires on January 1, 2040. (7) Post Windhaven(TM) is subject to a master lease with Electronic Data Systems. (8) The Company acquired this community in 1996. 9 12 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT The persons who are executive officers of the Company and its affiliates and their positions are as follows:
NAME POSITIONS AND OFFICES HELD ---- -------------------------- John A. Williams........................ Chairman of the Board, Chief Executive Officer and Director John T. Glover.......................... Vice Chairman and Director Jeffrey A. Harris....................... President and Chief Operating Officer W. Daniel Faulk, Jr..................... President -- Post Apartment Development and Chief Development Officer Arthur E. Lomenick...................... Senior Executive Vice President -- Post Apartment Development R. Byron Carlock, Jr.................... Executive Vice President and Chief Investment Officer -- Post Corporate Services Sherry W. Cohen......................... Executive Vice President and Secretary -- Post Corporate Services James F. Duffy.......................... Executive Vice President -- Post Apartment Development R. Gregory Fox.......................... Executive Vice President and Chief Accounting Officer -- Post Corporate Services Martha J. Logan......................... Executive Vice President -- Post Apartment Management John B. Mears........................... Executive Vice President -- Post Apartment Development Michelle G. Toups....................... Executive Vice President -- Post Apartment Management Thomas L. Wilkes........................ Executive Vice President -- Post Apartment Management Terry L. Chapman........................ Senior Vice President -- Post Apartment Management Douglas S. Gray......................... Senior Vice President -- Post Corporate Services John D. Hooks........................... Senior Vice President -- Post Apartment Management Joseph R. Taylor........................ Senior Vice President -- Post Apartment Development Sheila James Teabo...................... Senior Vice President -- Post Apartment Management Janie S. Maddox......................... Vice President -- Post Corporate Services William F. Leseman...................... Executive Vice President -- RAM Partners, Inc. William C. Lincicome.................... Executive Vice President -- Post Landscape Group, Inc. Janet M. Appling........................ Vice President -- Post Corporate Apartments
The following is a biographical summary of the experience of the executive officers of the Company: John A. Williams. Mr. Williams is the Chairman of the Board and Chief Executive Officer of the Company and is a Director. Mr. Williams founded the business of the Company in 1971 and since that time has acted as Chairman and Chief Executive Officer. Mr. Williams is currently serving on the board of directors of Crawford & Co. and the Atlanta Regional Commission and is Chairman of Metro Atlanta Chamber of Commerce. Mr. Williams is 57 years old. John T. Glover. Mr. Glover has been the Vice Chairman of the Company since February 29, 2000 and a Director since 1984. From 1984 through February 29, 2000, Mr. Glover was President, Chief Operating Officer, and Treasurer of the Company. Mr. Glover is a Director of SunTrust Bank, Haverty's Furniture Companies, Inc. and Emory Healthcare, Inc. Mr. Glover is 53 years old. Jeffrey A. Harris. Mr. Harris has been with the Company for fifteen years and, as of March 1, 2000, is currently the President and Chief Operating Officer of the Company. From December 1998 to December 1999, he was President 10 13 of Post Apartment Management. From October 1995 to December 1998, he was President of Post Management Services. Prior thereto, Mr. Harris was President of Post Apartment Management from March 1995, Executive Vice President of Post Apartment Management from April 1993 and Senior Vice President from 1989. Mr. Harris is a former President of and currently serves on the Board of Directors of the Atlanta Apartment Association. Mr. Harris is 42 years old. W. Daniel Faulk, Jr. Mr. Faulk has been with the Company for thirteen years and is currently President of Post Apartment Development and Chief Development Officer. From April 1993 to December 1999, he was President of Post Apartment Development, which is responsible for the development and construction of all Post(R) apartment communities. Prior thereto, Mr. Faulk was President of Post Atlanta since February 1987. Mr. Faulk is currently on the board of directors of Mountain National Bank. Mr. Faulk is 57 years old. Arthur E. Lomenick. Mr. Lomenick joined the Company in October 1997 and, since December 1998, has been Senior Executive Vice President of Post Apartment Development. From October 1997 to December 1998, he was an Executive Vice President of Post West. He is responsible for new development in the Western United States. Mr. Lomenick was a Senior Vice President of Columbus Realty Trust ("Columbus") from October 1994 through October 1997 and was Vice President from October 1993 to October 1994. Previously, Mr. Lomenick served as Vice President, Investments, for Memphis Real Estate since January 1993. Mr. Lomenick is 44 years old. R. Byron Carlock, Jr. Mr. Carlock joined the Company in June 1998 as Executive Vice President and Chief Investment Officer. Mr. Carlock was Chairman of The Carlock Companies, Inc. from March 1998 through June 1998 and was President and Chief Operating Officer of W.B. Johnson Properties, LLC from March 1997 through February 1998. From June 1987 through March 1997 Mr. Carlock served the Trammell Crow organization in various capacities including Managing Director of Crow Investment Trust, Director of Trammell Crow Capital Markets, Associate of Trammell Crow Ventures and Development Associate of Trammell Crow Company. Mr. Carlock is a council member of the Urban Land Institute and a board member of CHARIS Community Housing. Mr. Carlock is 37 years old. Sherry W. Cohen. Ms. Cohen has been with the Company for fifteen years. Since October 1997, she has been an Executive Vice President of Post Corporate Services responsible for supervising and coordinating legal affairs and insurance. Since April 1990, Ms. Cohen had also been Corporate Secretary. She was a Senior Vice President with Post Corporate Services from July 1993 to October 1997. Prior thereto, Ms. Cohen was a Vice President of Post Properties, Inc. since April 1990. Ms. Cohen is 45 years old. James F. Duffy. Mr. Duffy joined the Company in October 1997 and, since December 1998, has been Executive Vice President of Post Apartment Development. He is responsible for the construction of all Post apartment communities located in the Western United States. From October 1997 to December 1998 he was an Executive Vice President of Post West. He was a Senior Vice President of Columbus from May 1996 through October 1997. Prior to his affiliation with Columbus, Mr. Duffy was President of the JFD Group, a business consulting firm specializing in the commercial construction industry from 1993 to 1996. Prior thereto, he was President of the W. B. Moore Company from 1991 to 1993. Mr. Duffy is 55 years old. R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and, since December 1998, has served as Executive Vice President of Post Corporate Services and the Company's Chief Accounting Officer responsible for financial reporting and planning, accounting, management information systems and human resources. From February 1996 to December 1998, Mr. Fox was a Senior Vice President. Prior to joining the Company, he was a senior manager in the audit division of Price Waterhouse LLP where he was employed for ten years. Mr. Fox is a Certified Public Accountant. Mr. Fox is 40 years old. Martha J. Logan. Ms. Logan has been with the Company for eight years. Since December 1998, she has been Executive Vice President of Post Apartment Management. From October 1997 to December 1998, Ms. Logan was Executive Vice President of Post Management Services. From October 1995 to October 1997, she was President of Post Management Services. Prior thereto, Ms. Logan was President of RAM since July 1994, Executive Vice President of RAM from January 1994 and Vice President of RAM since 1991. Ms. Logan is 45 years old. 11 14 John B. Mears. Mr. Mears has been with the Company since November 1993 and, since December 1998, has been Executive Vice President of Post Apartment Development. From October 1997 to December 1998, he was an Executive Vice President of Post East Development. He is responsible for new development in the Eastern United States. Prior thereto, he was a Senior Vice President of Post Apartment Development since July 1994. Prior to joining the Company, Mr. Mears was an associate in the Real Estate Investment Banking Group at Merrill Lynch and Company since July 1992. Mr. Mears is 36 years old. Michelle G. Toups. Ms. Toups joined the Company in November 1996 and is currently an Executive Vice President for Post Apartment Management responsible for the operations of Post(R) communities in the Eastern United States. From November 1996 through December 1999, she was a Group Vice President for Post Apartment Management. Prior thereto, she was a Senior Vice President at Security Capital Atlantic for more than three years. Ms. Toups is 46 years old. Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 and, since December 1998, has been an Executive Vice President and Director of Operations for Post Apartment Management responsible for the operations of Post(R) communities in the Western United States. From October 1997 to December 1998 he was an Executive Vice President and Director of Operations of Post West. Mr. Wilkes was a Senior Vice President of Columbus from October 1993 through October 1997. Mr. Wilkes served as President of CRH Management Company, a multifamily property management firm and a member of the Columbus Group, since its formation in October 1990 to December 1993. Mr. Wilkes is a Certified Property Manager. Mr. Wilkes is 40 years old. Terry L. Chapman. Mr. Chapman has been with the Company for twenty-six years and, since December 1998, has been a Senior Vice President of Post Apartment Management. From October 1997 to December 1998, he was a Senior Vice President of Post Management Services. Prior thereto, he was an Executive Vice President of Post Management Services for more than five years. He is responsible for maintenance, quality assurance, security, and preventive maintenance for all Post(R) communities. Mr. Chapman is 53 years old. Douglas S. Gray. Mr. Gray joined the Company in December 1997 and, since January 1999, has been a Senior Vice President of Post Corporate Services responsible for financial planning and asset management. He was a Vice President of Post Corporate Services from December 1997 to December 1998. Prior to joining Post, Mr. Gray was Vice President of Dutch Institutional Holding Co. from July 1994 to November 1997. Prior thereto, he was Director of Property Services for The Landmarks Group from June 1988 to June 1994. Mr. Gray is 40 years old. John D. Hooks. Mr. Hooks has been with the Company for twenty-one years and since December 1998 has been a Senior Vice President of Post Apartment Management. From October 1997 to December 1998 Mr. Hooks was a Senior Vice President of Post Management Services. He is responsible for landscape design, installation and maintenance on all Post(R) communities. Prior thereto, he was an Executive Vice President of Post Landscape since July 1993. He was the Senior Vice President of Landscape from January 1987 to July 1993. Mr. Hooks is 45 years old. Joseph R. Taylor. Mr. Taylor has been with the Company thirteen years and is currently a Senior Vice President of Post Apartment Development. He is responsible for the construction of all Post apartment communities located in the Eastern United States. Prior thereto, he was a Vice President in 1998, a Senior Project Manager in 1997, and a Project Manager for more than 5 years in Post Apartment Development. Mr. Taylor is 36 years old. Sheila James Teabo. Ms. Teabo has been with the Company thirteen years and is currently a Senior Vice President of Post Apartment Management responsible for the operations of certain Post(R) communities in the Eastern United States. From 1995 through 1997, she was a Regional Vice President of Post Apartment Management. Prior thereto, she was an Area Vice President for more than three years of Post Apartment Management. Ms. Teabo is 36 years old. Janie S. Maddox. Ms. Maddox has been with the Company for twenty-three years. Since November 1995, she has been a Vice President of Post Corporate Services responsible for public relations. Prior thereto, she was a Senior Vice President of Post Management Services primarily responsible for human resources since 1990. Ms. Maddox is 52 years old. 12 15 William F. Leseman. Mr. Leseman has been with the Company for ten years. Since October 1997, he has been Executive Vice President of RAM responsible for its operations. Prior thereto, he was a Senior Vice President of RAM from 1995 through September 1997. Prior thereto, Mr. Leseman was Senior Vice President of Post Management Services from 1994 to 1995 and an Area Vice President of Post Management Services from 1989 to 1994. Mr. Leseman is 40 years old. William C. Lincicome. Mr. Lincicome has been with the Company for nine years. Since September 1996, he has been Executive Vice President of Post Landscape Group responsible for its operations. He was an independent architectural consultant from April 1996 to September 1996 and was Vice President and Director of Land Planning of Post Landscape Services from 1989 to 1996. Mr. Lincicome is 47 years old. Janet M. Appling. Ms. Appling has been with the Company 23 years and is currently a Vice President of Post Corporate Apartments responsible for its operations. Prior thereto, she was the Director of Post Corporate Apartments since 1986. Ms. Appling is 45 years old. 13 16 PART II ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "PPS." The following table sets forth the quarterly high and low closing sales prices per share reported on the NYSE, as well as the quarterly dividends declared per share:
DIVIDENDS QUARTER ENDED HIGH LOW DECLARED ------------------------- ---------- ---------- ----------- 1998 First Quarter............ $ 41.2500 $ 38.1250 $ 0.650 Second Quarter........... 41.2500 38.5000 0.650 Third Quarter............ 40.2500 36.3750 0.650 Fourth Quarter........... 40.7500 36.8750 0.650 1999 First Quarter............ $ 38.8125 $ 35.2500 $ 0.700 Second Quarter........... 42.0625 35.3750 0.700 Third Quarter............ 41.0000 38.8750 0.700 Fourth Quarter........... 39.7500 36.7500 0.700
On February 17, 2000, the Company had 1,914 common shareholders of record. The Company pays regular quarterly dividends to holders of shares of Common Stock. Future distributions by the Company will be at the discretion of the board of directors and will depend on the actual funds from operations of the Company, the Company's financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code") and such other factors as the board of directors deems relevant. For a discussion of the Company's credit agreements and their restrictions on dividend payments, see Liquidity and Capital Resources at Management's Discussion and Analysis of Financial Condition and Results of Operations. During 1999, the Company did not sell any unregistered securities. There is no established public trading market for the Units. As of February 17, 2000, the Operating Partnership had 110 holders of record of Units of the Operating Partnership. For each quarter during 1998 and 1999, the Operating Partnership paid a cash distribution to holders of Units equal in amount to the dividend paid on the Company's common stock for such quarter. During 1999, the Operating Partnership did not sell any unregistered securities, other than the Series D Preferred Units, as disclosed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and the Form 10-Q for the quarterly period ended September 30, 1999. 14 17 ITEM 6. SELECTED FINANCIAL DATA POST PROPERTIES, INC. (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 1999 1998 1997 1996 1995 --------- --------- --------- --------- --------- OPERATING DATA: Revenue: Rental .......................................... $ 318,697 $ 275,755 $ 185,732 $ 158,618 $ 133,817 Property management - third-party (1) ........... 3,368 3,164 2,421 2,828 2,764 Landscape services - third-party (1) ............ 9,118 7,252 5,148 4,882 4,647 Other ........................................... 14,744 12,734 6,815 5,247 3,477 --------- --------- --------- --------- --------- Total revenue ............................... 345,927 298,905 200,116 171,575 144,705 --------- --------- --------- --------- --------- Property operating and maintenance expense (exclusive of depreciation and amortization) ............................. 113,152 99,717 67,515 58,202 49,912 Depreciation .................................... 58,013 46,646 29,048 23,603 20,819 Property management expenses - third-party (1) . 2,925 2,499 1,959 2,055 2,166 Landscape services expenses - third-party (1) ... 7,904 6,264 4,284 3,917 3,950 Interest expense ................................ 33,192 31,297 24,658 22,131 22,698 Amortization of deferred loan costs ............. 1,496 1,185 980 1,352 1,967 General and administrative ...................... 7,788 8,495 7,364 7,716 6,071 Minority interest in consolidated property partnerships .................................. 511 397 -- -- 451 --------- --------- --------- --------- --------- Total expense .............................. 224,981 196,500 135,808 118,976 108,034 --------- --------- --------- --------- --------- Income before minority interest of unitholders, net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office and extraordinary item ................... 120,946 102,405 64,308 52,599 36,671 Net gain (loss) on sale of assets ................. (1,522) -- 3,270 854 1,746 Loss on unused treasury locks ..................... -- (1,944) -- -- -- Loss on relocation of corporate office ............ -- -- (1,500) -- -- Minority interest of preferred unitholders in Operating Partnership ........................... (1,851) -- -- -- -- Minority interest of common unitholders in Operating Partnership ........................... (12,598) (11,511) (11,131) (9,984) (8,429) --------- --------- --------- --------- --------- Income before extraordinary item .................. 104,975 88,950 54,947 43,469 29,988 Extraordinary item, net of minority interest (2) .................................... (458) -- (75) -- (870) --------- --------- --------- --------- --------- Net income ........................................ 104,517 88,950 54,872 43,469 29,118 Dividends to preferred shareholders ............... (11,875) (11,473) (4,907) (1,063) -- --------- --------- --------- --------- --------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS ............................. $ 92,642 $ 77,477 $ 49,965 $ 42,406 $ 29,118 ========= ========= ========= ========= ========= PER COMMON SHARE DATA: Income before extraordinary item (net of preferred dividends) - basic ............ $ 2.42 $ 2.21 $ 2.11 $ 1.95 $ 1.63 Net income available to common shareholders - basic ............................ 2.41 2.21 2.11 1.95 1.58 Income before extraordinary item (net of preferred dividends) - diluted .......... 2.39 2.18 2.09 1.94 1.63 Net income available to common shareholders - diluted .......................... 2.38 2.18 2.09 1.94 1.58 Dividends declared ................................ 2.80 2.60 2.38 2.16 1.96
15 18
DECEMBER 31, 1999 1998 1997 1996 1995 ---------- ---------- ----------- ----------- --------- BALANCE SHEET DATA: Real estate, before accumulated depreciation.................................... $2,582,785 $2,255,074 $ 1,936,011 $ 1,109,342 $ 937,924 Real estate, net of accumulated depreciation.................................... 2,279,769 2,007,926 1,734,916 931,670 781,100 Total assets..................................... 2,350,173 2,066,713 1,780,563 958,675 812,984 Total debt....................................... 989,583 800,008 821,209 434,319 349,719 Shareholders' equity............................. 1,058,862 1,051,686 756,920 398,993 343,624
DECEMBER 31, 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ OTHER DATA: Cash flow provided from (used in): Operating activities .................... $ 153,038 $ 148,618 $ 109,554 $ 78,966 $ 57,362 Investing activities .................... $ (317,960) $ (328,216) $ (208,377) $ (166,762) $ (114,531) Financing activities .................... $ 149,638 $ 189,873 $ 109,469 $ 79,021 $ 60,885 Funds from operations(3) .................... $ 162,581 $ 136,146 $ 87,392 $ 74,212 $ 56,798 Weighted average common shares outstanding -- basic .................... 38,460,689 35,028,596 23,664,044 21,787,648 18,382,299 Weighted average common Units outstanding -- basic .................... 43,663,373 40,244,351 28,880,928 26,917,723 23,541,639 Weighted average common shares outstanding -- diluted ................... 38,916,987 35,473,587 23,887,906 21,879,248 18,387,894 Weighted average common Units outstanding -- diluted .................. 44,119,671 40,689,342 29,104,790 27,009,323 23,547,234 Total stabilized communities (at end of period) ...................... 85 83 78 49 42 Total stabilized apartment units (at end of period) ...................... 29,032 27,568 25,938 17,930 14,962 Average economic occupancy (fully stabilized communities)(4) ....... 96.4% 96.5% 94.8% 95.3% 96.0%
(1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties. (2) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. The extraordinary item has been reduced by the portion related to the minority interest of the unitholders calculated on the basis of weighted average Units outstanding for the year. (3) The Company uses the National Association of Real Estate Investment Trust ("NAREIT") definition of FFO, which was adopted for periods beginning after January 1, 1996. FFO for any period means the consolidated net income available to common shareholders of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles ("GAAP"). FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. NAREIT's definition of FFO excludes items classified by GAAP as extraordinary or unusual and significant non-recurring events that materially distort the comparative measurement of performance over time. Effective January 1, 2000 NAREIT amended its definition of FFO to include in FFO all non-recurring events, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of property. The Company will use the amended definition of FFO in reporting results for all periods on or after January 1, 2000. The Company does not expect use of the amended definition to materially affect FFO. (4) Amount represents average economic occupancy for communities stabilized for both the current and prior respective periods. Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts (average economic occupancy, taking account of these amounts, would have been 95.0% for both years ended December 31, 1999 and 1998). Concessions were $2,847 and $3,141 and employee discounts were $583 and $519 for the years ended December 31, 1999 and 1998, respectively. A community is considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month, or (ii) one year after completion of construction. 16 19 POST APARTMENT HOMES, L.P. (DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 1999 1998 1997 1996 1995 --------- --------- --------- --------- --------- OPERATING DATA: Revenue: Rental ....................................... 318,697 275,755 185,732 158,618 133,817 Property management -- third-party(1) ........ 3,368 3,164 2,421 2,828 2,764 Landscape services -- third-party(1) ......... 9,118 7,252 5,148 4,882 4,647 Other ........................................ 14,744 12,734 6,815 5,247 3,477 --------- --------- --------- --------- --------- Total revenue .............................. 345,927 298,905 200,116 171,575 144,705 --------- --------- --------- --------- --------- Property operating and maintenance expense (exclusive of depreciation and amortization) ............................ 113,152 99,717 67,515 58,202 49,912 Depreciation (real estate and non-real estate .. 58,013 46,646 29,048 23,603 20,819 assets) Property management expenses -- third-party(1) . 2,925 2,499 1,959 2,055 2,166 Landscape services expenses -- third-party(1) .. 7,904 6,264 4,284 3,917 3,950 Interest expense ............................... 33,192 31,297 24,658 22,131 22,698 Amortization of deferred loan costs ............ 1,496 1,185 980 1,352 1,967 General and administrative ..................... 7,788 8,495 7,364 7,716 6,071 Minority interest in consolidated property partnerships ........................ 511 397 -- -- 451 --------- --------- --------- --------- --------- Total expenses ............................. 224,981 196,500 135,808 118,976 108,034 --------- --------- --------- --------- --------- Income before net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office, and .......... 120,946 102,405 64,308 52,599 36,671 extraordinary item Net gain (loss) on sale of assets .............. (1,522) -- 3,270 854 1,746 Loss on unused treasury locks .................. -- (1,944) -- -- -- Loss on relocation of corporate office ......... -- -- (1,500) -- -- --------- --------- --------- --------- --------- Income before extraordinary item ............... 119,424 100,461 66,078 53,453 38,417 Extraordinary item(2) .......................... (521) -- (93) -- (1,120) --------- --------- --------- --------- --------- Net income ..................................... 118,903 100,461 65,985 53,453 37,297 Distributions to preferred unitholders ......... (13,726) (11,473) (4,907) (1,063) -- --------- --------- --------- --------- --------- NET INCOME AVAILABLE TO COMMON UNITHOLDERS ........................... $ 105,177 $ 88,988 $ 61,078 $ 52,390 $ 37,297 ========= ========= ========= ========= ========= PER COMMON UNIT DATA: Income before extraordinary item (net of preferred distributions) -- basic .... $ 2.42 $ 2.21 $ 2.11 $ 1.95 $ 1.63 Net income available to common unitholders -- basic ......................... 2.41 2.21 2.11 1.95 1.58 Income before extraordinary item (net of preferred distributions) -- diluted .. 2.39 2.18 2.09 1.94 1.63 Net income available to common unitholders -- diluted ....................... 2.38 2.18 2.09 1.94 1.58 Distributions declared ......................... 2.80 2.60 2.38 2.16 1.96
17 20
DECEMBER 31, 1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- --------- BALANCE SHEET DATA: Real estate, before accumulated depreciation ........................... $ 2,582,785 $ 2,255,074 $ 1,936,011 $ 1,109,342 $ 937,924 Real estate, net of accumulated depreciation............................ 2,279,769 2,007,926 1,734,916 931,670 781,100 Total assets ........................... 2,350,173 2,066,713 1,780,563 958,675 812,984 Total debt ............................. 989,583 800,008 821,209 434,319 349,719 Partners' equity ....................... 1,251,342 1,177,051 869,304 482,434 425,489
DECEMBER 31, 1999 1998 1997 1996 1995 ----------- ----------- ------------ ----------- ------------ OTHER DATA: Cash flow provided from (used in): Operating activities ................. $ 153,038 $ 148,618 $ 109,554 $ 78,966 $ 57,362 Investing activities ................. $ (317,960) $ (328,216) $ (208,377) $ (166,762) $ (114,531) Financing activities ................. $ 149,638 $ 189,873 $ 109,469 $ 79,021 $ 60,885 Funds from operations(3) ............... $ 162,581 $ 136,146 $ 87,392 $ 74,212 $ 56,798 Weighted average common Units outstanding -- basic .................. 43,663,373 40,244,351 28,880,928 26,917,723 23,541,639 Weighted average common Units outstanding -- diluted ................ 44,119,671 40,689,342 29,104,790 27,009,323 23,547,234 Total stabilized communities (at end of period) ................... 85 83 78 49 42 Total stabilized apartment units (at end of period) ................... 29,032 27,568 25,938 17,930 14,962 Average economic occupancy (fully stabilized communities)(4)..... 96.4% 96.5% 94.8% 95.3% 96.0%
(1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties. (2) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. The extraordinary item has been reduced by the portion related to the minority interest of the unitholders calculated on the basis of weighted average Units outstanding for the year. (3) The Company uses the National Association of Real Estate Investment Trust ("NAREIT") definition of FFO, which was adopted for periods beginning after January 1, 1996. FFO for any period means the consolidated net income available to common unitholders of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles ("GAAP"). FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. NAREIT's definition of FFO excludes items classified by GAAP as extraordinary or unusual and significant non-recurring events that materially distort the comparative measurement of performance over time. Effective January 1, 2000 NAREIT amended its definition of FFO to include in FFO all non-recurring events, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of property. The Company will use the amended definition of FFO in reporting results for all periods on or after January 1, 2000. The Company does not expect use of the amended definition to materially affect FFO. (4) Amount represents average economic occupancy for communities stabilized for both the current and prior respective periods. Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts (average economic occupancy, taking account of these amounts, would have been 95.0% for each of the years ended December 31, 1999 and 1998). Concessions were $2,847 and $3,141 and employee discounts were $583 and $519 for the years ended December 31, 1999 and 1998, respectively. A community is considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month, or (ii) one-year after completion of construction. 18 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA) OVERVIEW The following discussion should be read in conjunction with all of the financial statements appearing elsewhere in this report. The following discussion is based primarily on the Consolidated Financial Statements of Post Properties, Inc. (the "Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except for the effect of minority interest in the Operating Partnership, the following discussion with respect to the Company is the same for the Operating Partnership. As of December 31, 1999, there were 44,027,748 Units outstanding, of which 38,834,323 or 88.2%, were owned by the Company and 5,193,425, or 11.8% were owned by other limited partners (including certain officers and directors of the Company). As of December 31, 1999, there were 7,800,000 preferred units outstanding, of which 5,000,000 were owned by the Company. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 The Operating Partnership recorded net income available to common unitholders of $105,177, $88,988, and $61,078 for the years ended December 31, 1999, 1998 and 1997, respectively. The Company recorded net income available to common shareholders of $92,642, $77,477 and $49,965 for the years ended December 31, 1999, 1998 and 1997, respectively. The Company's increases in net income available to common shareholders of $15,165, from 1998 to 1999, and $27,512, from 1997 to 1998 were primarily related to the Merger (1997 to 1998 only), increased rental rates for fully stabilized communities and an increase in units placed in service. COMMUNITY OPERATIONS The Company's net income is generated primarily from the operation of its apartment communities. For purposes of evaluating comparative operating performance, the Company categorizes its operating communities based on the period each community reaches stabilized occupancy. A community is generally considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month or (ii) one year after completion of construction. At December 31, 1999, the Company's portfolio of apartment communities consisted of the following: (i) 68 communities that were completed and stabilized for all of the current and prior year, (ii) seven communities that achieved full stabilization during the prior year, (iii) 10 communities which reached stabilization during 1999, and (iv) 16 communities and additions to three existing communities currently in the development or lease-up stage. For communities with respect to which construction is completed and the community has become fully operational, all property operating and maintenance expenses are expensed as incurred and those recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset are capitalized. (See "Capitalization of Fixed Assets and Community Improvements"). The Company has adopted an accounting policy related to communities in the development and lease-up stage whereby substantially all operating expenses (including pre-opening marketing expenses) are expensed as incurred. The Company treats each unit in an apartment community separately for cost accumulation, capitalization and expense recognition purposes. Prior to the commencement of leasing activities, interest and other construction costs are capitalized and reflected on the balance sheet as construction in progress. Once a unit is placed in service, all operating expenses allocated to that unit, including interest, are expensed as incurred. During the lease-up phase, the sum of interest expense on completed units and other operating expenses (including pre-opening marketing expenses) will initially exceed rental revenues, resulting in a "lease-up deficit," which continues until such time as rental revenues exceed such expenses. Lease up deficits for the years ended December 31, 1999, 1998, and 1997 were $2,798, $2,063 and $1,339, respectively. 19 22 In order to evaluate the operating performance of its communities, the Company has presented financial information which summarizes the revenue in excess of specified expense on a comparative basis for all of its operating communities combined and for communities which have reached stabilization prior to January 1, 1998. ALL OPERATING COMMUNITIES The operating performance for all of the Company's apartment communities combined for the years ended December 31, 1999, 1998 and 1997 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------- ----------------------------------- % % 1999 1998 CHANGE 1998 1997 CHANGE --------- --------- -------- --------- --------- -------- Rental and other revenue: Fully stabilized communities(1) .................... $ 236,923 $ 228,878 3.5% $ 228,878 $ 207,686 10.2% Adjustment for acquired communities(2) ............. -- -- n/m -- (36,594) n/m Communities stabilized during 1998 ................. 22,197 19,149 15.9% 19,149 5,441 n/m Development and lease-up communities(3) ............ 58,486 23,708 146.7% 23,708 8,328 n/m Sold communities(4) ................................ 318 3,867 (91.8)% 3,867 3,205 20.7% Other revenue(5) ................................... 14,753 12,415 18.8% 12,415 4,392 182.7% --------- --------- ------ --------- --------- ------ 332,677 288,017 15.5% 288,017 192,458 49.7% --------- --------- ------ --------- --------- ------ Property operating and maintenance expense (exclusive of depreciation and amortization): Fully stabilized communities(1) .................... 73,114 72,013 1.5% 72,013 54,556 32.0% Adjustment for acquired communities(2) .................................... -- -- n/m -- (689) n/m Communities stabilized during 1998 ................. 7,028 6,183 13.7% 6,183 2,123 191.2% Development and lease-up communities(3) ............ 22,580 11,199 101.6% 11,199 3,174 n/m Sold communities(4) ................................ 128 621 (79.4)% 621 1,147 (45.9)% Other expenses(6) .................................. 10,302 9,701 6.2% 9,701 7,204 34.7% --------- --------- ------ --------- --------- ------ 113,152 99,717 13.5% 99,717 67,515 47.7% --------- --------- ------ --------- --------- ------ Revenue in excess of specified expense .............. $ 219,525 $ 188,300 16.6% $ 188,300 $ 124,943 50.7% ========= ========= ====== ========= ========= ====== Recurring capital expenditures:(7) Carpet ............................................. $ 2,864 $ 2,550 12.3% $ 2,550 $ 1,617 57.7% Other .............................................. 5,777 4,929 17.2% 4,929 2,058 139.5% --------- --------- ------ --------- --------- ------ Total ............................................ $ 8,641 $ 7,479 15.5% $ 7,479 $ 3,675 103.5% ========= ========= ====== ========= ========= ====== Average apartment units in service .................. 29,304 27,416 6.9% 27,416 19,413 41.2% ========= ========= ====== ========= ========= ======
(1) Communities which reached stabilization prior to January 1, 1998. Includes fully stabilized communities acquired as a result of the Merger. (2) The adjustment for acquired communities represents the operating results of the fully stabilized communities owned by Columbus prior to the Merger. (3) Communities in the "construction", "development" or "lease-up" stage during 1999 and, therefore, not considered fully stabilized for all of the periods presented. (4) Includes one community containing 416 units, which was sold on May 22, 1997 and one community containing 198 units which was sold March 19, 1999. The revenues and expenses for these communities had previously been included in the fully stabilized group. (5) Other revenue includes revenue on furnished apartment rentals above the unfurnished rental rates and any revenue not directly related to property operations. (6) Other expenses includes certain indirect central office operating expenses related to management, grounds maintenance, and costs associated with furnished apartment rentals. (7) In addition to those expenses which relate to property operations, the Company incurs recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. n/m - not meaningful For the year ended December 31, 1999, rental and other revenue increased $44,660 or 15.5% compared to 1998, primarily as a result of the completion of new communities and increased rental rates for existing communities. For the year ended December 31, 1998, rental and other revenue increased $95,559 or 49.7% compared to 1997, primarily as a result of the Merger, completion of new communities and increased rental rate for existing communities. 20 23 Property operating and maintenance expenses (exclusive of depreciation and amortization) increased from 1998 to 1999 primarily due to an increase in the number of units placed in service through the development of communities. Property operating and maintenance expenses (exclusive of depreciation and amortization) increased from 1997 to 1998 primarily as a result of the Merger and completion of new communities. For the years ended December 31, 1999 and 1998, recurring capital expenditures increased $1,162 or 15.5% and $3,804 or 103.5%, respectively, compared to the prior years, primarily due to additional units placed in service, the Merger (for 1997 to 1998) and the timing and extent of scheduled capital improvements. FULLY STABILIZED COMMUNITIES The Company defines fully stabilized communities as those which have reached stabilization prior to the beginning of the previous calendar year. To enhance comparability, Management has presented 1997 rental and other revenue and property operating and maintenance expense on a pro forma and historical basis. The adjustment for acquired communities represents the rental and other revenue and property operating and maintenance expenses, for the periods prior to the date of the Merger, of the 5,950 fully stabilized apartment units that were acquired through the Merger. The operating performance of the 68 communities containing an aggregate of 23,462 units which were stabilized as of January 1, 1998, are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ----------------------------------- -------------------------------------- % % 1999 1998 CHANGE 1998 1997 CHANGE --------- --------- -------- ---------- ---------- -------- Rental and other revenue(1) ................... $ 236,923 $ 228,878 3.5% $ 228,878 $ 207,686 10.2% Adjustment for acquired communities(2) ........ -- -- -- -- (36,594) n/m --------- --------- ---------- ---------- Historical - rental and other revenue(3) ...... 236,923 228,878 3.5% 228,878 171,092 33.8% --------- --------- ---------- ---------- Property operating and maintenance expense (exclusive of depreciation and amortization)(1) ......................... 73,114 72,013 1.5% 72,013 54,556 32.0% Adjustment for acquired communities(2) ........ -- -- -- -- (689) n/m --------- --------- ---------- ---------- Historical-property operating and maintenance expense (exclusive of depreciation and amortization)(3)(4) .......................... 73,114 72,013 1.5% 72,013 53,867 33.7% --------- --------- ---------- ---------- Revenue in excess of specified expense(3) ..... $ 163,809 $ 156,865 4.4% $ 156,865 $ 117,225 33.8% ========= ========= ========== ========== Average economic occupancy(3)(5) .............. 96.4% 96.5% 96.5% 92.7% ========= ========= ========== ========== Average monthly rental rate per apartment unit(3)(6) ................................... $ 851 $ 826 3.0% $ 826 $ 773 6.9% ========= ========= ========== ========== Apartment units in service ..................... 23,462 23,462 23,462 23,462 ========= ========= ========== ==========
(1) Communities which reached stabilization prior to January 1, 1998. Includes fully stabilized communities acquired in October 1997 through the Merger. As a result, 1997 rental and other revenue and property operating and maintenance expense are presented on a pro forma basis. (2) The adjustment for acquired communities represents the operating results of the fully stabilized communities owned by Columbus prior to the Merger. (3) Represents the Company's historical results of operations for fully stabilized communities. (4) In addition to those expenses which relate to property operations, the Company incurs recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. For the years ended December 31, 1999 and 1998, recurring expenditures were $8,215 and $7,082 or $350 and $302 on a per unit basis, respectively. (5) Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts. (Average economic occupancy, taking account of these amounts would have been 95.0% for both years ended December 31, 1999 and 1998.) Concessions were $2,847 and $3,141 and employee discounts were $583 and $519 for the years ended December 31, 1999 and 1998, respectively. (6) Average monthly rental rate is defined as the average of the gross actual rental rates for leased units and the average of the anticipated rental rates for unoccupied units. 21 24 Rental and other revenue increased from 1998 to 1999 primarily due to increased rental rates. The increase in property and maintenance expense (exclusive of depreciation and amortization) from 1998 to 1999 was primarily due to increased personnel and property tax expenses partially offset by a decline in utilities expense as a result of water submetering. Rental and other revenue increased from 1997 to 1998 due to increased rental rates and the number of units in service as a result of the Merger. The increase in property and maintenance expenses (exclusive of depreciation and amortization) from 1997 to 1998 was primarily due to an increase in personnel costs and the number of units in service as a result of the Merger. THIRD PARTY SERVICES THIRD PARTY MANAGEMENT SERVICES The Company provides asset management, leasing and other consulting services to non-related owners of apartment communities through its subsidiary, RAM. The operating performance of RAM for the years ended December 31, 1999, 1998 and 1997 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------- --------------------------------- % % 1999 1998 CHANGE 1998 1997 CHANGE -------- -------- -------- -------- -------- -------- Property management and other revenue ................... $ 3,368 $ 3,164 6.4% $ 3,164 $ 2,444 29.5% Property management expense ...... 2,925 2,499 17.0% 2,499 1,887 32.4% Depreciation expense ............. 27 34 (20.6)% 34 44 (22.7)% -------- -------- -------- -------- Revenue in excess of specified expense ......................... $ 416 $ 631 (34.1)% $ 631 $ 513 23.0% ======== ======== ======== ======== Average apartment units in service 12,572 11,046 13.8% 11,046 9,061 21.9% ======== ======== ======== ========
The change in revenue in excess of specified expense from 1998 to 1999 is primarily attributable to the management of more communities in lease-up phases as a result of turnover in management contract. The change from 1997 to 1998 is primarily attributable to the change in the average number and average gross revenue of units managed. THIRD PARTY LANDSCAPE SERVICES The Company provides landscape maintenance, design and installation services to non-related parties through a subsidiary, Post Landscape Group, Inc., formerly Post Landscape Services, Inc. ("Post Landscape Group"). The operating performance of Post Landscape Group for the years ended December 31, 1999, 1998 and 1997 are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------- ------------------------------ % % 1999 1998 CHANGE 1998 1997 CHANGE --------- -------- -------- -------- --------- -------- Landscape services and other revenue.......................... $ 9,118 $ 7,252 25.7% $ 7,252 $ 5,148 40.9% Landscape services expense............... 7,904 6,264 26.2% 6,264 4,284 46.2% Depreciation expense..................... 293 173 69.4% 173 107 61.7% --------- -------- -------- --------- Revenue in excess of specified expense................................ $ 921 $ 815 13.0% $ 815 $ 757 7.7% ========= ======== ======== =========
The change in landscape services revenue and landscape services expense from 1998 to 1999 and 1997 to 1998 is primarily due to an increase in landscape contracts. 22 25 OTHER INCOME AND EXPENSES Depreciation expense increased from 1998 to 1999 and from 1997 to 1998 primarily as a result of an increase in units in service, additional leasehold improvements and technology expenditures and communities acquired in the Merger (1997 to 1998 only). Interest expense increased from 1998 to 1999 and from 1997 to 1998 primarily due to an increase in debt used to fund the development of new communities and additional debt incurred in connection with the Merger (1997 to 1998 only). Amortization of deferred loan costs increased from 1997 to 1998 due largely to two public debt issuances completed by the Company in 1998. From 1998 to 1999, amortization of deferred loan costs increased primarily due to two secured debt issuances completed by the Company in 1999. See "Liquidity and Capital Resources" below. General and administrative expenses increased from 1997 to 1998 primarily as a result of the Merger. General and administrative expenses decreased from 1998 to 1999 as a result of a reduction in personnel related expenditures and an increase in development support. The net gain on sale of assets in 1997 resulted from the sale of a community and the net loss on sale of assets in 1999 resulted from the net loss on the sale of one community and two tracts of land. The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. The loss on relocation of corporate office in 1997 resulted from the relocation of the Company's corporate office prior to the end of the lease term on the Company's corporate office space. The extraordinary items in 1997 and 1999, net of the minority interest portion, resulted from the costs associated with the early retirement of debt. LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company's net cash provided by operating activities increased from $109,554 in 1997 to $148,618 in 1998, principally due to increased property operating income. Net cash provided by operating activities increased from $148,618 in 1998 to $153,038 in 1999 primarily due to increased net income partially offset by a net decrease in cash from changes in current assets. This change in current assets is primarily attributable to $7,750 of employee loans (see Related Party footnote to Consolidated Financial Statements), $9,500 in tax increment financing receivables associated with public/private development projects and additional expenditures for pre-development activities. Net cash used in investing activities increased from $208,377 in 1997 to $328,216 in 1998, primarily due to increases in spending on construction and acquisition of real estate assets. Net cash used in investing activities decreased from $328,216 in 1998 to $317,960 in 1999 primarily due to proceeds from the sale of one community in March 1999 and reduced capital expenditures. Net cash provided by financing activities increased from $109,469 in 1997 to $189,873 in 1998 primarily due to proceeds from the public issuances of preferred stock and common stock during 1998. Net cash provided by financing activities decreased from $189,873 in 1998 to $149,638 in 1999 primarily due to reduced proceeds from debt and equity offerings partially offset by reduced debt payments. The Company has elected to be taxed as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of the Code commencing with its taxable year ended December 31, 1993. REITs are subject to a number of organizational and operational requirements, including a requirement that they currently distribute 95% of their ordinary taxable income. As a REIT, the Company generally will not be subject to Federal income tax on net income. At December 31, 1999, the Company had total indebtedness of $989,583 and cash and cash equivalents of $5,870. The Company's indebtedness includes approximately $179,277 in conventional mortgages payable and $235,880 in tax-exempt bond indebtedness secured by communities, senior unsecured notes of $390,000, and other unsecured 23 26 debt and borrowings under unsecured lines of credit totaling approximately $184,426. A schedule of indebtedness is included in Item 7. The Company expects to meet its short-term liquidity requirements generally through its net cash provided by operations and borrowings under credit arrangements and expects to meet certain of its long-term liquidity requirements, such as scheduled debt maturities, repayment of financing of construction and development activities and possible property acquisitions, through long-term secured and unsecured borrowings, possible sale of properties and the issuance of debt securities or additional equity securities of the Company or Units of the Operating Partnership in connection with acquisitions of land or improved properties. The Company believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and payment of dividends by the Company in accordance with REIT requirements in both the short and the long term. The budgeted expenditures for improvements and renovations to certain of the communities are expected to be funded from property operations. Lines of Credit On May 7, 1999, the Company's syndicated line of credit (the "Revolver") was amended, increasing its capacity to $350,000. The Revolver matures on April 30, 2002 and borrowings currently bear interest at LIBOR plus .825% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short-term funds up to $175,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March 31, 2000. Management believes the Cash Management Line will be renewed at maturity with similar terms. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Company with an automatic daily sweep which applies all available cash to reduce the outstanding balance. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. Other Unsecured Debt On March 1, 1998, the Company entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Company $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. Tax Exempt Bonds On June 29, 1995, the Company replaced the bank letters of credit providing credit enhancement for its outstanding tax-exempt bonds. Under an agreement with the Federal National Mortgage Association ("FNMA"), FNMA now provides, directly or indirectly through other bank letters of credit, credit enhancement with respect to such bonds. Under the terms of such agreement, FNMA has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Secured Debt On March 30, 1999, the Operating Partnership issued $50,000 of secured notes to an insurance company. These notes bear interest at 6.5% with an effective rate of 7.3% after consideration of a terminated swap agreement, 24 27 mature on March 1, 2009 and are secured by two apartment communities. Net proceeds of $49,933 were used to repay outstanding indebtedness. On July 23, 1999, the Operating Partnership issued $104,000 of secured notes to FNMA. These notes bear interest at 30-day LIBOR (capped at 7% for one year) plus credit enhancement, liquidity and service fees of .935%, mature on July 23, 2029 and are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the principle amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Operating Partnership has an option to call these notes after ten years from the issuance date. As a requirement of the debt agreement with FNMA, the Company entered into a fixed-rate swap which fixed the interest rate on the notes to 6.56% for a period of ten years. The Company entered into a variable rate swap in which the Company would pay a variable rate equal to the rate on the notes and receive a fixed rate of 6.50%. Net proceeds of $101,988 were used to repay outstanding indebtedness. Senior Unsecured Debt Offerings On June 7, 1995, the Company issued $50,000 of unsecured senior notes with The Northwestern Mutual Life Insurance Company. The notes were in two tranches: the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2000; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to reduce other secured indebtedness and to pay down the Revolver. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. On September 30, 1996, the Company completed a public offering of $125,000 senior unsecured debt comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316%, or 71 basis points over the rate on U.S. Treasury securities with a comparable maturity. The second tranche, $25,000 or 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544%, or 83 basis points over the rate on U.S. Treasury securities with a comparable maturity. Proceeds from the Notes were used to pay down the Revolver. Medium Term Notes and Mandatory Par Put Remarketed Securities On January 29, 1997, the Operating Partnership established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Company increased the amount available under this program to $344,000. As of December 31, 1999, the Operating Partnership had $215,000 aggregate principle amount of notes outstanding under the MTN Program. Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) pay down existing indebtedness outstanding under the Company's Revolver. On March 12, 1998, the Operating Partnership issued $100,000 of 6.85% Mandatory Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Operating Partnership entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). Preferred Unit Offerings On September 3, 1999, the Operating Partnership issued $70,000 of Series D Cumulative Redeemable Preferred Units of limited partnership interest (the "Series D Preferred Units") to an institutional investor in a private placement meeting the requirements of Regulation D promulgated under the Securities Act of 1933, as amended. The Series D Preferred Units are exchangeable for Series D Preferred Shares on a one for one basis at any time on or after September 3, 2009, or prior thereto provided certain requirements specified in the Series D Preferred Partnership Units Agreement have been met. Net proceeds to the Operating Partnership of approximately $68,000 were used to repay outstanding indebtedness. 25 28 Perpetual Preferred Stock Offerings On February 9, 1998, the Company sold two million non-convertible 7 5/8% Series C Cumulative Redeemable Shares (the "Series C Perpetual Preferred Shares") with a liquidation preference of $25 per share. Net proceeds of $48,284 from the sale of Series C Perpetual Shares were contributed to the Operating Partnership in exchange for two million Perpetual Preferred Units and used by the Operating Partnership to repay outstanding indebtedness. Common Stock Offerings On December 8, 1998, the Company issued 730,000 shares of common stock at a price of $37 per share. The net proceeds of approximately $27,000 were contributed to the Operating Partnership and used to pay down outstanding balances on the Company's lines of credit. On November 4, 1998, the Company issued 1.15 million shares of common stock at a price of $38.6875 per share. The net proceeds of approximately $42,200 were contributed to the Operating Partnership and used to pay down outstanding balances on the Company's lines of credit. On May 28, 1998, the Company issued 373,250 shares of its common stock at a price of $40.1875 per share. The shares were deposited into a registered unit investment trust, the Paine Webber Equity Trust Reit Series 1. Net proceeds of $13,662 were contributed to the Operating Partnership and were used to fund development and other operating cash flow needs. On April 29, 1998, the Company issued approximately 1.1 million shares of its common stock at a price of $40.5625 per share. The shares were deposited into a registered unit investment trust, the Equity Investor Fund Cohen & Steers Realty Majors Portfolio. Net proceeds of $44,059 were contributed to the Operating Partnership and used to repay outstanding indebtedness. On March 4, 1998, the Company issued 3.5 million shares of common stock at a price of $39 per share. Net proceeds of $129,179 were used by the Operating Partnership to repay outstanding indebtedness. Sale of Properties In February 2000, the Company sold a 213 unit property located in Atlanta for $32,350. Net proceeds estimated at $31,500 will be used to repay outstanding indebtedness. In February 2000, the Company's Investment Committee approved the sale of and subsequently listed for sale three properties in Mississippi containing 983 units and a commercial property located in Dallas, TX. Dividend Reinvestment Plan The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 26 29 Schedule of Indebtedness The following table reflects the Company's indebtedness at December 31, 1999:
MATURITY PRINCIPAL DESCRIPTION LOCATION INTEREST RATE DATE (1) BALANCE ----------- -------------- ------------- -------- --------- CONVENTIONAL FIXED RATE (SECURED) Post Hillsboro Village & The Lee Apartments.... Nashville, TN 9.20% 10/01/01 $ 2,915 Parkwood Townhomes(TM)......................... Dallas, TX 7.375% 04/01/14 833 Northwestern Mutual Life....................... N/A 6.50% 03/01/09 49,462 ---------- 53,210 ---------- CONVENTIONAL FLOATING RATE (SECURED) Addison Circle Apartment Homes by Post(TM)- Phase I........................ Dallas, TX LIBOR + .75% 06/15/00 22,067 FNMA........................................... Atlanta, GA LIBOR + .935% 07/23/29 104,000 ---------- 126,067 ---------- TAX EXEMPT FLOATING RATE (SECURED) Post Ashford(R)Series 1995.................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 9,895 Post Valley(R)Series 1995..................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,600 Post Brook(R)Series 1995...................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 4,300 Post Village(R)(Atlanta) Hills Series 1995.... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 7,000 Post Mill(R)Series 1995....................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,880 Post Canyon(R)Series 1996..................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 16,845 Post Corners(R)Series 1996.................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,760 Post Bridge(R)................................ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,450 Post Village(R)(Atlanta) Gardens.............. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,500 Post Chase(R)................................. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000 Post Walk(R).................................. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000 Post Lake(R).................................. Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 28,500 Post Fountains at Lee Vista(R)................ Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 21,500 Post Village(R) (Atlanta) Fountains and Meadows................................ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 26,000 Post Court(R)................................. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,650 ---------- 235,880 ---------- SENIOR NOTES (UNSECURED) Medium Term Notes............................. N/A LIBOR + .25% 03/03/00 30,000 Northwestern Mutual Life...................... N/A 8.21% 06/07/00 30,000 Medium Term Notes............................. N/A 7.02% 04/02/01 37,000 Northwestern Mutual Life...................... N/A 8.37% 06/07/02 20,000 Senior Notes.................................. N/A 7.25% 10/01/03 100,000 Medium Term Notes............................. N/A 7.30% 04/01/04 13,000 Medium Term Notes............................. N/A 6.69% 09/22/04 10,000 Medium Term Notes............................. N/A 6.78% 09/22/05 25,000 Senior Notes.................................. N/A 7.50% 10/01/06 25,000 Mandatory Par Put Remarketed.................. N/A 6.85% (4) 03/16/15 100,000 ---------- 390,000 ---------- LINES OF CREDIT & OTHER UNSECURED DEBT City of Phoenix................................ N/A 5.00% (5) 03/01/21 2,000 Revolver ...................................... N/A LIBOR + .825% or prime minus .25% 04/30/02 165,000 Cash Management Line........................... N/A LIBOR + .675% or prime minus .25% 03/31/00 17,426 ----------- 184,426 ----------- TOTAL................................ $ 989,583 ===========
(1) All of the mortgages can be prepaid at any time, subject to certain prepayment penalties. (2) Bond financed (interest rate on bonds + credit enhancement fees effective October 1, 1998). (3) These bonds are cross collateralized. The Company has purchased an interest rate cap that limits the Company's exposure to increases in the base rate to 5%. 27 30 (4) The annual interest rate on these securities to March 16, 2005 (the "Remarketing Date") is 6.85%. On the Remarketing Date, they are subject to mandatory tender for remarketing. (5) This loan is interest free for the first three year, with interest at 5.00% thereafter. Repayment is to commence on March 1, 2001 subject to the conditions set forth in the Agreement. (6) Represents stated rate. The Company may also make "money market" loans of up to $175,000 at rates below the stated rate. At December 31, 1999, the outstanding balance of the Revolver consisted of "money market" loans with an average interest rate of 6.75%. Capitalization of Fixed Assets and Community Improvements The Company has established a policy of capitalizing those expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset. All expenditures necessary to maintain a community in ordinary operating condition are expensed as incurred. During the first five years of a community (which corresponds to the estimated depreciable life), carpet replacements are expensed as incurred. Thereafter, carpet replacements are capitalized. Acquisition of assets and community improvement expenditures for the years ended December 31, 1999 and 1998 are summarized as follows:
YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 ------------ ------------ New community development and acquisition activity ............................. $ 320,081 $ 288,002 Revenue generating additions and improvements: Property renovations ........................................................ 7,826 12,896 Submetering of water service ................................................ 185 718 Nonrecurring capital expenditures: Vehicle access control gates ................................................ 794 377 Other community additions and improvements .................................. 2,177 1,046 Corporate additions and improvements ........................................ -- 4,527 Recurring capital expenditures: Carpet replacements ......................................................... 2,864 2,550 Other community additions and improvements .................................. 5,777 4,929 Corporate additions and improvements ........................................ 6,811 4,049 ------------ ------------ $ 346,515 $ 319,094 ============ ============
INFLATION Substantially all of the leases at the Communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable the Company to seek increases in rents. The substantial majority of these leases are for one year or less and the remaining leases are for up to two years. At the expiration of a lease term, the Company's lease agreements provide that the term will be extended unless either the Company or the lessee gives at least sixty (60) days written notice of termination; in addition, the Company's policy permits the earlier termination of a lease by a lessee upon thirty (30) days written notice to the Company and the payment of one month's additional rent as compensation for early termination. The short-term nature of these leases generally serves to reduce the risk to the Company of the adverse effect of inflation. YEAR 2000 ISSUE The Year 2000 issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. The Company's computer equipment and software and devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to engage in normal business activities. The Company completed its Year 2000 project on schedule. No operational problems were encountered as a result of the Year 2000 issue. The Company incurred costs of approximately $2,900 related to the Year 2000 issue. NEW ACCOUNTING PRONOUNCEMENTS See Note 1 to Consolidated Financial Statements of the Company. 28 31 FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION Historical Funds from Operations The Company considers funds from operations ("FFO") a useful measure of performance of an equity REIT. FFO is defined to mean net income available to common shareholders determined in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. Cash available for distribution ("CAD") is defined as FFO less capital expenditures funded by operations and loan amortization payments. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO and CAD should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO and CAD for the years ended December 31, 1999, 1998 and 1997 presented on a historical basis are summarized in the following table: Calculations of Funds from Operations and Cash Available for Distribution
YEAR ENDED DECEMBER 31, --------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Net income available to common shareholders....................... $ 92,642 $ 77,477 $ 49,965 Extraordinary item, net of minority interest...................... 458 -- 75 Minority interest................................................. 12,598 11,511 11,131 Net (gain) loss on sale of assets................................. 1,522 -- (3,270) Loss on unused treasury locks..................................... -- 1,944 -- Loss on relocation of corporate office............................ -- -- 1,500 ------------ ------------ ------------ Adjusted net income............................................... 107,220 90,932 59,401 Depreciation of real estate assets................................ 55,361 45,214 27,991 ------------ ------------ ------------ Funds from Operations (1)......................................... 162,581 136,146 87,392 Recurring capital expenditures (2)................................ (8,641) (7,479) (3,675) Non-recurring capital expenditures (3)............................ (2,971) (1,423) (605) Loan amortization payments........................................ (81) (75) (179) ------------ ------------ ------------ Cash Available for Distribution................................... $ 150,888 $ 127,169 $ 82,933 ============ ============ ============ Revenue generating capital expenditures (4)....................... $ 8,011 $ 13,614 $ 8,168 ============ ============ ============ Cash Flow Provided From (Used In): Operating activities............................................ $ 153,038 $ 148,618 $ 109,554 Investing activities............................................ $ (317,960) $ (328,216) $ (208,377) Financing activities............................................ $ 149,638 $ 189,873 $ 109,469 Weighted average common shares outstanding - basic................ 38,460,689 35,028,596 23,664,044 ============ ============ ============ Weighted average common shares outstanding - diluted.............. 38,916,987 35,473,587 23,887,906 ============ ============ ============ Weighted average common shares and Units outstanding - basic...... 43,663,373 40,244,351 28,880,928 ============ ============ ============ Weighted average common shares and Units outstanding - diluted.... 44,119,671 40,689,342 29,104,790 ============ ============ ============
(1) The Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO which was adopted for periods beginning after January 1, 1996. FFO for any period means the consolidated net income available to common shareholders of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. NAREIT's definition of FFO excludes items classified by GAAP as extraordinary or unusual and significant non-recurring events that materially distort the comparative measurement of performance over time. Effective January 1, 2000 NAREIT amended its definition of FFO to include in FFO all non-recurring events, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of property. The Company will use the amended definition of FFO in reporting results for all periods on or after January 1, 2000. The Company does not expect use of the amended definition to materially affect FFO. (2) Recurring capital expenditures consisted primarily of $2,864, $2,550 and $1,617 of carpet replacement and $5,777, $4,929 and $2,058 of other community additions and improvements to existing communities for the years ended December 31, 1999, 1998 and 1997, respectively. Since the Company does not add back the depreciation of non-real estate assets in its calculation of FFO, capital 29 32 expenditures of $6,811, $8,576 and $3,220 are excluded from the calculation of CAD for the years ended December 31, 1999, 1998 and 1997, respectively. (3) Non-recurring capital expenditures consisted of the additions of vehicle access control gates to communities of $794, $377 and $115 and other community additions and improvements of $2,177, $1,046 and $490 for the years ended December 31, 1999, 1998 and 1997, respectively. (4) Revenue generating capital expenditures included major renovations of communities in the amount of $7,826, $12,896 and $5,532 for the years ended December 31, 1999, 1998 and 1997, respectively, and submetering of water service to communities in the amounts of $185, $718 and $2,636 for the years ended December 31, 1999, 1998, and 1997, respectively. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of such statements in this report include descriptions of our plans with respect to the development of new apartment communities, our plans to enter new markets and our expectations relating to our continuing growth. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Additional information concerning the risk and uncertainties listed above, and other factors that you may wish to consider, is contained elsewhere in the Company's filings with the Securities and Exchange Commission. The following are some of the factors that could cause the Company's actual results to differ materially from the expected results described in the Company's forward-looking statements: - - conditions affecting the acquisition, development and ownership of residential real estate, including local zoning and land use issues, environmental regulations, the Americans with Disabilities Act, the Fair Housing Amendments Act of 1988 and general conditions in the multi-family residential real estate market. - - adverse or unanticipated weather conditions, which may affect the Company's overall level of development. - - the Company's ability to obtain financing for the development of additional apartment communities. - - the impact of competition, including competition for tenants and locations and in other important aspects of the Company's business. The Company's primary competitors include other regional or national apartment communities. The multifamily apartment community business is highly competitive. - - general economic conditions which affected consumer confidence and purchases of new homes, including interest rates, the overall level of economic activity, the availability of consumer credit and mortgage financing, unemployment rates, and other factors. - - the Company's ability to continue to qualify as a real estate investment trust under the Code. - - changes in laws and regulations, including changes in accounting standards, tax statutes or regulations, and environmental and land use regulations, and uncertainties of litigation. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE SENSITIVITY The Company and Operating Partnership's primary market risk exposure is interest rate risk. At December 31, 1999, the Company and Operating Partnership together had $338,493 of variable rate debt tied to LIBOR. In 30 33 addition, they had $235,880 in variable tax-exempt debt tied to "AAA" NON-AMT. In addition, the Company and Operating Partnership have interest rate risk associated with fixed rate debt at maturity. Management has and will continue to manage interest rate risk as follows: - - maintain a conservative ratio of fixed rate, long-term debt to total debt such that variable rate exposure is kept at an acceptable level; - - fix certain long-term variable rate debt through the use of interest rate swaps or interest rate caps with appropriately matching maturities; - - use treasury locks where appropriate to fix rates on anticipated debt transactions, and - - take advantage of favorable market conditions for long-term debt and/or equity. Management uses various financial models and advisors to achieve these objectives. The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by (expected) contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based upon implied forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency.
EXPECTED MATURITY DATE ---------------------------------------------------------------------------------------------------- THERE- FAIR 2000 2001 2002 2003 2004 AFTER TOTAL VALUE --------- --------- --------- --------- --------- --------- --------- --------- (IN MILLIONS) ---------------------------------------------------------------------------------------------------- Long-term Debt: Fixed Rate ............... $ 30,949 $ 40,817 $ 21,122 $ 101,191 $ 24,894 $ 196,237 $ 415,210 $ 420,675 --------- --------- --------- --------- --------- --------- --------- --------- Average interest rate ... 7.04% 7.02% 6.94% 6.81% 6.78% 6.67% 7.12% to 6.80% Floating Rate (1) ........ LIBOR-based: Cash Management Line (2)................ 17,426 17,426 17,426 Addison Circle........... 22,067 22,067 22,067 MTN (03/03/00)........... 30,000 30,000 30,000 Revolver (2)............. 165,000 165,000 165,000 FNMA..................... 104,000 104,000 104,000 -------- --------- --------- --------- --------- --------- --------- --------- Total LIBOR-based....... 69,493 -- 165,000 -- -- 104,000 338,493 338,493 Tax-exempt (3)........... 235,880 235,880 235,880 -------- --------- --------- --------- --------- --------- --------- --------- Total floating rate Debt................... 69,493 -- 165,000 -- -- 339,880 574,373 574,373 -------- --------- --------- --------- --------- --------- --------- --------- Total debt.................. $100,442 $ 40,817 $ 186,122 $ 101,191 $ 24,894 $ 536,117 $ 989,583 $ 995,048 ======== ========= ========= ========= ========= ========= ========= =========
(1) Interest on these debt instruments is based on LIBOR ranging from LIBOR plus .25% to .935% above LIBOR. At December 31, 1999, the LIBOR rate was 5.8225%. See Schedule of Indebtedness in Management's Discussion and Analyses for rates on individual debt instruments. (2) Assumes the Company's Revolver and Cash Management Line are repaid at the maturity date. Management believes these lines will be renewed at maturity with similar terms. (3) At December 31, 1999, the "AAA" NON-AMT rate was 5.50%. Interest on these debt instruments is equal to the "AAA" NON-AMT rate plus .515%. 31 34
AVERAGE EXPECTED PAY RATE/ AVERAGE SETTLEMENT FAIR INTEREST RATE DERIVATIVES NOTIONAL AMOUNT CAPRATE RECEIVE RATE DATE VALUE - -------------------------------- --------------------- --------- ---------------- ---------- --------- Interest Rate Swaps $104,000 amortizing 1 month Variable to fixed........... to $90,270 6.56% LIBOR 7/31/09 $ 3,591 $104,000 amortizing 1 month Fixed to variable........... to $90,270 LIBOR 6.50% 7/31/09 (4,322) 1 month Interest rate cap.............. $150,000 LIBOR -- 08/01/00 6 Interest rate caps............. $235,880 5.00% -- 2/01/03 1,323 -------- $ 598 ========
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements are listed under Item 14(a) and are filed as part of this report on the pages indicated. The supplementary data are included in Note 13 of the Notes to Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 32 35 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections under the headings "Election of Directors" entitled "Nominees for Election," "Incumbent Directors -- Term Expiring 2001," and "Incumbent Directors -- Term Expiring 2002" of the Proxy Statement for Annual Meeting of Shareholders to be held May 17, 2000 (the "Proxy Statement") are incorporated herein by reference for information on Directors of the Registrant. See Item X in Part I hereof for information regarding executive officers of the Registrant. The section under the heading "Other Matters" entitled "Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The section under the heading "Election of Directors" entitled "Compensation of Directors" of the Proxy Statement and the sections under the heading titled "Executive Compensation" entitled "Summary Compensation Table," "Option Grants Table," "Fiscal Year-End Option Value Table," "Profit Sharing Plan," "Noncompetition and Employment Contract," and "Compensation Committee Interlocks and Insider Participation" of the Proxy Statement are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section under the heading "Common Stock Ownership by Management and Principal Shareholders" of the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section under the heading "Certain Transactions" of the Proxy Statement is incorporated herein by reference. 33 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (A) 1. AND 2. FINANCIAL STATEMENTS AND SCHEDULES The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. INDEX TO FINANCIAL STATEMENTS
PAGE ---- POST PROPERTIES, INC. Consolidated Financial Statements: Report of Independent Accountants...................................................................... 35 Consolidated Balance Sheets as of December 31, 1999 and 1998........................................... 36 Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997............. 37 Consolidated Statements of Shareholders' Equity and Accumulated Earnings for the Years Ended December 31, 1999, 1998 and 1997......................................................... 38 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997............. 39 Notes to the Consolidated Financial Statements......................................................... 40 POST APARTMENT HOMES, L.P. Consolidated Financial Statements: Report of Independent Accountants...................................................................... 55 Consolidated Balance Sheets as of December 31, 1999 and 1998........................................... 56 Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997............. 57 Consolidated Statements of Partners' Equity for the Years Ended December 31, 1999, 1998 and 1997....... 58 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997............. 59 Notes to the Consolidated Financial Statements......................................................... 60 Schedule III: Real Estate and Accumulated Depreciation............................................................... 75 All other schedules are omitted because they are either not applicable or not required. POST PROPERTIES, INC. -- 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN Financial Statements: Report of Independent Accountants...................................................................... 78 Statement of Net Assets Available for Plan Benefits as of December 31, 1999 and 1998................... 79 Statement of Changes in Net Assets Available for Plan Benefits for the years ended December 31, 1999 and 1998........................................................................... 80 Notes to Financial Statements.......................................................................... 81
34 37 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Post Properties, Inc. In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 14(a) 1. and 2. on page 34 present fairly, in all material respects, the financial position of Post Properties, Inc. at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the management of Post Properties, Inc.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 35 38 POST PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, --------------------------------- 1999 1998 ------------ ------------ ASSETS Real estate assets Land ........................................................................ $ 277,784 $ 252,922 Building and improvements ................................................... 1,574,158 1,379,847 Furniture, fixtures and equipment ........................................... 137,602 108,233 Construction in progress .................................................... 576,361 480,267 Land held for future development ............................................ 16,880 33,805 ------------ ------------ 2,582,785 2,255,074 Less: accumulated depreciation .............................................. (303,016) (247,148) ------------ ------------ Real estate assets ........................................................ 2,279,769 2,007,926 Cash and cash equivalents ..................................................... 5,870 21,154 Restricted cash ............................................................... 1,380 1,348 Deferred charges, net ......................................................... 20,820 18,686 Other assets .................................................................. 42,334 17,599 ------------ ------------ Total assets ........................................................... $ 2,350,173 $ 2,066,713 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable ................................................................. $ 989,583 $ 800,008 Accrued interest payable ...................................................... 9,160 7,609 Dividend and distribution payable ............................................. 31,285 25,115 Accounts payable and accrued expenses ......................................... 59,780 48,214 Security deposits and prepaid rents ........................................... 9,023 8,716 ------------ ------------ Total liabilities ...................................................... 1,098,831 889,662 ------------ ------------ Minority interest of preferred unitholders in Operating Partnership ........... 70,000 -- ------------ ------------ Minority interest of common unitholders in Operating Partnership .............. 122,480 125,365 ------------ ------------ Commitments and contingencies ................................................. -- -- Shareholders' equity Preferred stock, $.01 par value, 20,000,000 authorized: 8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50 per share, 1,000,000 shares issued and outstanding .......... 10 10 7 5/8% Series B Cumulative Redeemable Shares, liquidation preference $25 per share, 2,000,000 shares issued and outstanding ................................................................ 20 20 7 5/8% Series C Cumulative Redeemable Shares, liquidation preference $25 per share, 2,000,000 shares issued and outstanding ................................................................ 20 20 Common stock, $.01 par value, 100,000,000 authorized, 38,834,323 and 38,051,734 shares issued and outstanding at December 31, 1999 and 1998, respectively ..................................................... 388 380 Additional paid-in capital .................................................. 1,058,424 1,051,256 Accumulated earnings ........................................................ -- -- ------------ ------------ Total shareholders' equity ............................................. 1,058,862 1,051,686 ------------ ------------ Total liabilities and shareholders' equity ............................. $ 2,350,173 $ 2,066,713 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 36 39 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ REVENUES Rental ....................................................................... $ 318,697 $ 275,755 $ 185,732 Property management - third party ............................................ 3,368 3,164 2,421 Landscape services - third party ............................................. 9,118 7,252 5,148 Interest ..................................................................... 764 472 89 Other ........................................................................ 13,980 12,262 6,726 ------------ ------------ ------------ Total revenue ............................................................ 345,927 298,905 200,116 ------------ ------------ ------------ EXPENSES Property operating and maintenance (exclusive of items shown separately below) .................................................... 113,152 99,717 67,515 Depreciation ................................................................. 58,013 46,646 29,048 Property management - third party ............................................ 2,925 2,499 1,959 Landscape services - third party ............................................. 7,904 6,264 4,284 Interest ..................................................................... 33,192 31,297 24,658 Amortization of deferred loan costs .......................................... 1,496 1,185 980 General and administrative ................................................... 7,788 8,495 7,364 Minority interest in consolidated property partnerships ...................... 511 397 -- ------------ ------------ ------------ Total expenses ........................................................... 224,981 196,500 135,808 ------------ ------------ ------------ Income before net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office, minority interest of unitholders in Operating Partnership and extraordinary item ............................ 120,946 102,405 64,308 Net gain (loss) on sale of assets ............................................ (1,522) -- 3,270 Loss on unused treasury locks ................................................ -- (1,944) -- Loss on relocation of corporate office ....................................... -- -- (1,500) Minority interest of preferred unitholders in Operating Partnership .......... (1,851) -- -- Minority interest of common unitholders in Operating Partnership ............. (12,598) (11,511) (11,131) ------------ ------------ ------------ Income before extraordinary item ............................................. 104,975 88,950 54,947 Extraordinary item, net of minority interest of unitholders in Operating Partnership ................................................... (458) -- (75) ------------ ------------ ------------ Net income ................................................................... 104,517 88,950 54,872 Dividends to preferred shareholders .......................................... (11,875) (11,473) (4,907) ------------ ------------ ------------ Net income available to common shareholders .................................. $ 92,642 $ 77,477 $ 49,965 ============ ============ ============ EARNINGS PER COMMON SHARE - BASIC Income before extraordinary item (net of preferred dividends) ................ $ 2.42 $ 2.21 $ 2.11 Extraordinary item ........................................................... (0.01) -- -- ------------ ------------ ------------ Net income available to common shareholders .................................. $ 2.41 $ 2.21 $ 2.11 ============ ============ ============ Weighted average common shares outstanding ................................... 38,460,689 35,028,596 23,664,044 ============ ============ ============ Dividends declared ........................................................... $ 2.80 $ 2.60 $ 2.38 ============ ============ ============ EARNINGS PER COMMON SHARE - DILUTED Income before extraordinary item (net of preferred dividends) ................ $ 2.39 $ 2.18 $ 2.09 Extraordinary item ........................................................... (0.01) -- -- ------------ ------------ ------------ Net income available to common shareholders .................................. $ 2.38 $ 2.18 $ 2.09 ============ ============ ============ Weighted average common shares outstanding ................................... 38,916,987 35,473,587 23,887,906 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 37 40 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS IN THOUSANDS)
PREFERRED COMMON PAID-IN ACCUMULATED SHARES SHARES CAPITAL EARNINGS TOTAL ---------- --------- ----------- ----------- ----------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1996 ..................................... $ 10 $ 219 $ 398,764 $ -- $ 398,993 Proceeds from Preferred Shares, net of underwriting discount and offering costs of $1,709 ................ 20 -- 48,271 -- 48,291 Common shares issued in connection with Merger .......................................... -- 84 338,269 -- 338,353 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans ........................ -- 2 9,128 -- 9,130 Conversion of Units to shares ......................... -- 1 (1) -- -- Adjustment for minority interest of Unitholders in Operating Partnership at dates of capital transactions ......................................... -- -- (30,245) -- (30,245) Net income ............................................ -- -- -- 54,872 54,872 Dividends to preferred shareholders ................... -- -- -- (4,907) (4,907) Dividends declared and paid to common shareholders .... -- -- (3,273) (36,073) (39,346) Dividends declared to common shareholders ............. -- -- (4,329) (13,892) (18,221) --------- --------- ----------- --------- ----------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1997 ..................................... 30 306 756,584 -- 756,920 Proceeds from Preferred Shares, net of underwriting discount and offering costs of $1,716 ...................................... 20 -- 48,264 -- 48,284 Proceeds from Common Shares, net of Underwriting discount and offering Costs of $13,592 ................................... -- 69 255,838 -- 255,907 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans ....................... -- 5 18,855 -- 18,860 Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions .................... -- -- (15,031) -- (15,031) Net income ........................................... -- -- -- 88,950 88,950 Dividends to preferred shareholders ................... -- -- -- (11,473) (11,473) Dividends declared and paid to common Shareholders ........................................ -- -- (13,254) (55,752) (69,006) Dividends declared to common shareholders ............. -- -- -- (21,725) (21,725) --------- --------- ----------- --------- ----------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1998 ..................................... 50 380 1,051,256 -- 1,051,686 Offering cost of redeemable preferred units -- -- (1,810) -- (1,810) Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans ....................... -- 8 23,304 -- 23,312 Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions .................... -- -- 857 -- 857 Net income ............................................ -- -- -- 104,517 104,517 Dividends to preferred shareholders ................... -- -- -- (11,875) (11,875) Dividends declared and paid to common Shareholders ......................................... -- -- (15,183) (65,458) (80,641) Dividends declared to common shareholders ............. -- -- -- (27,184) (27,184) --------- --------- ----------- --------- ----------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1999 ..................................... $ 50 $ 388 $ 1,058,424 $ -- $ 1,058,862 ========= ========= =========== ========= ===========
The accompanying notes are an integral part of these consolidated financial statements. 38 41 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------ 1999 1998 1997 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ............................................................... $ 104,517 $ 88,950 $ 54,872 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest of preferred unitholders in Operating Partnership ...... 1,851 -- -- Minority interest of common unitholders in Operating Partnership ......... 12,598 11,511 11,131 Net (gain) loss on sale of assets ........................................ 1,522 -- (3,270) Loss on relocation of corporate office ................................... -- -- 1,500 Loss on unused treasury locks ............................................ -- 1,944 -- Extraordinary item, net of minority interest of unitholders in Operating Partnership ................................................... 458 -- 75 Depreciation ............................................................. 58,013 46,623 29,048 Write-off of deferred financing costs .................................... -- -- (93) Amortization of deferred loan costs ...................................... 1,496 1,209 980 Other .................................................................... -- 168 -- Changes in assets, (increase) decrease in: Restricted cash ......................................................... (32) 194 (394) Deferred charges ........................................................ (4,106) (7,115) -- Other assets ............................................................ (24,735) 2,998 11,797 Changes in liabilities, increase (decrease) in: Accrued interest payable ................................................ 1,551 104 2,172 Accounts payable and accrued expenses ................................... (402) 1,433 1,341 Security deposits and prepaid rents ..................................... 307 599 395 ---------- ---------- ---------- Net cash provided by operating activities ................................ 153,038 148,618 109,554 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables ......................................................... (286,696) (279,473) (190,810) Proceeds from sale of assets ............................................. 16,587 -- 25,402 Acquisition of Columbus Realty Trust, net of cash acquired ........................................................... -- -- (17,734) Payment for unused treasury locks ........................................ -- (1,944) -- Capitalized interest ..................................................... (21,417) (15,707) (9,567) Recurring capital expenditures ........................................... (8,641) (7,479) (3,675) Corporate capital expenditures ........................................... (6,811) (8,576) (3,220) Non-recurring capital expenditures ....................................... (2,971) (1,423) (605) Revenue generating capital expenditures .................................. (8,011) (13,614) (8,168) ---------- ---------- ---------- Net cash used in investing activities .................................... (317,960) (328,216) (208,377) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs ............................................... (1,495) -- (4,208) Debt proceeds ............................................................ 279,000 103,930 688,564 Debt payments ............................................................ (89,425) (275,131) (564,085) Proceeds from preferred units, net of offering costs ..................... 68,190 -- -- Proceeds from the sale of notes .......................................... -- 150,000 -- Offering proceeds, net of underwriters discount and offering costs ...................................................... -- 255,907 -- Proceeds from Preferred Shares ........................................... -- 48,284 48,291 Proceeds from Dividend Reinvestment Plan ................................. 23,312 18,860 9,130 Capital distributions to unitholders ..................................... (14,318) (13,277) (12,132) Distributions paid to preferred unitholders .............................. (1,384) -- -- Dividends paid to preferred shareholders ................................. (11,875) (11,473) (4,907) Dividends paid to common shareholders .................................... (102,367) (87,227) (51,184) ---------- ---------- ---------- Net cash provided by financing activities ................................ 149,638 189,873 109,469 ---------- ---------- ---------- Net (decrease) increase in cash and cash equivalents ..................... (15,284) 10,275 10,646 Cash and cash equivalents, beginning of period ........................... 21,154 10,879 233 ---------- ---------- ---------- Cash and cash equivalents, end of period ................................. $ 5,870 $ 21,154 $ 10,879 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 39 42 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. ORGANIZATION AND FORMATION OF THE COMPANY ORGANIZATION AND FORMATION OF THE COMPANY Post Properties, Inc. (the "Company" or "PPI") through its majority owned subsidiary, Post Apartment Homes, L.P. (the "Operating Partnership") currently owns and manages or is in the process of developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando, Northern Virginia, Nashville, Houston, Phoenix, Denver and Charlotte metropolitan areas. At December 31, 1999, approximately 54.8% and 20.4% (on a unit basis) of the Company's communities are located in the Atlanta and Dallas metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Company and the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. See Note 2 related to the acquisition of Columbus Realty Trust in 1997. Since units can be redeemed for shares of the Company on a one-for-one basis at the Operating Partnership's option, minority interest of unitholders in the operations of the Operating Partnership is calculated based on the weighted average of shares and units outstanding during the period. Certain items in the 1998 and 1997 consolidated financial statements were reclassified for comparative purposes with the 1999 consolidated financial statements. NEW ACCOUNTING PRONOUNCEMENTS Beginning January 1, 2001, the Company is required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Due to the Company's limited hedging activities, management does not believe the adoption of SFAS 133 will have a material effect on the Company's financial position or results of operations, nor will it significantly affect its financial statement disclosures. REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5 - 10 years). REVENUE RECOGNITION Rental -- Residential properties are leased under operating leases with terms of generally one year or less. Rental income is recognized when earned, which is not materially different from revenue recognition on a straight line basis. Property management and landscaping services -- Income is recognized when earned for property management and landscaping services provided to third parties. 40 43 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents. RESTRICTED CASH Restricted cash generally is comprised of resident security deposits for communities located in Florida and Tennessee and required maintenance reserves for communities located in DeKalb County, Georgia. DEFERRED FINANCING COSTS Deferred financing costs are amortized using the interest method over the terms of the related debt. INTEREST AND REAL ESTATE TAXES Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the lives of the constructed assets. Interest paid (including capitalized amounts of $21,417, $15,707 and $9,567 during 1999, 1998 and 1997, respectively, and interest rate protection receipts of $0, $0 and $296 during 1999, 1998 and 1997, respectively) aggregated $51,337, $46,889 and $39,815 for the years ended December 31, 1999, 1998 and 1997, respectively. DERIVATIVES The Company may enter into various treasury lock arrangements from time to time in anticipation of a specific debt transaction. These arrangements are used to manage the Company's exposure to fluctuations in interest rates. The Company does not utilize these arrangements for trading or speculative purposes. These arrangements, considered qualifying hedges, are not recorded in the financial statements until the debt transaction is consummated and the arrangement is settled. The proceeds or payments resulting from the settlement of the arrangement are deferred and amortized over the life of the debt as an adjustment to interest expense. Any arrangements not deemed hedges are recorded at fair value and recognized through the statement of operations. Premiums paid to purchase interest rate protection agreements (i.e. interest rate caps) are deferred and amortized over the terms of those agreements using the interest method. Unamortized premiums are included in deferred charges in the consolidated balance sheet. Amounts receivable under the interest rate protection agreements are accrued as a reduction of interest expense. Interest rate swaps qualifying for hedge accounting treatment are recorded on an accrual basis as an adjustment of the interest rate yield. Interest rate swaps not qualifying for hedge accounting treatment are recorded at fair value and recognized through the statement of operations. PER SHARE DATA Basic earnings per common share with respect to the Company for the years ended December 31, 1999, 1998 and 1997 is computed based upon the weighted average number of shares outstanding during the period. Diluted earnings per common share is based upon the weighted average number of shares outstanding during the period and includes the effect of the potential issuance of additional shares if stock options were exercised or converted into common stock. 41 44 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ACQUISITION OF COLUMBUS REALTY TRUST On October 24, 1997, Columbus Realty Trust ("Columbus") a Texas real estate investment trust, was merged into a wholly owned subsidiary of the Company (the "Merger") and then transferred into the Operating Partnership. At the time of the Merger, Columbus was operating 26 completed communities containing 6,296 apartment units and had an additional 5 communities under development that would contain 1,243 apartment units upon completion located in Dallas and Houston, Texas. Pursuant to the merger agreement, each outstanding share of Columbus common stock was converted into 0.615 shares of common stock of the Company, which resulted in the issuance of approximately 8.4 million shares of common stock of the Company. The total purchase price including liabilities assumed was $643,268. The Merger was accounted for as a purchase. Under the purchase method of accounting, the assets acquired and liabilities assumed of Columbus were recorded at their estimated fair market values and its results of operations have been included in the accompanying consolidated statements of operations from the date of the Merger, October 24, 1997. Unaudited, supplemental pro-forma information, assuming the Merger had occurred on January 1, 1997, is as follows:
YEAR ENDED DECEMBER 31, 1997 ----------------- Total revenue .................................................................. $ 247,295 Net income available to common shareholders before extraordinary items ......... $ 60,242 Net income available to common shareholders .................................... $ 60,167 Earnings per share available to common shareholders - basic .................... $ 1.99 Earnings per share available to common shareholders - diluted .................. $ 1.96
3. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, -------------------------- 1999 1998 ---------- ---------- Deferred financing costs ................................... $ 31,148 $ 26,568 Other ...................................................... 5,394 4,551 ---------- ---------- 36,542 31,119 Less: accumulated amortization ............................. (15,722) (12,433) ---------- ---------- $ 20,820 $ 18,686 ========== ==========
4. NOTES PAYABLE The Company's indebtedness consists of the following:
DECEMBER 31, -------------------------- 1999 1998 ---------- ---------- Conventional fixed rate (secured) .......................... $ 53,210 $ 3,825 Conventional floating rate (secured) ....................... 126,067 42,303 Tax-exempt fixed rate bond indebtedness (secured) .......... -- -- Tax-exempt floating rate bond indebtedness (secured) ....... 235,880 235,880 Lines of credit & other (unsecured) ........................ 184,426 62,000 Senior notes (unsecured) ................................... 390,000 456,000 ---------- ---------- Total ...................................................... $ 989,583 $ 800,008 ========== ==========
42 45 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) CONVENTIONAL FIXED AND FLOATING RATE MORTGAGES PAYABLE (SECURED) Conventional mortgages payable were comprised of five and four loans at December 31, 1999 and 1998, respectively, each of which is collateralized by an apartment community included in real estate assets. The mortgages payable are generally due in monthly installments of interest only and mature at various dates through 2029. The interest rates on the fixed rate mortgages payable ranged from 6.50% to 9.20% at December 31, 1999. At December 31, 1999, the interest rates on the variable rate mortgages payable were at a range from the London Interbank Offered Rate ("LIBOR") plus .75% to .935% above LIBOR. At December 31, 1999, LIBOR ranged from 5.82% to 6.50% for one, three, six, and twelve month indices. TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED) Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit enhanced debt maturing in 2025. Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. Such bonds are generally payable in monthly or semi-annual installments of interest only and mature at various dates through 2025. Floating rate indebtedness reissued in 1995 through 1998, bears interest at the "AAA" non-AMT tax exempt rate, set weekly, which was 5.50% at December 31, 1999 (average of 3.35% for 1999). With respect to such bonds, the Company pays certain credit enhancement fees of .515% of the amount of such bonds or the amount of such letters of credit, as the case may be. The Federal National Mortgage Association ("FNMA") has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Effective October 1, 1998, the Company obtained fee reductions related to these loans totaling .08% per annum. Of this savings, .06% was a reduction in the credit enhancement fee. This fee reduction resulted in approximately $181 of annual savings for the remaining term of these loans. OTHER SECURED DEBT On March 30, 1999, the Operating Partnership issued $50,000 of secured notes to an insurance company. These notes bear interest at 6.5% with an effective rate of 7.3% after considerations of a terminated swap agreement, mature on March 1, 2009 and are secured by two apartment communities. Net proceeds of $49,933 were used to repay outstanding indebtedness. On July 23, 1999, the Operating Partnership issued $104,000 of secured notes to FNMA. These notes bear interest at 30-day LIBOR (capped at 7% for one year) plus credit enhancement, liquidity and service fees of .935%, mature on July 23, 2029 and are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the principal amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Operating Partnership has an option to call these notes after ten years from the issuance date. As a requirement of the debt agreement with FNMA, the Company entered into a fixed-rate swap which fixed the interest rate on the notes to 6.56% for a period of ten years. The Company entered into a variable rate swap in which the Company would pay a variable rate equal to the rate on the notes and receive a fixed rate of 6.50%. Net proceeds of $101,988 were used to repay outstanding indebtedness. LINES OF CREDIT AND OTHER (UNSECURED) In May 1999, the Company's syndicated line of credit (the "Revolver") was amended, increasing its capacity to $350,000. The Revolver matures on April 30, 2002 and borrowings currently bear interest at LIBOR plus .825% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit 43 46 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short-term funds up to $175,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restrict the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was fully funded and used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and mature on March 31, 2000. Management believes the Cash Management Line will be renewed at maturity with similar terms. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Company with an automatic daily sweep which applies all available cash to reduce the outstanding balance. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. At December 31, 1999, the outstanding balances on the Revolver and Cash Management Line were $165,000 and $17,426, respectively. There were no outstanding balances on any of the other facilities at December 31, 1999. On March 1, 1998 the Company entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Company $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. All repayment terms are subject to the conditions set forth in the Agreement. SENIOR NOTES (UNSECURED) On June 7, 1995, the Company issued $50,000 of unsecured senior notes with the Northwestern Mutual Life Insurance Company. The notes were in two tranches: the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2000; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to reduce other secured indebtedness and to pay down the Revolver. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. On September 30, 1996, the Company completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to pay down existing indebtedness outstanding on the Revolver. 44 47 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) MEDIUM-TERM NOTES On January 29, 1997, the Operating Partnership established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Company increased the amount available under this program to $344,000. Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) pay down existing indebtedness outstanding under the Company's Revolver. The following table sets forth MTNs issued and outstanding as of December 31, 1999:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ------------------- ------------ --------------- ---------- March 3, 1997 $ 30,000 LIBOR plus .25% 03/03/2000 March 31, 1997 37,000 7.02% 04/02/2001 March 31, 1997 13,000 7.30% 04/01/2004 September 22, 1997 10,000 6.69% 09/22/2004 September 22, 1997 25,000 6.78% 09/22/2005 March 12, 1998 100,000 6.85% 03/16/2015 ------------ $ 215,000 ============
On March 12, 1998, the Operating Partnership issued $100,000 of 6.85% MandatOry Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds in the amount of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Operating Partnership entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). On April 8, 1998, the Operating Partnership sold $50,000 of Remarketed Reset Notes due April 7, 2009 under the MTN program. The notes bear an interest rate of LIBOR plus the applicable spread with the spread being reset from time to time. The initial spread is equal to .40% for a period of one year. The Operating Partnership has entered into an interest rate swap for the entire term of the notes to fix the interest rate index. Under the terms of the swap, the Operating Partnership paid a fixed rate of 6.02% and received LIBOR. This swap was settled in February 1999 at a loss of $1,495. This loss was deferred to amortize over the remaining term of the Remarketed Reset Notes. On April 7, 1999, the Operating Partnership repaid the Remarketed Reset Notes with the proceeds of conventional fixed rate secured debt. The remaining unamortized balance of the deferred swap loss was redesignated to the new debt and will be amortized over the remaining term of the new debt. The aggregate maturities of the Company's indebtedness are as follows: 2000..................................... $ 100,442 2001..................................... 40,817 2002..................................... 186,122 2003..................................... 101,191 2004..................................... 24,894 Thereafter............................... 536,117 ---------- $ 989,583 ==========
PLEDGED ASSETS The aggregate net book value at December 31, 1999 of property pledged as collateral for indebtedness amounted to approximately $417,772. 45 48 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) UNUSED TREASURY LOCKS The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1999 was due to the write off of loan costs resulting from the early extinguishment of debt. The extraordinary item is net of $63 in minority interest of the unitholders calculated on the basis of weighted average units and common shares outstanding for the year ended December 31, 1999. The extraordinary item for the year ended December 31, 1997 resulted from the write-off of deferred financing costs on the mortgage debt satisfied. The extraordinary item is net of $18 in minority interest of the unitholders calculated on the basis of weighted average units and common shares outstanding for the year ended December 31, 1997. 5. INCOME TAXES The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% of its REIT taxable income, as defined in the Code, to its shareholders and satisfy certain other requirements. As a result, the Company generally will not be subject to Federal income taxation at the corporate level on the income it distributes to the shareholders. Although Post Properties, Inc. has elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed as a subsidiary of the Operating Partnership to provide through its subsidiaries asset management, leasing and landscaping services to third parties. The consolidated taxable income of Post Services, if any, will be subject to tax at regular corporate rates. As of December 31, 1999, the net basis for Federal income tax purposes taking into account the special allocation of gain to the partners contributing property to the Operating Partnership and including minority interest in the Operating Partnership, was lower than the net assets as reported in the Company's consolidated financial statements by $49,100. 6. RELATED PARTY TRANSACTIONS The Company provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 1999, 1998 and 1997, the Company received landscaping fees of $610, $961 and $670 for such services. These amounts include reimbursements of direct expenses in the amount of $10, $295 and $138 which are not included in landscape services revenue. Accordingly, these transactions resulted in the Company recording landscape services net fees in excess of direct expenses of $600, $666 and $532 in the accompanying financial statements for the years ended December 31, 1999, 1998 and 1997, respectively. The Company provides accounting and administrative services to entities controlled by certain executive officers of the Company. Fees under this arrangement aggregated $25 for each year ended December 31, 1999, 1998 and 1997, respectively. The Company was contracted to assist in the development of apartment complexes constructed by a former executive and current shareholder. Fees under this arrangement were $100, $349, and $326 for the years ended December 31, 1999, 1998 and 1997, respectively. On December 10, 1999, the Company loaned $7,750 to certain executives. These loans are payable on December 10, 2009 and bear interest at a rate of 6.32% per annum. Proceeds from these loans were used by these executives to acquire the Company's common shares on the open market. 46 49 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. EMPLOYEE BENEFIT PLANS The employees of the Company are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Company contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Company contribution, the maximum employee contribution included in the calculation is 3% of salary. Company contributions of $346, $179 and $158 were made in 1999, 1998 and 1997, respectively. The Company maintains an Employee Stock Purchase Plan ("ESPP") to encourage stock ownership by eligible directors and employees. To participate in the ESPP, (i) directors must not be employed by the Company or the Operating Partnership and must have been a member of the Board of Directors for at least one month and (ii) an employee must have been employed full or part-time by the Company or the Operating Partnership for at least one month. The purchase price of shares of Common Stock under the ESPP is equal to 85% of the lesser of the closing price per share of Common Stock on the first or last day of the trading period, as defined. 8. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 1999, the Company had two stock-based compensation plans, the Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the "ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as described below. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for its plans. Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is required to be recognized for the Stock Plan and the ESPP. The compensation cost which is required to be charged against income for the Grant Plan, was $205, $182 and $209 for 1999, 1998 and 1997, respectively. Had compensation cost for the Company's Stock Plan and ESPP been determined based on the fair value at the grant dates for awards under the Plans consistent with the method of FASB Statement 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1999 1998 1997 ---------- ---------- ---------- Net income available to common shareholders..................... As reported..... $ 92,642 $ 77,477 $ 49,965 Pro forma....... $ 90,459 $ 76,589 $ 49,579 Net income per common share - basic............................ As reported..... $ 2.41 $ 2.21 $ 2.11 Pro forma....... $ 2.35 $ 2.19 $ 2.10 Net income per common share - diluted.......................... As reported..... $ 2.38 $ 2.18 $ 2.09 Pro forma....... $ 2.32 $ 2.16 $ 2.08
47 50 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) For purposes of the pro forma presentation, the fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. The weighted-average of all assumptions used in the calculation for various grants under all of the Company's plans during 1999, 1998, and 1997, are as follows:
1999 1998 1997 ------------ ------------ ------------ Dividend yield............................ 7.3% 7.0% 6.5% Expected volatility....................... 15.4% 15.3% 14.5% Risk-free interest rate................... 4.5% to 6.6% 4.7% to 5.8% 5.5% to 5.6% Expected option life...................... 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant to its employees and directors options to purchase up to 6,000,000 shares of common stock. Of this amount, 550,000 shares are available for grants of restricted stock. Options granted to any key employee or officer cannot exceed 100,000 shares a year (500,000 shares if such key employee or officer is a member of the Company's Executive Committee). The exercise price of each option may not be less than the market price on the date of grant and all options have a maximum term of ten years from the grant date. A summary of the status of the Company's Stock Plan as of December 31, 1999, 1998 and 1997, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
1999 1998 1997 ------------------------ ------------------------ ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- --------- --------- --------- --------- --------- Outstanding at beginning of year ............ 3,030,852 $ 31 2,237,551 $ 31 864,105 $ 31 Granted ..................................... 1,288,232 36 1,440,784 39 243,946 39 Converted in connection with the Merger .................................... -- -- -- -- 1,192,230 30 Exercised ................................... (164,053) 30 (67,326) 31 (49,406) 31 Forfeited ................................... (100,155) 37 (580,157) 39 (13,324) 38 --------- --------- --------- Outstanding at end of year .................. 4,054,876 35 3,030,852 34 2,237,551 31 ========= ========= ========= Options exercisable at year-end 2,290,143 2,065,438 2,000,279 ========= ========= ========= Weighted-average fair value of options granted during the year $ 2.08 $ 2.54 $ 2.85 ========= ========= =========
At December 31, 1999, the range of exercise prices for options outstanding was $27.625 - $40.63 and the weighted- average remaining contractual life was 7 years. 48 51 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Company is party to two ground leases with terms expiring in years 2040 and 2043 relating to a single operating community, one ground lease expiring in 2038 for a second operating community, three ground leases expiring in 2066, 2069 and 2074 for three communities under development and to office, equipment and other operating leases with terms expiring in years 2000 through 2004. Future minimum lease payments for non-cancelable land, office, equipment and other leases at December 31, 1999 are as follows: 2000......................... $ 1,992 2001......................... 1,830 2002......................... 1,190 2003......................... 1,275 2004......................... 1,243 2005 and thereafter.......... 160,163
The Company incurred $5,109, $4,915 and $3,366 of rent expense for the years ended December 31, 1999, 1998 and 1997, respectively. CONTINGENCIES The Company is party to various legal actions which are incidental to its business. Management believes that these actions will not have a material adverse affect on the consolidated balance sheets and statements of operations. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, rents and landscape service receivables, accounts payable, accrued expenses, notes payable and other liabilities are carried at amounts which reasonably approximate their fair values. The fair value of fixed rate debt was approximately $420,675 at December 31, 1999. The fair values of interest rate protection agreements and interest rate swaps (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 1999, there were no carrying amounts related to these arrangements in the consolidated balance sheet. As of December 31, 1999, the expected net proceeds from settlement of these contracts was approximately $598. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 1999. Although management is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 49 52 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 12. EARNINGS PER SHARE For the years ended December 31, 1999, 1998 and 1997, basic and diluted earnings per common share for income before extraordinary item, net of preferred dividends, and net income available to common shareholders before extraordinary item has been computed as follows:
YEAR ENDED 1999 ----------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------ Income before extraordinary item ...................... $ 104,975 Less: Preferred stock dividends ....................... (11,875) ------------ BASIC EPS Income available to common shareholders before extraordinary item .................................. 93,100 38,460,689 $ 2.42 ============ EFFECT OF DILUTIVE SECURITIES Options ............................................... -- 456,298 ------------ ------------ DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ............... $ 93,100 38,916,987 $ 2.39 ============ ============ ============ YEAR ENDED 1998 ----------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------ Income before extraordinary item ...................... $ 88,950 Less: Preferred stock dividends ....................... (11,473) ------------ BASIC EPS Income available to common shareholders before extraordinary item .................................. 77,477 35,028,596 $ 2.21 ============ EFFECT OF DILUTIVE SECURITIES Options ............................................... -- 444,991 ------------ ------------ DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ............... $ 77,477 35,473,587 $ 2.18 ============ ============ ============ YEAR ENDED 1997 ----------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------ Income before extraordinary item ...................... $ 54,947 Less: Preferred stock dividends ....................... (4,907) ------------ BASIC EPS Income available to common shareholders before extraordinary item .................................. 50,040 23,664,044 $ 2.11 ============ EFFECT OF DILUTIVE SECURITIES Options ............................................... -- 223,862 ------------ ------------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ............... $ 50,040 23,887,906 $ 2.09 ============ ============= ============
13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 1999, 1998 and 1997 are as follows: (a) On the date of the Second Offering and Third Offering, holders of 5,401,185 and 5,139,243 Units of the Operating Partnership, respectively, were allocated capital on a pro rata basis in proportion to their Units over 50 53 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) total Units outstanding in the Operating Partnership. During 1999, 1998 and 1997, holders of 22,299, 750 and 6,519 Units in the Operating Partnership, respectively, exercised their option to convert their Units to shares of the Company on a one-for-one basis. During 1996, the Company exercised its option to purchase land in exchange for 138,150 Units of the Operating Partnership. The net effect of the capital allocated to the unitholders of the Operating Partnership on the dates of the offerings, the subsequent conversion of Units of the Operating Partnership to shares of the Company, the adjustments to minority interest for the dilutive impact of the Dividend Reinvestment and Employee Stock Purchase Plans and the issuance of Units of the Operating Partnership in exchange for land was a reclassification decreasing minority interest and increasing shareholders' equity in the amount of $857 for the year ended December 31, 1999 and increasing minority interest and decreasing shareholders' equity in the amount of $15,031 and $30,245 for the years ended December 31, 1998 and 1997, respectively. (b) The Operating Partnership committed to distribute $30,818, $25,115 and $21,327 for the quarters ended December 31, 1999, 1998 and 1997, respectively. As a result, the Company declared dividends of $27,184, $21,725 and 18,221 for the quarters ended December 31, 1999, 1998 and 1997, respectively. The remaining distributions from the Operating Partnership in the amount of $3,634, $3,390 and $3,104 for the quarters ended December 31, 1999, 1998 and 1997, respectively, are distributed to minority interest unitholders in the Operating Partnership. (c) The Merger, which was completed in 1997, was a stock for stock transaction. In connection with the Merger, the cash and non-cash components were are follows: Fair value of assets acquired........................ $ 643,268 Less: Value of stock issued in exchange for Stock of Columbus............................... 338,353 Liabilities assumed............................... 285,852 Cash acquired..................................... 1,329 ---------- Cash component of purchase price, net of cash acquired..................................... $ 17,734 ==========
14. SEGMENT INFORMATION SEGMENT DESCRIPTION In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise and Related Information," the Company presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on substantially the same basis as the internally reported information used by the Company's chief operating decision makers to manage the business. The Company's chief operating decision makers focus on the Company's primary sources of income which are property rental operations and third party services. Third party services are designated as one segment. Property rental operations are broken down into four segments based on the various stages in the property ownership lifecycle. The Company's five segments are further described as follows: Property Rental Operations - Fully stabilized communities - those apartment communities which have been stabilized (the earlier of the point at which a property reaches 95% occupancy or one year after completion of construction) for both the current and prior year. - Communities stabilized during 1998 - communities which reached stabilized occupancy in the prior year. 51 54 - Development and lease up communities - those communities which are in lease-up but were not stabilized by the beginning of the current year, including communities which stabilized during the current year. - Sold communities - communities which were sold in the current or prior year. Third Party Services - fee income and related expenses from the Company's apartment community management, landscaping and corporate apartment rental services. SEGMENT PERFORMANCE MEASURE Management uses contribution to funds from operations ("FFO") as the performance measure for its segments. FFO is defined by the National Association of Real Estate Investment Trusts as net income available to common shareholders determined in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. NAREIT's definition of FFO excludes items classified by GAAP as extraordinary or unusual and significant non-recurring events that materially distort the comparative measurement of performance over time. Effective January 1, 2000 NAREIT amended its definition of FFO to include in FFO all non-recurring events, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of property. The Company will use the amended definition of FFO in reporting results for all periods on or after January 1, 2000. The Company does not expect use of the amended definition to materially affect FFO. 52 55 POST PROPERTIES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) SEGMENT INFORMATION The following table reflects each segment's contribution to consolidated revenues and FFO together with a reconciliation of segment contribution to FFO, total FFO and income before extraordinary item and preferred dividends. Additionally, substantially all of the Company's assets relate to the Company's property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally.
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1999 1998 1997 ------------- ------------- ------------- REVENUES Fully stabilized communities................................. $ 236,923 $ 228,878 $ 171,092 Communities stabilized during 1998........................... 22,197 19,149 5,441 Development and lease-up communities......................... 58,486 23,708 8,328 Sold communities............................................. 318 3,867 3,205 Third party services......................................... 12,486 10,416 7,569 Other........................................................ 15,517 12,887 4,481 ------------- ------------- ------------- Consolidated revenues........................................ $ 345,927 $ 298,905 $ 200,116 ============= ============= ============= CONTRIBUTION TO FUNDS FROM OPERATIONS Fully stabilized communities................................. $ 163,809 $ 156,865 $ 117,225 Communities stabilized during 1998........................... 15,169 12,966 3,318 Development and lease-up communities......................... 35,906 12,509 5,154 Sold communities............................................. 190 3,246 2,058 Third party services......................................... 1,657 1,653 1,326 ------------- ------------- ------------- Contribution to FFO.......................................... 216,731 187,239 129,081 ------------- ------------- ------------- Other operating income, net of expense....................... 2,674 3,186 (2,723) Depreciation on non-real estate assets....................... (1,962) (1,432) (1,057) Minority interest in consolidated property Partnerships.............................................. (511) (397) -- Interest expense............................................. (33,192) (31,297) (24,658) Amortization of deferred loan costs.......................... (1,496) (1,185) (980) General and administrative................................... (7,788) (8,495) (7,364) Dividends to preferred shareholders.......................... (11,875) (11,473) (4,907) ------------- ------------- ------------- Total FFO.................................................... 162,581 136,146 87,392 ------------- ------------- ------------- Depreciation on real estate assets........................... (55,361) (45,214) (27,991) Net gain (loss) on sale of assets............................ (1,522) -- 3,270 Loss on unused treasury locks................................ -- (1,944) -- Loss on relocation of office space........................... -- (1,500) Minority interest of unitholders in Operating Partnership...................................... (12,598) (11,511) (11,131) Dividends to preferred shareholders.......................... 11,875 11,473 4,907 ------------- ------------- ----------- Income before extraordinary item and preferred dividends.................................... $ 104,975 $ 88,950 $ 54,947 ============= ============= =============
15. SUBSEQUENT EVENTS In February 2000, the Company sold a 213 unit property located in Atlanta for $32,350. Net proceeds estimated at $31,500 will be used to repay outstanding indebtedness. In February 2000, the Company's Investment Committee approved the sale of and subsequently listed for sale three properties in Mississippi containing 983 units and a commercial property located in Dallas, TX. 53 56 POST PROPERTIES, INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) 16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 1999 and 1998 are as follows:
YEAR ENDED DECEMBER 31, 1999* ------------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- Revenues $ 80,891 $ 85,503 $ 88,158 $ 91,375 ---------- ---------- ---------- ---------- Net income before net gain (loss) on sale of assets, minority interest of unitholders in Operating Partnership and extraordinary items................................ 29,406 29,624 30,626 31,290 Net gain (loss) on sale of assets.................................... (1,567) 476 (246) (185) Minority interest of preferred unitholders in Operating Partnership.............................................. -- -- (435) (1,416) Minority interest of common unitholders in Operating Partnership.............................................. (2,992) (3,237) (3,206) (3,163) Extraordinary items.................................................. (458) -- -- -- ---------- ---------- ---------- ---------- Net income........................................................... 24,389 26,863 26,739 26,526 Dividends to preferred shareholders.................................. (2,969) (2,969) (2,969) (2,968) ---------- ---------- ---------- ---------- Net income available to common shareholders.......................... $ 21,420 $ 23,894 $ 23,770 $ 23,558 ========== ========== ========== ========== Earnings per common share: Net income available to common shareholders - basic.................. $ 0.56 $ 0.62 $ 0.62 $ 0.61 Net income available to common shareholders - diluted................ $ 0.56 $ 0.61 $ 0.61 $ 0.60
YEAR ENDED DECEMBER 31, 1998* ------------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- Revenues............................................................. $ 68,987 $ 73,455 $ 76,992 $ 79,471 ---------- ---------- ---------- ---------- Net income before, loss on unused treasury locks and minority interest of unitholders in Operating Partnership........................................................ 22,310 25,437 26,825 27,833 Loss on unused treasury locks........................................ (1,944) -- -- -- Minority interest of unitholders in Operating Partnership........................................................ (2,510) (2,902) (3,022) (3,077) ---------- ---------- ---------- ---------- Net income........................................................... 17,856 22,535 23,803 24,756 Dividends to preferred shareholders.................................. (2,566) (2,969) (2,969) (2,969) ---------- ---------- ---------- ---------- Net income available to common shareholders.......................... $ 15,290 $ 19,566 $ 20,834 $ 21,787 ========== ========== ========== ========== Earnings per common share: Net income available to common shareholders - basic.................. $ 0.48 $ 0.56 $ 0.58 $ 0.59 Net income available to common shareholders - diluted................ $ 0.47 $ 0.55 $ 0.57 $ 0.58
* The total of the four quarterly amounts for minority interest of unitholders in Operating Partnership, extraordinary item, net income and earnings per share may not equal the total for the year. These differences result from the use of a weighted average to compute minority interest in the Operating Partnership and average number of shares outstanding. 54 57 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Post Apartment Homes, L.P. In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 14(a) 1. and 2. on page 34 present fairly, in all material respects, the financial position of Post Apartment Homes, L.P. at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the management of Post Apartment Homes, L.P.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 55 58 POST APARTMENT HOMES, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ----------------------------------- 1999 1998 ----------- ----------- ASSETS Real estate assets Land ......................................................... $ 277,784 $ 252,922 Building and improvements..................................... 1,574,158 1,379,847 Furniture, fixtures and equipment............................. 137,602 108,233 Construction in progress...................................... 576,361 480,267 Land held for future development.............................. 16,880 33,805 ----------- ----------- 2,582,785 2,255,074 Less: accumulated depreciation................................ (303,016) (247,148) ----------- ----------- Real estate assets.......................................... 2,279,769 2,007,926 Cash and cash equivalents....................................... 5,870 21,154 Restricted cash................................................. 1,380 1,348 Deferred charges, net........................................... 20,820 18,686 Other assets.................................................... 42,334 17,599 ----------- ----------- Total assets............................................. $ 2,350,173 $ 2,066,713 =========== =========== LIABILITIES AND PARTNERS' EQUITY Notes payable................................................... $ 989,583 $ 800,008 Accrued interest payable........................................ 9,160 7,609 Distribution payable............................................ 31,285 25,115 Accounts payable and accrued expenses........................... 59,780 48,214 Security deposits and prepaid rents............................. 9,023 8,716 ----------- ----------- Total liabilities........................................ 1,098,831 889,662 ----------- ----------- Commitments and contingencies................................... -- -- Partners' equity................................................ 1,251,342 1,177,051 ----------- ----------- Total liabilities and partners' equity................... $ 2,350,173 $ 2,066,713 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 56 59 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ REVENUES Rental $ 318,697 $ 275,755 $ 185,732 Property management - third party ............................ 3,368 3,164 2,421 Landscape services - third party ............................ 9,118 7,252 5,148 Interest ..................................................... 764 472 89 Other ........................................................ 13,980 12,262 6,726 ------------ ------------ ------------ Total revenue ............................................ 345,927 298,905 200,116 ------------ ------------ ------------ EXPENSES Property operating and maintenance (exclusive of items shown separately below)..................................... 113,152 99,717 67,515 Depreciation ................................................. 58,013 46,646 29,048 Property management - third party ............................ 2,925 2,499 1,959 Landscape services - third party ............................. 7,904 6,264 4,284 Interest ..................................................... 33,192 31,297 24,658 Amortization of deferred loan costs .......................... 1,496 1,185 980 General and administrative ................................... 7,788 8,495 7,364 Minority interest in consolidated property partnerships....... 511 397 -- ------------ ------------ ------------ Total expenses ........................................... 224,981 196,500 135,808 ------------ ------------ ------------ Income before net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office and extraordinary item ..................... 120,946 102,405 64,308 Net gain (loss) on sale of assets ............................. (1,522) -- 3,270 Loss on unused treasury locks ................................. -- (1,944) -- Loss on relocation of corporate office ........................ -- -- (1,500) ------------ ------------ ------------ Income before extraordinary item .............................. 119,424 100,461 66,078 Extraordinary item ............................................ (521) -- (93) ------------ ------------ ------------ Net income .................................................... 118,903 100,461 65,985 Distributions to preferred Unitholders ........................ (13,726) (11,473) (4,907) ------------ ------------ ------------ Net income available to common Unitholders .................... $ 105,177 $ 88,988 $ 61,078 ============ ============ ============ EARNINGS PER COMMON UNIT - BASIC Income before extraordinary item (net of preferred distributions) ............................ $ 2.42 $ 2.21 $ 2.11 Extraordinary item ............................................ (.01) -- -- ------------ ------------ ------------ Net income available to common Unitholders .................... $ 2.41 $ 2.21 $ 2.11 ============ ============ ============ Weighted average common Units outstanding ..................... 43,663,373 40,244,351 28,880,928 ============ ============ ============ Distributions declared ........................................ $ 2.80 $ 2.60 $ 2.38 ============ ============ ============ EARNINGS PER COMMON UNIT - DILUTED Income before extraordinary item (net of preferred distributions) ........................... $ 2.39 $ 2.18 $ 2.09 Extraordinary item ........................................... (.01) -- -- ------------ ------------ ------------ Net income available to common Unitholders ................... $ 2.38 $ 2.18 $ 2.09 ============ ============ ============ Weighted average common Units outstanding .................... 44,119,671 40,689,342 29,104,790 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 57 60 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DOLLARS IN THOUSANDS)
GENERAL LIMITED PARTNER PARTNERS TOTAL ------------ ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1996................................ $ 5,216 $ 477,218 $ 482,434 Contributions from PPI related to Preferred Shares................. 483 47,808 48,291 Common units issued in connection with Merger...................... 3,384 334,969 338,353 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans................................ 91 9,039 9,130 Distributions to preferred Unitholders............................. (49) (4,858) (4,907) Distributions to common Unitholders................................ (487) (48,172) (48,659) Distributions declared to common Unitholders....................... (213) (21,110) (21,323) Net income......................................................... 660 65,325 65,985 ------------ ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1997................................ 9,085 860,219 869,304 Contributions from PPI related to Preferred Shares................. -- 48,284 48,284 Contributions from PPI related to Common Shares.................... 2,559 253,348 255,907 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans................................ 189 18,671 18,860 Distributions to preferred Unitholders............................. -- (11,473) (11,473) Distributions to common Unitholders................................ (792) (78,385) (79,177) Distributions declared to common Unitholders....................... (251) (24,864) (25,115) Net income......................................................... 1,005 99,456 100,461 ------------ ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1998................................ 11,795 1,165,256 1,177,051 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans................................ 233 23,079 23,312 Proceeds from issuance of preferred units, net of offering costs... -- 68,190 68,190 Distributions to preferred Unitholders............................. -- (13,726) (13,726) Distributions to common Unitholders................................ (916) (90,654) (91,570) Distributions declared to common Unitholders....................... (308) (30,510) (30,818) Net income......................................................... 1,189 117,714 118,903 ------------ ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1999................................ $ 11,993 $ 1,239,349 $ 1,251,342 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 58 61 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income......................................................$ 118,903 $ 100,461 $ 65,985 Adjustments to reconcile net income to net cash provided by operating activities: Net (gain) loss on sale of assets............................... 1,522 -- (3,270) Loss on relocation of corporate office.......................... -- -- 1,500 Loss on unused treasury locks................................... -- 1,944 -- Extraordinary item.............................................. 521 -- 93 Depreciation.................................................... 58,013 46,623 29,048 Write-off of deferred financing costs........................... -- -- (93) Amortization of deferred loan costs............................. 1,496 1,209 980 Other........................................................... -- 168 -- Changes in assets, (increase) decrease in: Restricted cash............................................... (32) 194 (394) Deferred charges.............................................. (4,106) (7,115) -- Other assets.................................................. (24,735) 2,998 11,797 Changes in liabilities, increase (decrease) in: Accrued interest payable...................................... 1,551 104 2,172 Accounts payable and accrued expenses......................... (402) 1,433 1,341 Security deposits and prepaid rents........................... 307 599 395 ------------ ------------ ------------ Net cash provided by operating activities....................... 153,038 148,618 109,554 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables............................................... (286,696) (279,473) (190,810) Proceeds from sale of assets.................................... 16,587 -- 25,402 Acquisition of Columbus Realty Trust, net of cash acquired...... -- -- (17,734) Payment for unused treasury locks............................... -- (1,944) -- Capitalized interest............................................ (21,417) (15,707) (9,567) Recurring capital expenditures.................................. (8,641) (7,479) (3,675) Corporate capital expenditures.................................. (6,811) (8,576) (3,220) Non-recurring capital expenditures.............................. (2,971) (1,423) (605) Revenue generating capital expenditures......................... (8,011) (13,614) (8,168) ------------ ------------ ------------ Net cash used in investing activities........................... (317,960) (328,216) (208,377) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs...................................... (1,495) -- (4,208) Debt proceeds................................................... 279,000 103,930 688,564 Debt payments................................................... (89,425) (275,131) (564,085) Proceeds from the sale of notes................................. -- 150,000 -- Offering proceeds, net of underwriters discount and offering costs............................................ -- 255,907 -- Proceeds from issuance of preferred units, net of offering costs......................................... 68,190 -- -- Proceeds from contributions from PPI related to Preferred Shares........................................... -- 48,284 48,291 Proceeds from contributions from PPI related to Dividend Reinvestment Plan................................. 23,312 18,860 9,130 Capital distributions to preferred Unitholders.................. (13,259) (11,473) (4,907) Capital distributions to common Unitholders..................... (116,685) (100,504) (63,316) ------------ ------------ ------------ Net cash provided by financing activities....................... 149,638 189,873 109,469 ------------ ------------ ------------ Net (decrease) increase in cash and cash equivalents............ (15,284) 10,275 10,646 Cash and cash equivalents, beginning of period.................. 21,154 10,879 233 ------------ ------------ ------------ Cash and cash equivalents, end of period........................ $ 5,870 $ 21,154 $ 10,879 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements 59 62 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 1. ORGANIZATION AND FORMATION OF THE COMPANY ORGANIZATION AND FORMATION OF THE COMPANY Post Apartment Homes, L.P. (the "Operating Partnership"), a Georgia limited partnership, was formed on January 22, 1993, to conduct the business of developing, leasing and managing upscale multi-family apartment communities for its general partner, Post Properties, Inc. (the "Company" or "PPI"). The Operating Partnership, through its operating divisions and subsidiaries, is the entity through which all of the Company's operations are conducted. At December 31, 1999, the Company, through wholly owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 88.2% of the common units in the Operating Partnership ("Units") and 64.1% of the Perpetual Preferred Units. The other limited partners of the Operating Partnership, who hold Units, are those persons (including certain officers and directors of the Company) who, at the time of the Initial Offering, elected to hold all or a portion of their interest in the form of Units rather than receiving shares of Common Stock. Each Unit may be redeemed by the holder thereof for either one share of Common Stock or cash equal to the fair market value thereof at the time of such redemption, at the option of the Operating Partnership. The Operating Partnership presently anticipates that it will cause shares of Common Stock to be issued in connection with each such redemption rather than paying cash (as has been done in all redemptions to date). With each redemption of outstanding Units for Common Stock, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues shares of Common Stock, the Company will contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership will issue an equivalent number of Units to the Company. The Company elected to be taxed as a real estate investment trust ("REIT") for Federal income tax purposes beginning with the year ended December 31, 1993. A REIT is a legal entity which holds real estate interest and, through payments of dividends to shareholders, in practical effect is not subject to Federal income taxes at the corporate level. The Operating Partnership currently owns and manages or is in the process of developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando, Northern Virginia, Nashville, Houston, Phoenix, Denver and Charlotte metropolitan areas. At December 31, 1999, approximately 54.8% and 20.4% (on a unit basis) of the Company's communities are located in the Atlanta and Dallas metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. See Note 2 related to the acquisition of Columbus Realty Trust in 1997. Certain items in the 1998 and/or 1997 consolidated financial statements were reclassified for comparative purposes with the 1999 consolidated financial statements. NEW ACCOUNTING PRONOUNCEMENTS Beginning January 1, 2001, the Operating Partnership is required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Due to the Operating Partnership's limited hedging activities, management does not believe the adoption of SFAS 133 will have a material effect on the Operating Partnership's financial position or results of operations, nor will it significantly affect its financial statement disclosures. 60 63 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5-10 years). PREFERRED UNITS On September 3, 1999, the Operating Partnership issued $70,000 of Series D Cumulative Redeemable Preferred Units to an institutional investor in a private placement meeting the requirements of Regulation D promulgated under the Securities Act of 1933, as amended. The $25 preferred units may be redeemed by the Company after five years at par, but are otherwise perpetual in term. The preferred units may also be exchanged, under certain circumstances, for shares of the Company's 8 percent Series D Cumulative Redeemable Preferred Stock. Net proceeds to the Operating Partnership of approximately $68,000 were used to repay outstanding indebtedness. REVENUE RECOGNITION Rental -- Residential properties are leased under operating leases with terms of generally one year or less. Rental income is recognized when earned, which is not materially different from revenue recognition on a straight line basis. Property management and landscaping services -- Income is recognized when earned for property management and landscaping services provided to third parties. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents. RESTRICTED CASH Restricted cash generally is comprised of resident security deposits for communities located in Florida and Tennessee and required maintenance reserves for communities located in DeKalb County, Georgia. DEFERRED FINANCING COSTS Deferred financing costs are amortized using the interest method over the terms of the related debt. INTEREST AND REAL ESTATE TAXES Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the lives of the constructed assets. Interest paid (including capitalized amounts of $21,417, $15,707 and $9,567 during 1999, 1998 and 1997, respectively, and interest rate protection receipts of $0, $0 and $296 during 1999, 1998 and 1997, respectively) aggregated $51,337, $46,889 and $39,815 for the years ended December 31, 1999, 1998 and 1997, respectively. DERIVATIVES The Operating Partnership may enter into various treasury lock arrangements from time to time in anticipation of a specific debt transaction. These arrangements are used to manage the Operating Partnership's exposure to 61 64 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) fluctuations in interest rates. The Operating Partnership does not utilize these arrangements for trading or speculative purposes. These arrangements, considered qualifying hedges, are not recorded in the financial statements until the debt transaction is consummated and the arrangement is settled. The proceeds or payments resulting from the settlement of the arrangement are deferred and amortized over the life of the debt as an adjustment to interest expense. Any arrangements not deemed hedges are recorded at fair value and recognized through the statement of operations. Premiums paid to purchase interest rate protection agreements (i.e. interest rate caps) are capitalized and amortized over the terms of those agreements using the interest method. Unamortized premiums are included in deferred charges in the consolidated balance sheet. Amounts receivable under the interest rate protection agreements are accrued as a reduction of interest expense. Interest rate swaps qualifying for hedge accounting treatment are recorded on an accrual basis as an adjustment of the interest rate yield. Interest rate swaps not qualifying for hedge accounting treatment are recorded at fair value and recognized through the statement of operations. PER UNIT DATA Basic earnings per common Unit with respect to the Operating Partnership for the years ended December 31, 1999, 1998 and 1997 is computed based upon the weighted average number of units outstanding during the period. Diluted earnings per common Unit is based upon the weighted average number of Units outstanding during the period and includes the effect of the potential issuance of additional Units if stock options were exercised or converted into common stock of the Company. USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ACQUISITION OF COLUMBUS REALTY TRUST On October 24, 1997, Columbus Realty Trust ("Columbus") a Texas real estate investment trust, was merged into a wholly owned subsidiary of the Company (the "Merger") and then transferred into the Operating Partnership. At the time of the Merger, Columbus was operating 26 completed communities containing 6,296 apartment units and had an additional 5 communities under development that would contain 1,243 apartment units upon completion located in Dallas and Houston, Texas. Pursuant to the merger agreement, each outstanding share of Columbus common stock was converted into 0.615 shares of common stock of the Company, which resulted in the issuance of approximately 8.4 million shares of common stock of the Company. The total purchase price including liabilities assumed was $643,268. The Merger was accounted for as a purchase. Under the purchase method of accounting, the assets acquired and liabilities assumed of Columbus were recorded at their estimated fair market values and its results of operations have been included in the accompanying consolidated statements of operations from the date of the Merger, October 24, 1997. 62 65 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) Unaudited, supplemental pro forma information, assuming the Merger had occurred on January 1, 1997, is as follows:
YEAR ENDED DECEMBER 31, 1997 ----------------- Total revenue ........................................................ $247,295 Net income available to common unitholders before extraordinary items ............................ $ 69,978 Net income available to common unitholders ........................... $ 69,885 Earnings per unit available to common unitholders - basic ............ $ 1.99 Earnings per unit available to common unitholders - diluted .......... $ 1.96
3. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, ----------------------- 1999 1998 -------- -------- Deferred financing costs .................................... $ 31,148 $ 26,568 Other ....................................................... 5,394 4,551 -------- -------- 36,542 31,119 Less: accumulated amortization .............................. (15,722) (12,433) -------- -------- $ 20,820 $ 18,686 ======== ========
4. NOTES PAYABLE The Operating Partnership's indebtedness consists of the following:
DECEMBER 31, ----------------------------- 1999 1998 ---------- ---------- Conventional fixed rate (secured)....................... $ 53,210 $ 3,825 Conventional floating rate (secured).................... 126,067 42,303 Tax-exempt fixed rate bond indebtedness (secured)....... -- -- Tax-exempt floating rate bond indebtedness (secured).... 235,880 235,880 Lines of credit & other (unsecured)..................... 184,426 62,000 Senior notes (unsecured)................................ 390,000 456,000 ---------- ---------- Total................................................... $ 989,583 $ 800,008 ========== ==========
CONVENTIONAL FIXED AND FLOATING RATE MORTGAGES PAYABLE (SECURED) Conventional mortgages payable were comprised of five and four loans at December 31, 1999 and 1998, respectively, each of which is collateralized by an apartment community included in real estate assets. The mortgages payable are generally due in monthly installments of interest only and mature at various dates through 2029. The interest rates on the fixed rate mortgages payable ranged from 6.50% to 9.20% at December 31, 1999. At December 31, 1999, the interest rates on the variable rate mortgages payable were at a range from the London Interbank Offered Rate ("LIBOR") to .75% to .935% above LIBOR. At December 31, 1999, LIBOR ranged from 5.82% to 6.50% for one, three, six, and twelve month indices. TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED) Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit enhanced debt maturing in 2025. 63 66 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. Such bonds are generally payable in monthly or semi-annual installments of interest only and mature at various dates through 2025. Floating rate indebtedness reissued in 1995 through 1998 bears interest at the "AAA" non-AMT tax exempt rate, set weekly, which was 5.50% at December 31, 1999 (average of 3.35% for 1998). With respect to such bonds, the Operating Partnership pays certain credit enhancement fees of .515% of the amount of such bonds or the amount of such letters of credit, as the case may be. The Federal National Mortgage Association ("FNMA") has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Effective October 1, 1998, the Company obtained fee reductions related to these loans totaling .08% per annum. Of this savings, .06% was a reduction in the credit enhancement fee. This fee reduction resulted in approximately $181 of annual savings for the remaining term of these loans. OTHER SECURED DEBT On March 30, 1999, the Operating Partnership issued $50,000 of secured notes to an insurance company. These notes bear interest at 6.5% with an effective rate of 7.3% after consideration of a terminated swap agreement, mature on March 1, 2009 and are secured by two apartment communities. Net proceeds of $49,933 were used to repay outstanding indebtedness. On July 23, 1999, the Operating Partnership issued $104,000 of secured notes to FNMA. These notes bear interest at 30-day LIBOR (capped at 7% for one year) plus credit enhancement, liquidity and service fees of .935%, mature on July 23, 2029 and are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the penalty amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Operating Partnership has an option to call these notes after 10 years from the issuance date. As a requirement of the debt agreement with FNMA, the Company entered into a fixed-rate swap which fixed the interest rate on the notes to 6.56% for a period of ten years. The Company entered into a variable rate swap in which they would pay a variable rate equal to the rate on the notes and receive a fixed rate of 6.50%. Net proceeds of $101,988 were used to repay outstanding indebtedness. LINES OF CREDIT AND OTHER (UNSECURED) In May 1999, the Operating Partnership's syndicated line of credit (the "Revolver") was amended, increasing its capacity to $350,000. The Revolver matures on April 30, 2002 and borrowings currently bear interest at LIBOR plus .825% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Operating Partnership's senior unsecured debt. The Revolver also includes a money market competitive bid option for short term funds up to $175,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Operating Partnership does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. On July 26, 1996, the Operating Partnership closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was fully funded and used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and mature on March 31, 1999. Management believes the Cash Management Line will be renewed at maturity with 64 67 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) similar terms. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Operating Partnership with an automatic daily sweep which applies all available cash to reduce the outstanding balance. At December 31, 1999, the outstanding balances on the Revolver and Cash Management Line were $165,000 and $17,426, respectively. There were no outstanding balances on any of the other facilities at December 31, 1999. In addition, the Operating Partnership has a $3,000 facility to provide letters of credit for general business purposes. On March 1, 1998, the Operating Partnership entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Operating Partnership $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. All repayment terms are subject to the conditions set forth in the Agreement. SENIOR NOTES (UNSECURED) On June 7, 1995, the Operating Partnership issued $50,000 of unsecured senior notes with the Northwestern Mutual Life Insurance Company. The notes were in two tranches: the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2000; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to reduce other secured indebtedness and to pay down the Revolver. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. On September 30, 1996, the Operating Partnership completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to pay down existing indebtedness outstanding on the Revolver. On January 29, 1997, the Operating Partnership established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Operating Partnership increased the amount available under this program to $344 million. Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) pay down existing indebtedness outstanding under the Operating Partnership's Revolver. The following table sets forth MTNs issued and outstanding as of December 31, 1999:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ------------------ -------- -------------- ---------- March 3, 1997 $ 30,000 LIBOR plus .25% 03/03/2000 March 31, 1997 37,000 7.02% 04/02/2001 March 31, 1997 13,000 7.30% 04/01/2004 September 22, 1997 10,000 6.69% 09/22/2004 September 22, 1997 25,000 6.78% 09/22/2005 March 12, 1998 100,000 6.85% 03/16/2015 -------- $215,000 ========
65 68 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) On March 12, 1998, the Operating Partnership issued $100,000 of 6.85% MandatOry Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds in the amount of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Operating Partnership entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). On April 8, 1998, the Operating Partnership sold $50,000 of Remarketed Reset Notes due April 7, 2009 under the MTN program. The notes bear an interest rate of LIBOR plus the applicable spread with the spread being reset from time to time. The initial spread is equal to .40% for a period of one year. The Operating Partnership has entered into an interest rate swap for the entire term of the notes to fix the interest rate index. Under the terms of the swap, the Operating Partnership paid a fixed rate of 6.02% and received LIBOR. This swap was settled in February 1999 at a loss of $1,495. This loss was deferred to amortize over the remaining term of the Remarketed Reset Notes. On April 7, 1999, the Operating Partnership repaid the Remarketed Reset Notes with the proceeds of conventional fixed rate secured debt. The remaining unamortized balance of the deferred swap loss was redesignated to the new debt and will be amortized over the remaining term of the new debt. The aggregate maturities of the Operating Partnership's indebtedness are as follows:
2000................................................... $ 100,442 2001................................................... 40,817 2002................................................... 186,122 2003................................................... 101,191 2004................................................... 24,894 Thereafter............................................. 536,117 --------- $ 989,583 =========
PLEDGED ASSETS The aggregate net book value at December 31, 1999 of property pledged as collateral for indebtedness amounted to approximately $ 417,772. UNUSED TREASURY LOCKS The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1999 was due to the write off of loan costs resulting from the early extinguishment of debt. The extraordinary item for the year ended December 31, 1997 resulted from the write-off of deferred financing costs on the mortgage debt satisfied. 5. INCOME TAXES Income or losses of the Operating Partnership are allocated to the partners of the Operating Partnership for inclusion in their respective income tax returns. Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% of its REIT taxable income, as 66 69 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) defined in the Code, to its shareholders and satisfy certain other requirements. As a result, the Operating Partnership generally will not be subject to Federal income taxation at the corporate level on the income the Company distributes to the shareholders. Although the Company has elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed as a subsidiary of the Operating Partnership to provide through its subsidiaries asset management, leasing and landscaping services to third parties. The consolidated taxable income of Post Services, if any, will be subject to tax at regular corporate rates. As of December 31, 1999, the net basis for Federal income tax purposes, taking into account the special allocation of gain to the partners contributing property to the Operating Partnership, was lower than the net assets as reported in the Operating Partnership's consolidated financial statements by $49,100. 6. RELATED PARTY TRANSACTIONS The Operating Partnership provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 1999, 1998 and 1997, the Operating Partnership received landscaping fees of $610, $961 and $670 for such services. These amounts include reimbursements of direct expenses in the amount of $10, $295 and $138, which are not included in landscape services revenue. Accordingly, these transactions resulted in the Operating Partnership recording landscape services net fees in excess of direct expenses of $600, $666 and $532 in the Operating Partnership financial statements for the years ended December 31, 1999, 1998 and 1997, respectively. The Operating Partnership provides accounting and administrative services to entities controlled by certain executive officers of the Operating Partnership. Fees under this arrangement aggregated $25 for each year ended December 31, 1999, 1998 and 1997, respectively. The Operating Partnership was contracted to assist in the development of apartment complexes constructed by a former executive and current shareholder. Fees under this arrangement were $100, $349 and $326 for the years ended December 31, 1999, 1998 and 1997, respectively. On December 10, 1999, the Company loaned $7,750 to certain executives. These loans are payable on December 10, 2009, and bear interest at a rate of 6.32% per annum. Proceeds from these loans were used by these executives to acquire the Company's common shares on the open market. 7. EMPLOYEE BENEFIT PLANS Through a plan adopted by the Company, the employees of the Operating Partnership are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Operating Partnership contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Operating Partnership contribution, the maximum employee contribution included in the calculation is 3% of salary. Operating Partnership contributions of $346, $179 and $158 were made in 1999, 1998 and 1997, respectively. During 1995, the Company adopted the Employee Stock Purchase Plan ("ESPP") to encourage stock ownership by eligible directors and employees. To participate in the ESPP, (i) directors must not be employed by the Company or the Operating Partnership and must have been a member of the Board of Directors for at least one month and (ii) an employee must have been employed full-time by the Company or the Operating Partnership for at least one month. The purchase price of shares of Common Stock under the ESPP is equal to 85% of the lesser of the closing price per share of Common Stock on the first or last day of the trading period, as defined. 67 70 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 8. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 1999, the Company had two stock-based compensation plans, the Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the "ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as described below. The Operating Partnership applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is required to be recognized for the Stock Plan and the ESPP. The compensation cost which is required to be charged against income for the Grant Plan was $205, $182 and $209 for 1999, 1998 and 1997, respectively. Had compensation cost for the Company's Stock Plan and ESPP been determined based on the fair value at the grant dates for awards under the Plans consistent with the method of FASB Statement 123, the Operating Partnership's net income and earnings per Unit would have been reduced to the pro forma amounts indicated below:
1999 1998 1997 -------- -------- -------- Net income available to common unitholders ......................... As reported........ $105,177 $ 88,988 $ 61,078 Pro forma.......... $102,994 $ 88,100 $ 60,692 Net income per common Unit - basic ............................... As reported........ $ 2.41 $ 2.21 $ 2.11 Pro forma.......... $ 2.36 $ 2.19 $ 2.10 Net income per common Unit - diluted ............................. As reported........ $ 2.39 $ 2.18 $ 2.09 Pro forma.......... $ 2.33 $ 2.16 $ 2.08
For purposes of the pro forma presentation, the fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. The weighted-average of all assumptions used in the calculation for various grants under all of the Company's plans during 1999, 1998 and 1997, are as follows:
1999 1998 1997 ------------ ------------ ------------ Dividend yield ................................... 7.3% 7.0% 6.5% Expected volatility .............................. 15.4% 15.3% 14.5% Risk-free interest rate .......................... 4.5% to 6.6% 4.7% to 5.8% 5.5% to 5.6% Expected option life ............................. 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant to its employees and directors options to purchase up to 6,000,000 shares of common stock. Of this amount, 550,000 shares are available for grants of restricted stock. Options 68 71 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) granted to any key employee or officer cannot exceed 100,000 shares a year (500,000 shares if such key employee or officer is a member of the Company's Executive Committee). The exercise price of each option may not be less than the market price on the date of grant and all options have a maximum term of ten years from the grant date. A summary of the status of the Company's Stock Plan as of December 31, 1999, 1998 and 1997, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
1999 1998 1997 ---------------------- ---------------------- ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- ------ ---------- ------ ---------- ------ Outstanding at beginning of year ................. 3,030,852 $31 2,237,551 $31 864,105 $31 Granted .......................................... 1,288,232 36 1,440,784 39 243,946 39 Converted in connection with the Merger ........................................ -- -- -- -- 1,192,230 30 Exercised ........................................ (164,053) 30 (67,326) 31 (49,406) 31 Forfeited ........................................ (100,155) 37 (580,157) 39 (13,324) 38 ---------- ---------- ---------- Outstanding at end of year ....................... 4,054,876 35 3,030,852 34 2,237,551 31 ========== ========== ========== Options exercisable at year-end .................. 2,290,143 2,065,438 2,000,279 ========== ========== ========== Weighted-average fair value of options granted during the year .......................... $ 2.08 $ 2.54 $ 2.85 ========== ========== ==========
At December 31, 1999, the range of exercise prices for options outstanding was $27.625 - $40.63 and the weighted-average remaining contractual life was 7 years. 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Operating Partnership is party to two ground leases with terms expiring in years 2040 and 2043 relating to a single operating community, one ground lease expiring in 2038 for a second operating community, three ground leases expiring in 2066, 2069 and 2074 for three communities under development and to office, equipment and other operating leases with terms expiring in years 1999 through 2003. Future minimum lease payments for non-cancelable land, office, equipment and other leases at December 31, 1999 are as follows:
2000......................... $ 1,992 2001......................... 1,830 2002......................... 1,190 2003......................... 1,275 2004......................... 1,243 2005 and thereafter.......... 160,163
The Operating Partnership incurred $5,109, $4,915 and $3,366 of rent expense for the years ended December 31, 1999, 1998 and 1997, respectively. 69 72 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) CONTINGENCIES The Operating Partnership is party to various legal actions which are incidental to its business. Management believes that these actions will not have a material adverse affect on the consolidated balance sheets and statements of operations. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, rents and landscape service receivables, accounts payable, accrued expenses, and other liabilities are carried at amounts which reasonably approximate their fair values. The fair value of fixed rate debt was approximately $420,675 at December 31, 1999. The fair values of interest rate protection agreements and an interest rate swap (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 1999, there were no carrying amounts related to these arrangements in the consolidated balance sheet. As of December 31, 1999, the expected proceeds from settlement of these contracts was approximately $598. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 1999. Although management is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 70 73 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 12. EARNINGS PER UNIT For the years ended December 31, 1999, 1998 and 1997, basic and diluted earnings per common Unit for income before extraordinary item, net of preferred distributions, and net income available to common Unitholders before extraordinary item has been computed as follows:
YEAR ENDED 1999 ---------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item ......................................... $ 119,424 Less: Preferred stock distributions ...................................... (13,726) ---------- BASIC EPS Income available to common Unitholders before extraordinary item ......... 105,698 43,663,373 $ 2.42 ========== =========== ======== EFFECT OF DILUTIVE SECURITIES Options .................................................................. -- 456,298 ---------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item .................................. $ 105,698 44,119,671 $ 2.39 ========== =========== ========
YEAR ENDED 1998 ---------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item ......................................... $ 100,461 Less: Preferred stock distributions ...................................... (11,473) ---------- BASIC EPS Income available to common Unitholders before extraordinary item ......... 88,988 40,244,351 $ 2.21 ======== EFFECT OF DILUTIVE SECURITIES Options .................................................................. -- 444,991 ---------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item .................................. $ 88,988 40,689,342 $ 2.18 ========== =========== ========
YEAR ENDED 1997 ---------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item ......................................... $ 66,078 Less: Preferred stock distributions ...................................... (4,907) ---------- BASIC EPS Income available to common Unitholders before extraordinary item ......... 61,171 28,880,928 $ 2.11 ======== EFFECT OF DILUTIVE SECURITIES Options .................................................................. -- 223,862 ---------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item .................................. $ 61,171 29,104,790 $ 2.09 ========== =========== ========
13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 1999, 1998 and 1997 are as follows: (a) The Operating Partnership committed to distribute $30,818, $25,115 and $21,327 for the quarters ended December 31, 1999, 1998 and 1997, respectively. 71 74 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) (b) The Merger, which was completed in 1997, was a stock for stock transaction. In connection with the Merger, the cash and non-cash components were are follows: Fair value of assets acquired .................... $ 643,268 Less: Value of stock issued in exchange for Stock of Columbus ............................ 338,353 Liabilities assumed ........................... 285,852 Cash acquired ................................. 1,329 ---------- Cash component of purchase price, net of Cash acquired ................................. $ 17,734 ==========
14. SEGMENT INFORMATION SEGMENT DESCRIPTION In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise and Related Information," the Operating Partnership presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on substantially the same basis as the internally reported information used by the Operating Partnership's chief operating decision makers to manage the business. The Operating Partnership's chief operating decision makers focus on the Operating Partnership's primary sources of income which are property rental operations and third party services. Third party services are designated as one segment. Property rental operations are broken down into four segments based on the various stages in the property ownership lifecycle. The Operating Partnership's five segments are further described as follows: Property Rental Operations - Fully stabilized communities -- those apartment communities which have been stabilized (the earlier of the point at which a property reached 95% occupancy or one year after completion of construction) for both the current and prior year. - Communities stabilized during 1998 -- communities which reached stabilized occupancy in the prior year. - Development and Lease up Communities -- those communities which are in lease-up but were not stabilized by the beginning of the current year including communities which stabilized during the current year. - Sold communities -- communities which were sold in the current or prior year. Third Party Services -- fee income and related expenses from the Operating Partnership's apartment community management, landscaping and corporate apartment rental services. SEGMENT PERFORMANCE MEASURE Management uses contribution to funds from operations ("FFO") as the performance measure for its segments. FFO is defined by the National Association of Real Estate Investment Trusts as net income available to common unitholders determined in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Operating Partnership's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Operating Partnership's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Operating Partnership's needs. NAREIT's definition of FFO 72 75 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) excludes items classified by GAAP as extraordinary or unusual and significant non-recurring events that materially distort the comparative measurement of performance over time. Effective January 1, 2000 NAREIT amended its definition of FFO to include in FFO all non-recurring events, except for those that are defined as extraordinary items under GAAP and gains and losses from sales of property. The Company will use the amended definition of FFO in reporting results for all periods on or after January 1, 2000. The Company does not expect use of the amended definition to materially affect FFO. SEGMENT INFORMATION The following table reflects each segment's contribution to consolidated revenues and FFO together with a reconciliation of segment contribution to FFO, total FFO and income before extraordinary item. Additionally, substantially all of the Operating Partnership's assets relate to the Operating Partnership's property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally. Summarized financial information concerning the Company's reportable segments is shown in the following tables.
YEAR ENDED DECEMBER 31, ----------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- REVENUES Fully stabilized communities ......................................... $ 236,923 $ 228,878 $ 171,092 Communities stabilized during 1998 ................................... 22,197 19,149 5,441 Development and lease-up communities ................................. 58,486 23,708 8,328 Sold communities ..................................................... 318 3,867 3,205 Third party services ................................................. 12,486 10,416 7,569 Other ................................................................ 15,517 12,887 4,481 ----------- ----------- ----------- Consolidated revenues ................................................ $ 345,927 $ 298,905 $ 200,116 =========== =========== =========== CONTRIBUTION TO FUNDS FROM OPERATIONS Fully stabilized communities ......................................... $ 163,809 $ 156,865 $ 117,225 Communities stabilized during 1998 ................................... 15,169 12,966 3,318 Development and lease-up communities ................................. 35,906 12,509 5,154 Sold communities ..................................................... 190 3,246 2,058 Third party services ................................................. 1,657 1,653 1,326 ----------- ----------- ----------- Contribution to FFO .................................................. 216,731 187,239 129,081 ----------- ----------- ----------- Other operating income, net of expense ............................... 4,525 3,186 (2,723) Depreciation on non-real estate assets ............................... (1,962) (1,432) (1,057) Minority interest in consolidated property partnerships ................................................ (511) (397) -- Interest expense ..................................................... (33,192) (31,297) (24,658) Amortization of deferred loan costs .................................. (1,496) (1,185) (980) General and administrative ........................................... (7,788) (8,495) (7,364) Distributions to preferred unitholders ............................... (13,726) (11,473) (4,907) ----------- ----------- ----------- Total FFO ............................................................ 162,581 136,146 87,392 ----------- ----------- ----------- Depreciation on real estate assets ................................... (55,361) (45,214) (27,991) Net gain (loss) on sale of assets .................................... (1,522) -- 3,270 Loss on unused treasury locks ........................................ -- (1,944) -- Loss on relocation of office space ................................... -- -- (1,500) Distributions to preferred unitholders ............................... 13,726 11,473 4,907 ----------- ----------- ----------- Income before extraordinary item and preferred distributions ......... $ 119,424 $ 100,461 $ 66,078 =========== =========== ===========
73 76 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 15. SUBSEQUENT EVENTS In February 2000, the Company sold a 213 unit property located in Atlanta for $32,350. Net proceeds estimated at $31,500 will be used to repay outstanding indebtedness. In February 2000, the Company's Investment Committee approved the sale of and subsequently listed for sale three properties in Mississippi containing 983 units and a commercial property located in Dallas, TX. 16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 1999 and 1998 are as follows:
YEAR ENDED DECEMBER 31, 1999* ------------------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- Revenues ............................................. $ 80,891 $ 85,503 $ 88,158 $ 91,375 Net income before gain (loss) on sale of assets and extraordinary items .............. 29,406 29,624 30,626 31,290 Net gain (loss) on sale of assets .................... (1,567) 476 (246) (185) Extraordinary items .................................. (521) -- -- -- ---------- ---------- ---------- ---------- Net income ........................................... 27,318 30,100 30,380 31,105 Distributions to preferred Unitholders ............... (2,969) (2,969) (3,404) (4,384) ---------- ---------- ---------- ---------- Net income available to common Unitholders ........... $ 24,349 $ 27,131 $ 26,976 $ 26,721 ========== ========== ========== ========== Earnings per common Unit: Net income available to common Unitholders -- basic ............................................ $ 0.56 $ 0.62 $ 0.62 $ 0.61 Net income available to common Unitholders -- diluted .......................................... $ 0.56 $ 0.61 $ 0.61 $ 0.60
YEAR ENDED DECEMBER 31, 1999* ------------------------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- Revenues ............................................. $ 68,987 $ 73,455 $ 76,992 $ 79,471 Net income before loss on unused treasury locks .................................... 22,310 25,437 26,825 27,833 Loss on unused treasury locks ........................ (1,944) -- -- -- ---------- ---------- ---------- ---------- Net income ........................................... 20,366 25,437 26,825 27,833 Distributions to preferred Unitholders ............... (2,566) (2,969) (2,969) (2,969) ---------- ---------- ---------- ---------- Net income available to common Unitholders ........... $ 17,800 $ 22,468 $ 23,856 $ 24,864 ========== ========== ========== ========== Earnings per common Unit: Net income available to common Unitholders -- basic ............................................. $ 0.48 $ 0.56 $ 0.58 $ 0.59 Net income available to common Unitholders -- diluted ........................................... $ 0.47 $ 0.55 $ 0.57 $ 0.58
* The total of the four quarterly amounts for earnings per Unit may not equal the total for the year. These differences result from the use of a weighted average to compute average number of Units outstanding. 74 77 SCHEDULE III POST PROPERTIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (DOLLARS IN THOUSANDS)
INITIAL COSTS ----------------------- COST CAPITALIZED RELATED BUILDING AND SUBSEQUENT DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION ----------- ------------ ------ ------------ -------------- GEORGIA Post Ashford ..................... Apartments $ 9,895 (2) $ 1,906 $ -- $ 8,444 Post Briarcliff .................. Apartments -- 12,634 -- 46,157 Post Bridge ...................... Apartments 12,450 (2) 868 -- 12,113 Post Brookhaven .................. Apartments -- 7,921 -- 30,926 Post Canyon ...................... Apartments 16,845 (2) 931 -- 17,833 Post Chase ....................... Apartments 15,000 (2) 1,438 -- 14,615 Post Chastain .................... Apartments 30,700 6,352 -- 39,732 Post Collier Hills .............. Apartments -- 6,487 -- 25,072 Post Corners ..................... Apartments 14,760 (2) 1,473 -- 14,783 Post Court ....................... Apartments 18,650 (2) 1,769 -- 17,206 Post Creek ....................... Apartments -- 10,406 36,756 3,914 Post Crest ....................... Apartments 27,995 4,733 -- 24,665 Post Crossing..................... Apartments -- 3,951 -- 19,429 Post Dunwoody..................... Apartments -- 4,917 -- 28,385 Post Gardens...................... Apartments -- 5,859 -- 33,747 Post Glen......................... Apartments 21,467 5,591 -- 21,529 Post Lane......................... Apartments -- 1,512 -- 8,243 Post Lenox Park................... Apartments 11,400 3,132 -- 10,706 Post Lindbergh.................... Apartments -- 6,268 -- 27,002 Post Mill ........................ Apartments 12,880 (2) 915 -- 12,644 Post Oak.......................... Apartments -- 2,028 -- 8,226 Post Oglethorpe................... Apartments -- 3,662 -- 16,952 Post Park......................... Apartments -- 6,253 -- 39,851 Post Parkwood..................... Apartments -- 1,331 -- 7,338 Post Peachtree Hills............. Apartments -- 4,215 -- 13,675 Post Pointe....................... Apartments -- 2,417 -- 15,741 Post Renaissance.................. Apartments -- -- -- 19,705 Post Ridge........................ Apartments -- 5,150 -- 31,486 Post River........................ Apartments -- 1,011 -- 9,440 Post River - Phase II............. Apartments -- 2,278 -- 8,264 Post Spring....................... Apartments -- 3,316 -- 6,694 Post Summit....................... Apartments -- 1,575 -- 6,287 Post Terrace...................... Apartments -- 4,131 -- 20,067 Post Valley ...................... Apartments 18,600 (2) 1,117 -- 18,822 Post Vinings...................... Apartments -- 4,322 -- 21,619 Post Village The Arbors...................... Apartments -- 384 -- 16,031 The Fountains The Meadows ....... Apartments 26,000 (2) 611 -- 38,013 The Gardens .................... Apartments 14,500 (2) 187 -- 27,816 The Hills ...................... Apartments 7,000 (2) 91 -- 13,428 Post Walk ........................ Apartments 19,300 (2) 2,954 -- 17,337 Post Woods ....................... Apartments 27,100 1,378 -- 27,120 Parkside by Post.................. Apartments -- 3,402 -- 14,455 3400 Stratford.................... Apartments -- 328 -- 8,474 Riverside by Post................. Mixed Use -- 11,130 -- 107,506 TEXAS Addison Circle Apartment Homes by Post - Phase I........... Mixed Use 22,067 2,885 41,482 3,280 Addison Circle Apartment Homes by Post - Phase II......... Mixed Use -- 3,417 1,128 78,307 Addison Circle Apartment Homes by Post - Phase III........ Mixed Use -- 752 -- 4,361 American Beauty Mill.............. Apartments -- 234 2,786 3,312 Block 580......................... Mixed Use -- 2,825 2,536 27,604 Block 588......................... Apartments -- 1,278 48 17,272 Clyde Lane........................ Apartments -- 1,628 895 1,510 Cole's Corner..................... Mixed Use -- 1,886 18,006 1,423 Columbus Square by Post........... Mixed Use -- 4,565 24,595 438 EDS Legacy/Towncenter............. Apartments -- 683 -- 6,316 Fort Worth........................ Apartments -- -- 123 2 Heights of State-Thomas........... Mixed Use -- 2,161 15,559 3,650 Mattingly Site.................... Apartments -- 675 11 489 Midtown - Phase I................. Mixed Use -- 2,012 1,134 32,344 Midtown - Phase II................ Mixed Use -- 865 278 1,803 Post Parkwood..................... Apartments 833 306 2,592 4,474 Post Ascension.................... Apartments -- 1,230 8,976 336 Post Hackberry Creek............. Apartments -- 7,269 23,579 671 Post Lakeside..................... Apartments -- 3,924 20,334 983 Post Town Lake/Parks.............. Apartments -- 2,985 19,464 979 Post White Rock................... Apartments -- 1,560 9,969 912 Post Winsted...................... Apartments -- 2,826 18,632 256 Post Windhaven.................... Apartments -- 4,029 23,385 400 The Shores by Post................ Mixed Use -- 11,572 69,794 2,667 GROSS AMOUNTS AT WHICH CARRIED AT CLOSE OF PERIOD ---------------------------------- DEPRECIABLE BUILDING AND ACCUMULATED DATE OF DATE LIVES LAND IMPROVEMENTS TOTAL (1) DEPRECIATION CONSTRUCTION ACQUIRED YEARS -------- ------------ --------- ------------ ------------ ------------- ----------- GEORGIA Post Ashford ............... $ 1,906 $ 8,444 $ 10,350 $ 3,109 4/86 - 6/87 6/87 5 - 40 Years Post Briarcliff ............ 12,634 46,157 58,791 1 12/96 9/96 5 - 40 Years Post Bridge ................ 869 12,112 12,981 4,842 9/84 - 12/86 9/84 5 - 40 Years Post Brookhaven ............ 7,921 30,926 38,847 10,160 7/89 - 12/92 3/89 5 - 40 Years Post Canyon ................ 931 17,833 18,764 7,174 4/84 - 4/86 10/81 5 - 40 Years Post Chase ................. 1,438 14,615 16,053 5,901 6/85 - 4/87 6/85 5 - 40 Years Post Chastain .............. 6,779 39,305 46,084 12,317 6/88 - 10/90 6/88 5 - 40 Years Post Collier Hills ........ 7,183 24,376 31,559 2,414 10/95 6/95 5 - 40 Years Post Corners ............... 1,473 14,783 16,256 6,093 8/84 - 4/86 8/84 5 - 40 Years Post Court ................. 1,769 17,206 18,975 6,221 6/86 - 4/88 12/85 5 - 40 Years Post Creek ................. 10,442 40,634 51,076 5,406 9/81 - 8/83 5/96 5 - 40 Years Post Crest ................. 4,763 24,635 29,398 3,219 9/95 10/94 5 - 40 Years Post Crossing............... 3,951 19,429 23,380 2,926 4/94 - 8/95 11/93 5 - 40 Years Post Dunwoody............... 4,961 28,341 33,302 5,710 11/88 12/84 & 8/94 (6) 5 - 40 Years Post Gardens................ 5,931 33,675 39,606 875 7/96 5/96 5 - 40 Years Post Glen................... 5,784 21,336 27,120 1,597 7/96 5/96 5 - 40 Years Post Lane................... 2,067 7,688 9,755 2,889 4/87 - 5/88 1/87 5 - 40 Years Post Lenox Park............. 3,132 10,706 13,838 1,764 3/94 - 5/95 3/94 5 - 40 Years Post Lindbergh.............. 6,652 26,618 33,270 697 11/96 8/96 5 - 40 Years Post Mill .................. 922 12,637 13,559 5,468 5/83 - 5/85 5/81 5 - 40 Years Post Oak.................... 2,027 8,227 10,254 2,176 9/92 - 12/93 9/92 5 - 40 Years Post Oglethorpe............. 3,662 16,952 20,614 2,909 3/93 - 10/94 3/93 5 - 40 Years Post Park................... 8,830 37,274 46,104 12,809 6/87 - 9/90 6/87 5 - 40 Years Post Parkwood............... 1,331 7,338 8,669 1,161 7/94 - 8/95 6/94 5 - 40 Years Post Peachtree Hills....... 4,857 13,033 17,890 2,866 2/92 - 9/94 2 & 11/92 (6) 5 - 40 Years Post Pointe................. 3,027 15,131 18,158 5,884 4/87 - 12/88 12/86 5 - 40 Years Post Renaissance............ -- 19,705 19,705 4,701 7/91 - 12/94 6/91 & 1/94 (6) 5 - 40 Years Post Ridge.................. 5,150 31,486 36,636 443 10/96 7/96 5 - 40 Years Post River.................. 1,011 9,440 10,451 2,986 9/90 - 1/92 7/90 5 - 40 Years Post River - Phase II....... 2,278 8,264 10,542 191 12/96 7/90 5 - 40 Years Post Spring................. 3,316 6,694 10,010 -- 9/99 (4) 9/99 -- Post Summit................. 1,575 6,287 7,862 2,201 1/90 - 12/90 1/90 5 - 40 Years Post Terrace................ 4,148 20,050 24,198 2,013 10/94 3/94 5 - 40 Years Post Valley ................ 1,117 18,822 19,939 6,768 3/86 - 4/88 12/85 5 - 40 Years Post Vinings................ 5,668 20,273 25,941 6,939 5/88 - 9/91 5/88 5 - 40 Years Post Village The Arbors................ 373 16,042 16,415 5,223 4/82 - 10/83 3/82 5 - 40 Years The Fountains The Meadows . 878 37,746 38,624 12,289 8/85 - 5/88 8/85 5 - 40 Years The Gardens .............. 637 27,366 28,003 8,909 6/88 - 7/89 5/84 5 - 40 Years The Hills ................ 307 13,211 13,519 4,301 5/84 - 4/86 4/83 5 - 40 Years Post Walk .................. 2,954 17,337 20,291 6,990 3/86 - 8/87 6/85 5 - 40 Years Post Woods ................. 3,070 25,428 28,498 9,732 3/76 - 9/83 6/76 5 - 40 Years Parkside by Post............ 3,402 14,455 17,857 -- 2/99 12/97 -- 3400 Stratford.............. 328 8,474 8,802 -- 4/99 (4) 1/99 -- Riverside by Post........... 13,393 105,243 118,636 467 7/96 1/96 5 - 40 Years TEXAS Addison Circle Apartment Homes by Post - Phase I..... 3,244 44,403 47,647 3,475 10/97 10/97 5 - 40 Years Addison Circle Apartment Homes by Post - Phase II... 3,417 79,435 82,852 -- 10/97 10/97 -- Addison Circle Apartment Homes by Post - Phase III.. 752 4,361 5,113 -- 7/99 (4) 10/97 -- American Beauty Mill........ 571 5,761 6,332 186 10/97 10/97 -- Block 580................... 2,841 30,124 32,965 2 10/97 10/97 5 - 40 Years Block 588................... 1,278 17,320 18,598 -- 10/97 (4) 10/97 -- Clyde Lane.................. 1,628 2,405 4,033 -- 10/97 (4) 10/97 -- Cole's Corner............... 2,086 19,229 21,315 1,631 n/a 10/97 5 - 40 Years Columbus Square by Post..... 4,565 25,033 29,598 1,431 n/a 10/97 5 - 40 Years EDS Legacy/Towncenter....... 684 6,315 6,999 -- n/a 10/97 -- Fort Worth.................. -- 125 125 -- 10/97 (4) 10/97 -- Heights of State-Thomas..... 2,235 19,135 21,370 1,559 10/97 10/97 5 - 40 Years Mattingly Site.............. 675 500 1,175 -- 10/97 (4) 10/97 -- Midtown - Phase I........... 2,012 33,478 35,490 -- 10/97 10/97 -- Midtown - Phase II.......... 1,947 999 2,946 -- 10/97 (4) 10/97 -- Post Parkwood............... 864 6,508 7,372 416 n/a 10/97 5 - 40 Years Post Ascension.............. 1,243 9,299 10,542 642 n/a 10/97 5 - 40 Years Post Hackberry Creek....... 7,269 24,250 31,519 1,583 n/a 10/97 5 - 40 Years Post Lakeside............... 3,924 21,317 25,241 1,626 n/a 10/97 5 - 40 Years Post Town Lake/Parks........ 2,985 20,443 23,428 1,556 n/a 10/97 5 - 40 Years Post White Rock............. 1,560 10,881 12,441 770 n/a 10/97 5 - 40 Years Post Winsted................ 2,826 18,888 21,714 1,079 n/a 10/97 5 - 40 Years Post Windhaven.............. 4,029 23,785 27,814 1,558 n/a 10/97 5 - 40 Years The Shores by Post.......... 11,572 72,461 84,033 4,590 n/a 10/97 5 - 40 Years
75 78 The Abbey of State-Thomas........ Apartments -- 575 6,276 1,590 The Commons at Turtle Creek...... Apartments -- 1,406 7,938 394 The Meridian at State-Thomas.... Apartments -- 1,535 11,605 252 The Residences on McKinney....... Apartments -- 1,494 18,022 546 The Rice......................... Apartments -- -- 13,393 20,540 The Vineyard of Uptown........... Apartments -- 1,133 8,560 105 The Vintage of Uptown............ Apartments -- 2,614 12,188 216 The Worthington of State-Thomas.................... Mixed Use -- 3,744 34,700 718 Thomas Tract..................... Apartments -- 1,934 68 5,087 Uptown Village................... Apartments -- 3,955 22,120 340 Wilson Building.................. Mixed Use 16,400 2,766 689 12,272 Campus Circle.................... Retail -- 1,045 3,084 444 Towne Crossing................... Retail -- 3,703 10,721 190 Post & Paddock................... Retail -- 2,352 7,383 496 FLORIDA Post Bay......................... Apartments -- 2,203 -- 15,297 Post Court....................... Apartments -- 2,083 -- 9,953 Post Fountains................... Apartments 21,500 (2) 3,856 -- 23,561 Post Harbour Island.............. Apartments -- 3,854 -- 41,706 Post Hyde Park................... Apartments -- 3,498 -- 25,827 Post Lake ........................ Apartments 28,500 (2) 6,113 -- 31,298 Post Parkside (Orlando).......... Apartments -- 8,673 -- 11,791 Post Rocky Point................. Apartments -- 10,510 -- 59,352 Post Village The Arbors...................... Apartments -- 2,063 -- 14,402 The Lakes....................... Apartments -- 2,813 -- 16,945 The Oaks........................ Apartments -- 3,229 -- 15,431 Post Walk at Hyde Park........... Apartments -- 1,943 -- 10,822 MISSISSIPPI Post Mark........................ Apartments -- 716 13,879 376 Post Pointe...................... Apartments -- 723 14,091 428 Post Trace....................... Apartments -- 1,944 24,616 722 VIRGINIA Post Corners at Trinity Centre... Apartments 18,400 4,404 -- 23,492 Post Forest...................... Apartments -- 8,590 -- 23,914 WASHINGTON, D.C. Post Pentagon Row................ Mixed Use -- -- 7,659 -- NORTH CAROLINA Uptown Place..................... Apartments -- 2,336 -- 15,421 Post Park at Phillips Place...... Mixed Use -- 4,305 -- 36,282 ARIZONA Roosevelt Sq. I.................. Apartments -- 1,920 -- 16,441 Roosevelt Sq. II................. Apartments -- 1,175 -- 1,088 TENNESSEE Bennie Dillon.................... Mixed Use -- 145 -- 8,350 Post Green Hills................. Apartments -- 2,464 -- 13,716 Post Hillsboro Village........... Apartments 2,085 2,255 2,555 15,944 The Lee Apartments............... Apartments 830 720 2,125 186 COLORADO Uptown Denver I & II............. Apartments -- 3,257 580 43,361 MISCELLANEOUS INVESTMENTS -- 16,580 4,024 25,342 -------- -------- -------- ---------- TOTAL $415,157 $344,529 $568,338 $1,669,918 ======== ======== ======== ==========
The Abbey of State-Thomas........ 575 7,866 8,441 442 n/a 10/97 5 - 40 Years The Commons at Turtle Creek...... 1,406 8,332 9,738 677 n/a 10/97 5 - 40 Years The Meridian at State-Thomas..... 1,535 11,857 13,392 795 n/a 10/97 5 - 40 Years The Residences on McKinney....... 1,494 18,568 20,062 1,509 n/a 10/97 5 - 40 Years The Rice......................... -- 33,933 33,933 489 10/97 10/97 5 - 40 Years The Vineyard of Uptown........... 1,133 8,665 9,798 493 n/a 10/97 5 - 40 Years The Vintage of Uptown............ 2,614 12,404 15,018 785 n/a 10/97 5 - 40 Years The Worthington of............. State-Thomas.................... 3,744 35,418 39,162 2,248 n/a 10/97 5 - 40 Years Thomas Tract..................... 1,934 5,155 7,089 -- 10/97 (4) 10/97 -- Uptown Village................... 3,955 22,460 26,415 1,354 n/a 10/97 5 - 40 Years Wilson Building.................. 2,766 12,961 15,727 -- 10/97 10/97 -- Campus Circle.................... 1,045 3,528 4,573 208 n/a 10/97 5 - 40 Years Towne Crossing................... 3,703 10,911 14,614 597 n/a 10/97 5 - 40 Years Post & Paddock................... 2,352 7,879 10,231 420 n/a 10/97 5 - 40 Years FLORIDA Post Bay......................... 2,573 14,927 17,500 5,169 5/87 - 12/88 5/87 5 - 40 Years Post Court....................... 2,083 9,953 12,036 3,360 4/90 - 5/91 10/87 5 - 40 Years Post Fountains................... 3,856 23,561 27,417 7,822 12/85 - 3/88 12/85 5 - 40 Years Post Harbour Island.............. 16,186 29,374 45,560 1 3/97 (4) 1/97 -- Post Hyde Park................... 4,950 24,375 29,325 2,088 9/94 7/94 5 - 40 Years Post Lake........................ 6,724 30,687 37,411 11,362 11/85 - 3/88 10/85 5 - 40 Years Post Parkside (Orlando).......... 8,673 11,791 20,464 1 03/99 03/99 5 - 40 Years Post Rocky Point................. 10,510 59,352 69,862 4,138 4/94 - 11/96 2/94 & 9/96(6) 5 - 40 Years Post Village The Arbors...................... 2,906 13,558 16,465 4,372 6/90 - 12/91 11/90 5 - 40 Years The Lakes....................... 3,488 16,270 19,758 5,246 7/88 - 12/89 5/88 5 - 40 Years The Oaks........................ 3,294 15,366 18,660 4,955 11/89 - 7/91 12/89 5 - 40 Years Post Walk at Hyde Park........... 1,974 10,791 12,765 1,357 10/95 - 9/97 9/95 5 - 40 Years MISSISSIPPI Post Mark........................ 717 14,254 14,971 1,187 n/a 10/97 5 - 40 Years Post Pointe...................... 723 14,519 15,242 799 n/a 10/97 5 - 40 Years Post Trace....................... 1,944 25,338 27,282 1,652 n/a 10/97 5 - 40 Years VIRGINIA Post Corners at Trinity Centre... 4,493 23,403 27,896 2,899 6/94 6/94 5 - 40 Years Post Forest...................... 9,106 23,398 (3) 32,504 9,081 1/89 - 12/90 3/88 5 - 40 Years WASHINGTON, D.C. Post Pentagon Row................ -- 7,659 7,659 -- 06/99 (4) 02/99 -- NORTH CAROLINA Uptown Place..................... 2,336 15,421 17,757 -- 09/98 (4) 09/98 -- Post Park at Phillips Place...... 4,305 36,282 40,587 3,021 1/96 11/95 5 - 40 Years ARIZONA Roosevelt Sq. I.................. 1,920 16,441 18,361 -- 02/99 (4) 02/99 -- Roosevelt Sq. II................. 1,175 1,088 2,263 -- -- (4) 02/99 -- TENNESSEE Bennie Dillon.................... 145 8,350 8,495 -- 7/98 7/98 -- Post Green Hills................. 2,505 13,675 16,180 1,837 9/94 7/94 5 - 40 Years Post Hillsboro Village........... 4,998 15,756 20,754 906 12/96 8/96 -- The Lee Apartments............... 720 2,311 3,031 194 n/a (5) 8/96 5 - 40 Years COLORADO Uptown Denver I & II............. 3,257 43,941 47,198 -- 10/97 (4) 10/97 -- MISCELLANEOUS INVESTMENTS 19,457 26,490 45,947 8,707 5 - 40 Years -------- ---------- ---------- -------- TOTAL $382,328 $2,200,457 $2,582,785 $303,016 ======== ========== ========== ========
(1) The aggregate cost for Federal Income Tax purposes to the Company was approximately $2,167,029 at December 31, 1999, taking into account the special allocation of gain to the partners contributing property to the Operating Partnership. (2) These properties serve as collateral for the Federal National Mortgage Association credit enhancement. (3) Balance includes an allowance for possible loss of $3,700 which was taken in prior years. (4) Construction still in process as of December 31, 1999. (5) The Company acquired this community during 1996. The Company is operating the community while evaluating whether to hold, renovate or sell the community. (6) Additional land was acquired for construction of a second phase. 76 79 A summary of activity for real estate investments and accumulated depreciation is as follows:
YEAR ENDED DECEMBER 31, --------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Real estate investments: Balance at beginning of year ...................................... $ 2,255,074 $ 1,936,011 $ 1,109,342 Purchase of minority interests in certain property partnerships ... -- -- -- Purchase of assets in connection with the Merger .................. -- -- 635,732 Improvements ................................................... 345,994 319,408 216,020 Disposition of property ........................................ (18,283) (345) (25,083) ----------- ----------- ----------- Balance at end of year ............................................ $ 2,582,785 $ 2,255,074 $ 1,936,011 =========== =========== =========== Accumulated depreciation: Balance at beginning of year ...................................... $ 247,148 $ 201,095 $ 177,672 Depreciation ................................................... 57,136 (a) 46,288 (a) 29,023 (a) Joint Venture Depreciation ..................................... (690) Depreciation on disposed property .............................. (578) (235) (5,600) ----------- ----------- ----------- Balance at end of year ............................................ $ 303,016 $ 247,148 $ 201,095 =========== =========== ===========
(a) Depreciation expense in the Consolidated Statements for the years ended December 31, 1999, 1998 and 1997, includes $877, $335 and $25, respectively, of depreciation expense on other assets. 77 80 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the Post Properties, Inc. 1995 Non-Qualified Employee Stock Purchase Plan In our opinion, the accompanying statements of net assets available for plan benefits and of changes in net assets available for plan benefits present fairly, in all material respects, the net assets of the Post Properties, Inc. 1995 Non-Qualified Employee Stock Purchase Plan at December 31, 1999 and 1998 and the changes in net assets available for plan benefits for the years then ended, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 78 81 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, ------------------------------ 1999 1998 ----------- ----------- ASSETS Receivable from Post Apartment Homes, L.P ...... $ 492,698 $ 563,764 =========== =========== NET ASSETS AVAILABLE FOR PLAN BENEFITS Net assets available for plan benefits ......... $ 492,698 $ 563,764 =========== ===========
79 82 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, ------------------------------- 1999 1998 ----------- ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1 ........ $ 563,764 $ 440,170 DEDUCTIONS: Purchase of participants' shares ....................... (974,817) (985,593) Payment for payroll taxes on behalf of participants ...................................... (49,104) (44,035) ADDITIONS: Participant contributions .............................. 952,855 1,153,222 ----------- ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31 ...... $ 492,698 $ 563,764 =========== ===========
80 83 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Post Properties, Inc. (the "Company") established the 1995 Non-Qualified Employee Stock Purchase Plan (the "Plan") to encourage stock ownership by eligible directors and employees. (B) The financial statements have been prepared on the accrual basis of accounting. (C) All expenses incurred in the administration of the Plan are paid by the Company and are excluded from these financial statements. NOTE 2 - THE PLAN The Plan became effective as of January 1, 1995. Under the Plan, eligible participating employees and directors of the Company can purchase Common Stock at a discount (up to 15% as set by the Compensation Committee of the Company's Board of Directors) from the Company through salary withholding or cash contributions. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, nor is it intended to qualify for special tax treatment under Section 401(a) of the Internal Revenue Code. Directors who have been a member of the Board of Directors for at least one full calendar month and full-time employees who have been employed a full calendar month are eligible to participate in the Plan. Eligible directors and employees (the "Participants") may contribute in cash or as a specified dollar amount or percentage of their compensation to the Plan. The minimum payroll deduction for a Participant for each payroll period for purchases under the Plan is $10.00. The maximum contribution which a Participant can make for purchases under the Plan for any calendar year is $100,000. All contributions to the Plan are held in the general assets of Post Apartment Homes, L.P., the Company's operating partnership. Shares of the Company's Common Stock are purchased by an investment firm semi-annually after the end of each six-month period, as defined, and credited to each Participant's individual account. The purchase price of the Common Stock purchased pursuant to the Plan is currently equal to 85% of the closing price on either the first or last trading day of each purchase period, whichever is lower. All Common Stock of the Company purchased by Participants pursuant to the Plan may be voted by the Participants or as directed by the Participants. The Plan does not discriminate, in scope, terms, or operation, in favor of officers or directors of the Company and is available, subject to the eligibility rules of the Plan, to all employees of the Company on the same basis. NOTE 3 - FEDERAL INCOME TAXES The Plan is not subject to Federal income taxes. The difference between the fair market value of the shares acquired under the Plan, and the amount contributed by the Participants is treated as ordinary income to the Participants' for Federal income tax purposes. Accordingly, the Company withholds all applicable taxes from the employee contributions. The fair market value of the shares is determined as of the stock purchase date. 81 84 3. EXHIBITS Certain of the exhibits required by Item 601 of Regulation S-K have been filed with previous reports by the registrant and are herein incorporated by reference thereto. The Registrant agrees to furnish a copy of all agreements relating to long-term debt upon request of the Commission.
EXHIBIT NO. DESCRIPTION 3.1(a) -- Articles of Incorporation of the Company 3.2(b) -- Articles of Amendment to the Articles of Incorporation of the Company. 3.3(c) -- Articles of Amendment to the Articles of Incorporation of the Company. 3.4(d) -- Articles of Amendment to the Articles of Incorporation of the Company. 3.5(e) -- Articles of Amendment to the Articles of Incorporation of the Company. 3.6(a) -- Bylaws of the Company 4.1(f) -- Indenture between the Company and Sun Trust Bank, Atlanta, as Trustee 10.1(g) -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership 10.2(g) -- First Amendment to Second Amended and Restated Partnership Agreement 10.3(g) -- Second Amendment to Second Amended and Restated Partnership Agreement 10.4(k) -- Third Amendment to Second Amended and Restated Partnership Agreement 10.5(k) -- Fourth Amendment to Second Amended and Restated Partnership Agreement 10.6(e) -- Fifth Amendment to the Second Amended and Restated Partnership Agreement 10.7(h) -- Employee Stock Plan 10.8(g) -- Amendment to Employee Stock Plan 10.9(g) -- Amendment No. 2 to Employee Stock Plan 10.10(g) -- Amendment No. 3 to Employee Stock Plan 10.11(g) -- Amendment No. 4 to Employee Stock Plan 10.12(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams 10.13(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover 10.14(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams dated as of June 1, 1998 10.15(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover dated as of June 1, 1998 10.16(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John A. Williams dated June 1, 1998 10.17(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John T. Glover dated as of June 1, 1998 10.18(e) -- Option and Transfer Agreement among the Operating Partnership, Post Services, John A. Williams and John T. Glover 10.19(h) -- Promissory Note made by Post Services, Inc. in favor of RAM Partners, Inc. 10.20(g) -- Form of officers and directors Indemnification Agreement 10.21(a) -- Form of Option Agreement to be entered into between the Operating Partnership and the owners of four parcels of undeveloped land 10.22(a) -- Profit Sharing Plan of the Company 10.23(g) -- Amendment Number One to Profit Sharing Plan 10.24(g) -- Amendment Number Two to Profit Sharing Plan
82 85 10.25(g) -- Amendment Number Three to Profit Sharing Plan 10.26(g) -- Amendment Number Four to Profit Sharing Plan 10.27(h) -- Form of General Partner 1% Exchange Agreement 10.28(i) -- Employee Stock Purchase Plan 10.29(g) -- Amendment to Employee Stock Purchase Plan 10.30(i) -- Amended and Restated Dividend Reinvestment and Stock Purchase Plan 10.31(k) -- Second Amended and Restated Credit Agreement dated as of November 20, 1998 among Post Apartment Homes, L.P., Wachovia Bank of Georgia, N.A., and the banks listed on the signature pages there to (the "Second Credit Agreement") 10.32(k) -- First Amendment to Second Credit Agreement 10.33 -- Third Amended and Restated Credit Agreement dated as of May 7, 1999 among Post Apartment Homes, L.P., Wachovia Bank, N.A., and the banks listed on the signature page thereto (the "Third Credit Agreement"). 10.34 -- First Amendment to the Third Credit Agreement. 10.35 -- Deferred Compensation Plan for Directors and Executive Committee Members 21.1 -- List of Subsidiaries 23.1 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-62243) 23.2 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-70689) 23.3 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 33-81772) 23.4 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-39461) 23.5 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-36595) 23.6 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-47399) 23.7 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 33-00020) 23.8 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-94121) 27.1 -- Financial Data Schedule for the Company for the year ended December 31, 1999 (for SEC use only) 27.2 -- Financial Data Schedule for the Operating Partnership for the year ended December 31, 1999 (for SEC use only)
- ------------------ (a) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-61936), as amended, of the Company. (b) Filed as an exhibit to the Current Report on Form 8-K, dated as of October 1, 1996, of the Company. (c) Filed as an exhibit to the Current Report on Form 8-K, dated as of October 28, 1997, of the Company. (d) Filed as an exhibit to the Current Report on Form 8-K, dated as of February 9, 1998, of the Company. (e) Filed as an exhibit to the Quarterly Report on Form 10-Q, dated as of November 15, 1999, of the Company. (f) Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No. 333-3555) of the Company. (g) Filed as an exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1997. (h) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-71650), as amended, of the Company. (i) Filed as an exhibit to the Registration Statement on Form S-8 (SEC File No. 33-86674) of the Company. (j) Filed as part of the Registration Statement on Form S-3 (SEC File No. 333-39461) of the Company. (k) Filed as an exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1998. The Company's proxy statement is expected to be filed with the Commission on or about March 24, 2000. (b) Reports on Form 8-K None. 83 86 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POST PROPERTIES, INC. (Registrant) March 14, 2000 John T. Glover ----------------------------------------------- John T. Glover, Vice Chairman and Director (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE John A. Williams Chairman of the Board, Chief - ---------------------------- Executive Officer and Director March 14, 2000 John A. Williams John T. Glover Vice Chairman and Director March 14, 2000 ---------------------------- John T. Glover R. Gregory Fox Executive Vice President, Chief - ---------------------------- Accounting Officer March 14, 2000 R. Gregory Fox Arthur M. Blank Director - ---------------------------- Arthur M. Blank March 14, 2000 Herschel M. Bloom Director - ---------------------------- Herschel M. Bloom March 14, 2000 Russell R. French Director - ---------------------------- Russell R. French March 14, 2000 Zell Miller Director - ---------------------------- Zell Miller March 14, 2000 Charles Rice Director - ---------------------------- Charles Rice March 14, 2000 J.C. Shaw Director - ---------------------------- J.C. Shaw March 14, 2000
84 87 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POST APARTMENT HOMES, L.P. By: Post G.P. Holdings, Inc., as General Partner March 14, 2000 By: John T. Glover ----------------------------------------- John T. Glover, Vice Chairman Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE John A. Williams Chief Executive Officer March 14, 2000 - ---------------------------- John A. Williams John T. Glover Vice Chairman March 14, 2000 ---------------------------- Principal Financial Officer John T. Glover R. Gregory Fox Executive Vice President, Chief - ---------------------------- Accounting Officer March 14, 2000 R. Gregory Fox
85 EX-10.33 2 THIRD AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit 10.33 $350,000,000 THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 7, 1999 among POST APARTMENT HOMES, L.P. The Banks Listed Herein, WACHOVIA BANK, N.A., as Administrative Agent and FIRST UNION NATIONAL BANK, as Syndication Agent and SUNTRUST BANK, ATLANTA as Documentation Agent 2 TABLE OF CONTENTS THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Page ---- ARTICLE I DEFINITIONS.................................................................................1 SECTION 1.01. Definitions.................................................................................1 SECTION 1.02. Accounting Terms and Determinations........................................................19 SECTION 1.03. References.................................................................................20 SECTION 1.04. Use of Defined Terms.......................................................................20 SECTION 1.05. Terminology................................................................................20 ARTICLE II THE CREDITS................................................................................20 SECTION 2.01. Commitments to Lend Loans..................................................................20 SECTION 2.02. Method of Borrowing Loans other than Transaction Rate Loans................................22 SECTION 2.03. Money Market Loans.........................................................................25 SECTION 2.04. Notes......................................................................................29 SECTION 2.05. Maturity of Loans..........................................................................30 SECTION 2.06. Interest Rates.............................................................................31 SECTION 2.07. Fees.......................................................................................34 SECTION 2.08. Optional Termination or Reduction of Commitments...........................................35 SECTION 2.09. Mandatory Termination of Commitments.......................................................35 SECTION 2.10. Optional Prepayments.......................................................................35 SECTION 2.11. Mandatory Prepayments......................................................................36 SECTION 2.12. General Provisions as to Payments..........................................................36 SECTION 2.13. Computation of Interest and Fees...........................................................40 ARTICLE III CONDITIONS TO BORROWINGS...................................................................41 SECTION 3.01. Conditions to First Borrowing..............................................................41 SECTION 3.02. Conditions to All Borrowings...............................................................43 ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................................................43 SECTION 4.01. Partnership or Corporate Existence and Power...............................................44 SECTION 4.02. Partnership or Corporate and Governmental Authorization; No Contravention..................44 SECTION 4.03. Binding Effect.............................................................................44 SECTION 4.04. Financial and Property Information.........................................................45 SECTION 4.05. No Litigation..............................................................................45 SECTION 4.06. Compliance with ERISA......................................................................45 SECTION 4.07. Compliance with Laws; Payment of Taxes.....................................................46 SECTION 4.08. Subsidiaries...............................................................................46 SECTION 4.09. Investment Company Act.....................................................................46 SECTION 4.10. Public Utility Holding Company Act.........................................................46 SECTION 4.11. Ownership of Property......................................................................46 SECTION 4.12. No Default.................................................................................46 SECTION 4.13. Full Disclosure............................................................................47 SECTION 4.14. Environmental Matters......................................................................47 SECTION 4.15. Partner Interests and Capital Stock........................................................48 SECTION 4.16. Margin Stock...............................................................................48 SECTION 4.17. Insolvency.................................................................................48 SECTION 4.18. Insurance..................................................................................48 ARTICLE V COVENANTS..................................................................................49 SECTION 5.01. Information................................................................................49
(i) 3 Page SECTION 5.02. Inspection of Property, Books and Records..................................................51 SECTION 5.03. Consolidated Total Secured Debt............................................................52 SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets..............................52 SECTION 5.05. Interest Coverage..........................................................................52 SECTION 5.06. Restricted Payments........................................................................52 SECTION 5.07. Loans or Advances..........................................................................52 SECTION 5.08. Purchases of Stock by the Significant Subsidiaries.........................................53 SECTION 5.09. Investments................................................................................53 SECTION 5.10. Dissolution................................................................................54 SECTION 5.11. Consolidations, Mergers and Sales of Assets................................................54 SECTION 5.12. Use of Proceeds............................................................................55 SECTION 5.13. Compliance with Laws; Payment of Taxes.....................................................55 SECTION 5.14. Insurance..................................................................................56 SECTION 5.15. Change in Fiscal Year......................................................................56 SECTION 5.16. Maintenance of Property; Principal Business................................................56 SECTION 5.17. Environmental Notices......................................................................57 SECTION 5.18. Environmental Matters......................................................................57 SECTION 5.19. Environmental Release......................................................................57 SECTION 5.20. Transactions with Affiliates...............................................................57 SECTION 5.21. Qualification as a Real Estate Investment Trust; General Partner...........................57 SECTION 5.22. Certain Covenants Concerning Subsidiaries..................................................58 Section 5.23. Year 2000 Compliance Reports...............................................................58 SECTION 5.24. Consolidated Fixed Charges Coverage Ratio..................................................59 ARTICLE VI DEFAULTS...................................................................................59 SECTION 6.01. Events of Default..........................................................................59 SECTION 6.02. Notice of Default..........................................................................62 ARTICLE VII THE ADMINISTRATIVE AGENT...................................................................63 SECTION 7.01. Appointment; Powers and Immunities.........................................................63 SECTION 7.02. Reliance by Administrative Agent...........................................................64 SECTION 7.03. Defaults...................................................................................64 SECTION 7.04. Rights of Administrative Agent as a Bank...................................................64 SECTION 7.05. Indemnification............................................................................65 SECTION 7.06. Consequential Damages......................................................................65 SECTION 7.07. Payee of Note Treated as Owner.............................................................65 SECTION 7.08. Nonreliance on Administrative Agent and Other Banks........................................66 SECTION 7.09. Failure to Act.............................................................................66 SECTION 7.10. Resignation or Removal of Administrative Agent.............................................66 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION......................................................67 SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair...................................67 SECTION 8.02. Illegality.................................................................................67 SECTION 8.03. Increased Cost and Reduced Return..........................................................68 SECTION 8.04. Base Rate Loans or Other Euro-Dollar Loans Substituted for Affected Euro-Dollar Loans..........................................................................70 SECTION 8.05. Compensation...............................................................................71 ARTICLE IX MISCELLANEOUS..............................................................................72 SECTION 9.01. Notices....................................................................................72 SECTION 9.02. No Waivers.................................................................................72 SECTION 9.03. Expenses; Documentary Taxes................................................................72
(ii) 4 SECTION 9.04. Indemnification............................................................................73 SECTION 9.05. Setoff; Sharing of Setoffs.................................................................73 SECTION 9.06. Amendments and Waivers.....................................................................74 SECTION 9.07. No Margin Stock Collateral.................................................................76 SECTION 9.08. Successors and Assigns.....................................................................76 SECTION 9.09. Confidentiality............................................................................79 SECTION 9.10. Representation by Banks....................................................................80 SECTION 9.11. Obligations Several........................................................................80 SECTION 9.12. Georgia Law................................................................................81 SECTION 9.13. Severability...............................................................................81 SECTION 9.14. Interest...................................................................................81 SECTION 9.15. Interpretation.............................................................................82 SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction..............................................82 SECTION 9.17. Counterparts...............................................................................82 SECTION 9.18. Source of Funds -- ERISA...................................................................82 SECTION 9.19. No Bankruptcy Proceedings..................................................................83
(iii) 5 EXHIBIT A-1 Form of Syndicated Loan Note EXHIBIT A-2 Form of Swing Loan Note EXHIBIT A-3 Form of Money Market Loan Note EXHIBIT B Form of Opinion of Counsel for the Borrower and Guarantor EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent EXHIBIT D Form of Assignment and Acceptance EXHIBIT E Form of Notice of Borrowing EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Closing Certificate EXHIBIT H Form of Guaranty EXHIBIT I Form of Borrowing Base Certificate EXHIBIT J Form of Money Market Quote Request EXHIBIT K Form of Money Market Quote EXHIBIT L Form of Designation Agreement EXHIBIT M Form of Contribution Agreement Schedule 4.08 Subsidiaries (iv) 6 THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 7, 1999 among POST APARTMENT HOMES, L.P., the BANKS listed on the signature pages hereof, FIRST UNION NATIONAL BANK (formerly First Union National Bank of Georgia), as Syndication Agent, WACHOVIA BANK, N.A. (formerly Wachovia Bank of Georgia, N.A.), as Administrative Agent and SUNTRUST BANK, ATLANTA, as Documentation Agent. This Third Amended and Restated Credit Agreement is an amendment and restatement of the $180,000,000 Amended and Restated Credit Agreement by and among the Borrower, Wachovia Bank of Georgia, N.A., First Union National Bank of Georgia, SunTrust Bank, Atlanta, Corestates Bank, and Commerzbank AG, Atlanta Agency, as Banks, First Union National Bank of Georgia, as Co-Agent, and Wachovia Bank of Georgia, N.A., as Administrative Agent, dated as of April 9, 1997, as amended by First Amendment to Amended and Restated Credit Agreement dated December 17, 1997, Second Amendment to Amended and Restated Credit Agreement dated July 31, 1998, as amended and restated by Second Amended and Restated Credit Agreement by and among the Borrower, Wachovia Bank, N.A., First Union National Bank, SunTrust Bank, Atlanta, Commerzbank AG, Atlanta Agency, Four Winds Funding Corporation, Bank One, Texas, N.A., and Chase Bank of Texas, National Association, as Banks, Wachovia Bank, N.A., as Administrative Agent, First Union National Bank, as Syndication Agent, and, SunTrust Bank, Atlanta, as Documentation Agent, dated as of November 20, 1998, as amended by First Amendment to Second Amended and Restated Credit Agreement dated February 18, 1999(collectively, the "Original Agreement"), all of which are superseded hereby. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Affiliate" of any relevant Person means (i) any Person that directly, or indirectly through one or more intermediaries, controls the relevant Person (a "Controlling Person"), (ii) any Person (other than the relevant Person or a Subsidiary of the relevant Person) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary of the relevant Person) of which 7 the relevant Person owns, directly or indirectly, 20% or more of the voting common stock, general partnership interest in a general or limited partnership or equivalent equity interests in any other Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Administrative Agent" means Wachovia Bank, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Banks hereunder, and its successors and permitted assigns in such capacity. "Administrative Agent's Letter Agreement" means that certain letter agreement, dated as of February 7, 1997 between the Borrower and the Administrative Agent relating to the structure of the Loans, and certain fees from time to time payable by the Borrower to the Administrative Agent, together with all amendments and supplements thereto. "Agreement" means this Third Amended and Restated Credit Agreement, together with all amendments and supplements hereto. "Anniversary Date" means April 30, 2000, and each April 30 thereafter. "Applicable Margin" has the meaning set forth in Section 2.06(a). "Assignee" has the meaning set forth in Section 9.08(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.08(c) in the form attached hereto as Exhibit D. "Authority" has the meaning set forth in Section 8.02. "Bank" means each bank listed on the signature pages hereof as having a Commitment, and its successors and its assigns permitted hereby; provided, however, that the term "Bank" shall exclude each Designated Bank when used in reference to a Syndicated Loan, the Commitments or terms relating to the Syndicated Loans and the Commitments. "Base Rate" means for any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent above the Federal Funds Rate. For purposes of determining the Base Rate for any 2 8 day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change. "Base Rate Loan" means a Loan to be made as a Base Rate Loan pursuant to the applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as applicable. "Borrower" means Post Apartment Homes, L.P., a Georgia limited partnership and its successors and its permitted assigns. "Borrowing" means a borrowing hereunder consisting of (i) Syndicated Loans made to the Borrower at the same time by all of the Banks, (ii) a Swing Loan made to the Borrower by Wachovia or (iii) a Money Market Loan made to the Borrower separately by one or more Banks, in each case pursuant to Article II. A Borrowing is a "Euro-Dollar Borrowing" if such Loans are made as Euro-Dollar Loans. A Borrowing is a "Base Rate Borrowing" if such Loan is made as a Base Rate Loan. A Borrowing is a "Transaction Rate Borrowing" if such Loan is made as a Transaction Rate Loan. A Borrowing is a "Syndicated Loan Borrowing" if such Loans are made as Syndicated Loans. A Borrowing is a "Swing Loan Borrowing" if such Loans are made as Swing Loans. A Borrowing is a "Money Market Borrowing" if such Loans are made pursuant to Section 2.03. A Borrowing is a "Fixed Rate Borrowing" if such Loans are made as Fixed Rate Loans. "Borrowing Base" means the sum of each of the following, as determined by reference to the most recent Borrowing Base Certificate furnished pursuant to Section 3.01(i) or Section 5.01(h), as applicable: (i) an amount equal to the product of: (x) 7.42857; times (y) the Net Operating Income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is not subject to a Mortgage and which either was on average at least 90% economically occupied during, or with respect to which the Construction Period Termination Date occurred prior to the commencement of, such 12 month period; provided, that if an Eligible Property satisfies the criteria set forth in both this clause (i) and clause (iii) below, it shall be included in the calculations only in clause (iii) below; plus (ii) an amount equal to the product of: (x) 7.42857; times (y) the Net Operating Income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is financed as to Debt only by bonds, debentures, notes or other similar instruments which have been fully in substance defeased in accordance with GAAP; plus 3 9 (iii) an amount equal to the product of: (x) 29.71428; times (y) the Net Operating Income for the 3 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is not subject to a Mortgage and with respect to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period ending on the last day of the month just ended prior to the date of determination; plus (iv) an amount equal to the lesser of: (x) 50% of the aggregate amount of cash expenditures (including indirect costs internally allocated in accordance with GAAP) as of the last day of the month just ended prior to the date of determination on all Eligible Properties which are not subject to a Mortgage and which consist of apartment communities as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended; and (y) $75,000,000 less the amount determined pursuant to clause (v); plus (v) an amount equal to the lesser of: (x) the sum of (A) 45% of the aggregate cost of all Eligible Properties which consist of raw land not subject to a Mortgage, or which consist of land acquired with existing improvements which are to be substantially demolished and the demolition of such improvements has commenced, plus (B) with respect to Eligible Properties which consist of land acquired with existing improvements which are to be substantially demolished, so long as such Eligible Property was on average at least 50% economically occupied during the 12 month period ending on the last day of the month just ended prior to the date of determination and demolition of such improvements has not commenced, the greater of 45% of the aggregate cost of such Eligible Property or 5.71429 times the Net Operating Income of such Eligible Property during such 12 month period; (y) $25,000,000; and (z) 33% of the sum of (A) the amounts determined pursuant to clauses (i) through (iv), inclusive (but without giving effect to clause (iv)(y)); less (vi) an amount equal to the greater of: (x) all outstanding Debt of the Borrower and the Guarantors (other than the Loans and any Debt owing to the Borrower or the Guarantors) which is not secured by a Lien (excluding Debt consisting of a Guarantee, where the underlying Debt of the principal obligor is subject to a Lien on property of the principal obligor); and (y) all commitments (other than the Commitments) to the Borrower and the Guarantors then available to be advanced, to fund Debt of the type described in clause (vi)(x). "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit I, duly executed by an Executive Officer, setting forth in reasonable detail the calculations for each component of the Borrowing Base. 4 10 "Capital Stock" means any capital stock issued by any Person, whether common or preferred, excluding Redeemable Preferred Stock. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. "Change in Control" shall mean the occurrence of either of the following: (i) more than 50% of the outstanding voting common stock of PPI is owned, directly or indirectly, by less than 6 "individuals" (as provided in Section 542(a)(2) of the Code); or (ii) a majority of the Persons comprising the Board of Directors of PPI shall during any 12 month period cease to serve on the Board of Directors of PPI for any reason other than disability or death. "Change of Law" shall have the meaning set forth in Section 8.02. "Closing Certificate" has the meaning set forth in Section 3.01(e). "Closing Date" means May 7, 1999. "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. "Commitment" means, with respect to each Bank, (i) the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) as to any Bank which enters into any Assignment and Acceptance (whether as transferor Bank or as Assignee thereunder), the amount of such Bank's Commitment after giving effect to such Assignment and Acceptance, in each case as such amount may be reduced from time to time pursuant to Sections 2.08 and 2.09. "Compliance Certificate" has the meaning set forth in Section 5.01(c). "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Fixed Charges" for any period means the sum of the following of the Borrower and its Subsidiaries, determined on a consolidated basis (x) Consolidated Interest Expense, plus (y) all scheduled principal payments (excluding balloon payments payable at maturity), plus (z) the aggregate of all preferred dividends paid. 5 11 "Consolidated Fixed Charges Coverage Ratio" means, at any date, for the Fiscal Quarter most recently ended and the immediately preceding 3 Fiscal Quarters, the ratio of: (i) Consolidated Income Available for Debt Service; to (ii) Consolidated Fixed Charges. "Consolidated Income Available for Debt Service" shall mean, calculated on a consolidated basis, the sum of the Borrower's and its Subsidiaries': (i) net income before Minority Interests and extraordinary items, plus (ii) depreciation and amortization, plus (iii) losses from sales or joint ventures, plus (iv) increases in deferred taxes and other non-cash items, minus (v) gains from sales or joint ventures, minus (vi) decreases in deferred taxes and other non-cash items, plus (vii) interest expense and plus (viii) taxes (excluding ad valorem taxes). "Consolidated Income Available for Distribution" means, in any calendar year, the sum of the following for such calendar year, calculated on a consolidated basis for the Borrower and its Subsidiaries: (i) Consolidated Income Available for Debt Service, less (ii) interest expense, and less (iii) taxes (excluding ad valorem taxes and taxes on gains described in clause (v) of the definition of Consolidated Income Available for Debt Service). "Consolidated Interest Expense" for any period means interest expensed during such period, determined on a consolidated basis for the Borrower or any of its Subsidiaries. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Assets" shall mean (i) all Undepreciated Real Estate Assets plus (ii) all other tangible assets of the Borrower and its Subsidiaries. "Consolidated Total Debt" shall mean the total liabilities of the Borrower and its Subsidiaries, on a consolidated basis (excluding liabilities on account of dividends which have been declared but not paid), plus the aggregate amount of Debt Guaranteed by the Borrower, the Guarantors and the Subsidiaries (other than of Debt of any of them) at the end of the Borrower's most recent Fiscal Quarter. "Consolidated Total Secured Debt" shall mean all Debt of the Borrower and its Subsidiaries consisting of (i) capitalized leases, and (ii) money borrowed or the deferred purchase price of real property which is also secured by a Mortgage on any real property owned by the Borrower or its Subsidiaries. 6 12 "Construction Period Termination Date" means, with respect to construction of apartment communities for Eligible Properties, the date which is 3 months after the issuance of a permanent certificate of occupancy for the last unit of such apartment community on such Eligible Property. "Contribution Agreement" means the Contribution Agreement of even date herewith in substantially the form of Exhibit M to be executed by the Borrower and the Guarantors. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument issued to assure the payment of Debt (but while such reimbursement obligation remains contingent due to there having been no presenting and honoring of a draft under any such letter of credit or similar instrument, only the principal component of the underlying Debt shall be included as Debt under this clause (vii)), (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person; provided, however, that the term Debt shall not include (A) any such obligations to the extent such obligations have been in substance defeased in accordance with GAAP, or (B) obligations under Redeemable Preferred Stock to the extent that any sinking fund payments have been made in connection therewith. "Debt Rating" means at any time whichever is the higher of the rating of the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, its prospective or implied credit rating for debt of such type) by Moody's Investor Service or Standard and Poor's (as such rating may change from time to time, either pursuant to Section 2.06(f) or otherwise) or if only one of them rates the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, has in effect a prospective or implied rating for such debt), such rating. 7 13 "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (including the Applicable Margin) which may be applicable to any Loans hereunder. "Designated Bank" means a special purpose corporation sponsored by its Designating Bank that is identified as such on the signature pages hereto next to the caption "Designated Bank" as well as each special purpose corporation sponsored by its Designating Bank that (i) shall have become a party to this Agreement pursuant to Section 9.08(g), and (ii) is not otherwise a Bank. "Designated Bank Note" means a Money Market Loan Note, evidencing the obligation of the Borrower to repay Money Market Loans made by a Designated Bank, and "Designated Bank Notes" means any and all such Money Market Loan Notes to Designated Banks issued hereunder. "Designating Bank" shall mean each Bank that is identified as such on the signature pages hereto next to the caption "Designating Bank" and immediately above the signature of its Designated Bank as well as each Bank that shall designate a Designated Bank pursuant to Section 9.08(g). "Designation Agreement" means a designation agreement in substantially the form of Exhibit L, entered into by a Bank and a Designated Bank and acknowledged by the Borrower and the Administrative Agent. "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized by law to close. "Eligible Properties" means any Property of the Borrower consisting of real estate as to which the Administrative Agent has received or reviewed each of the following, each in form and substance satisfactory to the Administrative Agent, in its reasonable business judgment: (i) an environmental report; (ii) a boundary survey; and (iii) an owner's title insurance policy, without a general survey exception, issued by an insurer acceptable to the Administrative Agent, in its reasonable business judgment; provided, however, that for each apartment community which was or is being constructed in phases, the term Eligible Property shall mean each such phase separately, except 8 14 that all phases as to which a period of 12 months after the Construction Period Termination Date has occurred for each such phase shall be treated as a single Eligible Property. "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent, or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or order. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "Environmental Requirements" means any legal requirement relating to health, safety or the environment and applicable to the Borrower, any Subsidiary or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law, including without limitation, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act, the Toxic Substances Control Act, the Federal 9 15 Insecticide, Fungicide and Rodenticide Act, or the Federal Occupational Safety and Health Act of 1970, each as amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Euro-Dollar Business Day" means any Domestic Business Day on which dealings in Dollar deposits are carried out in the London interbank market. "Euro-Dollar Loan" means a Syndicated Loan to be made as a Euro-Dollar Loan pursuant to the applicable Notice of Borrowing. "Euro-Dollar Reserve Percentage" means, for any Bank which is a member bank of the Federal Reserve System, on any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirement for such Bank in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Executive Officer" means any of the following officers of the General Partner: the Chairman, the President, the Chief Financial Officer, the Chief Accounting Officer, the Senior Vice President-Capital Markets and the Secretary. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such transactions, as determined by the Administrative Agent. "Fiscal Quarter" means any fiscal quarter of the Borrower. 10 16 "Fiscal Year" means, with reference to PPI, any fiscal year of PPI, and with reference to the Borrower, any fiscal year of the Borrower. "Fixed Rate Borrowing" means a Euro-Dollar Borrowing, a Transaction Rate Borrowing or a Money Market Borrowing, or any or all of them, as the context requires. "Fixed Rate Loan" means any Euro-Dollar Loan, Transaction Rate Loan or Money Market Loan, or any or all of them, as the context shall require. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "GP Sub" means Post GP Holdings, Inc., a Georgia corporation which is a direct Subsidiary of PPI and the owner of a 1% general partner interest in the Borrower as of the Closing Date. "General Partner" means the sole general partner of the Borrower (which, on the Closing Date, is PPI) or, if there is more than one such general partner, the managing general partner of the Borrower. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means, individually and collectively, as the context shall require: (i) GP Sub, LP Sub and PPI; and (ii) any Significant Subsidiary which becomes a Guarantor pursuant to Section 5.22(d). 11 17 "Guaranty" means the Guaranty Agreement of even date herewith in substantially the form of Exhibit "H" to be executed by the Guarantors, unconditionally guaranteeing payment of the Loans, the Notes and all other obligations of the Borrower to the Administrative Agent, the Syndication Agent, the Administrative Agent and the Banks hereunder, including without limitation all principal, interest, fees, costs, and compensation and indemnification amounts. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof, or (d) pesticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the first, second, third or sixth month thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period (subject to paragraph (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall, subject to paragraph (c) below, end on the last Euro-Dollar Business Day of the appropriate subsequent calendar month; and (c) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. (2) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter (or any lesser number of days ending on the Termination Date); provided that: 12 18 (a) any Interest Period (subject to paragraph (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) no Interest Period which begins before the Termination Date and would otherwise end after the Termination Date may be selected. (3) with respect to each Transaction Rate Borrowing, any period up to 14 days mutually agreeable to the Borrower and Wachovia which ends on or prior to the Termination Date. (4) with respect to each Money Market Borrowing, the period commencing on the date of such Borrowing and ending on the Stated Maturity Date or such other date or dates as may be specified in the applicable Money Market Quote; provided that: (a) any Interest Period (subject to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. "Investment" means any investment in any Person, whether by means of purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such other office as such Bank may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, or preferential arrangement which has the practical effect of constituting any of the foregoing in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. 13 19 "Liquidity Bank" means for any Designated Bank, at any date of determination, the collective reference to the financial institutions which at such date are providing liquidity or credit support facilities to or for the account of such Designated Bank to fund such Designated Bank's obligations hereunder or to support the securities, if any, issued by such Designated Bank to fund such obligations. "Loans" means, as the context shall require, either (i) Syndicated Loans, which may be either Base Rate Loans or Euro-Dollar Loans made pursuant to the terms and conditions set forth in Section 2.01(a), (ii) Swing Loans, which may be either Base Rate Loans or Transaction Rate Loans made pursuant to the terms and conditions set forth in Section 2.01(b) or (iii) Money Market Loans made pursuant to the terms and conditions set forth in 2.03. "Loan Documents" means this Agreement, the Notes, the Guaranty, any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes or the Loans, as such documents and instruments may be amended or supplemented from time to time. "London Interbank Offered Rate" has the meaning set forth in Section 2.06(c). "LP Sub" means Post LP Holdings, Inc., a Georgia corporation which is a direct Subsidiary of PPI and the owner (as of the date of the Closing Date) of limited partnership interests representing approximately 87% of the partner interests in the Borrower. "Margin Stock" means "margin stock" as defined in Regulations T, U or X. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business or properties of PPI, the Borrower, and the Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or the Banks under the Loan Documents, or the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or enforceability of any Loan Document. 14 20 "Minority Interests" shall mean the minority interests of unit holders as shown on the then most recently available Form 10-K or 10-Q of PPI. "Money Market Borrowing Date" has the meaning specified in Section 2.03. "Money Market Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-3, including any Designated Bank Notes, evidencing the obligation of the Borrower to repay the Money Market Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Money Market Loans" means Loans made pursuant to the terms and conditions set forth in Section 2.03. "Money Market Quote" has the meaning specified in Section 2.03. "Money Market Quote Request" has the meaning specified in Section 2.03(b). "Money Market Rate" has the meaning specified in Section 2.03 (c)(ii)(C). "Mortgage" means a mortgage, deed to secure debt, deed of trust or similar instrument. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Operating Income" means, for any Eligible Property, the portion of Consolidated Income Available for Debt Service derived from such Eligible Property (which calculation excludes intracompany charges for management services that are eliminated in accordance with GAAP). "Notes" means the Syndicated Loan Notes, the Swing Loan Note or Money Market Loan Notes, or any one, or more, or all of them, as the context shall require. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Original Agreement" has the meaning set forth in the preamble hereto. "Original Notes" means the Notes executed and delivered pursuant to the Original Agreement. "Participant" has the meaning set forth in Section 9.08(b). 15 21 "Partner Interests" means any partner interests in the Borrower, whether limited or general. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Performance Pricing Determination Date" has the meaning set forth in Section 2.06(a). "Person" means an individual, a corporation, a partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "PPI" means Post Properties, Inc., a Georgia corporation, and its successors and assigns. "Prime Rate" refers to that interest rate so denominated and set by Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Properties" means all real property owned, leased or otherwise used or occupied by the Borrower, the Guarantors or any Subsidiary, wherever located. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Termination Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Refunding Loan" means a new Loan made on the day on which an outstanding Loan is maturing or a Base Rate Borrowing is being converted to a Euro-Dollar Borrowing or a Transaction Rate Borrowing, if and to the extent that the proceeds thereof are used entirely for the purpose of paying such maturing Loan or Loan being converted, excluding any difference between the amount of such maturing Loan or Loan being converted and any greater amount being borrowed on such day and actually either being made 16 22 available to the Borrower pursuant to Section 2.02(c) or remitted to the Administrative Agent as provided in Section 2.12, in each case as contemplated in Section 2.02(d). "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding principal amount of the sum of the (i) Syndicated Loans and (ii) Money Market Loans. "Restricted Payment" means (i) any distribution on any Partner Interests (other than distributions consisting solely of additional Partner Interests) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any Partner Interests or (b) any option, warrant or other right to acquire Partner Interests. "Significant Subsidiary" means any Subsidiary which either (x) has assets which constitute more than 5% of Consolidated Total Assets at the end of the most recent Fiscal Quarter, or (y) contributed more than 5% of Consolidated Income Available for Debt Service during the most recent Fiscal Quarter and the 3 Fiscal Quarters immediately preceding such Fiscal Quarter (or, with respect to any Subsidiary which existed during the entire 4 Fiscal Quarter period but was acquired by the Borrower during such period, which would have contributed more than 5% of Consolidated Income Available for Debt Service during such period had it been a Subsidiary for the entire period). "Stated Maturity Date" means, with respect to any Money Market Loans, the Stated Maturity Date therefor specified by the Bank in the applicable Money Market Quote. "Subsidiary" means (i) any corporation or other entity the majority of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and the majority of the shares of the voting capital stock or other equivalent 17 23 ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower, PPI, another Subsidiary, and/or one or more of John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary, and (ii) any other entity (other than PPI or the Borrower) the accounts of which are consolidated with the accounts of the Borrower. "Subsidiary Consolidated Total Assets" means Consolidated Total Assets, but without including assets of the Borrower or the Guarantors. "Swing Loan" means a Loan made by Wachovia pursuant to Section 2.01(b), which must be a Base Rate Loan or a Transaction Rate Loan. "Swing Loan Note" means the promissory note of the Borrower, substantially in the form of Exhibit A-2, evidencing the obligation of the Borrower to repay the Swing Loans, together with all amendments, consolidations, modifications, renewals, and supplements thereto. "Syndicated Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-1, evidencing the obligation of the Borrower to repay Syndicated Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Taxes" has the meaning set forth in Section 2.12(c). "Termination Date" means whichever is applicable of (i) April 30, 2002, or such later date to which it is extended by the Banks pursuant to Section 2.05(b) or (ii) any earlier date which constitutes the Termination Date pursuant to the provisions of and under the circumstances contained in Sections 2.08 or 2.09. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business. "Transaction Rate" has the meaning set forth in Section 2.01(b)(ii). "Transaction Rate Loan" means a Swing Loan to be made as a Transaction Rate Loan pursuant to Section 2.01(b). "Transaction Rate Request" has the meaning set forth in Section 2.01(b)(ii). 18 24 "Transferee" has the meaning set forth in Section 9.08(d). "Undepreciated Real Estate Assets" shall mean the cost (original cost plus capital improvements, if any) of real estate assets of the Borrower and its Subsidiaries, before depreciation and amortization, in accordance with GAAP. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "Unused Commitment" means at any date, with respect to any Bank, an amount equal to its Commitment less the aggregate outstanding principal amount of its Syndicated Loans (but not, with respect to Wachovia, its Swing Loans, or with respect to any Bank, its Money Market Loans). "Wachovia" means Wachovia Bank, N.A., a national banking association, and its successors. "Wholly Owned Subsidiary" means any Subsidiary all of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and all of the shares of the voting capital stock or other equivalent ownership interests of which are at the time directly or indirectly owned by the Borrower, PPI, another Wholly Owned Subsidiary, and/or one or more John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by PPI's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of PPI or the Borrower and its Consolidated Subsidiaries, as applicable, delivered to the Banks unless with respect to any such change concurred in by PPI's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower 19 25 shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Banks shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04). SECTION 1.03. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other Subdivisions are references to articles, exhibits, schedules, sections and other subdivisions hereof. SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.05. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend Loans. (a) Syndicated Loans. Each Bank severally agrees, on the terms and conditions set forth herein, to make Syndicated Loans to the Borrower from time to time before the Termination Date; provided that, immediately after each such Syndicated Loan is made, (i) the aggregate principal amount of Syndicated Loans by such Bank shall not exceed the amount of its Commitment, and (ii) the aggregate outstanding amount of all Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base. Each Syndicated Loan Borrowing under this Section shall be in an aggregate principal amount of $5,000,000 or any larger multiple 20 26 of $250,000 (except that any such Syndicated Loan Borrowing may be in the aggregate amount of the Unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.10, prepay Syndicated Loans and reborrow under this Section at any time before the Termination Date. (b) Swing Loans. (i) In addition to the foregoing, Wachovia shall from time to time, upon the request of the Borrower, if the applicable conditions precedent in Article III have been satisfied, make Swing Loans to the Borrower in an aggregate principal amount at any time outstanding not exceeding $5,000,000; provided that, immediately after such Swing Loan is made, the outstanding amount of the Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base. Within the foregoing limits, the Borrower may borrow under this Section 2.01(b), prepay and reborrow under this Section 2.01(b) at any time before the Termination Date. All Swing Loans shall be made as either Base Rate Loans or, subject to the provisions of clause (ii) below, Transaction Rate Loans. (ii) Swing Loans may be Transaction Rate Loans, if the Administrative Agent shall have determined that such Transaction Rate Loan, including the principal amount thereof, the Interest Period and the Transaction Rate applicable thereto, has been expressly agreed to by the Borrower and Wachovia (such agreement may be obtained by telephone, confirmed promptly to the Administrative Agent in writing) pursuant to the following procedures. If the Borrower desires a Transaction Rate Loan, (a) the Borrower shall provide Wachovia, with a copy to the Administrative Agent, with notice of a request (a "Transaction Rate Request") for a quote for a Transaction Rate Borrowing prior to 1:00 p.m. (Atlanta, Georgia time) on the date (which shall be a Domestic Business Day) of the proposed Transaction Rate Borrowing, which Transaction Rate Request shall include the principal amount and proposed Interest Period of the relevant Transaction Rate Borrowing, (b) prior to 1:30 p.m. (Atlanta, Georgia time) on such date, Wachovia shall furnish the Borrower, with a copy to the Administrative Agent, with its rate quote (a "Transaction Rate Quote") via facsimile transmission, (c) the Borrower shall immediately inform Wachovia and the Administrative Agent of its decision as to whether to request a Transaction Rate Borrowing at the Transaction Rate specified in such Transaction Rate Quote (a "Transaction Rate") (which may be done by telephone and promptly confirmed in writing, and which decision shall be irrevocable), and (d) if the Borrower has so informed Wachovia and the Administrative Agent that it does desire a Transaction Rate Borrowing at the Transaction Rate specified in such Transaction Rate Quote, then by 2:00 p.m. (Atlanta, Georgia time) on the date 21 27 of such decision, Wachovia shall make such Transaction Rate Borrowing, with interest accruing thereon at such Transaction Rate, available to the Administrative Agent in accordance with the procedures set forth herein. The Administrative Agent shall notify the Banks of any Transaction Rate Borrowing pursuant hereto. (iii) At any time on or after the occurrence of an Event of Default, upon the request of Wachovia, each Bank other than Wachovia shall, on the third Domestic Business Day after such request is made, purchase a participating interest in Swing Loans in an amount equal to its ratable share (based upon its respective Commitment) of such Swing Loans, and Wachovia shall furnish each Bank with a certificate evidencing such participating interest. On such third Domestic Business Day, each Bank will immediately transfer to Wachovia, in immediately available funds, the amount of its participation. Whenever, at any time after Wachovia has received from any such Bank its participating interest in a Swing Loan, the Administrative Agent receives any payment on account thereof, the Administrative Agent will distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Administrative Agent is required to be returned, such Bank will return to the Administrative Agent any portion thereof previously distributed by the Administrative Agent to it. Each Bank's obligation to purchase such participating interests shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: (1) any set-off, counterclaim, recoupment, defense or other right which such Bank or any other Person may have against Wachovia requesting such purchase or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments; (3) any adverse change in the condition (financial or otherwise) of the Borrower, PPI or any other Person; (4) any breach of this Agreement by the Borrower or any other Bank; or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.02. Method of Borrowing Loans other than Transaction Rate Loans. For all Loans other than Transaction Rate Loans (which shall be governed by the provisions of Section 2.01(b)(ii)): (a) The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing"), which shall be substantially in the form of Exhibit E, executed by the President of the General Partner or any person authorized in writing by the 22 28 President of the General Partner, prior to noon (Atlanta, Georgia time) on the same Domestic Business Day for each Base Rate Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing; (ii) the aggregate amount of such Borrowing; (iii) whether the Loans comprising such Borrowing are to be Syndicated Dollar Loans or Swing Loans, and whether they are to be Base Rate Loans or Euro-Dollar Loans; (iv) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; and (v) the amount available to be borrowed under Section 2.01. (b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly, and not later than 1:00 P.M., (Atlanta, Georgia time), notify each Bank of the contents thereof and, if it is a Syndicated Loan Borrowing, of such Bank's ratable share of such Borrowing and such Notice of Borrowing, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. (c) Not later than 3:00 P.M. (Atlanta, Georgia time) on the date of each Borrowing, each Bank (or Wachovia, with respect to Swing Loans) shall (except as provided in paragraph (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address determined pursuant to Section 9.01. Unless the Administrative Agent determines in its reasonable business judgment that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. Unless the Administrative Agent receives notice from a Bank, at the Administrative Agent's address referred to in or specified pursuant to Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Borrowing stating that such Bank will not make a Syndicated Loan in connection with such Borrowing, the Administrative Agent shall be entitled to assume that such Bank will make a Syndicated Loan in connection with such Borrowing and, in reliance on such assumption, the Administrative Agent may (but shall not be obligated to) make available such Bank's ratable share of such Borrowing to the Borrower for the account of such Bank. If the Administrative Agent makes such Bank's ratable share available to 23 29 the Borrower and such Bank does not in fact make its ratable share of such Borrowing available on such date, the Administrative Agent shall be entitled to recover such Bank's ratable share from such Bank or the Borrower (and for such purpose shall be entitled to charge such amount to any account of the Borrower maintained with the Administrative Agent), together with interest thereon for each day during the period from the date of such Borrowing until such sum shall be paid in full at a rate per annum equal to the rate at which the Administrative Agent determines that it obtained (or could have obtained) overnight Federal funds to cover such amount for each such day during such period, provided that (i) any such payment by the Borrower of such Bank's ratable share and interest thereon shall be without prejudice to any rights that the Borrower may have against such Bank and (ii) until such Bank has paid its ratable share of such Borrowing, together with interest pursuant to the foregoing, it will have no interest in or rights with respect to such Borrowing for any purpose hereunder. If the Administrative Agent does not exercise its option to advance funds for the account of such Bank, it shall forthwith notify the Borrower of such decision. (d) If any Bank makes a new Syndicated Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Syndicated Loan from such Bank, such Bank shall apply the proceeds of its new Syndicated Loan to make such repayment as a Refunding Loan and only an amount equal to the difference (if any) between the amount being borrowed and the amount of such Refunding Loan shall be made available by such Bank to the Administrative Agent as provided in paragraph (c) of this Section, or remitted by the Borrower to the Administrative Agent as provided in Section 2.12, as the case may be. (e) Notwithstanding anything to the contrary contained in this Agreement, the Borrower shall not be entitled to, and the Administrative Agent shall not knowingly fund, a Fixed Rate Borrowing if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived. (f) In the event that a Notice of Borrowing fails to specify whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement to repay any Loans maturing at the end of an Interest Period applicable thereto with the proceeds of a new Borrowing, and the Borrower fails to repay such Loans using its own moneys and fails to give a Notice of Borrowing in connection with such new Borrowing, a new Borrowing shall be deemed to be made on the date such Loans mature in an amount equal to the principal amount of the Loans so maturing, and the Loans comprising such new Borrowing shall be Base Rate Loans. 24 30 (g) Notwithstanding anything to the contrary contained herein, there shall not be more than 8 Euro-Dollar Loans and Money Market Loans outstanding at any given time. SECTION 2.03. Money Market Loans. (a) In addition to making Syndicated Loan Borrowings, the Borrower may, as set forth in this Section 2.03, request the Banks to make offers to make Money Market Borrowings available to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.03, provided that: (i) the number of interest rates applicable to Money Market Loans which may be outstanding at any given time is subject to the provisions of Section 2.02(g); (ii) the aggregate outstanding amount of all Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base; (iii) the Money Market Loans of any Bank will be deemed to be usage of the Commitments for the purpose of calculating availability pursuant to Section 2.01(a)(ii), 2.01(b)(ii) and 2.03(a)(ii) but will not reduce such Bank's obligation to lend its pro rata share of the remaining Unused Commitment; and (iv) the aggregate principal amount of all Money Market Loans shall not exceed fifty percent (50%) of the aggregate amount of the Commitments of all the Banks at such time. (b) When the Borrower wishes to request offers to make Money Market Loans, it shall give the Administrative Agent (which shall promptly notify the Banks) notice substantially in the form of Exhibit J hereto (a "Money Market Quote Request") so as to be received no later than 10:00 A.M. (Atlanta, Georgia time) at least 2 Domestic Business Days prior to the date of the Money Market Borrowing proposed therein (or such other time and date as the Borrower and the Administrative Agent, with the consent of the Required Banks, may agree), specifying: (i) the proposed date of such Money Market Borrowing, which shall be a Domestic Business Day (the "Money Market Borrowing Date"); (ii) the maturity date (or dates) (each a "Stated Maturity Date") for repayment of each Money Market Loan to be made as part of such Money Market Borrowing (which Stated Maturity Date shall be that date occurring not less than 7 days but not greater than 180 days from the date of such Money Market Borrowing); provided that the Stated Maturity 25 31 Date for any Money Market Loan may not extend beyond the Termination Date (as in effect on the date of such Money Market Quote Request); and (iii) the aggregate amount of principal to be received by the Borrower as a result of such Money Market Borrowing, which shall be at least $5,000,000 (and in larger integral multiples of $250,000) but shall not cause the limits specified in Section 2.03(a) to be violated. The Borrower may request offers to make Money Market Loans having up to 3 different Stated Maturity Dates in a single Money Market Quote Request; provided that the request for each separate Stated Maturity Date shall be deemed to be a separate Money Market Quote Request for a separate Money Market Borrowing. Except as otherwise provided in the immediately preceding sentence, after the first Money Market Quote Request has been given hereunder, no Money Market Quote Request shall be given until at least 5 Domestic Business Days after all prior Money Market Quote Requests have been fully processed by the Administrative Agent, the Banks and the Borrower pursuant to this Section 2.03. (c) (i) Each Bank may, but shall have no obligation to, submit a response containing an offer to make a Money Market Loan substantially in the form of Exhibit K hereto (a "Money Market Quote") in response to any Money Market Quote Request; provided that, if the Borrower's request under Section 2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but shall have no obligation to, make a single submission containing a separate offer for each such Stated Maturity Date and each such separate offer shall be deemed to be a separate Money Market Quote. Each Money Market Quote must be submitted to the Administrative Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date; provided that any Money Market Quote submitted by Wachovia may be submitted, and may only be submitted, if Wachovia notifies the Borrower of the terms of the offer contained therein not later than 9:45 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date (or 15 minutes prior to the time that the other Banks must have submitted their respective Money Market Quotes). Subject to Section 6.01, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall specify: (A) the proposed Money Market Borrowing Date and the Stated Maturity Date therefor; (B) the principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Money Market Quote, which 26 32 principal amounts (x) may be greater than or less than the Commitment of the quoting Bank, (y) shall be at least $5,000,000 or a larger integral multiple of $250,000, and (z) may not exceed the principal amount of the Money Market Borrowing for which offers were requested; (C) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) offered for each such Money Market Loan (such amounts being hereinafter referred to as the "Money Market Rate"); and (D) the identity of the quoting Bank. Unless otherwise agreed by the Administrative Agent and the Borrower, no Money Market Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Money Market Quote Request (other than setting forth the maximum principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Interest Period) and, in particular, no Money Market Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Money Market Loan for which such Money Market Quote is being made. (d) The Administrative Agent shall as promptly as practicable after the Money Market Quote is submitted (but in any event not later than 10:30 A.M. (Atlanta, Georgia time)) on the Money Market Borrowing Date, notify the Borrower of the terms (i) of any Money Market Quote submitted by a Bank that is in accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the principal amounts of the Money Market Borrowing for which offers have been received and (B) the respective principal amounts and Money Market Rates so offered by each Bank (identifying the Bank that made each Money Market Quote). (e) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, the Borrower shall notify the Administrative Agent of its acceptance or nonacceptance of the offers so notified to it pursuant to Section 2.03(d) and the Administrative Agent shall promptly (but in no event later than 11:30 A.M. on the Money Market Borrowing Date) notify each affected Bank. In the case of acceptance, such notice shall specify the aggregate principal amount of offers (for each Stated 27 33 Maturity Date) that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the aggregate principal amount of each Money Market Loan comprising a Money Market Borrowing shall be at least $5,000,000 (and in larger multiples of $250,000) but shall not cause the limits specified in Section 2.03(a) to be violated; (iii) acceptance of offers may only be made in ascending order of Money Market Rates; and (iv) the Borrower may not accept any offer where the Administrative Agent has advised the Borrower that such offer fails to comply with Section 2.03(c)(ii) or otherwise fails to comply with the requirements of this Agreement (including without limitation, Section 2.03(a)). If offers are made by 2 or more Banks with the same Money Market Rates for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Stated Maturity Date, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amount of such offers. Determinations by the Borrower of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. (f) any Bank whose offer to make any Money Market Loan has been accepted shall, not later than 3:00 P.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, make the appropriate amount of such Money Market Loan available to the Administrative Agent at its address referred to in Section 9.01 in immediately available funds. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower on such date by depositing the same, in immediately available funds, not later than 4:00 P.M. (Atlanta, Georgia time), in an account of such Borrower maintained with the Administrative Agent. (g) Money Market Loans by Designated Banks. For any Bank which is a Designating Bank, any Money Market Loan to be made by such Bank may from time to time be made by its Designated Bank in such Designated Bank's sole discretion, and nothing herein shall constitute a commitment to make Money Market Loans by such Designated Bank; provided that if any Designated Bank elects not to, or fails to, make any such Money Market Loan pursuant to a Money Market Quote that has been accepted by the Borrower in accordance with the foregoing, its Designating Bank hereby agrees that it shall make such Money Market Loan pursuant 28 34 to the terms hereof on the date such Money Market Loan is otherwise required to be made to the Borrower hereunder. SECTION 2.04. Notes. (a) The Syndicated Loans of each Bank shall be evidenced by a single Syndicated Loan Note payable to the order of such Bank for the account of its Lending Office in an amount equal to the original principal amount of such Bank's Commitment. The Swing Loans shall be evidenced by a single Swing Loan Note payable to the order of Wachovia in the original principal amount of $5,000,000. Loans outstanding under the Original Agreement on the Closing Date shall be deemed to have been made hereunder and shall be evidenced by the Notes. (b) The Money Market Loans made by any Bank to the Borrower shall be evidenced by a single Money Market Loan Note payable to the order of such Bank for the account of its Lending Office in an amount equal to 50% of the original principal amount of the aggregate Commitments. (c) Upon receipt of each Bank's Syndicated Loan Notes, Wachovia's Swing Loan Note and each Bank's Money Market Loan Notes pursuant to Section 3.01, the Administrative Agent shall deliver such Syndicated Loan Notes to such Bank, the Swing Loan Note to Wachovia and such Money Market Loan Notes to such Bank. Each Bank, as to the Syndicated Loans or the Money Market Loans (or Wachovia, as to the Swing Loans), shall record, and prior to any transfer of its Syndicated Loan Notes or Money Market Loan Notes (or Swing Loan Note) shall endorse on the schedules forming a part thereof appropriate notations to evidence, the date, amount and maturity of, and effective interest rate for, each Syndicated Loan or Money Market Loan (or Swing Loan) made by it, the date and amount of each payment of principal made by the Borrower with respect thereto, and such schedules of each such Bank's Syndicated Loan Notes or Money Market Loan Notes (or Wachovia's Swing Loan Note) shall constitute rebuttable presumptive evidence of the respective principal amounts owing and unpaid on such Bank's Syndicated Loan Notes or Money Market Loan Notes (or Wachovia's Swing Loan Note); provided that the failure of any Bank (or Wachovia) to make any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Syndicated Loan Notes or the Money Market Loan Notes (or Swing Loan Note) or the ability of any Bank to assign its Syndicated Loan Notes or Money Market Loan Notes or Wachovia to assign its Swing Loan Note. Each Bank (and Wachovia, with respect to the Swing Loan) is hereby irrevocably authorized by the Borrower so to endorse its Syndicated Loan Notes or Money Market Loan Notes (or Swing Loan Note) and to attach to and make a part of any Syndicated Loan Note or Money Market Loan Note (or Swing Loan Note) a continuation of any such schedule as and when required. SECTION 2.05. Maturity of Loans. (a) Each Loan included in any Borrowing shall mature, and the principal amount 29 35 thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. (b) Notwithstanding the foregoing, the outstanding principal amount of the Loans, if any, together with all accrued but unpaid interest thereon, if any, shall be due and payable on April 30, 2002, unless the Termination Date is otherwise extended by the Banks, in their sole and absolute discretion. Upon the written request of the Borrower, which request shall be delivered to the Administrative Agent at least 60 days prior to April 30, 2000 (the "Extension Date"), the Banks shall have the option (without any obligation whatsoever so to do) of extending the Termination Date for an additional one-year period. In the event that a Bank chooses not to extend the Termination Date for such an additional one-year period, notice shall be given by such Bank to the Borrower and the Administrative Agent at least 30 days prior to the Extension Date; provided, that the Termination Date shall not be extended with respect to any of the Banks unless the Required Banks are willing to extend the Termination Date. If less than all the Banks deliver favorable extension notices, but at least the Required Banks do so, then: (1) The Administrative Agent shall promptly notify those Banks that have delivered favorable extension notices (each an "Extending Bank") as to the amount of Commitments held by those Banks that have elected not to extend the Termination Date (each a "Terminating Bank"). Each Extending Bank shall be entitled to commit, effective as of the Extension Date, to purchase from the Terminating Banks, at any time after the Extension Date and on or before the Termination Date (prior to its extension hereunder), a ratable portion of the Commitments and outstanding Loans of the Terminating Banks in accordance with the Extending Bank's respective percentage of the remaining Aggregate Commitments. In such event, the Terminating Banks shall be required to sell to such Extending Bank all or any portion of their respective Commitments and outstanding Loans, at the times specified by the Extending Banks after the Extension Date and on or prior to the Termination Date (prior to its extension hereunder). Each Extending Bank desiring to purchase a portion of such Commitments and outstanding Loans shall notify the Administrative Agent and the Borrower of such election and shall deliver, in form satisfactory to the Administrative Agent and the Borrower, a commitment to effect such purchase, not later than fifteen (15) days prior to the Extension Date. If any of the Extending Banks elect not to commit to make such a purchase, the Administrative Agent shall again notify the other Extending Banks as to the amount of Commitments available to be purchased by them in the same manner as set forth in this paragraph, with any commitment with respect to such purchase to be 30 36 delivered to the Administrative Agent and the Borrower prior to the Extension Date. (2) If on the Extension Date, commitments to purchase all Commitments and outstanding Loans of the Terminating Banks pursuant to paragraph (1) above have not been delivered to the Administrative Agent and the Borrower, the Borrower shall be entitled to designate another bank or banks, acceptable to the Administrative Agent, to purchase any remaining Commitments and outstanding Loans from any Terminating Bank at any time after the Extension Date and on or prior to the Termination Date (prior to its extension hereunder). In such event, the Terminating Bank shall be required to sell to such designated bank or banks all or any portion of its Commitment and outstanding Loans, at the time specified by the Borrower after the Extension Date and on or prior to the Termination Date (prior to its extension hereunder). (3) If 30 days prior to the Termination Date (prior to its extension hereunder) any Terminating Banks hold Commitments that are not subject to purchase commitments from Extending Banks or banks designated by the Borrower pursuant to paragraph (2) above, then the Administrative Agent shall again notify the Extending Banks of the Commitments available to be purchased, and the Extending Banks shall be entitled to purchase such Commitments in accordance with the procedure set forth in paragraph (1) above. (4) If on the Termination Date (prior to its extension hereunder) any Commitments of any Terminating Banks are not purchased as set forth above, the Aggregate Commitments under the Facility shall be reduced by the aggregate amount of such Commitments of such Terminating Banks, and the Loans of such Terminating Banks shall be paid in full. On each Extension Date on which the Termination Date is extended pursuant to the foregoing, the Borrower shall pay the extension fee as required by Section 2.07(a). SECTION 2.06. Interest Rates. (a) "Applicable Margin" means: (i) until the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, (y) for each Euro-Dollar Loan, 0.825%; provided, however, that Euro-Dollar Loans made under the Original Agreement which are outstanding on the Closing Date shall be adjusted to reflect the provisions of this Section 2.06 for the remainder of their respective Interest Periods; and 31 37 (ii) subject to the proviso at the end of Section 2.06(a) (i), from and after the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, and (y) for each Euro-Dollar Loan, the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below as to such type of Loan and the Debt Rating in effect on the last day of the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that if there is no Debt Rating, the Applicable Margin for Euro-Dollar Loans shall be based upon Level V of the table below.
------------------------------------------------------------- Level Level Level Level Level I II III IV V ============================================================= Debt Rating Above BBB+/ BBB/ BBB-/ Below BBB+/ Baa1 Baa2 Baa3 BBB-/ Baa1 Baa3 ------------------------------------------------------------ Applicable Margin 0.675% 0.825% .95% 1.10% 1.30% ------------------------------------------------------------
In determining the amounts to be paid by the Borrower pursuant to Sections 2.06(a), the Borrower and the Banks shall refer to PPI's Debt Rating from time to time. For purposes hereof, "Performance Pricing Determination Date" shall mean each date on which the Debt Rating changes. Each change in interest and fees as a result of a change in Debt Rating shall be effective only for Loans (including Refunding Loans) which are made on or after the relevant Performance Pricing Determination Date. All determinations hereunder shall be made by the Administrative Agent unless the Required Banks shall object to any such determination. The Borrower shall promptly notify the Administrative Agent of any change in the Debt Rating. (b) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day less the Applicable Margin. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (c) Subject to the proviso at the end of Section 2.06(a) (i), each Euro Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period 32 38 applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable London Interbank Offered Rate for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 1 month, at intervals of 1 month after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Euro Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rates appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, provided that (i) if more than one such offered rate appears on the Reuters Screen LIBO Page, the "London Interbank Offered Rate" will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of such offered rates; (ii) if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York City, selected by the Administrative Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, for deposits in Dollars offered to leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Euro-Dollar Loan. (d) Each Money Market Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Money Market Loan is made until it becomes due, at a rate per annum equal to the applicable Money Market Rate set forth in the relevant Money Market Quote. Such interest shall be payable on the Stated Maturity Date thereof, and, if the Stated Maturity Date occurs more than 90 days after the date of the relevant Money Market Loan, at intervals of 90 days after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks by telecopier of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. 33 39 (f) After the occurrence and during the continuance of an Event of Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) may, at the election of the Required Banks, bear interest at the Default Rate. SECTION 2.07. Fees. (a) If the Termination Date is extended pursuant to Section 2.05(b), on each Extension Date on which the Termination Date is extended, the Borrower shall pay to the Administrative Agent, for the ratable account of each Bank which is an Extending Bank pursuant to such Section, a fully earned and non-refundable extension fee in the amount of 0.10% of the aggregate amount of the Commitments so extended (after giving effect to the amount of any Commitment which each such Extending Bank has committed to purchase pursuant to such Section). (b) The Borrower shall pay to the Administrative Agent for the ratable account of each Bank a facility fee (the "Facility Fee") on the maximum amount of the aggregate Commitments in effect for any relevant period, irrespective of usage, calculated in the manner provided in Section 2.06(a)(ii), at a rate per annum equal to (i) for the period commencing on the Closing Date to and including the first Performance Pricing Determination Date, 0.125%; and (ii) from and after the first Performance Pricing Determination Date, the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below and the Debt Rating for the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that if there is no Debt Rating, the Facility Fee shall be based upon Level V of the table below. The Facility Fee shall accrue at all times from and including the Closing Date to but excluding the Termination Date and shall be payable, in arrears, on each March 31, June 30, September 30 and December 31 and on the Termination Date.
------------------------------------------------------------- Level Level Level Level Level I II III IV V ============================================================= Debt Rating Above BBB+ BBB BBB- Below BBB+ BBB- ------------------------------------------------------------- Facility Fee 0.125% 0.125% 0.15% 0.15% 0.15% -------------------------------------------------------------
(c) The Borrower shall pay to the Administrative Agent, for the account and sole benefit of the Administrative Agent, such fees and other amounts at such times as set forth in the Administrative Agent's Letter Agreement. 34 40 SECTION 2.08. Optional Termination or Reduction of Commitments. The Borrower may, upon at least 3 Domestic Business Days' notice to the Administrative Agent, terminate at any time, or proportionately reduce the Unused Commitments from time to time by an aggregate amount of at least $5,000,000 or any larger multiple of $1,000,000. If the Commitments are terminated in their entirety, the date of such termination shall be the Termination Date for all purposes hereunder, and all Loans then outstanding, together with accrued interest thereon and any amounts payable pursuant to Section 8.05(a) in connection therewith, and all fees payable on the Termination Date, shall be due and payable on such date. SECTION 2.09. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date and any Loans then outstanding, together with accrued interest thereon and any amounts payable pursuant to Section 8.05(a) in connection therewith, and all fees payable on the Termination Date, shall be due and payable on such date. In the event of a Change in Control, the Administrative Agent (acting at the direction of the Required Banks) may terminate the Commitments on a date specified in a notice to the Borrower, which date (i) must be at least 3 Domestic Business Days following the date of such notice, and (ii) shall constitute the Termination Date for all purposes hereunder. SECTION 2.10. Optional Prepayments. (a) The Borrower may, upon at least 1 Domestic Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 for Syndicated Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Banks (or of Wachovia, as to Swing Loans) included in such Base Rate Borrowing. (b) Subject to the provisions of Section 8.05(a) with respect to any prepayment not made on the last day of the relevant Interest Period, the Borrower may, upon at least 2 Euro-Dollar Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Fixed Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 as to Syndicated Borrowings and Money Market Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment, together with any amount required to be paid pursuant to Section 8.05(a). Each such optional prepayment shall be applied to prepay ratably the Fixed Rate Loans of the several Banks (or of Wachovia, as to Swing Loans) included in such Fixed Rate Borrowing. 35 41 (c) Upon receipt of a notice of prepayment pursuant to this Section 2.10, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. SECTION 2.11. Mandatory Prepayments. (a) On each date on which the Commitments are reduced pursuant to Section 2.08, the Borrower shall repay or prepay such principal amount of the outstanding Loans, if any (together with interest accrued thereon and any amount required to be paid pursuant to Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the aggregate amount of the Commitments as then reduced. On the Termination Date, the Borrower shall make the payments required to be made pursuant to Section 2.09. (b) On each date on which the aggregate principal amount of the Loans outstanding exceeds the Borrowing Base on such date, the Borrower shall repay or prepay such principal amount of the outstanding Loans (together with interest thereon) as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the Borrowing Base on such date. (c) Each such payment or prepayment shall be applied to the Swing Loans or ratably to the Loans of the Banks outstanding on the date of payment or prepayment in the following order of priority: (i) first, to Swing Loans which are Base Rate Loans; (ii) secondly, to Transaction Rate Loans; (iii) thirdly, to Syndicated Loans which are Base Rate Loans; (iv) fourthly, to Euro-Dollar Loans; and (v) lastly, to Money Market Loans. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Syndicated Loans, Money Market Loans and Swing Loans and of fees hereunder, not later than noon (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks, and to Wachovia such payment received by the Administrative Agent on account of the Swing Loans. If the Administrative Agent fails to distribute to any Bank its ratable share of any such payment (i) on the day received, if received not later than 1:00 p.m. (Atlanta, Georgia time) or (ii) on the next Domestic Business Day, if received after 1:00 p.m. (Atlanta, Georgia time) on such day, then such Bank shall be entitled to recover such Bank's ratable share of such payment from the Administrative Agent, together with interest thereon for each day during the period from the date 36 42 such Bank's ratable share of such payment shall have become due until such distribution shall be made, at a rate per annum equal to the rate at which the Administrative Agent determines that it obtained (or could have obtained) overnight federal funds in such amount for each such day during such period. (b) Whenever any payment of principal of, or interest on, the Base Rate Loans, Transaction Rate Loans or the Money Market Loans or of fees hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. (c) All payments of principal, interest and fees and all other amounts to be made by the Borrower pursuant to this Agreement with respect to any Loan or fee relating thereto shall be paid without deduction for, and free from, any taxes, imposts, levies, deductions, or withholdings now or hereafter imposed by any governmental authority or by any taxing authority thereof or therein, excluding in the case of each Bank, (1) any taxes imposed by the United States or any political subdivision thereof on the effectively connected net income of any Bank or any Bank's Lending Office or any franchise taxes imposed by such jurisdiction, (2) taxes imposed on the net income of, or franchise taxes imposed upon, any Bank by the jurisdiction under the laws of which such Bank is organized or by any political subdivision thereof, (3) taxes imposed on the net income of such Bank's Lending Office, and franchise taxes imposed on it, by the jurisdiction of such Bank's Lending Office, or any political subdivision thereof, (4) any taxes imposed on any Bank by Section 884(a) of the Internal Revenue Code of 1986, as amended (and any successor statute to Section 884(a)), and (5) any United States withholding tax payable with respect to any payments to such Bank under the laws (including, without limitation, any treaty, ruling, judicial or administrative determination or regulation) in effect on the "Initial Date" (as hereinafter defined) or as a result of the Bank having voluntarily changed the jurisdiction of its Lending Office from a jurisdiction in which payments made to such Bank are exempt from United States withholding tax to a jurisdiction in which such payments are not so exempt, but not excluding any United States withholding tax payable or increased as a result of any change in any law, treaty, ruling, judicial or administrative determination or regulation, or interpretation thereof occurring after the Initial Date (all such non-excluded taxes, levies, imposts, deductions, and withholdings hereinafter referred to as "Taxes"). For purposes hereof, the term "Initial Date" shall mean, in the case of each Bank party hereto on the date hereof, the Closing Date, and in the case of 37 43 each other Bank, the effective date of the Assignment and Acceptance pursuant to which it became a Bank hereunder. In the event that the Borrower is required by applicable law to make any such withholding or deduction of Taxes with respect to any Loan or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to any Bank in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment, and shall pay to such Bank additional amounts as may be necessary in order that the amount received by such Bank after the required withholding or other payment shall equal the amount such Bank would have received had no such withholding or other payment been made. If no withholding or deduction of Taxes are payable in respect to any Loan or fee relating thereto, the Borrower shall furnish any Bank, at such Bank's written request, a certificate from each applicable taxing authority or an opinion of counsel reasonably acceptable to such Bank, in either case stating that such payments are exempt from or not subject to withholding or deduction of Taxes. If the Borrower fails to provide such original or certified copy of a receipt evidencing payment of Taxes or certificate(s) or opinion of counsel described in the preceding sentence, the Borrower hereby agrees to compensate such Bank for, and indemnify it with respect to, the tax consequences of the Borrower's failure to provide evidence of tax payments or tax exemption; provided, however, that the Borrower shall not be obligated to indemnify any party for penalties, additions to tax, interest or expenses associated with the payment of Taxes if the Bank's liability for such Taxes has arisen as a result of the fault of such Bank; and provided, further, that the Borrower shall not be obligated to indemnify any Bank for Taxes, penalties, additions to tax, interest or expenses incurred as a result of such Bank having voluntarily changed its Lending Office from a jurisdiction in which payments made to such Bank are exempt from United States withholding tax to a jurisdiction in which such payments are not so exempt. Such compensation or indemnification payment shall be made within 30 days from the date such Bank makes written request therefor. Any such request shall be made within 90 days after the date on which such payment of Taxes was made. Each such request shall be accompanied by a copy of the statement from the taxing authority demanding payment by such Bank of such Taxes or by a certificate from such Bank which certificate shall set forth in reasonable detail the basis for any additional amount payable to such party under this Section 2.12 (together with reasonable evidence of payment of such Taxes). Any Bank entitled to claim any additional amounts payable pursuant to this Section 2.12 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if the making of such change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter 38 44 accrue and the making of such a change would not, in the reasonable judgment of such Bank, be otherwise materially disadvantageous to such Bank. Each Bank which is not organized under the laws of the United States or any state thereof agrees, as soon as practicable after receipt by it of a request by the Borrower to do so, to file all appropriate forms and take other appropriate action to obtain a certificate or other appropriate document from the appropriate governmental authority in the jurisdiction imposing the relevant Taxes, establishing that it is entitled to receive payments of principal and interest under this Agreement and the Notes without deduction and free from withholding of any Taxes imposed by such jurisdiction; provided, that if it is unable, for any reason, to establish such exemption, or to file such forms and, in any event, during such period of time as such request for exemption is pending, the Borrower shall nonetheless remain obligated under the terms of the immediately preceding paragraph. In the event any Bank receives a refund of any Taxes paid by the Borrower pursuant to this Section 2.12(c), it will pay to the Borrower the amount of such refund promptly upon receipt thereof; provided, however, if at any time thereafter it is required to return such refund, the Borrower shall promptly repay to it the amount of such refund. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and the Banks contained in this Section 2.12(c) shall be applicable with respect to any Transferee, subject to Section 9.08(e) as to any Participant, and any calculations required by such provisions (i) shall be made based upon the circumstances of such Transferee, and (ii) constitute a continuing agreement and shall survive the termination of this Agreement and the payment in full or cancellation of the Notes. SECTION 2.13. Computation of Interest and Fees. Interest on Base Rate Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Interest on Euro-Dollar Loans and Money Market Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 365 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.14 Changes to Commitments. So long as the Borrower has not reduced the Commitments, the Borrower may request that the Commitments be increased to $350,000,000 (the "Maximum Commitment"). If the Borrower requests that the total 39 45 Commitments from the Banks then parties to this Agreement be increased, the Administrative Agent shall promptly give notice of such request (the "Commitment Increase Notice") to each Bank. Within five Business Days of its receipt of a Commitment Increase Notice from the Administrative Agent, each Bank that desires to increase its Commitment in response to such request (each such Bank, a "Consenting Bank") shall deliver notice to the Administrative Agent of its election to increase its Commitment and the maximum amount of such increase to its Commitment (for each Consenting Bank, its "Additional Commitment"), which may not be larger than the excess of (a) the Maximum Commitment, over (b) the Commitments then in effect. The failure of any Bank to so notify the Administrative Agent of its election and its Additional Commitment, if any, shall be deemed to be a refusal to increase its Commitment. If the sum of the Commitments then in effect plus the aggregate Additional Commitments does not exceed the Maximum Commitment, the Commitment of each Consenting Bank shall be increased by its Additional Commitment. If the sum of the Commitments then in effect plus the aggregate Additional Commitments exceeds the Maximum Commitment, the Commitment of each Consenting Bank shall be increased by an amount equal to the product of (i) such Consenting Bank's Additional Commitment multiplied by (ii) the quotient of (a) the excess of (A) the Maximum Commitment, over (B) the Commitments then in effect, divided by (b) the aggregate Additional Commitments of all Consenting Banks. Any increase in the Commitments shall be effective as of the tenth Business Day after the delivery of the Commitment Increase Notice; provided, that the Commitments may not at any time exceed the Maximum Commitment. SECTION 2.15 Additional Banks and Commitments. Upon (i) the execution of a signature page to this Agreement by a new bank or financial institution (a "New Bank") and acceptance thereof by the Administrative Agent,(ii) execution and delivery by the Borrower of a Syndicated Loan Note and a Money Market Loan Note in favor of the New Bank, and (iii) delivery of notice to the Banks by the Administrative Agent setting forth the effective date of the addition of the New Bank hereunder and the amount of such New Bank's Commitment, such New Bank shall be for all purposes a Bank party to this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth on the signature page executed by the New Bank; provided, however, (i) the total Commitments of all Banks (including any New Banks) shall not exceed in the aggregate the Maximum Commitment, and (ii) the Commitments and obligations of all Banks party hereto prior to the addition of any New Bank shall not be affected by the addition of such New Bank. ARTICLE III CONDITIONS TO BORROWINGS 40 46 SECTION 3.01. Conditions to First Borrowing. The obligation of each Bank to make a Loan on the occasion of the first Borrowing is subject to the satisfaction of the conditions set forth in Section 3.02 and receipt by the Administrative Agent of the following (as to the documents described in paragraphs (a), (c), (d) and (e) below, in sufficient number of counterparts for delivery of a counterpart to each Bank and retention of one counterpart by the Administrative Agent): (a) from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission stating that such party has duly executed a counterpart of this Agreement and sent such counterpart to the Administrative Agent; (b) a duly executed Syndicated Loan Note for the account of each Bank, a duly executed Swing Loan Note for the account of Wachovia and a duly executed Money Market Note for the account of each Bank, complying with the provisions of Section 2.04, and from each Bank which holds any of the Original Notes, such Original Notes, and a duly executed Guaranty and Contribution Agreement; (c) an opinion letter of King & Spalding, counsel for the Borrower and the Guarantors, dated as of the Closing Date, substantially in the form of Exhibit B and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Bank may reasonably request; (d) an opinion of Jones, Day, Reavis & Pogue, special counsel for the Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit C and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request; (e) a certificate (the "Closing Certificate") substantially in the form of Exhibit G, dated as of the Closing Date, signed by an Executive Officer (other than the Secretary) to the effect that (i) no Default has occurred and is continuing on the date of the first Borrowing and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the date of the first Borrowing hereunder; (f) all documents which the Administrative Agent or any Bank may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement, the Notes, the Guaranty and the Contribution Agreement, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent, including, without limitation, certificates of incumbency of the General Partner and of the Guarantors, signed by the Secretary or an Assistant Secretary of the General Partner and the Guarantors, certifying as to the names, true signatures and incumbency of the 41 47 officer or officers of the General Partner and the Guarantors authorized to execute and deliver the Loan Documents on behalf of the Borrower or the Guarantors, and certified copies of the following items: (i) the Borrower's Certificate of Limited Partnership; (ii) the Borrower's Partnership Agreement, (iii) for the General Partner and the Guarantors, its Certificate of Incorporation, (iv) for the General Partner and the Guarantors, its Bylaws, (v) for the Borrower, the General Partner and the Guarantors, a certificate of the Secretary of State of Georgia as to the valid existence of the Borrower, the General Partner or the Guarantors as a Georgia limited partnership or corporation, as the case may be, and certificates of good standing or valid existence of the Borrower, the General Partner and the Guarantors as a foreign limited partnership or corporation, as the case may be, in each other jurisdiction in which it is required to be qualified and (vi) the action taken by the Board of Directors of the General Partner and the Guarantors authorizing (A) on behalf of the Borrower, the execution, delivery and performance of this Agreement, the Notes, the Contribution Agreement and the other Loan Documents to which the Borrower is a party, and (B) on behalf of the Guarantors, the execution, delivery and performance of the Guaranty and the Contribution Agreement; (g) a Notice of Borrowing or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; and (h) receipt of the fees then due and payable to the Administrative Agent pursuant to the Administrative Agent's Letter Agreement. In addition, if the Borrower desires funding of a Euro-Dollar Loan on the Closing Date, the Administrative Agent shall have received, the requisite number of days prior to the Closing Date, a funding indemnification letter satisfactory to it, pursuant to which (i) the Administrative Agent and the Borrower shall have agreed upon the interest rate, amount of Borrowing and Interest Period for such Euro-Dollar Loan, and (ii) the Borrower shall indemnify the Banks from any loss or expense arising from the failure to close on the anticipated Closing Date identified in such letter or the failure to borrow such Euro-Dollar Loan on such date. SECTION 3.02. Conditions to All Borrowings. The obligation of each Bank to make a Syndicated Loan or of Wachovia to make a Swing Loan on the occasion of each Borrowing (other than a Borrowing which consists solely of a Refunding Loan) is subject to the satisfaction of the following conditions, except as expressly provided in the last sentence of this Section 3.02: (a) receipt by the Administrative Agent of a Notice of Borrowing, acceptance of a Transaction Rate Quote or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; 42 48 (b) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (c) the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement shall be true on and as of the date of such Borrowing; and (d) the fact that, immediately after such Borrowing, the conditions set forth in clauses (i) and (ii) of Section 2.01 shall have been satisfied. Each Borrowing (Syndicated, Swing and Money Market) hereunder (other than a Borrowing which consists solely of a Refunding Loan) shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in paragraphs (b), (c) and (d) of this Section, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d). ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower and (by incorporation by reference in the Guaranty) the Guarantors, as expressly stated, each represent and warrant that: SECTION 4.01. Partnership or Corporate Existence and Power. The Borrower is a limited partnership, and PPI and each Subsidiary is a corporation, duly organized, validly existing and in good standing under the laws of Georgia, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all partnership powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where any such failure does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.02. Partnership or Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents and by the Guarantors of the Guaranty (i) are within the Borrower's partnership powers and the Guarantors' respective corporate powers, (ii) have been duly authorized by all necessary partnership or corporate action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, other than filings required by federal or state securities laws with respect to this Agreement (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of limited partnership or partnership agreement of the Borrower or the articles of incorporation or by-laws of the 43 49 Guarantors or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower, the Guarantors or any Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower, the Guarantors or any Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes, the Guaranty and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower and the Guarantors parties thereto, enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. SECTION 4.04. Financial and Property Information. (a) The balance sheet of PPI and the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1998 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, in the case of PPI reported on by PriceWaterhouseCoopers LLP, copies of which have been delivered to each of the Banks, fairly present, in all material respects, in conformity with GAAP, the consolidated financial position of PPI and the Borrower and its Consolidated Subsidiaries, respectively, as of such date and their consolidated results of operations and cash flows for such periods stated. (b) Since December 31, 1998, there has been no event, act, condition or occurrence having a Material Adverse Effect. (c) All material information concerning the Properties which has been furnished to the Banks is true and correct in all material respects. SECTION 4.05. No Litigation. There is no action, suit or proceeding pending, or to the knowledge of the Executive Officers, threatened, against or affecting the Borrower, the Guarantors or any Subsidiaries before any court or arbitrator or any governmental body, agency or official which has or is reasonably expected to cause a Material Adverse Effect or which in any manner draws into question the validity of or is reasonably expected to impair the ability of the Borrower or the Guarantors to perform its obligations under, this Agreement, the Notes, the Guaranty or any of the other Loan Documents. SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the 44 50 PBGC or a Plan under Title IV of ERISA, except where any such failure does not involve an aggregate amount in excess of $2,500,000. (b) Neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. SECTION 4.07. Compliance with Laws; Payment of Taxes. The Borrower, the Guarantors and the Subsidiaries are in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where (i) such compliance is being contested in good faith through appropriate proceedings or (ii) any failure to comply does not have and is not reasonably expected to cause a Material Adverse Effect. There have been filed on behalf of the Borrower, the Guarantors and the Subsidiaries all Federal, state and local income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower, the Guarantors or any Subsidiary have been paid, except: (A) ad valorem taxes not in excess of an aggregate amount of $500,000; and (B) other liabilities, if (1) they are being contested in good faith and against which the Borrower, the Guarantors or Subsidiary has set up reserves in accordance with GAAP, or (2) the aggregate amount involved is not in excess of $2,500,000. The charges, accruals and reserves on the books of the Borrower, the Guarantors and the Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower and the Guarantors, adequate. United States income tax returns of PPI have been examined for the 1996 and 1997 Fiscal Years and the examination reports with respect thereto have been accepted by the District Director of the Internal Revenue Service. SECTION 4.08. Subsidiaries. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08, as supplemented from time to time, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. SECTION 4.09. Investment Company Act. Neither the Borrower, the Guarantors nor any Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Public Utility Holding Company Act. Neither the Borrower, PPI nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. SECTION 4.11. Ownership of Property. Each of the Borrower, PPI and the Subsidiaries has title to its properties 45 51 sufficient for the conduct of its business, except where any such failure does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.12. No Default. Neither the Borrower, PPI nor any of the Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which has or is reasonably expected to cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 4.13. Full Disclosure. All information heretofore furnished by the Borrower or the Guarantors to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Bank will be, true, accurate and complete in all material respects or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower and the Guarantors have disclosed to the Banks in writing any and all facts which have had or are reasonably expected to cause a Material Adverse Effect. SECTION 4.14. Environmental Matters. (a) Neither the Borrower, the Guarantors nor any other Subsidiary is, to the knowledge of the Executive Officers, subject to any Environmental Liability which has had or is reasonably expected to cause a Material Adverse Effect and neither the Borrower, the Guarantors nor any Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent (and the Administrative Agent shall promptly furnish a copy of any such disclosure to the Banks). None of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent. (b) No Hazardous Materials have been permitted or are being permitted to be used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, or, to the best of the knowledge of the Executive Officers, at or from any adjacent site or facility, except for Hazardous Materials, such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in all material respects in compliance with all applicable Environmental Requirements and except as disclosed in writing to the Administrative Agent. (c) The Borrower, the Guarantors and each of the Subsidiaries, has procured all Environmental Authorizations 46 52 necessary for the conduct of its business, and is in compliance with all Environmental Requirements (including, to the best knowledge of the Executive Officers, with respect to any Environmental Releases) in connection with the operation of the Properties and the Borrower's, the Guarantors' and each other Subsidiary's respective businesses, except where any such failure to comply does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.15. Partner Interests and Capital Stock. All Partner Interests and Capital Stock, debentures, bonds, notes and all other securities of the Borrower, the Guarantors and each of the Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including, but not limited to, the "Blue Sky" laws of all applicable states and the federal securities laws, except where any such failure to comply does not and is not reasonably expected to cause a Material Adverse Effect. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of non-voting Capital Stock of each of the Borrower's Subsidiaries is owned by the Borrower free and clear of any Lien or adverse claim. SECTION 4.16. Margin Stock. Neither the Borrower, the Guarantors nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. SECTION 4.17. Insolvency. After giving effect to the execution and delivery of the Loan Documents and the making of the Loans under this Agreement: (i) neither the Borrower nor the Significant Subsidiary will (x) be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction, whether current or contemplated, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with respect to the Loans will not be rendered avoidable under any Other Applicable Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable state law pertaining 47 53 to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time. SECTION 4.18. Insurance. The Borrower, the Guarantors and each of the Subsidiaries has (either in the name of the Borrower, the Guarantors or in such other Subsidiary's own name), with financially sound and reputable insurance companies having an A.M. Best rating of B+ or better, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 4.19. Real Estate Investment Trust. PPI is qualified under the Code as a real estate investment trust. SECTION 4.20. Year 2000 Compliance. The Borrower (i) has developed a program to evaluate the ability of its computer hardware and software systems and programs to handle effectively data that includes dates after December 31, 1999 ("Year 2000 Compliant"), (ii) has taken corrective action in respect of its main accounting system to make it Year 2000 Compliant, (iii) has taken corrective action, or is in the process of implementing a plan to take corrective action prior to January 1, 2000, in respect of all other of its core computer hardware and software systems and programs so that such core systems and programs become Year 2000 Compliant prior to January 1, 2000, and (iv) has begun a program to review its peripheral computer hardware and software systems and programs so as to identify any corrective action that may need to be taken in order for such peripheral systems and programs to become Year 2000 Compliant prior to January 1, 2000. Based on the foregoing, the Borrower does not expect that any Material Adverse Effect will exist or occur on or after January 1, 2000 as a result of any of its computer hardware or software systems or programs failing to be Year 2000 Compliant. ARTICLE V COVENANTS The Borrower and (by incorporation by reference in the Guaranty) the Guarantors agree that, so long as any Bank has any Commitment hereunder or any amount payable hereunder or under any Note remains unpaid: SECTION 5.01. Information. PPI and the Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each Fiscal Year, (i) a consolidated balance sheet of PPI as of the end of its Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all 48 54 certified by PricewaterhouseCoopers LLP or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business, and (ii) a consolidated balance sheet of Borrower and its Consolidated Subsidiaries as of the end of its Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by an Executive Officer; (b) as soon as available and in any event within 60 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, consolidated balance sheets of each of PPI and of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement of income and statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by an Executive Officer; (c) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate, substantially in the form of Exhibit F (a "Compliance Certificate"), of an Executive Officer (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.09, inclusive, and Sections 5.11 and 5.24 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within 5 Domestic Business Days after any Executive Officer becomes aware of the occurrence of any Default, a certificate of an Executive Officer setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of PPI generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports (excluding Form 4, Statement of Changes in Beneficial Ownership, or its equivalent, unless 49 55 they reflect a Change in Control) which PPI shall have filed with the Securities and Exchange Commission; (g) if and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (h) within 60 days after the end of each Fiscal Quarter, a Borrowing Base Certificate as of the last day of the Fiscal Quarter just ended; provided, however, that at the Borrower's election, Borrower may, and or at the Administrative Agent's election on not less than 10 Domestic Business Days notice, Borrower shall, submit a Borrowing Base Certificate to the Administrative Agent on or before the fifteenth Domestic Business Day after the end of the first or second month in any Fiscal Quarter, as of the last day of such month; (i) by April 1 of each year, a report as of the end of such Fiscal Year containing the following information: (i) a schedule of all outstanding Debt, showing for each component of Debt, the lender, the total commitment, the total Debt outstanding, the interest rate, if fixed, or a statement that the interest rate floats, the term, the required amortization (if any) and the security (if any); (ii) a schedule of all interest rate protection agreements, showing for each such agreement, the total dollar amount, the type of agreement (i.e. cap, collar, swap, etc.) and the term thereof; and (iii) a development schedule of the announced development pipeline, including for each announced development project, the project name and location, the number of units, the expected construction start date, the expected date of delivery of the first units, the expected stabilization date, and the total anticipated cost. (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Inspection of Property, Books and Records. The Borrower and the Guarantors will (i) keep, and cause each other Consolidated Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and 50 56 transactions in relation to its business and activities; and (ii) permit, and cause each other Consolidated Subsidiary to permit, representatives of any Bank at such Bank's expense prior to the occurrence of a Default and at the Borrower's or the Guarantors' expense after the occurrence and during the continuance of a Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower and the Guarantors agree to cooperate and assist in such visits and inspections, in each case at such reasonable times, upon reasonable prior notice to the Borrower or the Guarantors and as often as may reasonably be desired. SECTION 5.03. Consolidated Total Secured Debt. The amount of Consolidated Total Secured Debt will not at any time exceed the greater of (x) 40% of Consolidated Total Assets or (y) the lesser of (i) 50% of Consolidated Total Assets or (ii) $375,000,000. SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets. The ratio of Consolidated Total Debt to Consolidated Total Assets will not at any time exceed 0.60 to 1.00. SECTION 5.05. Interest Coverage. The ratio of (x) Consolidated Income Available for Debt Service to (y) interest expense shall at all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. SECTION 5.06. Restricted Payments. The Borrower's Restricted Payments in any calendar year shall not exceed 95% of Consolidated Income Available for Distribution for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Consolidated Income Available for Distribution to permit PPI to preserve its status as a real estate investment trust under the applicable provision of the Code, or (ii) PPI declares one or more capital gains dividends within such calendar year (in which event the amount of additional Restricted Payments that may be made as a result of such declaration as provided in this clause (ii) shall not exceed $30,000,000). In the event that the Borrower or PPI receives a public debt rating of BBB- or better from Standard & Poors or Baa3 or better from Moody's Investor's Service and so long as that rating is affirmed during each year, the Borrower's Restricted Payments in any calendar year will be limited to 100% of Consolidated Income Available for Distribution for such calendar year with the same exceptions contained in clauses (i) and (ii) of this Section 5.06. SECTION 5.07. Loans or Advances. Neither the Borrower nor any Guarantor or Subsidiary shall make loans or advances to any Person except: (i) deposits required by government agencies 51 57 or public utilities; (ii) without duplication, loans and advances made to the Borrower, any Guarantor or any Subsidiary; provided, that loans and advances from the Borrower and the Guarantors to Subsidiaries that are not Guarantors may not exceed an aggregate amount outstanding at any time equal to 10% of Consolidated Total Assets; (iii) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000.00; and (iv) without duplication, other loans or advances made in the ordinary course of business in the aggregate outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clause (iii) of this Section 5.07 and minus Investments made and permitted pursuant to Section 5.09(D); provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii), (iii) or (iv), the Borrower will be in full compliance with all the provisions of this Agreement. SECTION 5.08. Purchases of Stock by the Significant Subsidiaries. Except for purchases or acquisitions of shares of PPI's Capital Stock made for purposes of having such shares available for purchase by PPI shareholders pursuant to the Post Properties, Inc. Dividend Reinvestment and Stock Purchase Plan, as amended as of the Closing Date, and, subject to the approval of the Required Banks (not to be unreasonably withheld), as it may thereafter be amended, the Significant Subsidiaries shall not purchase or acquire any shares of PPI's Capital Stock during any 12 month period in excess of the lesser of (i) 2.25% of all PPI's Capital Stock outstanding on the first day of such period, or (ii) an aggregate purchase price of $30,000,000. SECTION 5.09. Investments. Neither the Borrower nor any Guarantor shall make Investments in any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and/or (v) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (B) Investments permitted by clauses (i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) without duplication, Investments (exclusive of loans and advances permitted under Section 5.07(ii)) from the Borrower in Subsidiaries that are not Guarantors in an aggregate amount outstanding at any time not in 52 58 excess of 10% of Consolidated Total Assets; and (D) without duplication, other Investments in an aggregate amount outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clauses (iii) and (iv) of Section 5.07. SECTION 5.10. Dissolution. Neither the Borrower, any Guarantor nor any of the Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock or that of any Subsidiary, except to the extent permitted by Section 5.11 and except for purchases by PPI of its own Capital Stock to the extent permitted by Section 5.08, and subject to the rights of limited partners of the Borrower to convert or exchange their Partner Interests in the Borrower to stock in PPI. SECTION 5.11. Consolidations, Mergers and Sales of Assets. The Borrower and the Guarantors will not, nor will the Borrower permit any other Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) the Borrower, any Guarantor and any Subsidiary may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower or such Guarantor or other Subsidiary is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (b) any Guarantor may merge with or transfer assets to the Borrower (with the Borrower as the survivor of any such merger), and any Subsidiary may merge with or transfer assets to the Borrower, any Guarantor, or another Subsidiary (with the Borrower or such Guarantor, as the case may be, as the survivor in any such merger in which the Borrower or any Guarantor is involved), and (c) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit, during any Fiscal Quarter, a transfer of assets or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding three (3) Fiscal Quarters, either (x) constituted more than five percent (5%) of Consolidated Total Assets at the end of the Fiscal Quarter immediately preceding such Fiscal Quarter, or (y) contributed more than five percent (5%) of Consolidated Income Available for 53 59 Debt Service during the four (4) Fiscal Quarters immediately preceding such Fiscal Quarter. In the case of any Subsidiary which transfers all or a substantial part of its assets pursuant to clause (c) of the preceding sentence, and in the case of any Subsidiary the stock or other ownership interests in which are being sold and with respect to which clause (c) would have been satisfied if the transaction had been a sale of assets of such Subsidiary, such Subsidiary shall be released from its obligations under the Guaranty (if it has become a party thereto) and, in the case of a transaction involving a sale of assets, such Subsidiary may dissolve. SECTION 5.12. Use of Proceeds. The proceeds of the Loans may be used for general corporate and partnership purposes of the Borrower and the Guarantors, and the Subsidiaries. No portion of the proceeds of the Loans will be used by the Borrower or the Guarantors (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, unless such tender offer or other acquisition is to be made on a negotiated basis with the approval of the Board of Directors of the Person to be acquired or (ii) for any purpose in violation of any applicable law or regulation. SECTION 5.13. Compliance with Laws; Payment of Taxes. (a) The Borrower and the Guarantors will, and will cause each of the Subsidiaries and each member of the Controlled Group to, comply with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where (i) the necessity of such compliance is being contested in good faith through appropriate proceedings, or (ii) any failure to comply which does not have and is not reasonably expected to cause a Material Adverse Effect. The Borrower and the Guarantors will, and will cause each of the Subsidiaries to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a Lien against the Property of the Borrower, the Guarantors or any other Subsidiary, except (A) liabilities being contested in good faith and against which, if requested by the Administrative Agent, the Borrower, the Guarantors or Subsidiary will set up reserves in accordance with GAAP, and (B) liabilities in an aggregate amount not in excess of $2,500,000. (b) If the Borrower or any other member of the Controlled Group shall enter into a Multiemployer Plan, the Borrower and the Guarantors shall not permit the aggregate complete or partial withdrawal liability under Title IV of ERISA with respect to Multiemployer Plans incurred by the Borrower, the Guarantors and members of the Controlled Group to exceed $5,000,000 at any time. For purposes of this Section 5.13(b), the amount of withdrawal liability of the Borrower and members of 54 60 the Controlled Group at any date shall be the aggregate present value of the amount claimed to have been incurred less any portion thereof which the Borrower, the Guarantors and members of the Controlled Group have paid or as to which the Borrower and the Guarantors reasonably believe, after appropriate consideration of possible adjustments arising under Sections 4219 and 4221 of ERISA, it and members of the Controlled Group will have no liability, provided that the Borrower and the Guarantors shall obtain prompt written advice from independent actuarial consultants supporting such determination. The Borrower and the Guarantors agree (i) once in each year, beginning with the first year in which the Borrower or any other member of the Controlled Group enters into a Multiemployer Plan, to request and use its best efforts to obtain a current statement (addressed to the Borrower and the Administrative Agent) of the withdrawal liability of the Borrower and the Guarantors and members of the Controlled Group from each Multiemployer Plan, if any, and (ii) to transmit a copy of such statement to the Administrative Agent and the Banks within 15 days after the Borrower receives the same. SECTION 5.14. Insurance. The Borrower and the Guarantors will maintain, and will cause each of the Subsidiaries to maintain (either in the name of the Borrower or the Guarantors' or such other Subsidiary's own name), with financially sound and reputable insurance companies having an A.M. Best rating of B+ or better, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 5.15. Change in Fiscal Year. The Borrower and the Guarantors will not, and will cause the Subsidiaries to not, change its Fiscal Year without the consent of the Required Banks. SECTION 5.16. Maintenance of Property; Principal Business. The Borrower and the Guarantors shall, and shall cause each other Subsidiary to, maintain all of its properties and assets in good condition, repair and working order, ordinary wear and tear excepted, and maintain all Property consisting of apartment communities (other than Property consisting of land acquired with existing improvements which are to be substantially demolished) in a first class manner. The principal business operations of the Borrower and the Subsidiaries, taken as a whole, will be directly or indirectly related to multi-family residential Properties. SECTION 5.17. Environmental Notices. Promptly upon any Executive Officer's becoming aware thereof, the Borrower and the Guarantors shall furnish to the Banks and the Administrative Agent prompt written notice of all Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting 55 61 the Properties or any adjacent property, which has had or is reasonably expected to cause a Material Adverse Effect. SECTION 5.18. Environmental Matters. The Borrower and the Guarantors will not, and will cause the Subsidiaries to not, and will not permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed, managed, or otherwise handled in compliance in all material respects with all applicable Environmental Requirements. SECTION 5.19. Environmental Release. The Borrower and the Guarantors agree that upon any Executive Officer's becoming aware of the occurrence of an Environmental Release at or on any of the Properties the Borrower will act immediately to investigate the extent of, and to take appropriate action to remediate such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority. SECTION 5.20. Transactions with Affiliates. Neither the Borrower, any Guarantor nor any of the Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower, any Guarantor or such other Subsidiary (which Affiliate is not PPI, the Borrower, the Guarantors or a Wholly Owned Subsidiary), except as permitted by law and in the ordinary course of business and pursuant to reasonable terms which are no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate. SECTION 5.21. Qualification as a Real Estate Investment Trust; General Partner. PPI shall at all times (i) remain qualified under the Code as a real estate investment trust and (ii) be the General Partner. The Borrower will not agree to amend or waive the requirements of Section 7.5A of the limited partnership agreement of the Borrower, as in effect on the date of this Agreement, as such requirements are applicable to the General Partner, without the prior written consent of the Required Banks (which consent the Banks hereby agree not to unreasonably withhold or delay). SECTION 5.22. Certain Covenants Concerning Subsidiaries. The Borrower and the Guarantors shall: (a) not permit the Subsidiary Consolidated Total Assets at any time to exceed twenty percent (20%) of Consolidated Total Assets; (b) not permit any of the Subsidiaries to Guarantee the Debt of another Person; provided, that any Subsidiary can 56 62 Guarantee the Debt of another Subsidiary, so long as the aggregate amount of Debt of Subsidiaries which is Guaranteed by Subsidiaries does not exceed $500,000; (c) not permit any Significant Subsidiary to (x) be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction in which it is engaged or about to be engaged, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA. For purposes of this Section 5.22(c), "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable state law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time; and (d) cause each Subsidiary which is or which becomes a Significant Subsidiary to deliver to the Administrative Agent within 20 Business Days after such event occurs (x) an executed counterpart of the Guarantee of the Loans (substantially in the form set forth in Exhibit H) in favor of the Agent and the Banks; (y) an executed counterpart of the Contribution Agreement (substantially in the form set forth in Exhibit L); and (z) documents pertaining to the Subsidiary reasonably requested by the Administrative Agent of the types described in paragraph (f) of Section 3.01. Section 5.23. Year 2000 Compliance Reports. The Borrower will deliver to the Agent: (a) Simultaneously with the delivery of each set of annual and semiannual financial statements referred to in Sections 5.01(a) and (b), through the year ending December 31, 1999, a statement of an authorized officer of the General Partner of the Borrower to the effect that nothing has come to the Borrower's attention to cause it to believe that its computer hardware and software systems and programs will fail to be Year 2000 Compliant such that there will exist or occur a Material Adverse Effect on or after January 1, 2000 as a result of such failure; (b) Within 5 Business Days after the Borrower becomes aware that its program to have its computer hardware and software systems and programs become Year 2000 Compliant prior to January 1, 2000 has been delayed in any material respect so that the Borrower reasonably expects that as a consequence thereof there 57 63 will exist or occur a Material Adverse Effect on or after January 1, 2000, a statement of such officer setting forth the details thereof and the actions being taken by the Borrower in respect thereof; and (c) promptly upon the receipt thereof, a copy of any material third party assessment of the Borrower's program to have its core computer hardware and software systems and programs to become Year 2000 Compliant, together with any recommendations made by such third party in respect of such program. SECTION 5.24. Consolidated Fixed Charges Coverage Ratio. At the end of each Fiscal Quarter, the Consolidated Fixed Charges Coverage Ratio shall not have been less than 1.75 to 1.0. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within 5 Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within 5 Domestic Business Days after such fee or other amount becomes due; or (b) the Borrower or any Guarantor shall fail to observe or perform any covenant contained in Sections 5.01(d), 5.02(ii), 5.03 to 5.06, inclusive, 5.08, 5.10 to 5.12, inclusive, 5.15 or 5.21; or (c) the Borrower or any Guarantor shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by paragraph (a) or (b) above) and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower or the Guarantors by the Administrative Agent at the request of any Bank or (ii) an Executive Officer otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made by the Borrower or a Guarantor in Article IV of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (e) the Borrower or any Guarantor shall fail to make any payment in respect of Debt in an aggregate amount in excess 58 64 of $2,500,000 outstanding (other than the Notes) when due or within any applicable grace period; or (f) any event or condition shall occur which results in the acceleration of the maturity of Debt outstanding of the Borrower or a Guarantor in an aggregate amount in excess of $2,500,000 (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or a Guarantor) or enables (with any condition for the giving of notice or the lapse of time, or both, having been satisfied) the holders of such Debt or any Person acting on such holders' behalf to accelerate the maturity thereof (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or a Guarantor); or (g) the Borrower or any Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (h) an involuntary case or other proceeding shall be commenced against the Borrower or a Guarantor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or a Guarantor under the federal bankruptcy laws as now or hereafter in effect; or (i) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be 59 65 entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; in each of the foregoing cases, where the aggregate amount not so paid or the resulting withdrawal liability of the Borrower, PPI or any Subsidiary is in excess of $2,500,000; or (j) one or more judgments or orders for the payment of money in an aggregate amount in excess of $2,500,000 shall be rendered against the Borrower or a Guarantor and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) a federal tax lien shall be filed against any Property of the Borrower or any Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be filed against any Property of the Borrower or a Guarantor under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing, except where in either such case (i) the aggregate amount involved is not in excess of $2,500,000, or (ii) such lien did not arise in connection with a capital gains transaction and is being contested in good faith and against which the Borrower or Subsidiary has set up reserves in accordance with GAAP. then, and in every such event, the Administrative Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and the obligation to make Swing Loans and they shall thereupon terminate, (ii) any Bank may terminate its obligation to fund a Money Market Loan in connection with any relevant Money Market Quote, and (iii) if requested by the Required Banks (but not otherwise), by notice to the Borrower declare the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) to be, and the Syndicated Loan Notes, together with the Swing Loan Note and the Money Market Loan Notes, shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default; provided that if any Event of Default specified in paragraph (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments and the obligation to make Swing Loans shall thereupon terminate and the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest thereon at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Banks. 60 66 SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 61 67 ARTICLE VII THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment; Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Bank; (b) shall not be responsible to the Banks for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Bank under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Banks, and then only on terms and conditions satisfactory to the Administrative Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or wilful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Administrative Agent and the Banks, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Administrative Agent shall be ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Bank, except that it will hold in trust for the account of each Bank any monies received by it which are payable to such Bank hereunder. SECTION 7.02. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any 62 68 certification, notice or other communication (including any thereof by telephone, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks in any action taken or failure to act pursuant thereto shall be binding on all of the Banks. SECTION 7.03. Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the nonpayment of principal of or interest on the Loans) unless the Administrative Agent has received notice from a Bank or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default or an Event of Default, or actually becomes aware of the existence of an Event of Default, the Administrative Agent shall give prompt notice thereof to the Banks. The Administrative Agent shall give each Bank prompt notice of each nonpayment of principal of or interest on the Syndicated Loans or the Swing Loan, whether or not it has received any notice of the occurrence of such nonpayment. The Administrative Agent shall (subject to Section 9.06) take such action hereunder with respect to such Default or Event of Default as shall be directed by the Required Banks, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. SECTION 7.04. Rights of Administrative Agent as a Bank. With respect to the Loans made by it, Wachovia in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as the Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include Wachovia in its individual capacity. The Administrative Agent may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with PPI or Borrower (and any of its Subsidiaries and Affiliates) as if it were not acting as the Administrative Agent, and the Administrative Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and the Administrative Agent) for services in connection with this Agreement or any 63 69 other Loan Document or otherwise without having to account for the same to the Banks. SECTION 7.05. Indemnification. Each Bank severally agrees to indemnify the Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements, but not including fees payable pursuant to the Administrative Agent's Letter Agreement), or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided that (i) no Bank shall be liable for any of the foregoing to the extent they arise from the negligence or wilful misconduct of the Administrative Agent and (ii) no Designated Bank shall be liable for any payment under this Section 7.05 so long as, and to the extent that, its Designating Bank makes such payments. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 7.06. Consequential Damages. THE ADMINISTRATIVE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 7.07. Payee of Note Treated as Owner. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent and the provisions of Section 9.08(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. SECTION 7.08. Nonreliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and 64 70 without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Administrative Agent. SECTION 7.09. Failure to Act. Except for action expressly required of the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Banks of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Administrative Agent by reason of taking, continuing to take, or failing to take any such action. SECTION 7.10. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower and the Administrative Agent may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Administrative Agent, subject to the right of the Borrower, so long as no Event of Default is in existence, to approve any such successor Administrative Agent which is not then a Bank or an Affiliate thereof, which approval shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's notice of resignation or the Required Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a bank which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor 65 71 Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: (a) the Administrative Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (b) the Required Banks advise the Administrative Agent that the London Interbank Offered Rate, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding the relevant type of Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make the type of Euro-Dollar Loans specified in such notice shall be suspended. Unless the Borrower notifies the Administrative Agent at least 2 Domestic Business Days before the date of any Borrowing of such type of Euro-Dollar Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, 66 72 whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Bank, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, a Change of Law or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement which is compensated by the payment of additional interest pursuant to the last paragraph of this Section 8.03(a)) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Lending Office); or (ii) shall impose on any Bank (or its Lending Office) or the London interbank market any other condition affecting its Fixed Rate Loans, its Syndicated Loan Notes or its Money Market Loan Notes or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Lending Office) of making or maintaining any Syndicated Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Lending Office) under this Agreement or under its Syndicated Loan Notes or Money Market Loan Notes with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction, but in no event shall the Borrower be liable for amounts incurred more than 90 days prior to receipt of such demand. 67 73 In addition, if at any time a Euro-Dollar Reserve Percentage greater than 0% is imposed on any Bank, the Borrower shall pay to such Bank additional interest on the unpaid principal amount of the Euro-Dollar Loans of such Bank until such principal amount is paid in full at an interest rate per annum equal at all times to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Euro-Dollar Loan for such Interest Period by (ii) 1.00 minus the Euro-Dollar Reserve Percentage, payable on each date on which interest is payable on such Euro-Dollar Loan. Such additional interest, if any, shall be determined by such Bank and notified to the Borrower through the Administrative Agent. (b) If any Bank shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction, but in no event shall the Borrower be liable for amounts incurred more than 90 days prior to receipt of such demand. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) Notwithstanding the foregoing, in the event the Borrower is required to pay any Bank amounts pursuant to Section 2.12(c) or this Section 8.03 and the designation of a different Lending Office pursuant to Section 2.12(c) or Section 8.03(c) will not avoid the need for compensation to such Bank (an "Affected Bank"), the Borrower may give notice to such Affected 68 74 Bank (with copies to the Administrative Agent) that it wishes to seek one or more assignees (which may be one or more of the Banks) to assume the Commitment of such Affected Bank and to purchase its outstanding Loans and Notes; provided, that if there is more than one Affected Bank which has requested substantially and proportionally equal compensation hereunder, the Borrower shall elect to seek an assignee to assume the Commitments of all such Affected Banks. Each Affected Bank agrees to sell its Commitment, Loans, Notes and interest in this Agreement in accordance with Section 9.08(c) to any such assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans and Notes, plus all other fees and amounts (including, without limitation, any compensation due to such Affected Banks under Section 2.12(c) or this Section 8.03) due to such Affected Bank hereunder calculated, in each case, to the date such Loans, Notes and interest are purchased. Upon such sale or prepayment, each such Affected Bank shall have no further commitment or other obligation to the Borrower hereunder or under any Note. (e) The provisions of this Section 8.03 shall be applicable with respect to any Transferee, subject to Section 9.08(e) as to any Participant, and any calculations required by such provisions shall be made based upon the circumstances of such Transferee. SECTION 8.04. Base Rate Loans or Other Euro-Dollar Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make or maintain any type of Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Syndicated Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans and interest and principal on such Syndicated Loans shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks, and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. Compensation. Upon the request of any Bank, delivered to the Borrower and the Administrative Agent, the Borrower shall pay to such Bank such amount or amounts as shall compensate such Bank for any loss, cost or expense (not including lost profits) reasonably and actually incurred by such Bank (except solely such as result from such Bank's breach of its 69 75 obligations under the Loan Documents or gross negligence or wilful misconduct) as a result of: (a) any payment or prepayment (pursuant to Section 2.08, 2.09, 2.10, 2.11, 6.01, 8.02 or otherwise) of a Euro-Dollar Loan on a date other than the last day of an Interest Period for such Loan; or (b) any failure by the Borrower to prepay a Euro-Dollar Loan on the date for such prepayment specified in the relevant notice of prepayment hereunder; or (c) any failure by the Borrower to borrow a Euro-Dollar Loan or Money Market Loan on the date for the Euro-Dollar Borrowing or Money Market Borrowing of which such Euro-Dollar Loan or Money Market Borrowing is a part specified in the applicable Notice of Borrowing delivered pursuant to Section 2.02 or notification of acceptance of Money Market Quotes pursuant to Section 2.03(e). ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature pages hereof or such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and the appropriate confirmation is received, (ii) if given by mail, 3 Domestic Business Days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i) all reasonable out-of-pocket expenses actually incurred by the Administrative Agent, including 70 76 reasonable fees and disbursements of special counsel for the Banks and the Administrative Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default hereunder or thereunder and (ii) if a Default occurs, all reasonable out-of-pocket expenses actually incurred by the Administrative Agent and the Banks, including reasonable fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including reasonable out-of-pocket expenses actually incurred in enforcing this Agreement and the other Loan Documents. The Borrower shall indemnify the Administrative Agent and each Bank against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. SECTION 9.04. Indemnification. The Borrower shall indemnify the Administrative Agent, the Banks and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Bank hereunder or breach by the Borrower of this Agreement or any other Loan Document or from any investigation, litigation (including, without limitation, any actions taken by the Administrative Agent or any of the Banks to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Administrative Agent and each Bank, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any out-of-pocket expenses (including, without limitation, reasonable legal fees) actually incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred solely by reason of the breach of obligations under the Loan Documents or gross negligence or wilful misconduct of the Person to be indemnified. SECTION 9.05. Setoff; Sharing of Setoffs. (a) The Borrower agrees that the Administrative Agent and each Bank (and Wachovia, as to the Swing Loans) shall have a right of setoff for all indebtedness and obligations owing to them from the Borrower upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned to the Administrative Agent or any such Bank or otherwise in the possession or control of the Administrative Agent or any such Bank for any purpose for the account or benefit of the Borrower and including any balance of any deposit account or of any credit of the Borrower with the Administrative Agent or any such Bank, 71 77 whether now existing or hereafter established, and the Borrower hereby authorizes the Administrative Agent and each Bank at any time or times with or without prior notice to apply such balances or any part thereof to any indebtedness and obligations owing by the Borrower to the Banks and/or the Administrative Agent during the existence of an Event of Default and in such amounts as they may elect, and whether or not the collateral, if any, or the responsibility of other Persons primarily, secondarily or otherwise liable may be deemed adequate; provided, however, nothing herein contained shall authorize or entitle the Administrative Agent or any Bank to exercise any right of setoff against any accounts, monies, government securities, or other Investments held by such Person under any escrow, trust, special purpose account, or other similar arrangement established with such Person by the Borrower or the Guarantors or Subsidiary for the purpose of (i) implementing a defeasance or "in substance" defeasance of Debt of the Borrower or the Guarantors or Subsidiary, or (ii) maintaining security deposits of tenants of any of the Properties. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Administrative Agent or any such Bank as soon as the same may be put in transit to it by mail or carrier or by other bailee. (b) Each Bank agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise (including, without limitation, from any collateral hereafter obtained), receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Syndicated Loan Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of all principal and interest owing with respect to the Syndicated Loan Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Syndicated Loan Notes held by the other Banks owing to such other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Syndicated Loan Notes held by the Banks owing to such other Banks shall be shared by the Banks pro rata; provided that (i) nothing in this Section shall impair the right of any Bank to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Syndicated Loan Notes, and (ii) if all or any portion of such payment received by the purchasing Bank is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay to the purchasing Bank the purchase price of such participation to the extent of such recovery together with an amount equal to such other Bank's ratable share (according to the proportion of (x) the amount of such other Bank's required repayment to (y) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the 72 78 total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Syndicated Loan Note or Money Market Loan Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.06. Amendments and Waivers. (a) Any provision of this Agreement, the Notes or any other Loan Documents, may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that, no such amendment or waiver shall: (1) unless signed by Banks having at least 75% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 75% of the aggregate outstanding principal amount of the sum of the Syndicated Loans, change the definition of "Borrowing Base"; or (2) unless signed by all Banks, (i) change the Commitment of any Bank or subject any Bank to any additional obligation, (ii) change the principal of or rate of interest on any Loan or any fees (other than fees payable to the Administrative Agent) hereunder, (iii) change the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) change the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) release or substitute all or any substantial part of the collateral (if any) held as security for the Loans, or (viii) release any Guarantee given to support payment of the Loans, except as expressly provided in the last sentence of Section 5.11. (b) The Borrower will not obtain from any Bank its written agreement to waive or amend any of the provisions of this Agreement except through the Administrative Agent, and the Administrative Agent shall be supplied by the Borrower with sufficient information to enable the Banks to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to the Administrative Agent for redelivery to each Bank forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Banks. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional 73 79 interest, fee or otherwise, to any Bank (in its capacity as such) as consideration for or as an inducement to the entering into by such Bank of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Banks. (c) Each Designated Bank hereby appoints its Designating Bank as such Designated Bank's agent and attorney in fact and grants to its Designating Bank an irrevocable power of attorney, coupled with an interest, to receive payments made for the benefit of such Designated Bank under this Agreement, to deliver and receive all communications and notices under this Agreement and other Loan Documents and to exercise on such Designated Bank's behalf all rights to vote and to grant and make approvals, waivers, consents, releases and amendments to or under this Agreement or the other Loan Documents. Any document executed by such agent on such Designated Bank's behalf in connection with this Agreement or the other Loan Documents shall be binding on such Designated Bank. The Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions. SECTION 9.07. No Margin Stock Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (b) Any Bank may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment hereunder or any other interest of such Bank hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. In no event shall a Bank that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Bank may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related Loan or Loans, 74 80 (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Loan or Loans, (iii) the change of the principal of the related Loan or Loans, (iv) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) fee is payable hereunder from the rate at which the Participant is entitled to receive interest or fee (as the case may be) in respect of such participation, (v) the release or substitution of all or any substantial part of the collateral (if any) held as security for the Loans, or (vi) the release of any Guarantee given to support payment of the Loans, except as expressly provided in the last sentence of Section 5.11. Each Bank selling a participating interest in any Loan, Note, Commitment or other interest under this Agreement, other than a Money Market Loan or Money Market Note or participating interest therein, shall, within 10 Domestic Business Days of such sale, provide the Borrower and the Administrative Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 8.03 and 8.05, subject to the provisions of Section 9.08(e), with respect to its participation in Loans outstanding from time to time. (c) Any Bank may at any time assign to one or more banks or financial institutions (each an "Assignee") all, or in the case of its Loans and Commitments, a proportionate part of all its Loans and Commitments, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance, executed by such Assignee, such transferor Bank and the Administrative Agent (and, in the case of an Assignee that is not then a Bank (or an Affiliate of a Bank), subject to clause (iii) below, by the Borrower); provided that (i) no interest may be sold by a Bank pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Bank's Commitment, (ii) if a Bank is assigning only a portion of its Commitment, then, the amount of the Commitment being assigned (determined as of the effective date of the assignment) shall be in an amount not less than $10,000,000, (iii) except during the continuance of an Event of Default, no interest may be sold by a Bank pursuant to this paragraph (c) to any Assignee that is not then a Bank (or an Affiliate of a Bank) without the consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld, and (iv) except during the existence of an Event of Default, each Bank may make only two assignments to a Person which, prior to the assignment, was not a Bank (or an Affiliate of such Bank), unless the Borrower has consented thereto in its sole discretion. Upon (A) execution of the Assignment and Acceptance by such transferor Bank, such Assignee, the Administrative Agent and (if applicable) the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Administrative Agent, (C) 75 81 payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, and (D) payment by such Assignee of a processing and recordation fee of $2,500 to the Administrative Agent, such Assignee shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Banks or the Administrative Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to such Assignee. (d) Subject to the provisions of Section 9.09, the Borrower authorizes each Bank to disclose to any Participant or Assignee (each a "Transferee") and any prospective Transferee any and all financial information in such Bank's possession concerning the Borrower which has been delivered to such Bank by the Borrower pursuant to this Agreement or which has been delivered to such Bank by the Borrower in connection with such Bank's credit evaluation prior to entering into this Agreement. (e) No Transferee shall be entitled to receive any greater payment under Section 8.03 than the transferor Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Anything in this Section 9.08 to the contrary notwithstanding, any Bank may assign and pledge all or any portion of the Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or obligations made by the Borrower to the assigning and/or pledging Bank in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Bank from its obligations hereunder. (g) Any Bank may at any time designate not more than one Designated Bank to fund Money Market Loans on behalf of such Designating Bank subject to the terms of this Section 9.08(g), and the provisions of Section 9.08(c) shall not apply to such designation. No Bank may have more than one Designated Bank at any time. Such designation may occur either by the execution of 76 82 the signature pages of this Agreement by such Bank and Designated Bank next to the appropriate "Designating Bank" and "Designated Bank" captions, or by execution by such parties of a Designation Agreement subsequent to the date of this Agreement; provided, that any Bank and its Designated Bank executing the signatures pages of this Agreement as "Designating Bank" and "Designated Bank", respectively, on the date hereof shall be deemed to have executed a Designation Agreement, and shall be bound by the respective representations, warranties and covenants contained therein, and such designation shall be conclusively deemed to be acknowledged by the Borrower and the Administrative Agent. The parties to each such designation occurring subsequent to the execution date hereof shall execute and deliver to the Administrative Agent and the Borrower for their acknowledgment a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Bank and a designee representing that it is a Designated Bank and acknowledged by the Borrower, the Administrative Agent will acknowledge such Designation Agreement and will give prompt notice thereof to the Borrower and the other Banks, whereupon, (i) the Borrower shall execute and deliver to the Designating Bank a Designated Bank Note payable to the order of the Designated Bank, (ii) from and after the effective date specified in the Designation Agreement, the Designated Bank shall become a party to this Agreement with a right to make Money Market Loans on behalf of its Designating Bank pursuant to Section 2.03(g), and (iii) the Designated Bank shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Bank which is not otherwise required to repay obligations of such Designated Bank which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Bank, the Designating Bank shall be and remain obligated to the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks for each and every obligation of the Designating Bank and its related Designated Bank with respect to this Agreement, including, without limitation, any indemnification obligations under Section 7.05 and any sums otherwise payable to the Borrower by the Designated Bank. Each Designating Bank shall serve as the administrative agent of its Designated Bank and shall on behalf of its Designated Bank: (i) receive any and all payments made for the benefit of such Designated Bank and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, releases, consents and amendments under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by a Designating Bank as administrative agent for its Designated Bank and need not be signed by such Designated Bank on its own behalf. The Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks may rely thereon without any requirement that the Designated Bank sign or acknowledge the same. No Designated Bank may assign or transfer all or any 77 83 portion of its interest hereunder or under any other Loan Document, other than via an assignment to its Designating Bank or Liquidity Bank (but any assignment to a Liquidity Bank shall not curtail or affect the appointment or rights of the Designating Bank pursuant to Section 9.06(c) or Section 4 of the Designation Agreement, which appointment and rights are irrevocable), if any, or otherwise in accordance with the provisions of Section 2.03(g). SECTION 9.09. Confidentiality. Each Bank agrees to exercise commercially reasonable efforts to keep any information delivered or made available by the Borrower to it confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Bank from disclosing such information (i) to any other Bank, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Bank, (iv) which has been publicly disclosed without breach of these or any other applicable confidentiality provisions, (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Bank or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel and independent auditors (whom the Bank agrees to advise as to the confidential nature of such information), (viii) to any actual or proposed Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 9.09; provided that should disclosure of any such confidential information be required by virtue of clause (ii) or clause (v) of the immediately preceding sentence, any relevant Bank shall promptly notify the Borrower of same so as to allow the Borrower to seek a protective order or to take any other appropriate action; provided, further, that, no Bank shall be required to delay compliance with any directive to disclose any such information so as to allow the Borrower to effect any such action, and (ix) by any Designated Bank to any rating agency, commercial paper dealer, or provider of a surety, guaranty or credit or liquidity enhancement to such Designated Bank which has agreed in writing to be bound by the provisions of this Section 9.09 and to use such information solely for purposes of evaluating the creditworthiness of the Borrower and the Guarantors and their abilities to perform their obligations under this Agreement and the other Loan Documents. SECTION 9.10. Representation by Banks. Each Bank hereby represents that it is a commercial lender or financial institution which makes Syndicated Loans and Money Market Loans in the ordinary course of its business and that it will make its Syndicated Loans and Money Market Loans hereunder for its own account in the ordinary course of such business; provided that, subject to Section 9.08, the disposition of the Note or Notes 78 84 held by that Bank shall at all times be within its exclusive control. SECTION 9.11. Obligations Several. The obligations of each Bank hereunder are several, and no Bank shall be responsible for the obligations or commitment of any other Bank hereunder. Nothing contained in this Agreement and no action taken by the Banks pursuant hereto shall be deemed to constitute the Banks to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Bank shall be a separate and independent debt, and each Bank shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Bank to be joined as an additional party in any proceeding for such purpose. SECTION 9.12. Georgia Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Georgia. SECTION 9.13. Severability. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.14. Interest. In no event shall the amount of interest, and all charges, amounts or fees contracted for, charged or collected pursuant to this Agreement, the Notes or the other Loan Documents and deemed to be interest under applicable law (collectively, "Interest") exceed the highest rate of interest allowed by applicable law (the "Maximum Rate"), and in the event any such payment is inadvertently received by any Bank, then the excess sum (the "Excess") shall be credited as a payment of principal, unless the Borrower shall notify such Bank in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that the Borrower not pay and the Banks not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. The right to accelerate maturity of any of the Loans does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Administrative Agent and the Banks do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Administrative Agent or the Banks hereunder or under any of the Notes or the other Loan Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, the Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any other 79 85 remedy, legal or equitable, against the Administrative Agent or any Bank, based in whole or in part upon contracting for charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Administrative Agent or any Bank, all interest at any time contracted for, charged or received from the Borrower in connection with this Agreement, the Notes or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. The Borrower, the Administrative Agent and each Bank shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each Note and each of the other Loan Documents (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by the Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of obligations hereunder and under the Notes and the other Loan Documents be automatically recomputed by the Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 9.15. Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction. The Borrower (a) and each of the Banks and the Administrative Agent irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, (b) submits to the nonexclusive personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (d) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Administrative Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. 80 86 SECTION 9.17. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.18. Source of Funds -- ERISA. Each of the Banks hereby severally (and not jointly) represents to the Borrower that no part of the funds to be used by such Bank to fund the Syndicated Loans and Money Market Loans hereunder from time to time constitutes (i) assets allocated to any separate account maintained by such Bank in which any employee benefit plan (or its related trust) has any interest nor (ii) any other assets of any employee benefit plan. As used in this Section, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 9.19. No Bankruptcy Proceedings. Each of the Borrower, the Banks, the Administrative Agent, the Syndication Agent and the Administrative Agent agrees that it will not institute against any Designated Bank or join any other Person in instituting against any Designated Bank any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Bank. [Signatures are contained on the following pages.] 81 87 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: ------------------------------- R. Byron Carlock, Jr. Executive Vice President Post Apartment Homes, L.P. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327-3057 Attention: John T. Glover, President Telecopier number: 404-951-1825 Confirmation number: 404-850-4400 82 88 COMMITMENTS Wachovia Bank, N.A., (SEAL) as Administrative Agent and as a Bank $70,000,000 By: ------------------------------------- Title: Lending Office Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Telecopier number: 404-332-4005 Confirmation number: 404-332-6971 83 89 $70,000,000 SUNTRUST BANK, ATLANTA (SEAL) By: ----------------------------------- Title: Lending Office SunTrust Bank, Atlanta 50 Hurt Plaza-Suite 700 Atlanta, Georgia 30303 Attention: Mr. W. John Neill Telecopier number: 404-827-6774 Confirmation number: 404-588-8248 84 90 FIRST UNION NATIONAL BANK, (SEAL) as Syndication Agent and as a Bank $60,000,000 B: -------------------------------------- Title: Lending Office First Union National Bank One First Union Center DC6 Charlotte, North Carolina 28288-0166 Attention: Mr. Daniel J. Sullivan Telecopier number: 704-383-6205 Confirmation number: 704-383-6441 85 91 $25,000,000 NATIONSBANK, N.A. (SEAL) By: ----------------------------------- Title: LENDING OFFICE NationsBank, N.A. 600 Peachtree Street, N.E. 6th Floor Atlanta, Georgia 30308-3318 Attention: Mr. Frank Chiu Telecopier No.: 404-607-4144 Confirmation No.: 404-607-4128 86 92 $25,000,000 SOUTHTRUST BANK, N.A. (SEAL) By: ----------------------------------- Title: Lending Office SouthTrust Bank, N.A. 420 North 20th Street Birmingham, Alabama 35290 Attention: Ms. Lynn Feuerlein Telecopier number: 205-254-8270 Confirmation number: 205-254-5870 87 93 $20,000,000 COMMERZBANK AG, ATLANTA AGENCY (SEAL) By: ------------------------------------ Title: By: ------------------------------------ Title: Lending Office Commerzbank AG, Atlanta Agency 1230 Peachtree Street 35th Floor Atlanta, GA 30309 Attention: Mr. Harry Yergey Telecopier number: 404-888-6539 Confirmation number: 404-888-6500 FOUR WINDS FUNDING CORPORATION (SEAL) By: Commerzbank AG, New York Branch, as Administrator and Attorney-in-Fact By: ------------------------------------ Title: By: ------------------------------------ Title: 88 94 $20,000,000 THE FIRST NATIONAL BANK OF CHICAGO (SEAL) By: ----------------------------------- Title: Lending Office The First National Bank of Chicago One First National Plaza Mail Suite IL1-0315 Chicago, Illinois 60670 Attention: Ms. Patricia Leung Telecopier number: 312-732-1117 Confirmation number: 312-732-8619 89 95 $10,000,000 CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (SEAL) By: ---------------------------------- Title: Lending Office Chase Bank of Texas, National Association 707 Travis, 6th Floor-North-47 Houston, Texas 77252-8047 Telecopier number: 713-216-7713 Confirmation number: 713-216-1511 90 96 $10,000,000 PNC BANK, NATIONAL ASSOCIATION (SEAL) By: ---------------------------------- Title: Lending Office PNC Bank, National Association One PNC Plaza Mail Stop P1-POPP-19-2 Pittsburgh, Pennsylvania 15222 Attention: Mr. Wayne Robertson Telecopier number: 412-762-6500 Confirmation number: 412-762-8452 91 EX-10.34 3 FIRST AMENDMENT TO THE THIRD CREDIT AGREEMENT 1 EXHIBIT 10.34 FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT(this "First Amendment") is dated as of the 3rd day of September, 1999 among POST APARTMENT HOMES, L.P.(the "Borrower"), WACHOVIA BANK, N.A., as Administrative Agent (the "Administrative Agent"), FIRST UNION NATIONAL BANK, as Syndication Agent, SUNTRUST BANK, ATLANTA, as Documentation Agent, and WACHOVIA BANK, N.A., SUNTRUST BANK, ATLANTA, FIRST UNION NATIONAL BANK, BANK OF AMERICA, N.A. (formerly Nationsbank, N.A.), SOUTHTRUST BANK, N.A., COMMERZBANK, AG, ATLANTA AGENCY, FOUR WINDS FUNDING CORPORATION, THE FIRST NATIONAL BANK OF CHICAGO, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION and PNC BANK, NATIONAL ASSOCIATION (collectively, the "Banks"); W I T N E S S E T H: WHEREAS, the Borrower, the Administrative Agent and the Banks executed and delivered that certain Third Amended and Restated Credit Agreement, dated as of May 7, 1999 (the "Credit Agreement"); WHEREAS, the Borrower has requested and the Administrative Agent and the Banks have agreed to certain amendments to the Credit Agreement, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Borrower, the Administrative Agent and the Banks hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. 2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement hereby is amended by deleting the definitions of "GP Sub" and "General Partner" and substituting the following therefor: "GP Sub" means Post GP Holdings, Inc., a Georgia corporation which is a direct Subsidiary of PPI, the General Partner and the owner of a 1% general partner interest in the Borrower as of the Closing Date. 2 "General Partner" means the sole general partner of the Borrower (which, on the Closing Date, is GP Sub) or, if there is more than one such general partner, the managing general partner of the Borrower. 3. Amendment to Section 2.06(a). Section 2.06(a) of the Credit Agreement hereby is amended by deleting the definition of "London Interbank Offered Rate" and substituting the following therefor: The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rates appear on Telerate Page 3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, provided that if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York City, selected by the Administrative Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, for deposits in Dollars offered by leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Euro-Dollar Loan. 4. Amendment to Section 5.21. Section 5.21 of the Credit Agreement hereby is amended by deleting it in its entirety and substituting the following therefor: SECTION 5.21. Qualification as a Real Estate Investment Trust; General Partner. PPI shall at all times remain qualified under the Code as a real estate investment trust. The Borrower will not agree to amend or waive the requirements of Section 7.5A of the limited partnership agreement of the Borrower, as in effect on the date of this Agreement, as such requirements are applicable to the General Partner, without the prior written consent of the Required Banks (which consent the Banks hereby agree not to unreasonably withhold or delay). The General Partner shall at all times be one of PPI, GP Sub or another Wholly Owned Subsidiary of PPI which is a Guarantor. 5. Amendment to Section 5.22(b). Section 5.22(b) of the Credit Agreement hereby is amended by deleting it in its entirety and substituting the following therefor: (b) not permit any of the Subsidiaries (other than the Borrower, the General Partner, or LP Sub) to Guarantee the Debt of another Person; provided, that any Subsidiary can Guarantee the Debt of another Subsidiary, so long as the 3 aggregate amount of Debt of Subsidiaries which is Guaranteed by Subsidiaries (other than the Borrower, the General Partner, or LP Sub) does not exceed $500,000; 6. Restatement of Representations and Warranties. The Borrower hereby restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof and with specific reference to this First Amendment and all other loan documents executed and/or delivered in connection herewith, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d) of the Credit Agreement. 7. Effect of Amendment. Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Borrower. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein. 8. Ratification. The Borrower hereby restates, ratifies and reaffirms each and every term, covenant and condition set forth in the Credit Agreement and the other Loan Documents effective as of the date hereof. 9. Counterparts. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 10. Section References. Section titles and references used in this First Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 11. No Default. To induce the Administrative Agent and the Banks to enter into this First Amendment and to continue to make advances pursuant to the Credit Agreement, the Borrower hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim or objection in favor of the Borrower arising out of or with respect to any of the Loans or other obligations of the Borrower owed to the Banks under the Credit Agreement. 12. Further Assurances. The Borrower agrees to take such further actions as the Administrative Agent shall reasonably request in connection herewith to evidence the amendments herein contained to the Borrower. 13. Governing Law. This First Amendment shall be governed by and construed and interpreted in accordance with, the laws of the State of Georgia. 14. Conditions Precedent. This First Amendment shall become effective only upon execution and delivery (i) of this First 3 4 Amendment by the Borrower, the Agent and the Required Banks and (ii) of the Consent and Reaffirmation of Guarantors at the end hereof by each of the Guarantors. IN WITNESS WHEREOF, the Borrower, the Administrative Agent and each of the Banks has caused this First Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. POST APARTMENT HOMES, L.P., (SEAL) WACHOVIA BANK, N.A., (SEAL) as Borrower as Administrative Agent and a Bank By: Post GP Holdings, Inc., its sole general partner By: ------------------------------- Title: By: R. Byron Carlock, Jr. Executive Vice President FIRST UNION NATIONAL BANK, (SEAL) SUNTRUST BANK, ATLANTA, (SEAL) as Syndication Agent and a Bank as Documentation Agent and a Bank By: By: ------------------------- Title: Title: BANK OF AMERICA, N.A. (formerly SOUTHTRUST BANK, N.A., (SEAL) Nationsbank, N.A.), (SEAL) as a Bank as a Bank By: By: ------------------------- Title: Title: COMMERZBANK AG, ATLANTA (SEAL) FOUR WINDS FUNDING AGENCY, as a Bank CORPORATION, as a Bank (SEAL) By: By: ------------------------- Title: Title: By: By: ------------------------- Title: Title: THE FIRST NATIONAL BANK CHASE BANK OF TEXAS, OF CHICAGO, (SEAL) NATIONAL ASSOCIATION, (SEAL) as a Bank as a Bank By: By: ------------------------- Title: Title: PNC BANK, NATIONAL ASSOCIATION, (SEAL) as a Bank By: Title 4 5 CONSENT AND REAFFIRMATION OF GUARANTORS Each of the undersigned (i) acknowledges receipt of the foregoing First Amendment to Credit Agreement (the "First Amendment"), (ii) consents to the execution and delivery of the First Amendment by the parties thereto and (iii) reaffirms all of its obligations and covenants under the Guaranty Agreement dated as of May 7, 1999 executed by it, and agrees that none of such obligations and covenants shall be affected by the execution and delivery of the First Amendment. This Consent and Reaffirmation may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. POST PROPERTIES, INC. (SEAL) By: ------------------------ R. Byron Carlock, Jr. Title: POST GP HOLDINGS, INC. (SEAL) By: ------------------------- R. Byron Carlock, Jr. Title: POST LP HOLDINGS, INC. (SEAL) By: ------------------------- R. Byron Carlock, Jr. Title: 5 EX-10.35 4 DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.35 POST PROPERTIES, INC. DEFERRED COMPENSATION PLAN FOR DIRECTORS AND EXECUTIVE COMMITTEE MEMBERS AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2000 2 TABLE OF CONTENTS
Page ---- ss. 1. PURPOSE....................................................................................................1 ------- ss. 2. DEFINITIONS................................................................................................1 ----------- 2.1 Account.........................................................................................1 2.2 Base Salary.....................................................................................1 2.3 Beneficiary.....................................................................................2 2.4 Board...........................................................................................2 2.5 Bonus...........................................................................................2 2.6 Change in Control...............................................................................2 2.7 Disability......................................................................................3 2.8 Distribution Subaccount.........................................................................3 2.9 Distribution Election Date......................................................................3 2.10 Director........................................................................................3 2.11 Executive Committee Member......................................................................4 2.12 Meeting Fees....................................................................................4 2.13 MPIP............................................................................................4 2.14 1934 Act........................................................................................4 2.15 Participating Employer..........................................................................4 2.16 Post............................................................................................4 2.17 Post Apartment Homes............................................................................4 2.18 Post Stock......................................................................................5 2.19 Retainer........................................................................................5 ss. 3. DEFERRAL ELECTIONS.........................................................................................5 ------------------ 3.1 Initial Election................................................................................5 (a) First Term Directors...................................................................5 (b) Executive Committee Members............................................................6 3.2 Annual Deferral Elections.......................................................................8 3.3 Automatic Election Extension....................................................................8 3.4 Account Credits.................................................................................8 (a) Director...............................................................................8 (b) Executive Committee Member.............................................................9 3.5 Participating Employer..........................................................................9 ss. 4. ACCOUNT ADJUSTMENTS.......................................................................................10 ------------------- 4.1 Alternatives...................................................................................10 4.2 Elections......................................................................................10 4.3 Adjustments....................................................................................11
3 ss. 5. DISTRIBUTION ELECTION DATE................................................................................11 -------------------------- 5.1 General Rule...................................................................................11 5.2 Death or Disability............................................................................12 5.3 Change in Control..............................................................................12 ss. 6. DISTRIBUTIONS.............................................................................................13 ------------- 6.1 General........................................................................................13 6.2 Distribution Forms.............................................................................13 (a) Standard Lump Sum.....................................................................13 (b) Five Annual Installments..............................................................14 (c) Ten Annual Installments...............................................................14 6.3 Hardships......................................................................................15 6.4 Beneficiary....................................................................................16 (a) Designation...........................................................................16 (b) Distribution..........................................................................17 6.5 Post Stock.....................................................................................17 6.6 General Assets.................................................................................18 (a) Director..............................................................................18 (b) Executive Committee Member............................................................18 ss. 7. MISCELLANEOUS.............................................................................................18 ------------- 7.1 Making and Revoking Elections..................................................................19 7.2 No Liability...................................................................................19 7.3 No Assignment; Binding Effect..................................................................19 7.4 Construction...................................................................................19 7.5 No Contract of Employment......................................................................20 7.6 Amendment and Termination......................................................................20 7.7 Administration.................................................................................20 7.8 Effective Date.................................................................................21
-ii- 4 ss. 1. PURPOSE The purpose of this Plan is to provide a mechanism under which (i) a Director can elect to defer the payment of all or a portion of his or her Meeting Fees and Retainer or his or her Meeting Fees or Retainer until his or her Distribution Election Date, (ii) an Executive Committee Member can elect to defer the payment of all or a portion of his or her Bonus and Base Salary or Bonus or Base Salary until his or her Distribution Election Date and (iii) Post can pay the amounts deferred as adjusted to track the investment performance of the investment alternative elected by the Director or Executive Committee Member. ss. 2. DEFINITIONS 2.1 Account -- means the bookkeeping account which shall be maintained by Post for each Director and for each Executive Committee Member as part of Post's books and records to show as of any date the interest, if any, of each Director and each Executive Committee Member in this Plan, and each Account shall consist of one, or more than one, Distribution Subaccount, depending on whether the Director or Executive Committee Member has elected one, or more than one, Distribution Election Date. 2.2 Base Salary -- means an Executive Committee Member's base salary which is payable by Post, Post Apartment Homes or any other Participating Employer. 5 2.3 Beneficiary -- means the person or persons designated as such in accordance with ss. 6.4. 2.4 Board -- means the Board of Directors of Post. 2.5 Bonus -- means an Executive Committee Member's annual bonus which is payable by Post, Post Apartment Homes or any other Participating Employer under the MPIP. 2.6 Change in Control -- means (1) a "change in control" of Post of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A for a proxy statement filed under Section 14(a) of the 1934 Act, (2) a "person" (as that term is used in Section 14(d)(2) of the 1934 Act) becomes after the effective date of this Plan the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) directly or indirectly of securities representing 50% or more of the combined voting power for election of directors of the then outstanding securities of Post, (3) the individuals who at the beginning of any period of two consecutive years or less constitute the Board cease for any reason during such period to constitute at least a majority of the Board, unless the election or nomination for election of each new member of the Board was approved by vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of such period, (4) the shareholders of Post approve any dissolution or liquidation of Post or any sale or disposition of 50% or more of the assets or business of Post or (5) the shareholders of Post approve a merger or consolidation to which Post is a party (other than a merger or consolidation with a wholly-owned subsidiary of Post) or a share exchange in which Post shall exchange Post shares for shares of another corporation as a result of which the persons who -2- 6 were shareholders of Post immediately before the effective date of such merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange. 2.7 Disability -- means any condition which qualifies a Director or an Executive Committee Member for long term disability benefits under any plan maintained by Post which provides long term disability benefits to participants or which Post determines would qualify a Director or an Executive Committee Member for such benefits if he or she was a participant in such plan. 2.8 Distribution Subaccount -- means a subaccount which shall be maintained as part of each Director's Account and each Executive Committee Member's Account which shows his or her interest in this Plan which is scheduled to be distributed as of the same Distribution Election Date. 2.9 Distribution Election Date -- means the distribution date described in ss. 5 as applicable to each Distribution Subaccount. 2.10 Director -- means any person (other than a person who is an employee of Post, Post Apartment Homes or any other Participating Employer) who has been elected a member of the Board and any former member of the Board for whom an Account is maintained under this Plan. 2.11 Executive Committee Member -- means an employee of Post, Post Apartment Homes or any other Participating Employer who is a member of Post's Executive Committee and any former member of Post's Executive Committee for whom an Account is maintained under this Plan. -3- 7 2.12 Meeting Fees -- means the fees which are payable to a Director exclusively for attending a meeting of the Board or a meeting of a committee of the Board. 2.13 MPIP -- means the Post Management Performance Incentive Plan as in effect from time to time and any successor to such plan. 2.14 1934 Act -- means the Securities Exchange Act of 1934, as amended. 2.15 Participating Employer -- means Post, Post Apartment Homes, and any organization related to Post or to Post Apartment Homes which pays, or has an obligation to pay, all or a part of an Executive Committee Member's Bonus or Base Salary and which effects such payments through, or which has such payments processed by, Post Apartment Homes. 2.16 Post -- means Post Properties, Inc., a Georgia corporation, and any successor to such corporation. 2.17 Post Apartment Homes -- means Post Apartment Homes, L.P., a Georgia limited partnership, and any successor to such partnership. 2.17 Post Apartment Homes -- means Post Apartment Homes, L.P., a Georgia limited partnership, and any successor to such partnership. 2.18 Post Stock -- means the common stock of Post, par value $.01 per share. 2.19 Retainer -- means all fees which are payable to a Director for services as a member of the Board except Meeting Fees. -4- 8 ss. 3. DEFERRAL ELECTIONS 3.1 Initial Election (a) First Term Directors. (1) A person who is nominated for election as a Director (other than a person who was a Director immediately before such nomination) shall have the right at any time before the effective date of his or her election to the Board to elect on the form provided for this purpose to defer the payment of all or a portion of his or her Meeting Fees and Retainer or Meeting Fees or Retainer which are otherwise payable during the first calendar year he or she serves as a Director. Any deferral election which is made by a person before the effective date of his or her election to the Board and not revoked before such effective date shall become irrevocable on the effective date of the Director's election to the Board, and an election once irrevocable shall remain irrevocable through the end of the calendar year which includes such effective date. (2) A person who is elected in any calendar year as a Director (other than a person who was a Director immediately before such election or who made an effective election under ss. 3.1(a)(1)) shall have the right at any time before the end of -5- 9 the 60-day period immediately following the effective date of his or her election to the Board to elect on the form provided for this purpose to defer the payment of all or a portion of his or her Meeting Fees and Retainer or Meeting Fees or Retainer, if any, which are otherwise payable after the date his or her deferral election under this ss. 3.1(a)(2) becomes effective. Any such deferral election which is made and not revoked before the end of such 60-day period shall become effective and irrevocable immediately after the end of such 60-day period, and a deferral election once effective shall remain irrevocable through the end of the calendar year which includes the effective date of such deferral election. (b) Executive Committee Members (1) New Executive Committee Member. A person who Post designates as an Executive Committee Member for the first time shall have the right at any time before the end of the 60-day period immediately following the effective date of such designation to elect on the form provided for this purpose (A) to defer the payment of all or a portion of his or her Base Salary, if any, which is payable after the date his or her deferral election under this ss. 3.1(b)(1) becomes effective and (B) to defer a portion of his or her Bonus which is payable for the calendar year in which such election -6- 10 becomes effective, and such portion of such Bonus shall not exceed a fraction of such Bonus, the numerator of which shall be the number of full calendar months remaining in such calendar year after such election becomes effective and the denominator of which shall be 12. Any such deferral election which is made and not revoked before the end of such 60-day period shall become effective and irrevocable immediately after the end of such 60-day period, and a deferral election once effective shall remain irrevocable through the end of the calendar year which includes the effective date of such deferral election. (2) Effective Date Start-Up Election. Post shall provide each person who will be an Executive Committee Member on January 1, 2000 the opportunity before January 1, 2000 to elect on the form provided for this purpose to defer the payment of all or a portion of his or her Base Salary which is otherwise payable after December 31, 1999. Any such deferral election which is made and not revoked before January 1, 2000 shall be effective and irrevocable on January 1, 2000, and a deferral election once effective shall remain irrevocable through the end of the calendar year which includes the effective date of such deferral election. 3.2 Annual Deferral Elections. A person who is a Director or an Executive Committee Member shall have the right before the beginning of any calendar -7- 11 year to elect on the form provided for this purpose to defer the payment of all or a portion of his or her Bonus and Base Salary or Bonus or Base Salary, Meeting Fees and Retainer or Meeting Fees or Retainer which are otherwise payable during such calendar year or, with respect to a Bonus, which is payable for such calendar year. Any election which is made and which is not revoked before the beginning of such calendar year shall become irrevocable on the first day of such calendar year and shall remain irrevocable through the end of such calendar year. 3.3 Automatic Election Extension. If a Director or an Executive Committee Member has made a deferral election under either ss. 3.1 or ss. 3.2 for any calendar year and has not revoked such election before the beginning of any subsequent calendar year, such election automatically shall remain in effect for such subsequent calendar year and, further, automatically shall be irrevocable during such subsequent calendar year. 3.4 Account Credits. (a) Director. The Meeting Fees and Retainer or Meeting Fees or Retainer which a Director elects to defer under this ss. 3 shall be credited to his or to her Account as of the date Post determines that such fees otherwise would have been payable directly to the Director if no election had been made under this ss. 3. (b) Executive Committee Member. Any Bonus and Base Salary or Bonus or Base Salary for any calendar year which an Executive Committee Member elects to defer under this ss. 3 shall be credited to his or her Account as of the date Post determines such Bonus -8- 12 and Base Salary or Bonus or Base Salary otherwise would have been payable directly to the Executive Committee Member if no election had been made under this ss. 3. 3.5 Participating Employer. If an Executive Committee Member makes a deferral election under this ss. 3 with respect to his or her Base Salary and Bonus or Base Salary or Bonus, Post shall direct each Participating Employer otherwise responsible for the payment of all or a part of such Base Salary or Bonus to defer the payment of such Base Salary or Bonus (to the extent otherwise payable by such Participating Employer) in accordance with the terms of this Plan and any related deferral election made under this ss. 3 by such Executive Committee Member. Similarly, if an Executive Committee Member amends or terminates any such election under this ss. 3, Post shall direct each Participating Employer otherwise responsible for the payment of all or a part of such Base Salary or Bonus to take whatever action is necessary or appropriate under this Plan to effect such amended or terminated election. ss. 4. ACCOUNT ADJUSTMENTS 4.1 Alternatives. Post from time to time shall select one, or more than one, benchmark investment alternative, including Post Stock, that a Director or an Executive Committee Member can elect under ss. 4.2 that Post use to make adjustments to his or her Account as if the credits to such Account had been invested in such benchmark investment alternative and there were no commissions or other changes of any kind incurred with respect to the purchase, holding or sale of such investment. -9- 13 Thus his or her Account shall be adjusted for increases and decreases in the market value of the benchmark investment alternative and for any dividends or any other distributions made with respect to the benchmark investment alternative as if the Account actually had been invested in such benchmark investment alternative. Post may establish limits on the portion of an Account that a Director or an Executive Committee Member can elect that Post use with respect to any single benchmark investment alternative, and Post may change the benchmark investment alternatives available under this ss. 4 at any time or from time to time with or without advance notice to a Director or an Executive Committee Member. 4.2 Elections. Each Director and Executive Committee Member shall have the right to make and to change a benchmark investment alternative election under this ss. 4 in accordance with such procedures as established by Post or Post's delegate from time to time, and Post or Post's delegate shall have the right to change such procedures at any time with or without notice to any Director or Executive Committee Member. Furthermore, if a Director or an Executive Committee Member fails to timely make a benchmark investment alternative election, Post shall have the right either to disregard his or her deferral election under ss. 3 until such an election is made or to make such an election on behalf of the Director or Executive Committee Member. 4.3 Adjustments. Post or Post's delegate shall adjust the credits to each Distribution Subaccount for any earnings and losses as if such credits actually had been invested in a benchmark investment alternative in accordance with the Director's or Executive Committee Member's election under this ss. 4. -10- 14 ss. 5. DISTRIBUTION ELECTION DATE 5.1 General Rule. Each Director and each Executive Committee Member as part of each deferral election under ss. 3 shall elect the date as of which he or she desires that the Distribution Subaccount attributable to such deferrals be distributed, and such date shall be either (a) a January 1 of a specified calendar year after calendar year 2000, (b) the date he or she reaches a specified age, (c) the date as of which his or her status as a Director terminates or the date he or she is no longer employed by Post, Post Apartment Homes or any other Participating Employer, (d) the fifth anniversary of the date described in ss. 5.1(c), (e) the later of the dates described in ss. 5(a), ss. 5(b), ss. 5.1(c) or ss. 5(d), or (f) the earlier of the dates described in ss. 5(a), ss. 5(b), ss. 5.1(c) or ss. 5(d). Any date described in ss. 5.1(a), ss. 5.1(b), ss. 5.1(c), ss. 5.1(d), ss. 5.1(e) or ss. 5.1(f) shall be referred to in this Plan as a "Distribution Election Date". No Director or Executive Committee Member shall have the right to change a Distribution Election Date for any deferrals after the date the related deferral election becomes irrevocable under ss. 3. If a Director or Executive Committee Member fails to elect the date as of which any of his or her Distribution Subaccounts shall be distributed, such Distribution Subaccount shall be distributed on the date described in ss. 5.1(c). -11- 15 5.2 Death or Disability. The date as of which a Director's status as such terminates as a result of his or her death or Disability or the date an Executive Committee Member is no longer employed by Post, Post Apartment Homes or any other Participating Employer as a result of his or her death or Disability automatically shall be treated as his or her Distribution Election Date for each Distribution Subaccount in his or her Account without regard to the Distribution Election Date which the Director or Executive Committee Member actually had elected under ss. 5.1. 5.3 Change in Control. Each Director and each Executive Committee Member shall have the right to elect on the form provided for this purpose that the date of a Change in Control of Post shall be treated as his or her Distribution Election Date for his or her entire Account. An election under this ss. 5.3 may be made at any time and may be revoked at any time. If such an election is in effect on January 1, 2000 or, if later, the date which is one year before the date of such Change in Control, his or her entire Account shall be paid in cash in a lump sum to the Director or Executive Committee Member on, or as soon as practicable after, the date of such Change in Control even if the Director or Executive Committee Member had subsequently revoked such election. ss. 6. DISTRIBUTIONS 6.1 General. The balance credited to a Director's or Executive Committee Member's Distribution Subaccount shall first become distributable as of his or her Distribution Election Date for such Distribution Subaccount. A Director or Executive Committee Member shall (subject to ss. 5.3) have the right to elect that such -12- 16 Distribution Subaccount be distributed in one of the distribution forms described in ss. 6.2, and such Distribution Subaccount shall be distributed in accordance with the last election made by the Director or Executive Committee Member which is in effect on January 1, 2000 or, if later, on the date which is one year before the Distribution Election Date. If a Director or Executive Committee Member fails to elect the form in which a Distribution Subaccount shall be distributed, any such Distribution Subaccount shall be distributed in the form described in ss. 6.2(a). 6.2 Distribution Forms. (a) Standard Lump Sum. A Director or Executive Committee Member shall have the right to elect that his or her Distribution Subaccount be distributed in cash in a lump sum, and a lump sum distribution shall be made as soon as practicable after his or her Distribution Election Date for such Distribution Subaccount. (b) Five Annual Installments. A Director or Executive Committee Member shall have the right to elect that a Distribution Subaccount be distributed in cash in five annual installments. If a Director's or Executive Committee Member's Distribution Subaccount is distributed under this distribution form, the first annual installment shall be made as soon as practicable after the Distribution Election Date for such Distribution Subaccount. The amount distributable each calendar year shall be determined by multiplying the balance credited to the Director's or Executive Committee Member's Distribution Subaccount by a fraction, the numerator of which shall -13- 17 be one and the denominator of which shall be the number of installments remaining after such installment has been paid plus one. The second annual installment through the fifth annual installment shall be distributed on or about the anniversary of the distribution of the first annual installment. (c) Ten Annual Installments. A Director or Executive Committee Member shall have the right to elect that a Distribution Subaccount be distributed in cash in ten annual installments. If a Director's or Executive Committee Member's Account is distributed under this distribution form, the first annual installment shall be made as soon as practicable after the Distribution Election Date for such Distribution Subaccount, and the amount distributable each calendar year shall be determined by multiplying the balance credited to the Director's or Executive Committee Member's Distribution Subaccount by a fraction, the numerator of which shall be one and the denominator of which shall be the number of installments remaining after such installment has been paid plus one. The second annual installment through the tenth annual installment shall be distributed on or about the anniversary of the distribution of the first annual installment. 6.3 Hardships. If a Director or an Executive Committee Member experiences a severe financial hardship or rapidly failing health, he or she shall have the right to request an immediate distribution of the balance credited to his or her -14- 18 Account in cash without regard to any election or elections in effect with respect to such Account under ss. 5 or ss. 6. Any such request shall be made to the Board, and the Director or Executive Committee Member making such request shall provide to the Board such evidence of such severe financial hardship or rapidly failing health as the Board shall request in addition to whatever evidence he or she desires that the Board consider in reviewing his or her request. A request shall be granted if the Board determines (a) (1) that the Director or Executive Committee Member in fact has a severe economic hardship which, if not cured, might adversely affect his or her performance as a Director or Executive Committee Member or (2) that his or her health in fact is rapidly failing and (b) the requested distributions will not violate the securities laws to the extent the distribution will be made from a Distribution Subaccount that is subject to adjustment under ss. 4.3 as if invested in Post Stock; provided, however, if a Director or Executive Committee Member makes such a request based on a severe financial hardship, the distribution made under this ss. 6.3 shall not exceed the amount which the Board determines is sufficient to cure such severe financial hardship. If a request for a distribution under this ss. 6.3 is made by a Director, such Director shall take no part in the Board's deliberations or decisions with respect to such request. 6.4 Beneficiary. (a) Designation. Each Director and each Executive Committee Member shall have the right to designate a person, or more than one person, as his or her Beneficiary to receive the balance credited to his or her Account in cash in the event of his or her death. Any such designation shall be made on a form provided for -15- 19 this purpose and shall be effective when such form is properly completed and delivered (in accordance with the instructions on such form) by the Director or Executive Committee Member to Post before his or her death. A Director or Executive Committee Member may change his or her Beneficiary designation from time to time and, if a Director or Executive Committee Member changes his or her Beneficiary designation at any time, his or her Beneficiary shall be the person or persons designated on the last form which is effective on his or her date of death. If no Beneficiary designation is in effect on the date a Director or Executive Committee Member dies or if no designated Beneficiary survives the Director or Executive Committee Member, the Director's or Executive Committee Member's estate automatically shall be treated as his or her Beneficiary under this Plan. (b) Distribution. If a Director's or Executive Committee Member's Beneficiary is a natural person, the Director's or Executive Committee Member's Distribution Subaccount, or each such subaccount, shall be distributed, or shall continue to be distributed, to such person in cash in accordance with the distribution election in effect for the Director or Executive Committee Member on the date of his or her death. If a Director's or Executive Committee Member's Beneficiary is a person other than a natural person, the balance credited to the Director or Executive Committee Member's -16- 20 entire Account shall be distributed to such person in cash in a lump sum as soon as practicable after the Director's or Executive Committee Member's death without regard to any Distribution Election Date or any distribution form which the Director or Executive Committee Member actually had elected. 6.5 Post Stock. If any deferrals credited to a Distribution Subaccount are subject to adjustment under ss. 4.3 as if invested in Post Stock, any distribution attributable to such deferrals shall be based on the closing price of a share of Post Stock on the Distribution Election Date or, if the distribution is made under ss. 6.3, on the date the Board grants the request for such distribution as such closing price is accurately reported in The Wall Street Journal or, if no closing price is so reported for such date, the last closing price as so reported before the Distribution Election Date. 6.6 General Assets. (a) Director. All distributions to, or on behalf of, a Director under this Plan shall be made from Post's general assets, and any claim by a Director or by his or her Beneficiary against Post for any distribution under this Plan shall be treated the same as a claim of any general and unsecured creditor of Post. (b) Executive Committee Member. All distributions to, or on behalf of, an Executive Committee Member shall be made from the general assets of Post, Post Apartment Homes or any other Participating Employer responsible for paying the related Bonus or Base Salary, and any claim by an Executive Committee Member or by his or her -17- 21 Beneficiary against Post, Post Apartment Homes or any other Participating Employer for any distribution under this Plan shall be treated the same as a claim of any general and unsecured creditor of such person. ss. 7. MISCELLANEOUS 7.1 Making and Revoking Elections. An election shall be treated as made or revoked under this Plan only when the form provided for making such election or revocation is properly completed and delivered to Post in accordance with the instructions on such form. 7.2 No Liability. No Director or Executive Committee Member and no Beneficiary of a Director or Executive Committee Member shall have the right to look to, or have any claim whatsoever against, any officers, director, employee or agent of Post, Post Apartment Homes or any other Participating Employer in his or her individual capacity for the distribution of any Account. 7.3 No Assignment; Binding Effect. No Director, Executive Committee Member or Beneficiary shall have the right to alienate, assign, commute or otherwise encumber an Account for any purpose whatsoever, and any attempt to do so shall be disregarded as completely null and void. The provisions of this Plan shall be binding on each Director, Executive Committee Member and Beneficiary and on Post, Post Apartment Homes and any other Participating Employer. 7.4 Construction. This Plan shall be construed in accordance with the laws of the State of Georgia except to the extent such laws are preempted by federal -18- 22 law. Headings and subheadings have been added only for convenience of reference and shall have no substantive effect whatsoever. All references to sections shall be to sections to this Plan. All references to the singular shall include the plural and all references to the plural shall include the singular. All definitions in this Plan shall apply exclusively to this Plan. 7.5 No Contract of Employment. A Director or Executive Committee Member's participation in this Plan shall not constitute a contract of employment or a right to continue to serve on the Board for any particular term or for any particular rate of compensation, and participation in this Plan shall have no bearing whatsoever on such terms or compensation or on any other conditions of employment or for membership on the Board. 7.6 Amendment and Termination. The Board shall have the right to amend this Plan from time to time and to terminate this Plan at any time; provided, however, the balance credited to each Account immediately after any such amendment or termination shall be no less than the balance credited to such Account immediately before such amendment or termination and no amendment or termination shall adversely affect a Director's or Executive Committee Member's right to the distribution of his or her Account or his or her Beneficiary's right to the distribution of such Account. Finally, this Plan shall be terminated if Post concludes that this Plan is subject to Part 2, Part 3 or Part 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended. 7.7 Administration. Post shall administer this Plan and shall have the power to interpret and make whatever equitable administrative and operational -19- 23 decisions Post deems reasonable and appropriate in light of the purpose of this Plan. Post shall have the right to administer this Plan in whole or in part using Post's own employees or to administer this Plan in whole or in part through a delegate retained by Post to provide recordkeeping or other services in connection with the operation and administration of this Plan. 7.8 Effective Date. The Plan initially shall be effective only for a Bonus, Base Salary, Meeting Fees and Retainers attributable to periods beginning after January 1, 2000, and this amended and restated Plan shall be effective as of January 1, 2000. POST PROPERTIES, INC. By: ------------------------------ Title ---------------------------- -20- EX-21.1 5 LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES OF POST PROPERTIES, INC.
NAME INCORPORATION ---- ------------- 1. Post Apartment Homes, L.P. Georgia 2. Post Services, Inc. Georgia 3. Post LP Holdings, Inc. Georgia 4. Post GP Holdings, Inc. Georgia 5. Post Travel, Inc. Georgia 6. Post Landscape Group, Inc. Georgia 7. RAM Partners, Inc. Georgia 8. Post Asset Management, Inc. Georgia 9. Rocky Point Management, Inc. Georgia 10. Cumberland Lake, Inc. Georgia 11. Briarcliff Commercial Property, LLC Georgia 12. Armada Homes, Inc. Delaware 13. Post Development Services Limited Partnership Georgia 14. Addison Circle Access, Inc. Delaware 15. Akard-McKinney Investment Company, LLC Texas 16. Post Uptown, LLC Texas 17. Greenwood Residential, LLC Texas 18. Columbus Management Services, LLC Texas 19. Uptown Denver, LLC Columbus 20. Addison Circle One, Ltd. Texas 21. Addison Circle Two, Ltd. Texas 22. Post Rice Lofts, LLC Texas 23. Rice Lofts, L.P. Texas 24. Post-AmerUs Rice Lofts, L.P. Georgia 25. Post-AmerUs American Beauty Mill, L.P. Georgia 26. Post Aviation, LLC Georgia 27. Villas at Parkway Village, L.P. Georgia 28. Villas GP, LLC Georgia 29. Post-AmerUs Bennie Dillon, L.P. Georgia 30. Post-AmerUs Wilson Building, L.P. Georgia 31. Addison Circle Three, Ltd. Texas 32. Addison Townhomes One, Ltd. Texas 33. Armada Condominiums, L.P. Georgia 34. Armada Phoenix Townhomes, LLC Texas 35. Armada Residences, L.P. Georgia 36. Gateway WW, LLC North Carolina 37. MT Acquisition, LLC Georgia 38. Residential Ventures, Inc. Georgia 39. Riverside Villas, LLC Georgia 40. STS Loan, L.P. Georgia
EX-23.1 6 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-62243) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.2 7 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-70689) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.3 8 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-81772) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.4 9 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-39461) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.5 10 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-36595) of our reports dated March 14, 2000 appearing on pages 35 and 55 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 1999, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.6 11 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-47399) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.7 12 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.7 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-00020) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-23.8 13 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.8 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-94121) of our report dated March 14, 2000 appearing on page 35 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. PricewaterhouseCoopers LLP Atlanta, Georgia March 14, 2000 EX-27.1 14 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST PROPERTIES, INC. FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000903127 POST PROPERTIES INC YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 7,250,000 0 0 0 0 0 2,582,785,000 303,016,000 2,350,173,000 0 989,583,000 0 50,000 388,000 1,058,424,000 2,350,173,000 0 345,927,000 0 179,342,000 0 0 33,192,000 120,946,000 0 93,100,000 0 458,000 0 92,642,000 2.41 2.38
EX-27.2 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001012271 POST APARTMENT HOMES LP YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 7,250,000 0 0 0 0 0 2,582,785,000 303,016,000 2,350,173,000 0 989,583,000 0 0 0 1,251,342,000 2,350,173,000 0 345,927,000 0 179,342,000 0 0 33,192,000 120,946,000 0 105,698,000 0 521,000 0 105,177,000 2.41 2.38
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