-----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, F1mm9MhRiXiXi0G+DoeXDPQ8SojUARPOUGqhALju3yXGBbvw+YDHwPJIDL4i6x6h 4llSWRnz5/6zaAoyZoBzEg== 0000950144-01-003013.txt : 20010224 0000950144-01-003013.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950144-01-003013 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 REFERENCES 429: 333-36595 REFERENCES 429: 333-42844 FILED AS OF DATE: 20010221 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: S-3 SEC ACT: SEC FILE NUMBER: 333-55994 FILM NUMBER: 1551353 BUSINESS ADDRESS: STREET 1: 4401 NORTHSIDE PARKWAY 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: S-3 SEC ACT: SEC FILE NUMBER: 333-55994-01 FILM NUMBER: 1551354 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 S-3 1 g66571s-3.txt POST PROPERTIES, INC. / POST APARTMENT HOMES, L.P. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. (Exact name of Registrant as specified in its charter) --------------------- GEORGIA 58-1550675 GEORGIA 58-2053632 (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.) Organization)
4401 NORTHSIDE PARKWAY SUITE 800 ATLANTA, GEORGIA 30327 (404) 846-5000 (Address, including zip code, and telephone number, including area code, of Registrant's Principal Executive Offices) --------------------- DAVID P. STOCKERT WITH A COPY TO: PRESIDENT AND CHIEF OPERATING OFFICER POST PROPERTIES, INC. JOHN J. KELLEY III 4401 NORTHSIDE PARKWAY, SUITE 800 STACEY K. GEER ATLANTA, GEORGIA 30327 KING & SPALDING (404) 846-5000 191 PEACHTREE STREET (Name, address, including zip code, and telephone number, ATLANTA, GEORGIA 30303-1763 including area code, of Agent for Service) (404) 572-4600
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM AGGREGATE TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2)(3) AMOUNT OF REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------------- Post Properties, Inc.: Common Stock.............................................. Preferred Stock........................................... $0 Depositary Shares representing Preferred Stock............ Post Apartment Homes, L.P.: Debt Securities(4)........................................ $366 million -------------------------- Total..................................................... $366 million $91,500(5) - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
(1) Does not include $287 million in securities of Post Properties, Inc. ("Post") and $134 million in securities of Post Apartment Homes, L.P. ("Post Apartment Homes") previously registered on Registration Statement Nos. 333-36595 and 333-42844 to which the prospectus included in this registration statement relates. Registration fees of $283,516 were previously paid in connection with an aggregate of $1 billion of securities (including the securities not yet issued) previously registered. (2) In no event will the aggregate maximum offering price of debt securities registered under this registration statement exceed $366 million. Any securities registered hereunder may be sold separately or as units with other securities registered hereunder. (3) The proposed maximum offering price per unit (a) has been omitted pursuant to Instruction II.D. of Form S-3 and (b) will be determined, from time to time, by the Registrants in connection with the issuance by the Registrants of the securities registered hereunder. (4) Subject to footnote (2), there is being registered hereunder an indeterminate number of debt securities as may be sold from time to time by Post Apartment Homes. Of the securities registered hereunder, Post Apartment Homes will only issue and sell non-convertible debt securities. (5) Calculated pursuant to Rule 457(o). --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS RELATING ALSO TO UP TO $87 MILLION OF UNSOLD SECURITIES REGISTERED UNDER REGISTRATION STATEMENT NO. 333-36595 PREVIOUSLY FILED BY THE REGISTRANTS AND DECLARED EFFECTIVE ON OCTOBER 16, 1997 AND UP TO $334 MILLION OF UNSOLD SECURITIES REGISTERED UNDER REGISTRATION STATEMENT NO. 333-42844 PREVIOUSLY FILED BY THE REGISTRANTS AND DECLARED EFFECTIVE ON SEPTEMBER 22, 2000. THIS REGISTRATION STATEMENT, WHICH IS A NEW REGISTRATION STATEMENT, ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO. 333-36595 AND REGISTRATION STATEMENT NO. 333-42844 AND SUCH POST-EFFECTIVE AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT IN ACCORDANCE WITH SECTION 8(C) OF THE SECURITIES ACT OF 1933. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This registration statement relates to securities which may be offered from time to time by Post Properties, Inc. ("Post") and Post Apartment Homes, L.P., a majority-owned subsidiary of Post ("Post Apartment Homes"). This registration statement contains a form of basic prospectus relating to both Post and Post Apartment Homes which will be used in connection with an offering of securities by Post or Post Apartment Homes. The specific terms of the securities to be offered will be set forth in a prospectus supplement relating to the securities to be sold. 3 SUBJECT TO COMPLETION, DATED FEBRUARY 21, 2001 PROSPECTUS (POST PROPERTIES LOGO) $287,000,000 POST PROPERTIES, INC. ---------------------- COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES ---------------------- $500,000,000 POST APARTMENT HOMES, L.P. ---------------------- DEBT SECURITIES ---------------------- We will provide the specific terms of these securities in supplements to this prospectus. You should read this prospectus and the applicable prospectus supplement carefully before you invest. ---------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ---------------------- This prospectus is dated , 2001 4 NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT CONSTITUTE AN OFFER TO SELL ONLY THE SECURITIES OFFERED HEREBY AND THEREBY, AND ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT IS CURRENT ONLY AS OF THEIR RESPECTIVE DATES. ---------------------- TABLE OF CONTENTS
PAGE ---- About this Prospectus....................................... 1 Where You Can Find More Information......................... 1 Post Properties, Inc. and Post Apartment Homes, L.P. ....... 2 Forward-Looking Information................................. 2 Use of Proceeds............................................. 4 Ratio of Earnings to Fixed Charges and to Fixed Charges and Preferred Stock Dividends................................. 5 Description of Debt Securities.............................. 6 Description of Common Stock................................. 14 Description of Preferred Stock.............................. 18 Description of Depositary Shares............................ 26 Federal Income Tax Considerations........................... 30 Plan of Distribution........................................ 45 Legal Matters............................................... 46 Experts..................................................... 46
i 5 ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission using a "shelf" registration process. Under this shelf process, we may sell: - debt securities, - common stock, - preferred stock, and - depositary shares either separately or in units, in one or more offerings. This prospectus provides you with a general description of those securities. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read this prospectus and the applicable prospectus supplement together with the additional information described under the heading "Where You Can Find More Information." The registration statement that contains this prospectus (including the exhibits to the registration statement) contains additional information about Post and Post Apartment Homes and the securities offered under this prospectus. That registration statement can be read at the SEC's web site or at the SEC offices mentioned under the heading "Where You Can Find More Information." WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. Our SEC filings are also available at the office of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. For further information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. We "incorporate by reference" into this prospectus the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus and any prospectus supplement and information that we file subsequently with the SEC will automatically update this prospectus and any prospectus supplement. We incorporate by reference the documents listed below and any future filings either Post or Post Apartment Homes makes with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") after the date of this 1 6 prospectus and prior to the time that we sell all the securities offered by this prospectus and any prospectus supplement: - Annual Report on Form 10-K for Post and Post Apartment Homes for the year ended December 31, 1999; - Quarterly Reports on Form 10-Q for Post and Post Apartment Homes for the quarters ended March 31, 2000, June 30, 2000 and September 30, 2000; - Current Reports on Form 8-K for Post and Post Apartment Homes dated May 4, 2000, June 13, 2000, October 2, 2000, November 30, 2000 and December 15, 2000; and - the description of Post's common stock contained in the Registration Statement on Form 8-A dated July 22, 1993. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost, by writing to or telephoning us at the following address: Post Properties, Inc. 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327 Attn: Secretary (404) 846-5000 POST PROPERTIES, INC. AND POST APARTMENT HOMES, L.P. We are one of the largest developers and operators of upscale multifamily apartment communities in the Southeastern and Southwestern United States. Post Properties, Inc., referred to in this prospectus as Post, is a self-administered and self-managed equity real estate investment trust, or REIT. Through its wholly owned subsidiaries, Post is the sole general partner of Post Apartment Homes and it controls a majority of the limited partnership interests, or Units, in Post Apartment Homes. Post conducts all of its business through Post Apartment Homes and its other subsidiaries. Our offices are located at 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and our telephone number is (404) 846-5000. When we refer to "we," "our" and "us" in this prospectus, we mean Post Properties, Inc. and its subsidiaries. Post(R) and PostSmart.net(R) are registered trademarks of Post Properties, Inc. This prospectus also includes trademarks, service marks, trade names and references to intellectual property owned by other companies. FORWARD-LOOKING INFORMATION Certain statements made in or incorporated by reference into this prospectus and any prospectus supplement, and other written or oral statements made by or on behalf of Post and Post Apartment Homes, may constitute "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and develop- 2 7 ments and our 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 or incorporated by reference into this prospectus and any prospectus supplement 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 expected. 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. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. The following are some of the factors that could cause our actual results to differ materially from the expected results described in our 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 our overall level of development; - our 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 our business. Our primary competitors include other regional or national apartment communities. The multifamily apartment community business is highly competitive; - general economic conditions which affect 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; - our ability to continue to qualify as a real estate investment trust under the Internal Revenue Code; and - changes in laws and regulations, including changes in accounting standards, tax statutes or regulations, and environmental and land use regulations, and uncertainties of litigation. Additional information concerning the risks and uncertainties listed above and other factors that you may wish to consider with respect to any investment in our securities is contained elsewhere in the filings by Post and Post Apartment Homes with the SEC. 3 8 USE OF PROCEEDS Post is required, by the terms of the partnership agreement of Post Apartment Homes, to invest the net proceeds of any sale of common stock, preferred stock or depositary shares in Post Apartment Homes in exchange for additional Units which will have preferences and rights that reflect the security to be issued. Unless otherwise indicated in any prospectus supplement, Post Apartment Homes intends to use such net proceeds and the net proceeds from the sale of debt securities for general corporate purposes including, without limitation, the acquisition and development of multi-family communities and the repayment of debt. Pending application of the net proceeds, Post Apartment Homes will invest the proceeds in interest-bearing accounts and short-term, interest-bearing securities, which are consistent with Post's intention to continue to qualify for taxation as a REIT. Such investments may include, for example, obligations of the Government National Mortgage Association, other government and government agency securities, certificates of deposit, interest-bearing bank deposits and mortgage loan participations. 4 9 RATIOS OF EARNINGS TO FIXED CHARGES AND TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------- ------------- 1996 1997 1998 1999 1999 2000 ---- ---- ---- ---- ----- ----- Post Apartment Homes -- ratio of earnings to fixed charges............................... 2.7 2.5 2.7 2.7 2.8 2.4 Post -- ratio of earnings to fixed charges and preferred stock dividends................... 2.6 2.2 2.2 2.2 2.3 1.9
- For purposes of calculating the ratio for Post Apartment Homes, fixed charges consist of: -- interest costs, whether expensed or capitalized; -- amortization of debt issuance costs; and -- the interest component of rental expense. - The ratio of earnings to fixed charges is calculated as follows: (pre-tax income from continuing operations) + (fixed charges) - (capitalized interest) --------------------------------------------------------------------------- (fixed charges) - For purposes of calculating the ratio for Post, fixed charges consist of: -- interest costs, whether expensed or capitalized; -- amortization of debt issuance costs; -- the interest component of rental expense; and -- preferred stock dividend requirements of consolidated subsidiaries. - The ratio of earnings to fixed charges and preferred stock dividends is calculated as follows: (pre-tax income from continuing operations) + (fixed charges)* - (capitalized interest) + (minority interest) - -------------------------------------------------------------------------------- (fixed charges) + (preferred stock dividends) - --------------- * For purposes of adding back fixed charges to the numerator, the preferred stock dividend requirements of the consolidated subsidiaries is excluded. 5 10 DESCRIPTION OF DEBT SECURITIES This section describes the general terms and provisions of the debt securities. The prospectus supplement will describe the specific terms of the debt securities offered through that prospectus supplement and any general terms outlined in this section that will not apply to those debt securities. The debt securities will be issued under an Indenture, dated as of September 15, 2000, between Post Apartment Homes and SunTrust Bank, as trustee, as amended by the First Supplemental Indenture. The Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as amended. As used in this prospectus, debt securities means the debentures, notes, bonds and other evidences of indebtedness that Post Apartment Homes issues and the Trustee authenticates and delivers under the Indenture. We have summarized selected terms and provisions of the Indenture in this section. The summary is not complete. We have also filed the Indenture and the First Supplemental Indenture as an exhibit to the registration statement. You should read the Indenture and the First Supplemental Indenture for additional information before you buy any debt securities. The summary that follows includes references to section numbers of the Indenture so that you can more easily locate these provisions. Capitalized terms used but not defined in this summary have the meanings specified in the Indenture. GENERAL The debt securities will be direct unsecured obligations of Post Apartment Homes. The debt securities will rank equally with all other unsecured and unsubordinated indebtedness of Post Apartment Homes. The Indenture does not limit the amount of debt securities that Post Apartment Homes may issue and permits Post Apartment Homes to issue debt securities from time to time. Debt securities issued under the Indenture will be issued as part of a series that has been established by Post Apartment Homes pursuant to the Indenture. (Section 301) Unless a prospectus supplement relating to debt securities states otherwise, the Indenture and the terms of the debt securities will not contain any covenants designed to afford holders of any debt securities protection in a highly leveraged or other transaction involving Post Apartment Homes that may adversely affect holders of the debt securities. If Post Apartment Homes ever issues bearer securities Post Apartment Homes will summarize provisions of the Indenture that relate to bearer securities in the applicable prospectus supplement. A prospectus supplement relating to a series of debt securities being offered will include specific terms relating to the offering. (Section 301) These terms will include some or all of the following: - the title and type of the debt securities; - any limit on the total principal amount of the debt securities; - the price at which the debt securities will be issued; - the date or dates on which the principal of and premium, if any, on the debt securities will be payable; - the maturity date of the debt securities; - if the debt securities will bear interest: -- the interest rate on the debt securities; -- the date from which interest will accrue; 6 11 -- the record and interest payment dates for the debt securities; and -- the first interest payment date; - any circumstances under which Post Apartment Homes may defer interest payments; - any optional redemption provisions that would permit Post Apartment Homes or the Holders (as defined below) of debt securities to elect redemption of the debt securities prior to their final maturity; - any sinking fund provisions that would obligate Post Apartment Homes to redeem the debt securities prior to their final maturity; - the currency or currencies in which the debt securities will be denominated and payable, if other than U.S. dollars; - any provisions that would permit Post Apartment Homes or the Holders of the debt securities to elect the currency or currencies in which the debt securities are paid; - whether the provisions described under the heading "Defeasance" below apply to the debt securities; - any changes to or additional Events of Default (as defined below) or covenants; - whether the debt securities will be issued in whole or in part in the form of Global Securities and, if so, the Depositary for those Global Securities (as defined below); - any special tax implications of the debt securities; and - any other terms of the debt securities. A "Holder," with respect to a registered security, means the person in whose name the registered security is registered in Post Apartment Homes' security register. (Section 101) "Global Security" means a debt security that Post Apartment Homes issues in accordance with the Indenture to represent all or part of a series of debt securities. TRUSTEE There may be more than one Trustee under the Indenture, each with respect to one or more series of debt securities. Any Trustee under the Indenture may resign or be removed with respect to one or more series of debt securities, and a successor Trustee may be appointed to act with respect to such series. (Section 608) In the event that two or more persons are acting as Trustee with respect to different series of debt securities, each Trustee shall be a trustee of a trust under the Indenture separate and apart from the trust administered by any other Trustee. (Section 609) Except as otherwise indicated, any action described herein to be taken by a Trustee may be taken by each Trustee with respect to, and only with respect to, the one or more series of debt securities for which it is Trustee under the Indenture. PAYMENT; TRANSFER Post Apartment Homes will designate a place of payment where you can receive payment of the principal of and any premium and interest on the debt securities or where you can transfer the debt securities. Even though Post Apartment Homes will designate a place of payment, Post Apartment Homes may elect to pay any interest on the debt 7 12 securities by mailing a check to the person listed as the owner of the debt securities in the security register or by wire transfer to an account designated by that person in writing not less than ten days before the date of the interest payment. (Sections 305, 307, 1002) There will be no service charge for any registration of transfer or exchange of the debt securities, but Post Apartment Homes may require you to pay any tax or other governmental charge payable in connection with a transfer or exchange of the debt securities. (Section 305) DENOMINATIONS Unless the prospectus supplement states otherwise, the debt securities will be issued only in registered form, without coupons, in denominations of $1,000 each or multiples of $1,000. ORIGINAL ISSUE DISCOUNT Debt securities may be issued under the Indenture as Original Issue Discount Securities and sold at a substantial discount below their stated principal amount. If a debt security is an "Original Issue Discount Security," that means that an amount less than the principal amount of the debt security will be due and payable upon a declaration of acceleration of the maturity of the debt security pursuant to the Indenture. (Section 101) The applicable prospectus supplement will describe the federal income tax consequences and other special factors which should be considered prior to purchasing any Original Issue Discount Securities. CONSOLIDATION, MERGER OR SALE The Indenture generally permits a consolidation or merger between Post Apartment Homes and another entity. It also permits the sale or transfer by Post Apartment Homes of all or substantially all of its property and assets and the purchase by it of all or substantially all of the property and assets of another entity. These transactions are permitted if: - Post Apartment Homes is the continuing entity or, if not, the resulting or acquiring entity assumes all of its responsibilities and liabilities under the Indenture, including the payment of all amounts due on the debt securities and performance of the covenants in the Indenture; - immediately after the transaction, no Event of Default exists; and - an officer's certificate and legal opinion covering these conditions are delivered to the Trustee. (Section 801 and 803) If Post Apartment Homes consolidates or merges with or into any other company or sells all or substantially all of its assets according to the terms and conditions of the Indenture, the resulting or acquiring company will be substituted for Post Apartment Homes in the Indenture with the same effect as if it had been an original party to the Indenture. As a result, such successor company may exercise the rights and powers of Post Apartment Homes under the Indenture, in the name of Post Apartment Homes or in its own name and Post Apartment Homes will be released from all of its liabilities and obligations under the Indenture and under the debt securities. (Section 802) 8 13 RESTRICTIVE COVENANTS Existence. Except as permitted under "-- Consolidation, Merger or Sale" above, Post Apartment Homes is required to do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights and franchises unless it determines that the preservation of its existence, rights and franchises is no longer desirable in the conduct of its business and that the loss of the preservation is not disadvantageous in any material respect to the Holders of the debt securities. (Section 1006) Maintenance of Properties. Post Apartment Homes is required to cause all of its material properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment. Post Apartment Homes is also required to cause to be made all necessary repairs, renewals, replacements, betterments and improvements on its material properties, so that the business carried on in connection with the properties may be properly and advantageously conducted at all times. Post Apartment Homes will not be prevented from selling or otherwise disposing for value its properties in the ordinary course of business. (Section 1007) Insurance. Post Apartment Homes is required to keep all of its insurable properties insured against loss or damage at least equal to their then full insurable value with financially sound and reputable insurance companies (Section 1008). Payment of Taxes and Other Claims. Post Apartment Homes is required to pay or discharge or cause to be paid or discharged, before they become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon its property. Post Apartment Homes is not required to pay or discharge or cause to be paid or discharged any tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. (Section 1009) Provision of Financial Information. The Holders of debt securities will be provided with copies of the annual reports and quarterly reports of Post Apartment Homes. Whether or not Post Apartment Homes is subject to Section 13 or 15(d) of the Exchange Act and for so long as any debt securities are outstanding, Post Apartment Homes will, to the extent permitted under the Exchange Act, be required to file with the Commission the annual reports, quarterly reports and other documents which Post Apartment Homes would have been required to file with the Commission pursuant to Section 13 or 15(d) if it were so subject. All of these documents are required to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which Post Apartment Homes would have been required to so file these documents if it were so subject. Post Apartment Homes will also, (1) within 15 days of each Required Filing Date, transmit by mail to all Holders of debt securities, as their names and addresses appear in the security register for the debt securities, without cost to them, and file with the Trustee copies of the annual reports and quarterly reports which it would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if it were subject to such Sections and (2) if filing such documents by Post Apartment Homes with the Commission is not permitted under the Exchange Act, promptly upon written request and 9 14 payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder. (Section 1010) Additional Covenants. Any additional or different covenants of Post Apartment Homes with respect to any series of debt securities will be set forth in the prospectus supplement relating to the specific debt securities. MODIFICATION AND WAIVER Under the Indenture, some of the rights and obligations of Post Apartment Homes and some of the rights of Holders of the debt securities may be modified or amended with the consent of the Holders of a majority in aggregate principal amount of the outstanding debt securities of each series of debt securities affected by the modification or amendment. The following modifications and amendments will not be effective against any Holder without its consent: - a change in the stated maturity date of any payment of principal or interest; - a reduction in payments due on the debt securities; - a change in the place of payment or currency in which any payment on the debt securities is payable; - a limitation of a Holder's right to sue Post Apartment Homes for the enforcement of certain payments due on the debt securities; - a reduction in the percentage of outstanding debt securities required to consent to a modification or amendment of the Indenture; and - a modification of any of the foregoing requirements. (Section 902) Under the Indenture, the Holders of a majority in aggregate principal amount of the outstanding debt securities of any series of debt securities may, on behalf of all Holders of that series: - waive compliance by Post Apartment Homes with certain restrictive covenants of the Indenture; and - waive any past default under the Indenture, except: -- a default in the payment of the principal of or any premium or interest on any debt securities of that series; or -- a default under any provision of the Indenture which itself cannot be modified or amended without the consent of the Holders of each outstanding debt security of that series. (Sections 1013, 513) EVENTS OF DEFAULT "Event of Default," when used in the Indenture with respect to any series of debt securities, means any of the following: - failure to pay interest on any debt security of that series for 30 days after the payment is due; - failure to pay the principal of or any premium on any debt security of that series when due; 10 15 - failure to deposit any sinking fund payment when due on debt securities of that series; - failure to perform any other covenant in the Indenture that applies to debt securities of that series for 60 days after Post Apartment Homes has received written notice of the failure to perform in the manner specified in the Indenture; - default with respect to over $20 million of recourse indebtedness, or with respect to over $20 million under any mortgage, lien or other similar encumbrance, indenture or instrument, including the Indenture, which secures any indebtedness or borrowed money, and which results in acceleration of the maturity of the outstanding principal amount of the indebtedness unless such acceleration is rescinded or the indebtedness is discharged; - certain events in bankruptcy, insolvency or reorganization; or - any other Event of Default that may be specified for the debt securities of that series when that series is created. (Section 501) If an Event of Default for any series of debt securities occurs and continues, the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding debt securities of the series may declare the entire principal of all the debt securities of that series to be due and payable immediately. If such a declaration occurs, the Holders of a majority of the aggregate principal amount of the outstanding debt securities of that series can, subject to certain conditions, rescind the declaration. (Sections 502, 513) The prospectus supplement relating to each series of debt securities which are Original Issue Discount Securities will describe the particular provisions that relate to the acceleration of maturity of a portion of the principal amount of such series when an Event of Default occurs and continues. An Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other series of debt securities issued under the Indenture. The Indenture requires Post Apartment Homes to file an officers' certificate with the Trustee each year that states that defaults do not exist under the terms of the Indenture. (Section 1011) The Trustee may withhold notice to the Holders of debt securities of any default, except defaults in the payment of principal, premium, interest or any sinking fund installment, if it considers such withholding of notice to be in the best interests of the Holders. (Section 601) Other than its duties in the case of a default, a Trustee is not obligated to exercise any of its rights or powers under the Indenture at the request, order or direction of any Holders, unless the Holders offer the Trustee reasonable indemnification. (Sections 602, 603) If reasonable indemnification is provided, then, subject to certain other rights of the Trustee, the Holders of a majority in principal amount of the outstanding debt securities of any series may, with respect to the debt securities of that series, direct the time, method and place of: - conducting any proceeding for any remedy available to the Trustee; or - exercising any trust or power conferred upon the Trustee. (Sections 512) 11 16 The Holder of a debt security of any series will have the right to begin any proceeding with respect to the Indenture or for any remedy only if: - the Holder has previously given the Trustee written notice of a continuing Event of Default with respect to that series; - the Holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made a written request of, and offered reasonable indemnification to, the Trustee to begin such proceeding; - the Trustee has not started such proceeding within 60 days after receiving the request; and - the Trustee has not received directions inconsistent with such request from the Holders of a majority in aggregate principal amount of the outstanding debt securities of that series during those 60 days. (Section 507) However, the Holder of any debt security will have an absolute right to receive payment of principal of and any premium and interest on the debt security when due and to institute suit to enforce such payment. (Section 508) DEFEASANCE Defeasance and Discharge. At the time that Post Apartment Homes establishes a series of debt securities under the Indenture, it can provide that the debt securities of that series are subject to the defeasance and discharge provisions of the Indenture. If Post Apartment Homes so provides, it will be discharged from its obligations on the debt securities of that series if it deposits with the Trustee, in trust, sufficient money or Government Obligations (as defined below) to pay the principal, interest, any premium and any other sums due on the debt securities of that series on the dates such payments are due under the Indenture and the terms of the debt securities. (Sections 1401 and 1404) As used above, "Government Obligations" mean: - securities of the same government which issued the currency in which the series of debt securities are denominated and in which interest is payable; or - securities of government agencies backed by the full faith and credit of such government. (Section 101) In the event that Post Apartment Homes deposits funds in trust and discharges its obligations under a series of debt securities as described above, then: - the Indenture will no longer apply to the debt securities of that series, except for certain obligations to compensate, reimburse and indemnify the Trustee, to register the transfer and exchange of debt securities, to replace lost, stolen or mutilated debt securities and to maintain paying agencies and the trust funds; and - Holders of debt securities of that series can only look to the trust fund for payment of principal, any premium and interest on the debt securities of that series. (Section 1402) 12 17 Defeasance of Certain Covenants and Certain Events of Default. At the time that Post Apartment Homes establishes a series of debt securities under the Indenture, it can provide that the debt securities of that series are subject to the covenant defeasance provisions of the Indenture. If Post Apartment Homes so provides and makes the deposit described under the heading "-- Defeasance and Discharge" above: - it will not have to comply with the following restrictive covenants contained in the Indenture: -- Existence (Sections 1006); -- Maintenance of Properties (Section 1007); -- Insurance (Section 1008); -- Payment of Taxes and Other Claims (Section 1009); -- Provision of Financial Information (Section 1010); and -- any other covenant Post Apartment Homes designates when it establishes the series of debt securities; and - it will not have to treat the events described in the fourth bullet point under the heading "-- Events of Default" as they relate to the covenants listed above that have been defeased and no longer are in effect and the events described in the last bullet point under the heading "-- Events of Default" as Events of Default under the Indenture in connection with that series. In the event of a defeasance, the obligations of Post Apartment Homes under the Indenture and the debt securities, other than with respect to the covenants and the Events of Default specifically referred to above, will remain in effect. (Sections 1402 and 1403) If Post Apartment Homes exercises its option not to comply with the covenants listed above and the debt securities of such series become immediately due and payable because an Event of Default has occurred, other than as a result of an Event of Default specifically referred to above, the amount of money and/or Government Obligations on deposit with the Trustee will be sufficient to pay the principal, interest, any premium and any other sums, due on the debt securities of such series on the date such payments are due under the Indenture and the terms of the debt securities, but may not be sufficient to pay amounts due at the time of acceleration. However, Post Apartment Homes would remain liable for the balance of the payments. Condition. Such a trust will only be permitted to be established if, among other things, Post Apartment Homes has delivered to the Trustee an opinion of counsel (as specified in the Indenture) to the effect that the Holders of the debt securities will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion of counsel, in the case of defeasance, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable U. S. federal income tax law occurring after the date of the Indenture (Section 1404). NO CONVERSION RIGHTS The debt securities will not be convertible into or exchangeable for any capital stock of Post or equity interest in Post Apartment Homes. 13 18 DESCRIPTION OF COMMON STOCK We have summarized certain terms and provisions of Post's common stock in this section. The summary is not complete. We have also filed Post's Articles of Incorporation and Bylaws as exhibits to the registration statement. You should read Post's Articles of Incorporation and Bylaws for additional information before you buy any common stock. GENERAL Shares Outstanding. Post's authorized common stock consists of 100,000,000 shares, par value $.01 per share. As of December 31, 2000, 38,853,596 shares were issued and outstanding, 808,596 shares were held in treasury, 5,181,411 shares were reserved for issuance upon exchange of outstanding Units and 6,000,000 shares were reserved for issuance upon exercise of outstanding stock options. Dividends. Holders of common stock may receive dividends when declared by Post's board of directors out of funds that Post can legally use to pay dividends. Post may pay dividends in cash, stock or other property. In certain cases, holders of common stock may not receive dividends until Post has satisfied its obligations to any holders of outstanding preferred stock. Voting Rights. Holders of common stock have the exclusive power to vote on all matters presented to Post's shareholders unless Georgia law or the certificate of designations for an outstanding series of preferred stock gives the holders of that series of preferred stock the right to vote on specified matters. Each holder of common stock is entitled to one vote per share. Holders of common stock have no cumulative voting rights for the election of directors. This means that a holder of a single share of common stock cannot cast more than one vote for each position to be filled on the board of directors. Other Rights. If Post voluntarily or involuntarily liquidates, dissolves or winds up its business, holders of common stock will receive pro rata, according to shares held by them, any remaining assets distributable to Post's shareholders after Post has provided for any liquidation preference for outstanding shares of preferred stock. When Post issues securities in the future, holders of common stock have no preemptive rights. This means that the holders of common stock have no right, as holders of common stock, to buy any portion of those issued securities. Listing. Post's outstanding shares of common stock are listed on the New York Stock Exchange under the symbol "PPS." Post intends to list with the New York Stock Exchange any additional shares of common stock to be sold pursuant to any prospectus supplement. EquiServe serves as the transfer agent and registrar for the common stock. Fully Paid. Post's outstanding shares of common stock are fully paid and nonassessable. This means that the full purchase price for the outstanding shares of common stock has been paid and the holders of such shares will not be assessed any additional monies for such shares. Any additional common stock that Post may issue in the future pursuant to any prospectus supplement or upon the conversion or exercise of other securities offered under this prospectus will also be fully paid and nonassessable. ANTI-TAKEOVER PROVISIONS CONTAINED IN POST'S ARTICLES OF INCORPORATION AND BYLAWS Certain provisions of Post's Articles of Incorporation and Bylaws may make it less likely that management would be changed or someone would acquire voting control of Post 14 19 without consent by the board of directors. These provisions may delay, deter or prevent tender offers or takeover attempts that shareholders may believe are in their best interests, including tender offers or attempts that might allow shareholders to receive premiums over the market price of their common stock. Preferred Stock. Post's board of directors can at any time, under its Articles of Incorporation and without shareholder approval, issue one or more new series of preferred stock. In some cases, the issuance of preferred stock without shareholder approval could discourage or make more difficult attempts to take control of Post through a merger, tender offer, proxy contest or otherwise. Preferred stock with special voting rights or other features issued to persons favoring management could stop a takeover by preventing the person trying to take control of Post from acquiring enough voting shares necessary to take control. Classified Board. Members of Post's board of directors are divided into three classes and serve staggered three-year terms under Post's Bylaws. This means that only approximately one-third of the directors are elected at each annual meeting of shareholders and that it would take two years to replace a majority of the directors unless they are removed. Directors may be removed from office at any time with or without cause. Nomination Procedures. Shareholders, as well as Post's board of directors, can nominate candidates for the board of directors. However, a shareholder must follow the advance notice procedures described in the Bylaws. In general, a shareholder must submit a written notice of the nomination to Post's corporate secretary at least 60 days before the date set for the annual meeting of shareholders. Proposal Procedures. Shareholders can propose that business other than nominations to the board of directors be considered at an annual meeting of shareholders only if a shareholder follows the advance notice procedures described in Post's Bylaws. In general, a shareholder must submit a written notice of the proposal and the shareholder's interest in the proposal at least 60 days before the date set for the annual meeting of shareholders. Amendment of Bylaws. Under Post's Bylaws, the board of directors can adopt, amend or repeal the bylaws, subject to limitations under the Georgia Business Corporation Act. Post's shareholders also have the power to change or repeal Post's Bylaws. GEORGIA ANTI-TAKEOVER STATUTES The Georgia Business Combination Code restricts certain business combinations with "interested shareholders" and contains fair price requirements applicable to certain mergers with certain "interested shareholders" that are summarized below. The restrictions imposed by these statutes will not apply to a corporation unless it elects to be governed by these statutes. Post has not elected to be covered by such restrictions. The Georgia business combination statute regulates business combinations such as mergers, consolidations, share exchanges and asset purchases where the acquired business has at least 100 shareholders residing in Georgia and has its principal office in Georgia, and where the acquiror became an "interested shareholder" of the corporation, unless either (1) the transaction resulting in such acquiror becoming an "interested shareholder" or the business combination received the approval of the corporation's board of directors prior to the date on which the acquiror became an "interested shareholder", or (2) the acquiror became the owner of at least 90% of the outstanding voting stock of the corporation, excluding shares held by directors, officers and affiliates of the corporation and shares held by certain other persons, 15 20 in the same transaction in which the acquiror became an "interested shareholder." For purposes of this statute, an "interested shareholder" generally is any person who directly or indirectly, alone or in concert with others, beneficially owns or controls 10% or more of the voting power of the outstanding voting shares of the corporation. The statute prohibits business combinations with an unapproved "interested shareholder" for a period of five years after the date on which such person became an "interested shareholder." The statute restricting business combinations is broad in its scope and is designed to inhibit unfriendly acquisitions. The Georgia fair price statute prohibits certain business combinations between a Georgia business corporation and an "interested shareholder" unless: - certain "fair price" criteria are satisfied; - the business combination is unanimously approved by the continuing directors; - the business combination is recommended by at least two-thirds of the continuing directors and approved by a majority of the votes entitled to be cast by holders of voting shares, other than voting shares beneficially owned by the "interested shareholder;" or - the interested shareholder has been such for at least three years and has not increased his ownership position in such three-year period by more than one percent in any twelve-month period. The fair price statute is designed to inhibit unfriendly acquisitions that do not satisfy the specified "fair price" requirements. LIMITATION ON MERGERS AND ASSET SALES Post may not engage in any merger, consolidation or other combination with or into another person or sale of all or substantially all of its assets unless such transaction includes the merger of Post Apartment Homes or sale of substantially all of the assets of Post Apartment Homes, which sale or merger must be approved by the holders of a majority of the outstanding Units. If Post were ever to hold less than a majority of the Units, this voting requirement might limit the possibility for acquisition or change in the control of Post. The foregoing limitation may have the effect of precluding a merger, consolidation or other combination of Post without the consent of Post's board of directors. RESTRICTIONS ON TRANSFER Ownership Limits. Post's Articles of Incorporation contain restrictions on the number of shares of common stock that a single shareholder may own. For Post to qualify as a REIT under the U.S. Internal Revenue Code, no more than 50% in value of its outstanding shares of common stock may be owned, actually and constructively under the applicable attribution provisions of the Code, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year or during a proportionate part of a shorter taxable year. The common stock must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year. Because Post has elected to be treated as a REIT, Post's Articles of Incorporation contain restrictions on the acquisition of common stock intended to ensure compliance with these requirements. 16 21 Subject to exceptions specified in the Articles of Incorporation, no person other than Messrs. Williams and Glover may own, or be deemed to own by virtue of the applicable attribution provisions of the Code, more than 6% (the "Ownership Limit") of the outstanding shares of common stock. Messrs. Williams and Glover are subject to a separate limitation (referred to as the "Excluded Holder Limit") pursuant to which they are prohibited from owning, actually and constructively under the applicable attribution provisions of the Code, more than 31%, in the aggregate, of the outstanding shares of common stock. In addition, Messrs. Williams and Glover are prohibited from acquiring any shares of common stock if their acquisition would cause five or fewer individuals to own, actually and constructively under the applicable attribution provisions of the Code, in the aggregate more than 50% in value of Post's outstanding stock. If any shareholder purports to transfer shares to a person and either the transfer would result in Post failing to qualify as a REIT, or the shareholder knows that the transfer would cause the transferee to hold more than the applicable Ownership Limit or Excluded Holder Limit, the purported transfer will be null and void as to that number of shares the transfer of which would cause a violation of the applicable limit, and the shareholder will be deemed not to have transferred such excess shares. In addition, if any person holds shares of common stock in excess of the applicable Ownership Limit or Excluded Holder Limit, that person will be deemed to hold the shares that cause the applicable limit to be exceeded in trust for Post, and will not receive dividends or distributions with respect to such shares and will not be entitled to vote such shares. The person will be required to sell such shares to Post for the lesser of the amount paid for the shares and the average of the last reported sales prices for the ten trading days immediately preceding the sale or to sell such shares at the direction of Post, in which case Post will be reimbursed for its expenses in connection with the sale plus any remaining amount of such proceeds that exceeds the amount such person paid for the shares and such person will be entitled to receive only the balance of the proceeds. If Post repurchases such shares, it may elect to pay for the shares with Units. All certificates representing shares of common stock will bear a legend referring to the restrictions described above. Every owner of more than 5%, or such lower percentage as may be required by the Code or the related regulations, of the issued and outstanding shares of common stock must file a written notice with Post containing the information specified in the Articles of Incorporation no later than January 30 of each year. In addition, each shareholder shall upon demand be required to disclose to Post in writing such information as Post may request in good faith in order to determine Post's status as a REIT. The foregoing ownership limitations may have the effect of precluding acquisition of control of Post without the consent of the board of directors. 17 22 DESCRIPTION OF PREFERRED STOCK This section describes the general terms and provisions of preferred stock of Post that may be offered by this prospectus. The prospectus supplement will describe the specific terms of the series of the preferred stock offered through that prospectus supplement and any general terms outlined in this section that will not apply to that series of preferred stock. We have summarized the terms and provisions of the preferred stock in this section. The summary is not complete. We have also filed Post's Articles of Incorporation as an exhibit to the registration statement. You should read Post's Articles of Incorporation and the Certificate of Designation, Preferences and Rights ("Certificate of Designation") relating to the applicable series of the preferred stock for additional information before you buy any preferred stock. GENERAL Pursuant to Post's Articles of Incorporation, Post's board of directors has the authority, without further shareholder action, to issue a maximum of 20,000,000 shares of Preferred Stock, including shares issued or reserved for issuance. As of December 31, 2000, Post had 1,150,000 shares designated as 8 1/2% Series A cumulative redeemable preferred stock, of which 1,000,000 shares were outstanding, 2,300,000 shares designated as 7 5/8% Series B cumulative redeemable preferred stock, of which 2,000,000 shares were outstanding, and 2,300,000 shares designated as 7 5/8% Series C cumulative redeemable preferred stock, of which 2,000,000 shares were outstanding. The board of directors has the authority to determine or fix the following terms with respect to shares of any series of preferred stock: - the number of shares and designation or title of the shares; - dividend rights; - whether and upon what terms the shares will be redeemable; - the rights of the holders upon Post's dissolution or upon the distribution of its assets; - whether and upon what terms the shares will have a purchase, retirement or sinking fund; - whether and upon what terms the shares will be convertible; - the voting rights, if any, which will apply; and - any other preferences, rights, limitations or restrictions of the series. If Post purchases, redeems or converts shares of preferred stock, it will retire and cancel them and restore them to the status of authorized but unissued shares of preferred stock. These shares will not be part of any particular series of preferred stock and may be reissued by Post. As described under "Description of Depositary Shares" below, Post may elect to offer depositary shares represented by depositary receipts. If Post so elects, each depositary share will represent a fractional interest to be specified in the applicable prospectus 18 23 supplement in a share of preferred stock. If Post issues depositary shares representing interests in preferred stock, the preferred stock will be deposited with a depositary. The preferred stock will have the dividend, liquidation, redemption, voting and conversion rights described in this section unless the applicable prospectus supplement provides otherwise. You should read the prospectus supplement relating to the particular series of the preferred stock it offers for specific terms, including: - the title and liquidation preference of the preferred stock and the number of shares offered; - the initial public offering price at which Post will issue the preferred stock; - the dividend rate or rates (or method of calculation), the dividend periods, the dates on which dividends will be payable and whether the dividends will be cumulative or noncumulative and, if cumulative, the dates from which the dividends will start to cumulate; - any redemption or sinking fund provisions; - any conversion provisions; - whether Post has elected to offer depositary shares as described under "Description of Depositary Shares" below; and - any additional dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions. When Post issues the preferred stock, the shares will be fully paid and nonassessable. This means that the full purchase price for the outstanding preferred stock will have been paid and the holders of such preferred stock will not be assessed any additional monies for such preferred stock. Unless the applicable prospectus supplement specifies otherwise: - each series of preferred stock will rank senior to Post's common stock and equally in all respects with the outstanding shares of each other series of preferred stock; and - the preferred stock will have no preemptive rights to subscribe for any additional securities which Post may issue in the future. This means that the holders of preferred stock will have no right, as holders of preferred stock, to buy any portion of those issued securities. DIVIDENDS The holders of the preferred stock of each series will be entitled to receive cash dividends, if declared by Post's board of directors or its duly authorized committee, out of assets that Post can legally use to pay dividends. The prospectus supplement relating to a particular series of preferred stock will set forth the dividend rates and dates on which dividends will be payable. The rates may be fixed or variable or both. If the dividend rate is variable, the applicable prospectus supplement will describe the formula used for determining the dividend rate for each dividend period. Post will pay dividends to the holders of record as they appear on Post's stock books on the record dates fixed by the board of directors or its duly authorized committee. 19 24 The applicable prospectus supplement will also state whether the dividends on any series of the preferred stock are cumulative or non-cumulative. Dividends, if cumulative, will be cumulative from and after the date set forth in the applicable prospectus supplement. If Post's board of directors does not declare a dividend payable on a dividend payment date on any non-cumulative series of preferred stock, then the holders of that series will not be entitled to receive a dividend for that dividend period and Post will not be obligated to pay the dividend for that dividend period even if the board of directors declares a dividend on that series payable in the future. Post's board of directors will not declare and pay a dividend on any of its stock ranking, as to dividends, equal with or junior to any series of the preferred stock unless full dividends on such series of the preferred stock have been declared and paid or declared and sufficient money is set aside for payment. Until full dividends are paid, or declared and payment is set aside, on each series of preferred stock ranking equal as to dividends, then: - Post will declare any dividends pro rata among the preferred stock of each series and any preferred stock ranking equal to the preferred stock as to dividends. This means that the dividends Post declares per share on each series of such preferred stock will bear the same relationship to each other that the full accrued dividends per share on each such series of the preferred stock bear to each other; - other than such pro rata dividends, Post will not declare or pay any dividends or declare or make any distributions upon any security ranking junior to or equal with the preferred stock as to dividends or upon liquidation except dividends or distributions paid for with securities ranking junior to the preferred stock as to dividends and upon liquidation; and - Post will not redeem, purchase or otherwise acquire, or set aside money for a sinking fund for, any securities ranking junior to or equal with the preferred stock as to dividends or upon liquidation except by conversion into or exchange for stock junior to the preferred stock as to dividends and upon liquidation. Post will not owe any interest, or any money in lieu of interest, on any dividend payment(s) on any series of the preferred stock which may be past due. REDEMPTION A series of the preferred stock may be redeemable, in whole or in part, at Post's option, and may be subject to mandatory redemption pursuant to a sinking fund or otherwise, as described in the applicable prospectus supplement. Redeemed preferred stock will become authorized but unissued shares of preferred stock that Post may issue in the future. If a series of the preferred stock is subject to mandatory redemption, the applicable prospectus supplement will specify the number of shares that Post will redeem each year and the redemption price. If preferred stock is redeemed, Post will pay all accrued and unpaid dividends on the preferred stock up to, but excluding, the redemption date. The prospectus supplement will also specify whether the redemption price will be paid in cash or other property. If (1) Post is only permitted to pay the redemption price for a series of preferred stock from the proceeds of a capital stock issuance and (2) the proceeds from the issuance are insufficient or no such issuance has occurred, then the terms of that series 20 25 may provide that the preferred stock will automatically and mandatorily be converted into such capital stock. If fewer than all of the outstanding shares of any series of the preferred stock are to be redeemed, Post's board of directors will determine the number of shares to be redeemed. Post will redeem the shares pro rata from the holders of record in proportion to the number of shares held by them, with adjustments to avoid redemption of fractional shares. Even though the terms of a series of preferred stock may permit redemption of the preferred stock in whole or in part, if any dividends, including accumulated dividends, on that series are past due: - Post will not redeem any preferred stock of that series unless Post simultaneously redeems all outstanding preferred stock of that series; and - Post will not purchase or otherwise acquire any preferred stock of that series. The prohibition discussed in the prior sentence will not prohibit Post from purchasing or acquiring preferred stock of that series to preserve its REIT status or pursuant to a purchase or exchange offer if Post makes the offer on the same terms to all holders of that series. Unless the applicable prospectus supplement specifies otherwise, Post will give notice of a redemption by mailing a notice to each record holder of the shares to be redeemed, between 30 to 60 days prior to the date fixed for redemption. If Post issues depositary shares representing interests in preferred stock, it will send a notice to the depositary between 40 to 70 days prior to the date fixed for redemption. Post will mail the notices to the holders' addresses as they appear on its stock records. Each notice will state: - the redemption date; - the number of shares and the series of the preferred stock to be redeemed; - the redemption price; - the place or places where holders can surrender the certificates for the preferred stock for payment of the redemption price; - that dividends on the shares to be redeemed will cease to accrue on the redemption date; and - the date when the holders' conversion rights, if any, will terminate. If Post redeems fewer than all shares of any series of the preferred stock held by any holder, it will also specify the number of shares to be redeemed from the holder in the notice. If Post has given notice of the redemption and has provided the funds for the payment of the redemption price, then beginning on the redemption date: - the dividends on the preferred stock called for redemption will no longer accrue; - such shares will no longer be considered outstanding; and - the holders will no longer have any rights as shareholders except to receive the redemption price. 21 26 When the holder properly surrenders the redeemed shares, the redemption price will be paid out of the funds provided by Post. If Post redeems fewer than all of the shares represented by any certificate, Post will issue a new certificate representing the unredeemed shares without cost to the holder. In the event that a redemption described above is deemed to be a "Tender Offer" within the meaning of Rule 14e-1 under the Exchange Act, Post will comply with all applicable provisions of the Exchange Act. CONVERSION The applicable prospectus supplement relating to a series of convertible preferred stock will describe the terms and conditions upon which shares of that series are convertible into shares of common stock or a different series of preferred stock. RIGHTS UPON LIQUIDATION Unless the applicable prospectus states otherwise, if Post voluntarily or involuntarily liquidates, dissolves or wind ups its business, the holders of shares of each series of the preferred stock will be entitled to receive: - liquidation distributions in the amount stated in the applicable prospectus supplement; and - all accrued and unpaid dividends, whether or not earned or declared. Post will pay these amounts to the holders of shares of each series of the preferred stock, and all amounts owing on any preferred stock ranking equally with such series of preferred stock as to distributions upon liquidation, out of Post's assets available for distribution to shareholders before any distribution is made to holders of any securities ranking junior to the preferred stock upon liquidation. The sale of all or substantially all of Post's property and assets, its merger into or consolidation with any other corporation or the merger of any other corporation into Post will not be considered a dissolution, liquidation or winding up of Post's business. If (1) Post voluntarily or involuntarily liquidates, dissolves or wind ups its business and (2) the assets available for distribution to the holders of the preferred stock of any series and any other shares of its stock ranking equal with such series as to any such distribution are insufficient to pay all amounts to which the holders are entitled, then Post will only make pro rata distributions to the holders of all shares ranking equal as to distributions upon dissolution, liquidation or winding up of its business. This means that the distributions Post pays to the holders of all shares ranking equal as to distributions upon dissolution, liquidation or winding up of its business will bear the same relationship to each other that the full distributable amounts for which such holders are respectively entitled upon such dissolution, liquidation or winding up of Post's business bear to each other. After Post pays the full amount of the liquidation distribution to which the holders of a series of the preferred stock are entitled, such holders will have no right or claim to any of Post's remaining assets. 22 27 VOTING RIGHTS Except as described in this section or in the applicable prospectus supplement, or except as expressly required by applicable law, the holders of the preferred stock will not be entitled to vote. If the holders of a series of preferred stock are entitled to vote and the applicable prospectus supplement does not state otherwise, then each share of preferred stock will be entitled to one vote. As more fully described under "Description of Depositary Shares" below, if Post elects to provide for the issuance of depositary shares representing fractional interests in a share of preferred stock, the holders of each depositary share will be entitled to a fraction of a vote. For any series of preferred stock having one vote per share, the voting power of the series, on matters on which holders of such series and holders of any other series of preferred stock are entitled to vote as a single class, will solely depend on the total number of shares in such series, and not on the aggregate liquidation preference or initial offering price. Whenever dividends on any shares of preferred stock are in arrears for six or more consecutive fiscal quarters, the holders of such shares of preferred stock, voting separately as a class with all other series of preferred stock that have similar voting rights, will be entitled to vote for the election of two additional directors of Post a special meeting called by the holders of record of at least 10% of any series of preferred stock so in arrears or, if such request is received less than 90 days before the date fixed for the next annual or special meeting of the shareholders, then at the next annual meeting of shareholders, and at each subsequent annual meeting. This right will continue until (1) if such series of preferred stock has a cumulative dividend, all dividends accumulated on such shares of preferred stock for the past dividend periods and the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment or (2) if such series of preferred stock does not have a cumulative dividend, four consecutive quarterly dividends shall have been fully paid or declared and a sum sufficient for the payment of the dividends set aside. In such case, the entire board of directors of Post will be increased by two directors. Unless Post receives the consent of the holders of an outstanding series of preferred stock and the outstanding shares of all other series of preferred stock which (1) rank equally with such series either as to dividends or the distribution of assets upon liquidation, dissolution or winding up of Post's business and (2) have voting rights that are exercisable and that are similar to those of such series, Post will not: - authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to such outstanding preferred stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of Post's business; or - amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of Post's Articles of Incorporation or of the resolutions contained in a Certificate of Designation creating such series of the preferred stock so as to materially and adversely affect any right, preference, privilege or voting power of such outstanding preferred stock. 23 28 This consent must be given by the holders of at least two-thirds of all such outstanding preferred stock described in the preceding sentence, voting together as a single class. Post will not be required to obtain this consent with respect to the actions listed in the second bullet point above, however, if it only (1) increases the amount of the authorized preferred stock, (2) creates and issues another series of preferred stock, or (3) increases the amount of authorized shares of any series of preferred stock, if such preferred stock in each case ranks equal with or junior to the preferred stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of its business. Under Georgia law, holders of each series of preferred stock will be entitled to vote as a class upon any proposed merger and any proposed amendment to the Articles of Incorporation, whether or not the Articles of Incorporation so state, if the merger or amendment would: - increase or decrease the aggregate number of authorized shares of such series; - effect an exchange or reclassification of all or part of the shares of the series into shares of another series; - effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class or series into shares of the series; - change the designation, rights, preferences or limitations of all or a part of the shares of the series; - change the shares of all or part of the series into a different number of shares of the same series; - create a new series having rights or preferences with respect to distributions or dissolution that are prior, superior or substantially equal to the shares of the series; - increase the rights, preferences or number of authorized shares of any class or series that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the series; - limit or deny an existing preemptive right of all or part of the shares of the series; - cancel or otherwise affect rights to distributions or dividends that have accumulated but have not yet been declared on all or part of the shares of the series; or - cancel, redeem or repurchase all or part of the shares of the series. SHAREHOLDER LIABILITY As discussed above under "Description of Common Stock -- General," applicable Georgia law provides that no shareholder, including holders of preferred stock, shall be personally liable for the acts and obligations of Post and that the funds and property of Post shall be the only recourse for such acts or obligations. RESTRICTIONS ON OWNERSHIP As discussed above under "Description of Common Stock -- Restrictions on Transfer," for Post to qualify as a REIT under the Code, not more than 50% in value of its outstanding capital shares may be owned, directly or indirectly, by five or fewer 24 29 individuals (as defined in the Code to include certain entities) during the last half of a taxable year. To assist Post in meeting this requirement, Post may take certain actions to limit the beneficial ownership, directly or indirectly, by a single person of Post's outstanding equity securities, including any preferred stock of Post. Therefore, the Certificate of Designations for each series of preferred stock may contain provisions restricting the ownership and transfer of the preferred stock. The applicable prospectus supplement will specify any additional ownership limitation relating to a series of preferred stock. REGISTRAR AND TRANSFER AGENT The Registrar and Transfer Agent for the preferred stock will be set forth in the applicable prospectus supplement. 25 30 DESCRIPTION OF DEPOSITARY SHARES GENERAL This section describes the general terms and provisions of the depositary shares. The prospectus supplement will describe the specific terms of the depositary shares offered through that prospectus supplement and any general terms outlined in this section that will not apply to those depositary shares. Post may offer fractional interests in preferred stock, rather than full preferred stock. If Post does, it will provide for the issuance by a depositary to the public of receipts for depositary shares, each of which will represent a fractional interest in a share of a particular series of preferred stock. The shares of any series of preferred stock underlying the depositary shares will be deposited under a separate deposit agreement between us and a depositary which will be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50 million. Post will name the depositary in the applicable prospectus supplement. Subject to the terms of the deposit agreement, each owner of a depositary share will have a fractional interest in all the rights and preferences of the share of preferred stock underlying such depositary share. Those rights include any dividend, voting, redemption, conversion and liquidation rights. The depositary shares will be evidenced by depositary receipts issued under the deposit agreement. If you purchase fractional interests in shares of the related series of preferred stock, you will receive depositary receipts as described in the applicable prospectus supplement. While the final depositary receipts are being prepared, Post may order the depositary to issue temporary depositary receipts substantially identical to the final depositary receipts although not in final form. The holders of the temporary depositary receipts will be entitled to the same rights as if they held the depositary receipts in final form. Holders of the temporary depositary receipts can exchange them for the final depositary receipts at Post's expense. If you surrender depositary receipts at the principal office of the depositary (unless the related depositary shares have previously been called for redemption), you are entitled to receive at such office the number of preferred stock and any money or other property represented by such depositary shares. Post will not issue partial preferred stock. If you deliver depositary receipts evidencing a number of depositary shares that represent more than a whole number of preferred stock, the depositary will issue you a new depositary receipt evidencing such excess number of depositary shares at the same time that the preferred stock are withdrawn. Holders of preferred stock received in exchange for depositary shares will no longer be entitled to deposit such shares under the deposit agreement or to receive depositary shares in exchange for such preferred stock. We have summarized selected terms and provisions of the deposit agreement, the depositary shares and the depositary receipts in this section. The summary is not complete. We will file the form of deposit agreement, including the form of depositary receipt, as an exhibit to a Current Report on Form 8-K before Post issues the depositary shares. You should read the forms of deposit agreement and depositary receipt relating to a series of preferred stock for additional information before you buy any depositary shares that represent preferred stock of such series. 26 31 DIVIDENDS The depositary will distribute all cash dividends received with respect to the preferred stock to the record holders of depositary shares representing the preferred stock in proportion to the numbers of depositary shares owned by the holders on the relevant record date. The depositary will distribute only the amount that can be distributed without attributing to any holder of depositary shares a fraction of one cent. The balance not distributed will be added to and treated as part of the next sum received by the depositary for distribution to record holders of depositary shares. REDEMPTION OF DEPOSITARY SHARES If the series of the preferred stock underlying the depositary shares is subject to redemption, the depositary shares will be redeemed from the redemption proceeds, in whole or in part, of such series of the preferred stock held by the depositary. The depositary will mail notice of redemption between 30 to 60 days prior to the date fixed for redemption to the record holders of the depositary shares to be redeemed at their addresses appearing in the depositary's records. The redemption price per depositary Share will bear the same relationship to the redemption price per share of preferred stock that the depositary share bears to the underlying share of preferred stock. Whenever Post redeems preferred stock held by the depositary, the depositary will redeem, as of the same redemption date, the number of depositary shares representing the preferred stock redeemed. If less than all the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected pro rata or by any other equitable method determined by Post that preserves Post's REIT status. After the date fixed for redemption, the depositary shares called for redemption will no longer be outstanding. When the depositary shares are no longer outstanding, all rights of the holders will cease, except the right to receive money or other property that the holders of the depositary shares were entitled to receive upon such redemption. Such payments will be made when holders surrender their depositary receipts to the depositary. CONVERSION If any series of preferred stock underlying the depositary shares is subject to conversion, the applicable prospectus supplement will describe the rights or obligations of each record holder of depositary receipts to convert the depositary shares. VOTING THE PREFERRED STOCK Upon receipt of notice of any meeting at which the holders of the preferred stock are entitled to vote, the depositary will mail information about the meeting contained in the notice to the record holders of the depositary shares relating to such preferred stock. Each record holder of such depositary shares on the record date, which will be the same date as the record date for the preferred stock, will be entitled to instruct the depositary as to how the preferred stock underlying the holder's depositary shares should be voted. The depositary will to vote the number of shares of preferred stock underlying the depositary shares according to the instructions received. Post will agree to take all action requested by and deemed necessary by the depositary in order to enable the depositary to vote the preferred stock in that manner. The depositary will not vote any shares of 27 32 preferred stock for which it does not receive specific instructions from the holders of the depositary shares relating to such preferred stock. LIQUIDATION PREFERENCE In the event of the liquidation, dissolution or winding up of Post, whether voluntary or involuntary, the applicable prospectus supplement will set forth the fraction of the liquidation preference accorded each share of preferred stock represented by the depositary share evidenced by a depositary receipt. TAXATION Owners of depositary shares will be treated for federal income tax purposes as if they were owners of the preferred stock represented by the depositary shares. Accordingly, for federal income tax purposes they will have the income and deductions to which they would be entitled if they were holders of the preferred stock. In addition: - no gain or loss will be recognized for federal income tax purposes upon the withdrawal of preferred stock in exchange for depositary shares as provided in the deposit agreement; - the tax basis of each share of preferred stock to an exchanging owner of depositary shares will, upon the exchange, be the same as the aggregate tax basis of the depositary shares exchanged for such share; and - the holding period for the preferred stock, in the hands of an exchanging owner of depositary shares who held the depositary shares as a capital asset at the time of the exchange, will include the period that the owner held such depositary shares. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of depositary receipt evidencing the depositary shares and any provision of the deposit agreement may be amended by agreement between us and the depositary at any time. However, any amendment that materially and adversely alters the rights of the existing holders of depositary shares will not be effective unless approved by the record holders of at least two-thirds of the depositary shares then outstanding. A deposit agreement will automatically terminate if: - all outstanding depositary shares relating to the deposit agreement have been redeemed; or - there has been a final distribution on the preferred stock of the relevant series in connection with Post's liquidation, dissolution or winding up of its business and the distribution has been distributed to the holders of the related depositary shares. A deposit agreement may be terminated by Post upon not less than 30 days' prior written notice to the applicable preferred stock depositary if (1) termination is necessary to preserve Post's status as a REIT or (2) a majority of each series of preferred stock affected by such termination consents to such termination, whereupon such preferred stock depositary will be required to deliver or make available to each holder of depositary receipts, upon surrender of the depositary receipts held by such holder, such number of whole shares of preferred stock as are represented by the depositary shares evidenced by such depositary receipts together with any other property held by such preferred stock 28 33 depositary with respect to such depositary receipts. Post will agree that if a deposit agreement is terminated to preserve its status as a REIT, then Post will use its best efforts to list the preferred stock issued upon surrender of the related depositary shares on a national securities exchange. CHARGES OF DEPOSITARY Post will pay all transfer and other taxes and governmental charges arising solely from the existence of the depositary arrangements. Post will pay associated charges of the depositary for the initial deposit of the preferred stock and any redemption of the preferred stock. Holders of depositary shares will pay transfer and other taxes and governmental charges and any other charges that are stated to be their responsibility in the deposit agreement. RESIGNATION AND REMOVAL OF DEPOSITARY The depositary may resign at any time by delivering notice to us. Post may also remove the depositary at any time. Resignations or removals will take effect upon the appointment of a successor depositary and its acceptance of the appointment. The successor depositary must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50 million. MISCELLANEOUS Post will forward to the holders of depositary shares all reports and communications that it must furnish to the holders of the preferred stock. Neither the depositary nor Post will be liable if the depositary is prevented or delayed by law or any circumstance beyond its control in performing its obligations under the deposit agreement. Post's obligations and the depositary's obligations under the deposit agreement will be limited to performance in good faith of duties set forth in the deposit agreement. Neither the depositary nor Post will be obligated to prosecute or defend any legal proceeding connected with any depositary shares or preferred stock unless satisfactory indemnity is furnished to us and/or the depositary. Post and the depositary may rely upon written advice of counsel or accountants, or information provided by persons presenting preferred stock for deposit, holders of depositary shares or other persons believed to be competent and on documents believed to be genuine. RESTRICTIONS ON OWNERSHIP As discussed above under "Description of Common Stock -- Restrictions on Transfer," for Post to qualify as a REIT under the Code, not more than 50% in value of its outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year. To assist Post in meeting this requirement, Post may take certain actions to limit the beneficial ownership, directly or indirectly, by a single person of Post's outstanding equity securities, including any preferred stock of Post. Therefore, the Certificate of Designations for each series of preferred stock underlying the depositary shares may contain provisions restricting the ownership and transfer of the preferred stock. The deposit agreement may contain similar provisions. The applicable prospectus supplement will specify any additional ownership limitation relating to a series of preferred stock and any depositary shares. 29 34 FEDERAL INCOME TAX CONSIDERATIONS INTRODUCTORY NOTES This discussion summarizes the material federal income tax considerations under current law that may be relevant to a prospective holder of the securities. It is not exhaustive of all possible tax considerations and does not give a detailed discussion of any state, local, or foreign tax considerations. It also does not discuss all of the aspects of federal income taxation that may be relevant to a prospective holder of securities in light of his particular circumstances or to certain types of holders (including insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) who are subject to special treatment under the federal income tax laws. As used in this section, the term "Post" refers solely to Post Properties, Inc. EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. QUALIFICATION AND TAXATION OF POST AS A REIT Post has made an election to be taxed as a REIT under Sections 856 through 860 of the Code effective for its short taxable year ending on December 31, 1993. Post's qualification and taxation as a REIT depends upon Post's ability to meet on a continuing basis, through actual annual operating results, distribution levels and diversity of stock ownership, the various qualification tests and organizational requirements imposed under the Code, as discussed below. Post believes that it is organized and has operated in such a manner as to qualify under the Code for taxation as a REIT commencing with its 1993 taxable year, and Post intends to continue to operate in such a manner. No assurance, however, can be given that Post will operate in a manner so as to qualify or remain qualified as a REIT. See "Failure to Qualify" below. In the opinion of King & Spalding, Post met the requirements for qualification and taxation as a REIT for its taxable years ended December 31, 1993 through 2000, and its current and proposed method of operation should enable it to continue to meet the requirements for qualification and taxation as a REIT. This opinion is based on various assumptions relating to the organization and operation of Post, Post Apartment Homes and the partnerships and limited liability companies in which Post Apartment Homes owns or has owned an interest and is conditioned upon certain representations made by Post as to certain relevant factual matters relating to the organization and expected manner of operation of Post, Post Apartment Homes, and their subsidiaries. King & Spalding is not aware of any facts or circumstances that are inconsistent with these assumptions and representations. Moreover, such qualification and taxation as a REIT will depend upon Post's ability to meet on a continuing basis, through actual annual operating results, distribution levels and diversity of stock ownership, the various qualification tests imposed under the Code discussed below. King & Spalding will not review compliance with these tests on a continuing basis. No assurance can be given that Post will satisfy such tests on a continuing basis. See "Failure to Qualify" below. 30 35 The sections of the Code relating to qualification and operation as a REIT are highly technical and complex. The following discussion sets forth certain material aspects of the Code sections that govern the federal income tax treatment of a REIT and its shareholders. The discussion is qualified in its entirety by the applicable Code provisions, Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change prospectively or retroactively. So long as Post continues to qualify for taxation as a REIT, it generally will not be subject to federal corporate income tax on its net income that is distributed currently to its shareholders. That treatment substantially eliminates the "double taxation" (i.e., taxation at both the corporate and shareholder levels) that generally results from investment in a corporation. However, Post will be subject to federal income tax in the following circumstances. First, Post will be taxed at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains. Second, under certain circumstances, Post may be subject to the "alternative minimum tax" on items of tax preference, if any. Third, if Post has (1) net income from the sale or other disposition of "foreclosure property" (which is, in general, property acquired by foreclosure or otherwise on default of a loan or lease secured by the property) that is held primarily for sale to customers in the ordinary course of business or (2) other nonqualifying income from foreclosure property, it will be subject to tax at the highest corporate rate on such income. Fourth, if Post has net income from prohibited transactions (which are, in general, certain sales or other dispositions of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business), such income will be subject to a 100% tax. Fifth, if Post should fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), and nonetheless has maintained its qualification as a REIT because certain other requirements have been met, it will be subject to a 100% tax on the net income attributable to the greater of the amounts by which it fails the 75% or 95% gross income test (or for taxable years beginning after December 31, 2000, a 90% test). Sixth, if Post should fail to distribute during each calendar year at least the sum of: - 85% of its REIT ordinary income for such year, - 95% of its REIT capital gain net income for such year and - any undistributed taxable income from prior periods, it would be subject to a 4% excise tax on the excess of such required distribution over the sum of the amounts actually distributed and amounts retained for which federal income tax was paid. Seventh, Post may be subject to a 100% excise tax with respect to certain "redetermined rents," "redetermined deductions," and "excess interest" to ensure arm's length (1) pricing for certain services provided by taxable REIT subsidiaries of Post to Post's tenants and (2) allocation of shared expenses between Post and its taxable REIT subsidiaries. Finally, if Post acquires any asset from a C corporation (i.e., a corporation generally subject to full corporate-level tax) in a transaction in which the basis of the asset in Post's hands is determined by reference to the basis of the asset (or any other property) in the hands of the corporation, and Post recognizes gain on the disposition of such asset during the ten-year period beginning on the date on which such asset was acquired by Post, then, to the extent of such property's "built-in" gain (the excess of the fair market value of such property at the time of acquisition by Post over the adjusted basis of such property at such time), such gain will be subject to the highest corporate rate applicable, 31 36 provided an election is made by Post to apply the principles of Section 1374 of the Code to such gain (a "Section 1374 election"). When Columbus Realty Trust ("Columbus"), which Post acquired by merger in 1997, was formed in 1993, it acquired certain built-in gain assets from a C corporation in a carryover basis transaction. Post believes that the aggregate net built-in gain with respect to such assets as of the date hereof is approximately $2.1 million. Post has filed a timely Section 1374 election with respect to the built-in gain assets acquired from Columbus. Accordingly, Post should be subject to a Section 1374 corporate-level tax if Post Apartment Homes sells a built-in gain asset in a taxable transaction during the ten-year period commencing on the date such assets were originally acquired by Columbus. Although Post has previously disposed of some of the built-in gain assets acquired from Columbus, Post has no current intention to incur the built-in gain tax with respect to the remaining assets that were acquired from Columbus. REQUIREMENTS FOR QUALIFICATION The Code defines a REIT as a corporation, trust or association: (1) that is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) that would be taxable as a domestic corporation, but for Sections 856 through 859 of the Code; (4) that is neither a financial institution nor an insurance company subject to certain provisions of the Code; (5) the beneficial ownership of which is held by 100 or more persons; (6) not more than 50% in value of the outstanding shares of which is owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) (the "5/50 Rule"); (7) that makes an election to be a REIT (or has made such election for a previous taxable year which has not been revoked or terminated) and satisfies all relevant filing and other administrative requirements established by the IRS that must be met in order to elect and maintain REIT status; (8) that uses a calendar year for federal income tax purposes; and (9) that meets certain other tests, described below, regarding the nature of its income and assets. The Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year, that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months, and that condition (6) must be met during the last half of the taxable year. For purposes of determining stock ownership under the 5/50 Rule, a supplemental unemployment compensation benefits plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes generally is considered an individual. A trust that is a qualified trust under Section 401(a) of the Code, however, generally is not considered an individual, and beneficiaries of such trust are treated as holding shares of a 32 37 REIT in proportion to their actuarial interests in such trust. Finally, Post will be treated as having met condition (6) above if it has complied with certain Treasury Regulations for ascertaining the ownership of its stock for such year and if it did not know (or after the exercise of reasonable diligence would not have known) that its stock was sufficiently closely held during such year to cause it to fail condition (6). Post's Articles of Incorporation contain restrictions regarding the transfer of its shares that are intended to assist Post in continuing to satisfy the share ownership requirements described in clauses (5) and (6) above. See "Description of Common Stock -- Restrictions on Transfer." Section 856(i) of the Code provides that a corporation that is a "qualified REIT subsidiary" shall not be treated as a separate corporation for federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of a "qualified REIT subsidiary" shall be treated as assets, liabilities and items of income, deduction and credit of the REIT. A "qualified REIT subsidiary" is a corporation, all of the capital stock of which is owned directly by the REIT. Certain subsidiaries of Post constitute qualified REIT subsidiaries. Accordingly, in applying the income and asset tests described below, such subsidiaries will be ignored for federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of such subsidiaries will be treated as assets, liabilities and items of income, deduction, and credit of Post. Such subsidiaries therefore will not be subject to federal corporate income taxation, although they may be subject to state and local taxation. In the case of a REIT that is a partner in an entity that is classified for federal income tax purposes as a partnership, Treasury Regulations provide that the REIT will be deemed to own its proportionate share of the assets of the partnership (based on the REIT's capital interest in the partnership) and will be deemed to be entitled to the gross income of the partnership attributable to such share. In addition, the assets and gross income of the partnership will retain the same character in the hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income and asset tests described below. The ownership of interests in Post Apartment Homes by Post will result in its proportionate share of the assets, liabilities and items of income of Post Apartment Homes being treated as assets, liabilities and items of income of Post for purposes of the asset and income tests described below. Income Tests. In order for Post to maintain its qualification as a REIT, two requirements relating to gross income must be satisfied annually. First, at least 75% of its gross income (excluding gross income from prohibited transactions) for each taxable year must consist of defined types of income derived directly or indirectly from investments relating to real property or mortgages on real property (including "rents from real property" and, in certain circumstances, interest) or temporary investment income. Second, at least 95% of its gross income (excluding gross income from prohibited transactions) for each taxable year must be derived from such real property or temporary investments, and from dividends, other types of interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing. The rent received by Post from its tenants will qualify as "rents from real property" in satisfying the gross income requirements for a REIT described above only if several conditions are met. First, the amount of rent must not be based, in whole or in part, on the income or profits of any person. However, an amount received or accrued generally will 33 38 not be excluded from the term "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, the Code provides that rents received from a tenant of Post will not qualify as "rents from real property" in satisfying the gross income tests if Post, or a direct or indirect owner of 10% or more of Post, directly or constructively owns 10% or more of such tenant (a "Related Party Tenant") unless such tenant is a "taxable REIT subsidiary" of the REIT and certain other conditions are satisfied. Third, if rent attributable to personal property that is leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." Finally, for the rent to qualify as "rents from real property," Post generally must not operate or manage its properties or furnish or render services to the tenants of such properties, other than through an "independent contractor" who is adequately compensated and from whom Post derives or receives no income. The "independent contractor" requirement, however, does not apply to the extent the services provided by Post are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not otherwise considered "rendered to the occupant." In addition, the "independent contractor" requirement will not apply to noncustomary services provided by Post, the annual value of which does not exceed 1% of the gross income derived from the property with respect to which the services are provided (the "1% de minimis exception"). For this purpose, such services may not be valued at less than 150% of Post's direct cost of providing the services, and any gross income deemed to have been derived by Post from the performance of noncustomary services pursuant to the 1% de minimis exception will constitute nonqualifying gross income under the 75% and 95% gross income tests. In addition, in taxable years beginning after December 31, 2000, a "taxable REIT subsidiary" of a REIT may provide noncustomary services to the tenants of the REIT without causing the rents paid by such tenants to be disqualified as "rents from real property." Post does not charge rent for any portion of any property that is based, in whole or in part, on the income or profits of any person. In addition, Post does not receive any material rent from a Related Party Tenant. Finally, Post intends to provide any noncustomary services through qualifying independent contractors or its taxable REIT subsidiaries or in compliance with the 1% de minimis exception. Post Apartment Homes receives fees in consideration of the performance of management, landscaping and administrative services with respect to properties that are not wholly owned, directly or indirectly, by Post Apartment Homes. A portion of such fees (corresponding to that portion of any such property owned by a third party) generally will not qualify under the 75% or 95% gross income tests. Post will also receive certain other types of non-qualifying income, including its allocable share of any dividends paid by Post Services to Post Apartment Homes (which will qualify under the 95% gross income test but not under the 75% gross income test). Post believes, however, that the aggregate amount of such fees and other non-qualifying income in any taxable year will not cause Post to exceed the limits on non-qualifying income under the 75% and 95% gross income tests. If Post fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it nevertheless may qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. Those relief provisions generally will be available if the failure to meet such tests is due to reasonable cause and not due to willful neglect, 34 39 Post attaches a schedule of the sources of its income to its return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible, however, to state whether in all circumstances Post would be entitled to the benefit of those relief provisions. As discussed above in "-- Qualification and Taxation of Post as a REIT," even if those relief provisions apply, a 100% tax would be imposed on the net income attributable to the greater of the amount by which Post fails the 75% and 95% gross income tests (or a 90% test for taxable years beginning after December 31, 2000). Asset Tests. At the close of each quarter of its taxable year, Post also must satisfy several tests relating to the nature of its assets. First, at least 75% of the value of Post's total assets must be represented by real estate assets (including its allocable share of real estate assets held by Post Apartment Homes and any subsidiary partnerships or limited liability companies), stock or debt instruments held for not more than one year that are purchased with the proceeds of a stock offering or long-term public debt offering of Post, cash, cash items and government securities. Second, of the investments not included in the 75% asset class, the value of any one issuer's debt and equity securities owned by Post (including its allocable share of such securities owned by Post Apartment Homes) may not exceed 5% of the value of Post's total assets. Third, Post may not own more than 10% of any one issuer's outstanding voting securities, and, with respect to taxable years beginning after December 31, 2000, more than 10% of the total value of any one issuer's outstanding debt and equity securities. Debt of an issuer that is secured by real estate assets does not constitute a "security" for purposes of the 5% and 10% asset tests. For taxable years beginning after December 31, 2000, the 5% and 10% asset tests described above do not apply to the securities of a "taxable REIT subsidiary" of the REIT, although the value of the debt and equity securities of all taxable REIT subsidiaries owned by the REIT cannot represent more than 20% of the value of the REIT's total assets. Any corporation in which a REIT directly or indirectly owns stock (other than another REIT, a corporation which directly or indirectly operates or manages a lodging facility or a health care facility, and, with certain exceptions, a corporation which directly or indirectly provides to any other person (under a franchise, license, or otherwise) rights to any brand name under which any lodging facility or health care facility is operated) may be treated as a "taxable REIT subsidiary" if the REIT and the corporation file a joint election with the Internal Revenue Service for the corporation to be treated as a taxable REIT subsidiary of the REIT. Post has filed joint elections with each of Post Services and Addison Circle Access, Inc. to have such corporations, as well as the corporate subsidiaries of Post Services, treated as taxable REIT subsidiaries of Post as of January 1, 2001. Accordingly, the debt and equity securities of Post Services and Addison Circle Access that are held by Post Apartment Homes are no longer subject to the 5% asset test or the 10% asset tests. In addition, because the 10% voting securities test does not apply to the securities of a taxable REIT subsidiary, Post Apartment Homes intends to acquire the voting stock of Post Services and Addison Circle Access, which is currently held by executive officers of Post. Post believes that its pro rata share of the debt and equity securities of Post Services and Addison Circle Access represents less than 20% of the value of Post's total assets, and, with respect to taxable years ending on or before December 31, 2000, represented less than 5% of the value of Post's total assets. In addition, Post believes that it satisfies the 5% and 35 40 10% asset tests with respect to Post Apartment Homes' ownership of the stock of certain corporations that have not elected to become taxable REIT subsidiaries of Post. No independent appraisals have been obtained, however, to support these conclusions, and King & Spalding, in rendering its opinion as to Post's qualification as a REIT, is relying on Post's representation as to the value of Post's assets. Although Post plans to take steps to ensure that it continues to satisfy all of the applicable REIT asset tests, there can be no assurance that such steps will always be successful or will not require a reduction in Post Apartment Homes' overall interest in the taxable REIT subsidiaries or its other investments. A number of constraints are imposed on REITs and their taxable REIT subsidiaries to ensure that REITs cannot, through taxable REIT subsidiaries, engage in substantial non-real estate activities and also to ensure that taxable REIT subsidiaries pay an appropriate corporate-level tax on their income. For example, a taxable REIT subsidiary will be subject to the "earnings stripping" rules of the Code with respect to interest paid to the REIT, which could disallow a portion of the taxable REIT subsidiary's interest deductions under certain circumstances. In addition, a 100% excise tax may be imposed on the REIT with respect to certain "redetermined rents", "redetermined deductions", and "excess interest" to ensure arm's length (1) pricing for services provided by the taxable REIT subsidiary to REIT tenants and (2) allocation of shared expenses between the REIT and the taxable REIT subsidiary. Distribution Requirements. In order to qualify as a REIT, Post is required to distribute with respect to each taxable year dividends (other than capital gain dividends) to its shareholders in an aggregate amount at least equal to (1) the sum of (A) 95% (90% beginning in 2001) of its "REIT taxable income" (computed without regard to the dividends paid deduction and its net capital gain) and (B) 95% (90% beginning in 2001) of the net income (after tax), if any, from foreclosure property, minus (2) the sum of certain items of non-cash income. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before Post timely files its federal income tax return for such year and if paid on or before the first regular dividend payment date after such declaration. To the extent that Post does not distribute all of its net capital gain or distributes at least 95% (90% beginning in 2001), but less than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax thereon at regular ordinary and capital gains corporate tax rates. Furthermore, if Post should fail to distribute during each calendar year at least the sum of: - 85% of its REIT ordinary income for such year, - 95% of its REIT capital gain income for such year and - any undistributed taxable income from prior periods, it would be subject to a 4% nondeductible excise tax on the excess of such required distribution over the sum of the amounts actually distributed and amounts retained for which federal income tax was paid. Post has made and intends to continue to make timely distributions sufficient to satisfy the annual distribution requirements. In this regard, the partnership agreement of Post Apartment Homes authorizes a qualified REIT subsidiary of Post, as general partner, to take such steps as may be necessary to cause Post Apartment Homes to distribute to its partners an amount sufficient to permit Post to meet these distribution requirements. It is 36 41 possible, however, that Post, from time to time, may not have sufficient cash or other liquid assets to meet the distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible expenses and the inclusion of such income and deduction of such expenses in arriving at Post's taxable income, or if the amount of nondeductible expenses (such as principal amortization or capital expenses) exceeds the amount of noncash deductions. In the event that such timing differences occur, in order to meet the distribution requirements, Post may cause Post Apartment Homes to arrange for short-term, or possibly long-term, borrowing to permit the payment of required dividends. If the amount of nondeductible expenses exceeds noncash deductions, Post Apartment Homes may refinance its indebtedness to reduce principal payments and borrow funds for capital expenditures. Under certain circumstances, Post may be able to rectify a failure to meet the distribution requirements for a year by paying "deficiency dividends" to its shareholders in a later year, which may be included in its deduction for dividends paid for the earlier year. Although Post may be able to avoid being taxed on amounts distributed as deficiency dividends, it will be required to pay to the IRS interest based upon the amount of any deduction taken for deficiency dividends. Recordkeeping Requirements. Pursuant to applicable Treasury Regulations, Post must maintain certain records and request on an annual basis certain information from its shareholders designed to disclose the actual ownership of its outstanding shares. Post intends to comply with these requirements. FAILURE TO QUALIFY If Post fails to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, it will be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Distributions to shareholders in any year in which Post fails to qualify will not be deductible nor will they be required to be made. In such event, to the extent of current and accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income and, subject to certain limitations of the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, Post also will be disqualified from taxation as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT. It is not possible to predict whether in all circumstances Post would be entitled to such statutory relief. OTHER TAX CONSIDERATIONS Tax Status of Post Apartment Homes and Other Pass-Through Entities. All of Post's investments have been made through Post Apartment Homes, which in turn holds an interest in a number of subsidiary partnerships. In the opinion of King & Spalding, Post Apartment Homes and the subsidiary partnerships (other than any subsidiary partnerships that are 100% beneficially owned by Post Apartment Homes and disregarded for federal income tax purposes) qualify as partnerships for federal income tax purposes and not as associations taxable as corporations or as publicly traded partnerships taxable as corporations. A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the 37 42 substantial equivalent of a secondary market. Treasury Regulations, which are effective for taxable years beginning after December 31, 1995 (the "PTP Regulations"), provide limited safe harbors, which, if satisfied, will prevent a partnership's interests from being treated as readily tradable on a secondary market or the substantial equivalent thereof. The "private placement" safe harbor applies if (1) all interests in the partnership were issued in a transaction (or transactions) that was not required to be registered under the Securities Act and (2) the partnership does not have more than 100 partners at any time during the partnership's taxable year. Post Apartment Homes does not currently meet the private placement safe harbor of the PTP Regulations because it has more than 100 partners. Under a special grandfather rule, an existing partnership may continue to rely on safe harbors contained in IRS Notice 88-75 until its first taxable year beginning after December 31, 2005, unless the partnership adds a "substantial new line of business" after December 4, 1995. Post believes that Post Apartment Homes has satisfied, and will continue to satisfy, the private placement safe harbor under such Notice because, in part, it has fewer than 500 direct and indirect partners. In addition, Post believes that it has not added a "substantial new line of business" since December 4, 1995. Upon expiration of the grandfather period, if Post Apartment Homes does not at that time satisfy the private placement safe harbor of the PTP Regulations, it is possible that Post Apartment Homes could be classified as a publicly traded partnership. In that event, Post Apartment Homes should satisfy a special "passive income" exception provided in Section 7704(c) of the Code and therefore should not be subject to federal income tax at the corporate level. However, if Post Apartment Homes were classified as a publicly traded partnership, the partners of Post Apartment Homes would nevertheless be subject to special passive loss limitation rules in Section 469(k) of the Code. If Post Apartment Homes were treated as an association taxable as a corporation, Post would fail the 75% asset test. Further, if the subsidiary partnerships were treated as taxable corporations, then Post would cease to qualify as a REIT if Post's ownership interest in such partnership exceeded 10% of the partnership's voting interests or the value of such interest exceeded 5% of the value of Post's assets or, beginning in 2001, 10% of the value of the outstanding interests in the partnership. Furthermore, in such a situation, distributions from the subsidiary partnerships to Post would be treated as dividends, which are not qualifying income under the 75% gross income test described above and which could therefore make it more difficult for Post to meet such test. See "-- Failure to Qualify" above for a discussion of the effect of Post's failure to meet such tests for a taxable year. Finally, Post would not be able to deduct its share of losses generated by any of the subsidiary partnerships in computing its taxable income. Taxation of Post Services and Operating Subsidiaries. Post Services and its existing subsidiaries file a corporate consolidated return for federal income tax purposes. The consolidated taxable income of these companies is subject to tax at regular corporate rates. To the extent such entities are required to pay federal, state and local income taxes, the cash available for distribution to shareholders will be correspondingly reduced. State and Local Taxes. Post, Post Apartment Homes and its subsidiaries may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or own property. The state and local tax treatment of Post, Post Apartment Homes and its subsidiaries may not conform to the federal income 38 43 tax consequences discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in the Securities. TAXATION OF TAXABLE U.S. SHAREHOLDERS As long as Post qualifies as a REIT, distributions made to taxable U.S. Shareholders (as hereinafter defined) out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by such U.S. Shareholders (as hereinafter defined) as ordinary income and will not be eligible for the dividends received deduction generally available to corporations. As used herein, the term "U.S. Shareholder" means a holder of Post's shares that for United States federal income tax purposes is: (1) a citizen or resident of the United States, (2) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or the District of Columbia, (3) an estate the income of which is subject to United States federal income taxation regardless of its source, or (4) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust, and (B) one or more United States persons have the authority to control all substantial decisions of the trust. Distributions that are designated as capital gain dividends will be taxed as gain from the sale or exchange of a capital asset held for more than one year (to the extent they do not exceed Post's actual net capital gain for the taxable year) without regard to the period for which the U.S. Shareholder has held his or her shares. The tax rates applicable to such capital gain are discussed below. However, corporate U.S. Shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. Distributions in excess of current and accumulated earnings and profits will not be taxable to a U.S. Shareholder to the extent that they do not exceed the adjusted basis of the U.S. Shareholder's shares, but will reduce the adjusted basis of such shares. To the extent that such distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of a U.S. Shareholder's shares, such distributions will be included in income as capital gain, assuming that such shares are capital assets in the hands of the U.S. Shareholder. The tax rate to which such capital gain will be subject will depend on the U.S. Shareholder's holding period for his shares. In addition, any distribution declared by Post in October, November or December of any year and payable to a U.S. Shareholder of record on a specified date in any such month shall be treated as both paid by Post and received by the U.S. Shareholder on December 31 of such year, provided that the distribution is actually paid by Post during January of the following calendar year. Post may make an election to treat all or part of its undistributed net capital gain as if it had been distributed to its shareholders. As described above, these undistributed amounts would be subject to corporate level tax payable by Post. If Post should make such an election, its shareholders would be required to include in their income as long-term capital gain their proportionate share of Post's undistributed net capital gain as designated by Post. Each such shareholder would be deemed to have paid his proportionate share of the income tax imposed on Post with respect to such undistributed net capital gain, and 39 44 this amount would be credited or refunded to the shareholder. In addition, the tax basis of the shareholder's stock would be increased by his proportionate share of undistributed net capital gains included in his income less his proportionate share of the income tax imposed on Post with respect to such gains. U.S. Shareholders may not include in their individual income tax returns any net operating losses or capital losses of Post. Instead, such losses would be carried over by Post for potential offset against its future income (subject to certain limitations). Taxable distributions from Post and gain from the disposition of its shares will not be treated as passive activity income and, therefore, U.S. Shareholders generally will not be able to apply any "passive activity losses" (such as losses from certain types of limited partnerships in which a shareholder is a limited partner) against such income. In addition, taxable distributions from Post generally will be treated as investment income for purposes of the investment interest limitations. Capital gains from the disposition of Post's shares (or distributions treated as such), however, will be treated as investment income only if the U.S. Shareholder so elects, in which case such capital gains will be taxed at ordinary income rates. Post will notify shareholders after the close of Post's taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, return of capital and capital gain. In general, any gain or loss realized upon a taxable disposition of Post's shares by a U.S. Shareholder who is not a dealer in securities will be treated as a capital gain or loss. Lower marginal tax rates for individuals may apply in the case of capital gains, depending on the holding period of Post's shares that are sold. However, any loss upon a sale or exchange by a U.S. Shareholder who has held such shares for six months or less (after applying certain holding period rules), will be treated as a long-term capital loss to the extent of distributions from Post required to be treated by such U.S. Shareholder as long- term capital gain. All or a portion of any loss realized upon a taxable disposition of Post's shares may be disallowed if other Post shares are purchased within 30 days before or after the disposition. For non-corporate taxpayers, the tax rate differential between capital gain and ordinary income may be significant. The highest marginal non-corporate income tax rate applicable to ordinary income is 39.6%, but any capital gain generally will be taxed to a non-corporate taxpayer at a maximum rate of 20% with respect to capital assets held for more than one year. The tax rates applicable to ordinary income apply to gain from the sale or exchange of capital assets held for one year or less. In the case of capital gain attributable to the sale or exchange of certain real property held for more than one year, an amount of such gain equal to the amount of all prior depreciation deductions not otherwise required to be taxed as ordinary depreciation recapture income will be taxed at a maximum rate of 25%. With respect to distributions designated by a REIT as capital gain dividends (including any deemed distributions of retained capital gains), the REIT also may designate and will notify shareholders, subject to certain limits, whether the dividend is taxable to non-corporate shareholders as a 20% rate gain distribution or an unrecaptured depreciation distribution taxed at a 25% rate. The characterization of income as capital or ordinary may affect the deductibility of capital losses. Capital losses not offset by capital gains may be deducted against a non-corporate taxpayer's ordinary income only up to a maximum annual amount of $3,000. Non-corporate taxpayers may carry forward their unused capital losses. All net capital gain 40 45 of a corporate taxpayer is subject to tax at ordinary corporate rates. A corporate taxpayer may deduct capital losses only to the extent of its capital gains, with unused losses eligible to be carried back three years and forward five years. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING Post will report to its U.S. Shareholders and to the IRS the amount of distributions paid during each calendar year and the amount of tax withheld, if any. Under the backup withholding rules, a U.S. Shareholder may be subject to backup withholding at the rate of 31% with respect to distributions paid unless such holder (1) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (2) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A U.S. Shareholder who does not provide Post with his correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the U.S. Shareholder's income tax liability. In addition, Post may be required to withhold a portion of capital gain distributions to any U.S. Shareholders who fail to certify their nonforeign status to Post. See "-- Taxation of Non-U.S. Shareholders." TAXATION OF TAX-EXEMPT SHAREHOLDERS Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts ("Exempt Organizations"), generally are exempt from federal income taxation. However, they are subject to taxation on their unrelated business taxable income ("UBTI"). While many investments in real estate generate UBTI, the IRS has issued a published ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on that ruling, amounts distributed by Post to Exempt Organizations generally should not constitute UBTI. However, if an Exempt Organization finances its acquisition of shares with "acquisition indebtedness," a portion of its income from distributions on such shares will constitute UBTI pursuant to the "debt-financed property" rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal service plans that are exempt from taxation under paragraphs (7), (9), (17) and (20), respectively, of Code section 501(c) are subject to different UBTI rules, which generally will require them to characterize distributions from Post as UBTI. In addition, in certain circumstances, a pension trust that owns more than 10% (by value) of the shares of a REIT would be required to treat a percentage of the dividends on its shares as UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross income, less related direct expenses, derived by Post from an unrelated trade or business (determined as if Post were a pension trust) divided by the gross income, less related direct expenses, of Post for the year in which the dividends are paid. The UBTI rule applies to a pension trust holding more than 10% of the Common Stock only if (1) the UBTI Percentage is at least 5%, (2) Post qualifies as a REIT by reason of the modification of the 5/50 Rule that allows the beneficiaries of the pension trust to be treated as holding shares of Post, in proportion to their actuarial interests in the pension trust and (3) either (A) one pension trust owns more than 25% of the value of such shares or (B) a group of pension trusts individually holding more than 10% of the value of shares collectively owns more than 50% of the value of the shares. 41 46 TAXATION OF NON-U.S. SHAREHOLDERS The rules governing United States federal income taxation of nonresident alien individuals and foreign corporations, foreign partnerships and other foreign holders of Post's shares that are not U.S. Shareholders as defined above (collectively, "Non-U.S. Shareholders") are complex and no attempt will be made herein to provide more than a summary of such rules. NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL, STATE AND LOCAL INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN THE SECURITIES, INCLUDING ANY REPORTING REQUIREMENTS. Distributions to Non-U.S. Shareholders that are not attributable to gain from sales or exchanges by Post of United States real property interests and are not designated by Post as capital gain dividends will be treated as dividends of ordinary income to the extent that they are made out of Post's current or accumulated earnings and profits. Such distributions ordinarily will be subject to a withholding tax equal to 30% of the gross amount of the distribution unless an applicable tax treaty reduces or eliminates that tax. However, if income from the investment in shares is treated as effectively connected with the Non-U.S. Shareholder's conduct of a United States trade or business, the Non-U.S. Shareholder generally will be subject to federal income tax at graduated rates, in the same manner as U.S. Shareholders are taxed with respect to such distributions (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). In addition, a foreign corporation receiving income that is treated as effectively connected income may be subject to an additional 30% "branch profits" tax, unless an applicable tax treaty reduces or eliminates that tax. Post expects to withhold United States income tax at the rate of 30% on the gross amount of any such distributions made to a Non-U.S. Shareholder unless (1) a lower treaty rate applies and any required form (e.g., IRS Form W-88EN) evidencing eligibility for that reduced rate is filed with Post or (2) the Non-U.S. Shareholder files an IRS Form W-8ECI with Post. Distributions in excess of current and accumulated earnings and profits of Post will not be taxable to a shareholder to the extent that such distributions do not exceed the adjusted basis of the shareholder's shares but rather will reduce the adjusted basis of such shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of a Non-U.S. Shareholder's shares, such distributions will give rise to tax liability if the Non-U.S. Shareholder otherwise would be subject to tax on any gain from the sale or disposition of his shares as described below. Because it generally cannot be determined at the time a distribution is made whether or not such distribution will be in excess of current and accumulated earnings and profits, the entire amount of any distribution normally will be subject to withholding at the same rate as a dividend. However, amounts so withheld are refundable to the extent it is determined subsequently that such distribution was, in fact, in excess of the payor's current and accumulated earnings and profits. Post is required to withhold 10% of any distribution in excess of its current and accumulated earnings and profits to the extent that its shares constitute "U.S. real property interests" under Section 897(c) of the Code. Consequently, although Post intends to withhold at a rate of 30% on the entire amount of any distribution to a Non-U.S. Shareholder, to the extent that Post does not do so, any portion of a distribution not subject to 30% withholding may be subject to 10% withholding under certain circumstances. 42 47 For any year in which Post qualifies as a REIT, distributions that are attributable to gain from sales or exchanges of U.S. real property interests will be taxed to a Non-U.S. Shareholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of United States real property interests are taxed to a Non-U.S. Shareholder as if such gain were effectively connected with a United States business. Non-U.S. Shareholders thus would be taxed at the normal capital gain rates applicable to U.S. Shareholders (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). Distributions subject to FIRPTA also may be subject to the 30% branch profits tax in the hands of a corporate Non-U.S. Shareholder not entitled to treaty relief or exemption. Post is required to withhold 35% of any distribution that is designated by it as a capital gains dividend. The amount withheld is creditable against the Non-U.S. Shareholder's U.S. tax liability. Gain recognized by a Non-U.S. Shareholder upon a sale of shares generally will not be taxed under FIRPTA if Post is a "domestically controlled REIT," defined generally as a REIT in which at all times during a specified testing period less than 50% in value of the stock was held directly or indirectly by foreign persons. Post believes that it is currently a "domestically-controlled REIT" and, therefore, the sale of Common Stock will not be subject to taxation under FIRPTA. However, because Post's shares are publicly traded, no assurance can be given that Post is or will continue to be a "domestically-controlled REIT." In addition, a Non-U.S. Shareholder that owned (actually or constructively under certain constructive ownership rules) 5% or less of Post's outstanding shares at all times during a specified testing period will not be subject to tax under FIRPTA if such shares are regularly traded on an established securities market (e.g., the NYSE, on which the shares are currently traded). Furthermore, gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (1) investment in shares is effectively connected with the Non- U.S. Shareholder's United States trade or business, in which case the Non-U.S. Shareholder will be subject to the same treatment as U.S. Shareholders with respect to such gain, or (2) the Non-U.S. Shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other conditions apply, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains. If the gain on the sale of shares were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as U.S. Shareholders with respect to such gain (subject to a special alternative minimum tax in the case of nonresident alien individuals). OTHER TAX CONSEQUENCES Post's shareholders may be subject to state or local taxation in various state or local jurisdictions, including those in which they own property, transact business or reside. The state and local tax treatment of Post's shareholders may not conform to the federal income tax consequences discussed above (although shareholders who are individuals generally should not be required to file state income tax returns outside of their state of residence with respect to Post's operations and distributions). 43 48 TAXATION OF HOLDERS OF PREFERRED STOCK, DEPOSITARY SHARES AND DEBT SECURITIES If Post offers one or more series of preferred stock or depositary shares, or if Post Apartment Homes offers one or more series of debt securities, then there may be tax consequences for the holders of such securities not discussed herein. For a discussion of any such additional consequences, see the applicable prospectus supplement. 44 49 PLAN OF DISTRIBUTION We may sell any securities: - through underwriters or dealers; - through agents; or - directly to one or more purchasers. The distribution of the securities may be effected from time to time in one or more transactions: - at a fixed price or prices, which may be changed from time to time; - at market prices prevailing at the time of sale; or - at prices related to such prevailing market prices, or at negotiated prices. For each series of securities, the prospectus supplement will set forth the terms of the offering including: - the initial public offering price; - the names of any underwriters, dealers or agents; - the purchase price of the securities; - our proceeds from the sale of the securities; - any underwriting discounts, agency fees, or other compensation payable to underwriters or agents; - any discounts or concessions allowed or reallowed or repaid to dealers; and - the securities exchanges on which the securities will be listed, if any. If we use underwriters in the sale, they will buy the securities for their own account. The underwriters may then resell the securities in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale or thereafter. The obligations of the underwriters to purchase the securities will be subject to certain conditions. The underwriters will be obligated to purchase all the securities offered if they purchase any securities. Any initial public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time. In connection with an offering, underwriters and selling group members and their affiliates may engage in transactions to stabilize, maintain or otherwise affect the market price of the securities in accordance with applicable law. If we use dealers in the sale, we will sell securities to such dealers as principals. The dealers may then resell the securities to the public at varying prices to be determined by such dealers at the time of resale. If we use agents in the sale, they will use their reasonable best efforts to solicit purchases for the period of their appointment. If we sell directly, no underwriters or agents would be involved. We are not making an offer of securities in any state that does not permit such an offer. Underwriters, dealers and agents that participate in the securities distribution may be deemed to be underwriters as defined in the Securities Act of 1933. Any discounts, commissions, or profit they receive when they resell the securities may be treated as underwriting discounts and commissions under that Act. We may have agreements with 45 50 underwriters, dealers and agents to indemnify them against certain civil liabilities, including certain liabilities under the Securities Act of 1933, or to contribute with respect to payments that they may be required to make. We may authorize underwriters, dealers or agents to solicit offers from certain institutions whereby the institution contractually agrees to purchase the securities from us on a future date at a specific price. This type of contract may be made only with institutions that we specifically approve. Such institutions could include banks, insurance companies, pension funds, investment companies and educational and charitable institutions. The underwriters, dealers or agents will not be responsible for the validity or performance of these contracts. The securities, other than the common stock, will be new issues of securities with no established trading market and unless otherwise specified in the applicable prospectus supplement, we will not list any series of the securities on any exchange. It has not presently been established whether the underwriters, if any, of the securities will make a market in the securities. If the underwriters make a market in the securities, such market making may be discontinued at any time without notice. No assurance can be given as to the liquidity of the trading market for the securities. LEGAL MATTERS King & Spalding will pass upon the legality of the securities offered by this prospectus. King & Spalding will pass upon certain tax matters related to Post. Herschel M. Bloom, a member of King & Spalding, is a director of Post. Any underwriters, dealers or agents will be represented by their own legal counsel. EXPERTS The consolidated financial statements incorporated in this prospectus by reference to the Annual Report on Form 10-K of Post Properties, Inc. and Post Apartment Homes, L.P. for the year ended December 31, 1999, have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 46 51 (POST LOGO) 52 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an estimate, subject to future contingencies, of the expenses to be incurred by the Registrants in connection with the issuance and distribution of the securities being registered: SEC registration fee........................................ $ 91,500 Legal fees and expenses..................................... 200,000 Trustee fees and expenses................................... 25,000 Accounting fees and expenses................................ 50,000 Blue sky fees and expenses.................................. 10,000 Printing and engraving fees................................. 80,000 Rating agency fees.......................................... 200,000 Listing fees................................................ 50,000 Miscellaneous............................................... 43,500 -------- Total............................................. $750,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Part 5 of Article 8 of the Georgia Business Corporation Code States: 14-2-850. PART DEFINITIONS. As used in this part, the term: (1) "Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (2) "Director" or "officer" means an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation's request if his or her duties to the corporation also impose duties on, or otherwise involve services by, the director or officer to the plan or to participants in or beneficiaries of the plan. Director or officer includes, unless the context otherwise requires, the estate or personal representative of a director or officer. (3) "Disinterested director" means a director who at the time of a vote referred to in subsection (c) of Code Section 14-2-853 or a vote or selection referred to in subsection (b) or (c) of Code Section 14-2-855 or subsection (a) of Code Section 14-2-856 is not: (A) A party to the proceeding; or (B) An individual who is a party to a proceeding having a familial, financial, professional, or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made with respect to the proceeding, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director's judgment when voting on the decision being made. II-1 53 (4) "Expenses" include counsel fees. (5) "Liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding. (6) "Official capacity" means: (A) When used with respect to a director, the office of director in a corporation; and (B) When used with respect to an officer, as contemplated in Code Section 14-2-857, the office in a corporation held by the officer. Official capacity does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan, or other entity. (7) "Party" means an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (8) "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal. 14-2-851. AUTHORITY TO INDEMNIFY. (a) Except as otherwise provided in this Code section, a corporation may indemnify an individual who is a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if: (1) Such individual conducted himself or herself in good faith; and (2) Such individual reasonably believed: (A) In the case of conduct in his or her official capacity, that such conduct was in the best interests of the corporation; (B) In all other cases, that such conduct was at least not opposed to the best interests of the corporation; and (C) In the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful. (b) A director's conduct with respect to an employee benefit plan for a purpose he or she believed in good faith to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (a)(1)(B) of this Code section. (c) The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this Code section. (d) A corporation may not indemnify a director under this Code section: (1) In connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under this Code section; or II-2 54 (2) In connection with any proceeding with respect to conduct for which he was adjudged liable on the basis that personal benefit was improperly received by him, whether or not involving action in his official capacity. 14-2-852. MANDATORY INDEMNIFICATION. A corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. 14-2-853. ADVANCE FOR EXPENSES. (a) A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding because he or she is a director if he or she delivers to the corporation: (1) A written affirmation of his or her good faith belief that he or she has met the relevant standard of conduct described in Code Section 14-2-851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation as authorized by paragraph (4) of subsection (b) of Code Section 14-2-202; and (2) His or her written undertaking to repay any funds advanced if it is ultimately determined that the director is not entitled to indemnification under this part. (b) The undertaking required by paragraph (2) of subsection (a) of this Code section must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment. (c) Authorizations under this Code section shall be made: (1) By the board of directors: (A) When there are two or more disinterested directors, by a majority vote of all the disinterested directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; or (B) When there are fewer than two disinterested directors, by the vote necessary for action by the board in accordance with subsection (c) of Code Section 14-2-824, in which authorization directors who do not qualify as disinterested directors may participate; or (2) By the shareholders, but shares owned or voted under the control of a director who at the time does not qualify as a disinterested director with respect to the proceeding may not be voted on the authorization. II-3 55 14-2-854. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. (a) A director who is a party to a proceeding because he or she is a director may apply for indemnification or advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall: (1) Order indemnification or advance for expenses if it determines that the director is entitled to indemnification under this part; or (2) Order indemnification or advance for expenses if it determines, in view of all the relevant circumstances, that it is fair and reasonable to indemnify the director or to advance expenses to the director, even if the director has not met the relevant standard of conduct set forth in subsections (a) and (b) of Code Section 14-2-851, failed to comply with Code Section 14-2-853, or was adjudged liable in a proceeding referred to in paragraph (1) or (2) of subsection (d) of Code Section 14-2-851, but if the director was adjudged so liable, the indemnification shall be limited to reasonable expenses incurred in connection with the proceeding. (b) If the court determines that the director is entitled to indemnification or advance for expenses under this part, it may also order the corporation to pay the director's reasonable expenses to obtain court-ordered indemnification or advance for expenses. 14-2-855. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION. (a) A corporation may not indemnify a director under Code Section 14-2-851 unless authorized thereunder and a determination has been made for a specific proceeding that indemnification of the director is permissible in the circumstances because he or she has met the relevant standard of conduct set forth in Code Section 14-2-851. (b) The determination shall be made: (1) If there are two or more disinterested directors, by the board of directors by a majority vote of all the disinterested directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; (2) By special legal counsel: (A) Selected in the manner prescribed in paragraph (1) of this subsection; or (B) If there are fewer than two disinterested directors, selected by the board of directors (in which selection directors who do not qualify as disinterested directors may participate); or (3) By the shareholders, but shares owned by or voted under the control of a director who at the time does not qualify as a disinterested director may not be voted on the determination. (c) Authorization of indemnification or an obligation to indemnify and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if there are fewer than two disinterested directors or if the determination is made by special legal counsel, authorization of II-4 56 indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subparagraph (b)(2)(B) of this Code section to select special legal counsel. 14-2-856. SHAREHOLDER APPROVED INDEMNIFICATION. (a) If authorized by the articles of incorporation or a bylaw, contract, or resolution approved or ratified by the shareholders by a majority of the votes entitled to be cast, a corporation may indemnify or obligate itself to indemnify a director made a party to a proceeding including a proceeding brought by or in the right of the corporation, without regard to the limitations in other Code sections of this part, but shares owned or voted under the control of a director who at the time does not qualify as a disinterested director with respect to any existing or threatened proceeding that would be covered by the authorization may not be voted on the authorization. (b) The corporation shall not indemnify a director under this Code section for any liability incurred in a proceeding in which the director is adjudged liable to the corporation or is subjected to injunctive relief in favor of the corporation: (1) For any appropriation, in violation of the director's duties, of any business opportunity of the corporation; (2) For acts or omissions which involve intentional misconduct or a knowing violation of law; (3) For the types of liability set forth in Code Section 14-2-832; or (4) For any transaction from which he or she received an improper personal benefit. (c) Where approved or authorized in the manner described in subsection (a) of this Code section, a corporation may advance or reimburse expenses incurred in advance of final disposition of the proceeding only if: (1) The director furnishes the corporation a written affirmation of his or her good faith belief that his or her conduct does not constitute behavior of the kind described in subsection (b) of this Code section; and (2) The director furnishes the corporation a written undertaking, executed personally or on his or her behalf, to repay any advances if it is ultimately determined that the director is not entitled to indemnification under this Code section. 14-2-857. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS. (a) A corporation may indemnify and advance expenses under this part to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation: (1) To the same extent as a director; and (2) If he or she is not a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for liability arising out of conduct that constitutes: (A) Appropriation, in violation of his or her duties, of any business opportunity of the corporation; II-5 57 (B) Acts or omissions which involve intentional misconduct, or a knowing violation of law; (C) The types of liability set forth in Code Section 14-2-832; or (D) Receipt of an improper personal benefit. (b) The provisions of paragraph (2) of subsection (a) of this Code section shall apply to an officer who is also a director if the sole basis on which he or she is made a party to the proceeding is an act or omission solely as an officer. (c) An officer of the corporation who is not a director is entitled to mandatory indemnification under Code Section 14-2-852, and may apply to a court under Code Section 14-2-854 for indemnification or advances for expenses, in each case to the same extent to which a director may be entitled to indemnification or advances for expenses under those provisions. (d) A corporation may also indemnify and advance expenses to an employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract. 14-2-858. INSURANCE A corporation may purchase and maintain insurance on behalf of an individual who is a director, officer, employee, or agent of the corporation or who, while a director, officer, employee, or agent of the corporation, serves at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity against liability asserted against or incurred by him or her in that capacity or arising from his or her status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify or advance expenses to him or her against the same liability under this part. 14-2-859. APPLICATION OF PART (a) A corporation may, by a provision in its articles of incorporation or bylaws or in a resolution adopted or a contract approved by its board of directors or shareholders, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification or advance funds to pay for or reimburse expenses consistent with this II-6. Any such obligatory provision shall be deemed to satisfy the requirements for authorization referred to in subsection (c) of Code Section 14-2-853 or subsection (c) of Code Section 14-2-855. Any such provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall be deemed to obligate the corporation to advance funds to pay for or reimburse expenses in accordance with Code Section 14-2-853 to the fullest extent permitted by law, unless the provision specifically provides otherwise. (b) Any provision pursuant to subsection (a) of this Code section shall not obligate the corporation to indemnify or advance expenses to a director of a predecessor of the corporation, pertaining to conduct with respect to the predecessor, unless otherwise specifically provided. Any provision for indemnification or advance for expenses in the articles of incorporation, bylaws, or a resolution of the board of directors or shareholders, partners, or, in the case of limited liability companies, members or managers of a II-6 58 predecessor of the corporation or other entity in a merger or in a contract to which the predecessor is a party, existing at the time the merger takes effect, shall be governed by paragraph (3) of subsection (a) of Code Section 14-2-1106. (c) A corporation may, by a provision in its articles of incorporation, limit any of the rights to indemnification or advance for expenses created by or pursuant to this part. (d) This part does not limit a corporation's power to pay or reimburse expenses incurred by a director or an officer in connection with his or her appearance as a witness in a proceeding at a time when he or she is not a party. (e) Except as expressly provided in Code Section 14-2-857, this part does not limit a corporation's power to indemnify, advance expenses to, or provide or maintain insurance on behalf of an employee or agent. ARTICLES OF INCORPORATION As permitted by the Georgia Business Corporation Code, Post's Articles of Incorporation provide that a director shall not be personally liable to Post or its shareholders for monetary damages for breach of duty of care or other duty as a director, except that such provision shall not eliminate or limit the liability of a director (a) for any appropriation, in violation of his duties, of any business opportunity of Post, (b) for acts or omissions that involve intentional misconduct or a knowing violation of law, (c) for unlawful corporate distributions or (d) for any transaction from which the director derived an improper personal benefit. The Articles of Incorporation of Post further provide that if the Georgia Business Corporation Code is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of Post shall be eliminated or limited to the fullest extent permitted by the Georgia Business Corporation Code, as amended. Under Article IV of Post's Bylaws and certain agreements entered into by Post, Post is required to indemnify to the fullest extent permitted by the Georgia Business Corporation Code, any individual made a party to a proceeding (as defined in the Georgia Business Corporation Code) because such person is or was a director or officer against liability (as defined in the Georgia Business Corporation Code), incurred in the proceeding, if such person acted in a manner such person believed in good faith to be in or not opposed to the best interests of Post and, in the case of any criminal proceeding, such person had no reasonable cause to believe such person's conduct was unlawful. Post is required to pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding in advance of final disposition of the proceeding if: (a) Such person furnishes Post a written affirmation of his good faith belief that he has met the standard of conduct set forth above; and (b) Such person furnishes Post a written undertaking, executed personally on such person's behalf to repay any advances if it is ultimately determined that such person is not entitled to indemnification. The written undertaking required by paragraph (b) above must be an unlimited general obligation of such person but need not be secured and may be accepted without reference to financial ability to make repayment. II-7 59 The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in Article VI of Post's Bylaws are not exclusive of any other right which any person may have under any statute, provision of Post's Articles of Incorporation, provision of Post's Bylaws, agreement, vote of shareholders or disinterested directors or otherwise. The Partnership Agreement of Post Apartment Homes also provides for indemnification of Post and its officers and directors to the same extent indemnification is provided to officers and directors of Post in its Articles of Incorporation, and limits the liability of Post and its officers and directors to Post Apartment Homes and its partners to the same extent liability of officers and directors of Post to Post and its shareholders is limited under Post's Articles of Incorporation. Post's directors and officers are insured against damages from actions and claims incurred in the course of their duties, and Post is insured against expenses incurred in defending lawsuits arising from certain alleged acts of its directors and officers. ITEM 16. EXHIBITS The following Exhibits are filed as part of this Registration Statement:
EXHIBIT NO. DESCRIPTION - ------- ----------- 3.1 -- Articles of Restatement of the Articles of Incorporation of Post (incorporated by reference to Exhibit 3.1 of Post's Registration Statement on Form S-11) (File No. 33-61936) 3.2 -- Form of Amendment to Articles of Incorporation designating the 8 1/2% Series A Cumulative Redeemable Preferred Shares (incorporated by reference to Exhibit 4(a) of Post's Current Report on Form 8-K dated September 26, 1996) 3.3 -- Form of Amendment to Articles of Incorporation designating the 7 5/8% Series B Cumulative Redeemable Preferred Shares (incorporated by reference to Exhibit 4(a) of Post's Current Report on Form 8-K dated October 23, 1997) 3.4 -- Form of Amendment to Articles of Incorporation designating the 7 5/8% Series C Cumulative Redeemable Preferred Shares (incorporated by reference to Exhibit 4(a) of Post's Current Report on Form 8-K dated February 4, 1998) 3.5 -- Bylaws of Post (incorporated by reference to Exhibit 3.2 of Post's Registration Statement on Form S-11) (File No. 33-61936) 4.1+ -- Indenture dated as of September 15, 2000 between Post Apartment Homes and the Trustee (incorporated by reference to Exhibit 4.1 of Post's and Post Apartment Homes' Amendment No. 1 to Registration Statement on Form S-3) (File No. 333-42884) 4.2 -- Form of First Supplemental Indenture (incorporated by reference to Exhibit 4.2 of Post's and Post Apartment Homes' Post-Effective Amendment No. 1 to Registration Statement on Form S-3) (File No. 333-42884) 5.1 -- Opinion of King & Spalding regarding the validity of the securities being registered 8.1 -- Opinion of King & Spalding regarding tax matters 12.1 -- Computation of Ratio of Earnings to Fixed Charges 12.2 -- Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 23.1 -- Consent of King & Spalding (included as part of Exhibit 5.1 and 8.1)
II-8 60
EXHIBIT NO. DESCRIPTION - ------- ----------- 23.2 -- Consent of PricewaterhouseCoopers LLP 24.1 -- Power of Attorney (included on page II-2) 25.1 -- Statement of Eligibility of Trustee on Form T-1 (incorporated by reference to Exhibit 25.1 of Post's and Post Apartment Homes' Amendment No. 1 to Registration Statement on Form S-3) (File No. 333-42884)
- --------------- + In the event that Post or Post Apartment Homes issues a form of security not filed as an exhibit to this registration statement, such form of security will be filed as an exhibit to a Current Report on Form 8-K. ITEM 17. UNDERTAKINGS (a) Each of the undersigned registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Each of the undersigned registrants hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's II-9 61 annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer, or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) Each of the undersigned registrants hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) Each of the undersigned registrants hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-10 62 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each of the Registrants certify that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta and the State of Georgia, on the 21st day of February, 2001. POST PROPERTIES, INC. By: /s/ DAVID P. STOCKERT ----------------------------------- David P. Stockert President and Chief Operating Officer POST APARTMENT HOMES, L.P. By: POST GP HOLDINGS, INC., as General Partner By: /s/ DAVID P. STOCKERT ----------------------------------- David P. Stockert President and Chief Operating Officer We, the undersigned directors and officers of Post Properties, Inc. and Post GP Holdings, Inc., the General Partner of Post Apartment Homes, L.P. do hereby constitute and appoint John T. Glover, David P. Stockert, Sherry W. Cohen, R. Gregory Fox and each and any of them, our true and lawful attorneys-in-fact and agents, to do any and all acts and things in our names and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our name in the capacities indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable said corporation to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, or any registration statement for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, including specifically, but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue thereof. II-11 63 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on the 21st day of February, 2001 by the following persons in the capacities indicated:
SIGNATURE TITLE --------- ----- /s/ JOHN A. WILLIAMS Chairman of the Board and Chief - --------------------------------------------------- Executive Officer (Principal John A. Williams Executive Officer) /s/ JOHN T. GLOVER Vice Chairman and Director - --------------------------------------------------- John T. Glover /s/ R. GREGORY FOX Executive Vice President (Principal - --------------------------------------------------- Financial and Accounting Officer) R. Gregory Fox /s/ ROBERT L. ANDERSON Director - --------------------------------------------------- Robert L. Anderson /s/ ARTHUR M. BLANK Director - --------------------------------------------------- Arthur M. Blank /s/ HERSCHEL M. BLOOM Director - --------------------------------------------------- Herschel M. Bloom /s/ RUSSELL R. FRENCH Director - --------------------------------------------------- Russell R. French /s/ CHARLES E. RICE Director - --------------------------------------------------- Charles E. Rice /s/ RONALD DE WAAL Director - --------------------------------------------------- Ronald de Waal
II-12 EX-5.1 2 g66571ex5-1.txt OPINION OF KING & SPALDING 1 EXHIBIT 5.1 King & Spalding 191 Peachtree Street Atlanta, Georgia 30303 February 21, 2001 Post Properties, Inc. Post Apartment Homes, L.P. 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327 Re: Post Properties, Inc. and Post Apartment Homes, L.P. -- Shelf Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as counsel for Post Properties, Inc., a Georgia corporation (the "Parent"), and Post Apartment Homes, L.P., a Georgia limited partnership (the "Operating Partnership," and collectively with the General Partner, the "Company"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the offering from time to time, as set forth in the prospectus contained in the Registration Statement (the "Prospectus") and as to be set forth in one or more supplements to the Prospectus (each such supplement, a "Prospectus Supplement", of (A) the common stock, par value $.01 per share ("Common Stock") of the Parent, preferred stock, par value $.01 per share ("Preferred Stock") of the Parent, and depositary shares representing Preferred Stock ("Depositary Shares"), in an aggregate principal amount not to exceed $287,000,000, to be issued by the Parent, and (B) debt securities ("Debt Securities"), in an aggregate principal amount not to exceed $500,000,000, to be issued by the Operating Partnership. In connection with this opinion, we have examined and relied upon such records, documents, certificates and other instruments as in our judgment are necessary or appropriate to form the basis for the opinions hereinafter set forth. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate. As to matters of fact material to this opinion, we have relied upon statements and representations of representatives of the Company and of public officials. 2 Post Properties, Inc. Post Apartment Homes, L.P. February 21, 2001 Page 2 We have assumed that the execution and delivery of, and the performance of all obligations under, an indenture between the Operating Partnership and the trustee (the "Trustee"), in the form attached to the Registration Statement as Exhibit 4.1 (the "Indenture"), has been duly authorized by all requisite action by the Trustee, and that the Indenture has been duly executed and delivered by, and is a valid and binding agreement of, the Trustee, enforceable against the Trustee in accordance with its terms. This opinion is limited in all respects to the federal laws of the United States of America and the laws of the States of Georgia and New York, and no opinion is expressed with respect to the laws of any other jurisdiction or any effect which such laws may have on the opinions expressed herein. This opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein. Based upon the foregoing, and the other limitations and qualifications set forth herein, we are of the opinion that: (i) The Parent is a corporation validly existing and, based solely on a certificate of the Secretary of State of the State of Georgia, in good standing under the laws of the State of Georgia; (ii) The Operating Partnership is a validly existing limited partnership under the laws of the State of Georgia; (iii) Upon the due authorization of the issuance of shares of Common Stock and the issuance and sale thereof as described in the Registration Statement (together with any applicable Prospectus Supplement), such shares will be validly issued, fully paid and nonassessable; (iv) Upon the due authorization of the issuance of shares of Preferred Stock and the issuance and sale thereof as described in the Registration Statement (together with any applicable Prospectus Supplement), such shares will be validly issued, fully paid and nonassessable; (v) Upon the due authorization of the issuance of Depositary Shares and the issuance and sale thereof as described in the Registration Statement (together with any applicable Prospectus Supplement), such Depositary Shares will be validly issued, fully paid and nonassessable; (vi) Upon the due authorization of the issuance of Debt Securities and the issuance and sale thereof as described in the Registration Statement (together with any applicable Prospectus Supplement) and, when executed by the Company and duly authenticated by the Trustee in accordance with the terms of the Indenture, the Debt Securities will (x) be valid and binding obligations of the Operating 3 Post Properties, Inc. Post Apartment Homes, L.P. February 21, 2001 Page 3 Partnership, enforceable against the Operating Partnership in accordance with their terms and (y) be entitled to the benefits of the Indenture. The opinions set forth above are subject, as to enforcement, to (i) bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally, and (ii) general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or law). This opinion is given as of the date hereof, and we assume no obligation to advise you after the date hereof of facts or circumstances that come to our attention or changes in law that occur which could affect the opinions contained herein. This letter is being rendered solely for the benefit of the Company in connection with the matters addressed herein. This opinion may not be furnished to or relied upon by any person or entity for any purpose without our prior written consent. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Prospectus that is included in the Registration Statement. Very truly yours, KING & SPALDING EX-8.1 3 g66571ex8-1.txt OPINION OF KING & SPALDING 1 EXHIBIT 8.1 King & Spalding 191 Peachtree Street Atlanta, Georgia 30303 February 21, 2001 Post Properties, Inc. Post Apartment Homes, L.P. 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327 Re: Post Properties, Inc. and Post Apartment Homes, L.P. Shelf Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as counsel for Post Properties, Inc., a Georgia corporation (the "Company"), and Post Apartment Homes, L.P., a Georgia limited partnership (the "Operating Partnership"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the offering from time to time, as set forth in the prospectus contained in the Registration Statement (the "Prospectus") and as to be set forth in one or more supplements to the Prospectus, of (A) the common stock, par value $.01 per share (the "Common Stock") of the Company, preferred stock, par value $.01 per share ("Preferred Stock") of the Company, and depositary shares representing Preferred Stock, in an aggregate amount not to exceed $287,000,000 and (B) debt securities, in an aggregate principal amount not to exceed $500,000,000 to be issued by the Operating Partnership. The Company and the Operating Partnership have requested our opinion as to (i) the qualification of the Company as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"); (ii) the classification, for federal income tax purpose, of the Operating Partnership and each of the partnerships and limited liability companies in which the Operating Partnership has, at any time through the date hereof, held an interest (the "Pass-Through Affiliates"); and (iii) the accuracy of the information in the Prospectus under the heading "Federal Income Tax Considerations." Unless the context requires otherwise, capitalized terms used in this opinion letter and not otherwise defined herein shall have the meanings ascribed to such terms in the Prospectus. 2 Post Properties, Inc. Post Apartment Homes, L.P. February 21, 2001 Page 2 FACTS AND ASSUMPTIONS RELIED UPON In rendering the opinion expressed herein, we have examined such documents as we have deemed appropriate, including (but not limited to) the Registration Statement, including the reports incorporated by reference therein, the Prospectus, and the analyses of qualifying income prepared by the Company with the assistance of PricewaterhouseCoopers LLP, the Company's accounting firm. We have also examined the organizational documents, as amended, of the following entities: the Company, the Operating Partnership, Post Development Services Limited Partnership, Addison Circle One, Ltd., Addison Circle Two, Ltd., Addison Circle Three, Ltd., P/C First Avenue, LLC, P/C 89th Street, LLC, P/C Times Square, LLC, Post West Avenue Lofts, L.P., Rice Lofts, L.P., Villas at Parkway Village, L.P., Post Rice Lofts, LLC, Post Uptown, LLC, Akard-McKinney Investment Company, LLC, Columbus Management Services, LLC, Post Aviation, LLC, Greenwood Residential, LLC, Villas GP, LLC, Uptown Denver, LLC, Post 89th Street, LLC, Post Times Square, LLC, Post 1499 Massachusetts, LLC, Post West Avenue, LLC, Post Paseo Colorado, LLC, Post Carlyle I, LLC, Post Services, Inc. and Addison Circle Access, Inc. In our examination of documents, we have assumed, with your consent, that all documents submitted to us are authentic originals, or if submitted as photocopies or telecopies, that they faithfully reproduce the originals thereof, that all such documents have been or will be duly executed to the extent required, that all representations and statements set forth in such documents are true and correct, and that all obligations imposed by any such documents on the parties thereto have been or will be performed or satisfied in accordance with their terms. We also have obtained such additional information and representations as we have deemed relevant and necessary through consultation with officers of the Company and with PricewaterhouseCoopers LLP, including representations of the Company that are set forth in a letter to us. OPINION Based upon and subject to the foregoing, we are of the following opinion: (1) The Company was organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code for each of its taxable years beginning with its taxable year ended December 31, 1993, and its organization and proposed method of operation should enable it to continue to meet the requirements for qualification and taxation as a REIT. (2) The Operating Partnership and each Pass-Through Affiliate which is not 100% beneficially owned by the Operating Partnership are properly treated as partnerships for federal income tax purposes, and each Pass-Through Affiliate that is 100% beneficially owned by the Operating Partnership is disregarded for federal income tax purposes. (3) The discussion contained in the Prospectus under the heading "Federal Income Tax Considerations" is accurate and fairly summarizes the federal income tax considerations that are 3 Post Properties, Inc. Post Apartment Homes, L.P. February 21, 2001 Page 3 likely to be material to a holder of the Common Stock, and, to the extent such discussion contains statements of law or legal conclusions, such statements and conclusions are the opinion of King & Spalding. The opinion expressed herein is given as of the date hereof and is based upon the Code, the U.S. Treasury regulations promulgated thereunder, current administrative positions of the U.S. Internal Revenue Service, and existing judicial decisions, any of which could be changed at any time, possibly on a retroactive basis. Any such changes could adversely affect the opinion rendered herein and the tax consequences to the Company, the Operating Partnership and the investors in the securities that are described in the Prospectus. In addition, as noted above, our opinion is based solely on the documents that we have examined, the additional information that we have obtained, and the representations that have been made to us, and cannot be relied upon if any of the facts contained in such documents or in such additional information is, or later becomes, inaccurate or if any of the representations made to us is, or later becomes, inaccurate. We are not aware, however, of any facts or circumstances contrary to or inconsistent with the information, assumptions, and representations upon which we have relied for purposes of this opinion. Finally, our opinion is limited to the tax matters specifically covered thereby, and we have not been asked to address, nor have we addressed, any other tax matters. We hereby consent to the filing of this opinion letter as an Exhibit to the Registration Statement and to the reference to our firm under the caption "Legal matters" in the Prospectus. Very truly yours, King & Spalding EX-12.1 4 g66571ex12-1.txt COMPUTATION OF RATIO 1 EXHIBIT 12.1 POST APARTMENT HOMES, L.P. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine Months Ended September Year Ended December 31, -------------------- ---------------------------------------------------------------- 2000 1999 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- ------- ------- Pre-tax income (loss) from continuing operations $ 98,003 $ 88,318 $119,424(1) $100,461 $ 66,078(1) $53,453(1) $38,417(1) Fixed Charges: Interest incurred and amortization of debt discount and premium on all indebtedness 55,742 39,898 56,105 48,189 35,205 27,916 29,714 Rentals - 33.34%(2) 2,106 1,799 2,385 2,220 1,686 939 405 -------- -------- -------- -------- -------- ------- ------- Total fixed charges 57,848 41,697 58,490 50,409 36,891 28,855 30,119 -------- -------- -------- -------- -------- ------- ------- Earnings before income taxes, minority interest and fixed charges 155,851 130,015 177,914 150,870 102,969 82,308 68,536 Adjustment for capitalized interest (18,992) (14,710) (21,417) (15,707) (9,567) (4,443) (5,653) -------- -------- -------- -------- -------- ------- ------- Total earnings $136,859 $115,305 $156,497 $135,163 $ 93,403 $77,865 $62,883 ======== ======== ======== ======== ======== ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 2.4 2.8 2.7 2.7 2.5 2.7 2.1 ======== ======== ======== ======== ======== ======= =======
(1) Included in the pre-tax income from continuing operations for 1999, 1997, 1996 and 1995 was a non-recurring (loss)/gain of ($1,522), $3,270, $854 and $1,746, respectively, relating to the sale of real estate assets as disclosed in the Company's consolidated financial statements. If such sales had not occurred, the ratio of earnings to fixed charges would have been 2.7, 2.4, 2.7 and 2.0 for 1999, 1997, 1996 and 1995, respectively. (2) The interest factor of rental expense is calculated as one-third of rental expense for all leases except for two leases for which the interest factor is calculated as 100% of rental expense. The Company believes these represent appropriate interest factors. EX-12.2 5 g66571ex12-2.txt COMPUTATION OF RATIO 1 EXHIBIT 12.2 POST PROPERTIES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
Nine Months Ended September 30, Year Ended December 31, ------------------- -------------------------------------------------------------------- 2000 1999 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- -------- -------- Pre-tax income (loss) from continuing operations $ 83,904 $ 78,448 $104,975(1) $ 88,950(1) $ 54,947(1) $ 43,469(1) $ 29,988(1) Minority interest in the income of subsidiary with fixed charges 14,099 9,870 14,449 11,511 11,131 9,984 8,429 -------- -------- -------- -------- -------- -------- -------- 98,003 88,318 119,424 100,461 66,078 53,453 38,417 -------- -------- -------- -------- -------- -------- -------- Fixed Charges: Interest incurred and amortization of debt discount and premium on all indebtedness 55,742 39,898 56,105 48,189 35,205 27,916 29,714 Rentals - 33.34% (2) 2,106 1,799 2,385 2,220 1,686 939 405 Preferred dividends required of consolidated subsidiaries 4,200 435 1,851 -------- -------- -------- -------- -------- -------- -------- Total fixed charges 62,048 42,132 60,341 50,409 36,891 28,855 30,119 -------- -------- -------- -------- -------- -------- -------- Preferred stock dividends 8,907 8,907 11,875 11,473 4,907 1,063 -- -------- -------- -------- -------- -------- -------- -------- Earnings before income taxes, minority interest and fixed charges 160,051 130,450 179,765 150,870 102,969 82,308 68,536 Adjustment for capitalized interest (18,992) (14,710) (21,417) (15,707) (9,567) (4,443) (5,653) Preferred dividends required of consolidated subsidiaries (4,200) (435) (1,851) -------- -------- -------- -------- -------- -------- -------- Total earnings $136,859 $115,305 $156,497 $135,163 $ 93,402 $ 77,865 $ 62,883 -------- -------- -------- -------- -------- -------- -------- RATIO OF EARNINGS TO FIXED CHARGES 1.9 2.3 2.2 2.2 2.2 2.6 2.1 AND PREFERRED DIVIDENDS (3) -------- -------- -------- -------- -------- -------- --------
(1) Included in the pre-tax income from continuing operations for 1999, 1997, 1996 and 1995 was a non-recurring (loss)/gain of ($1,522), $3,270, $854 and $1,746, respectively, relating to the sale of real estate assets as disclosed in the Company's consolidated financial statements. If such sales had not occurred, the ratio of earnings to fixed charges would have been 2.7, 2.4, 2.7 and 2.0 for 1999, 1997, 1996 and 1995, respectively. (2) The interest factor of rental expense is calculated as one-third of rental expense for all leases except for two leases for which the interest factor is calculated as 100% of rental expense. The Company believes these represent appropriate interest factors. (3) Calculated as total earnings plus preferred stock dividends divided by the sum of total fixed charges plus preferred stock dividends. EX-23.2 6 g66571ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our reports dated March 14, 2000 relating to the consolidated financial statements and financial statement schedules, which appear in Post Properties, Inc.'s and Post Apartment Homes, L. P.'s Annual Report on Form 10-K for the year ended December 31, 1999. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers LLP Atlanta, Georgia February 19, 2001 -----END PRIVACY-ENHANCED MESSAGE-----