-----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, AkZHpeSYJ+0RJiTW+NzucygGzMynBlK5319nxRq3U6EW16sHQedr/AIKrsS8p9MF VkY06Rv9KPh8PSoKRUkXOQ== 0000950144-01-004132.txt : 20010329 0000950144-01-004132.hdr.sgml : 20010329 ACCESSION NUMBER: 0000950144-01-004132 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POST PROPERTIES INC CENTRAL INDEX KEY: 0000903127 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581550675 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12080 FILM NUMBER: 1582475 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: 10-K SEC ACT: SEC FILE NUMBER: 000-28226 FILM NUMBER: 1582476 BUSINESS ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: 7708504400 MAIL ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 10-K 1 g67475e10-k.txt POST PROPERTIES, INC. / POST APARTMENT HOMES, L.P. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSMISSION PERIOD FROM TO ---------- ---------- COMMISSION FILE NUMBER 1-12080 COMMISSION FILE NUMBER 0-28226 POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. (Exact name of registrants as specified in their charters) GEORGIA 58-1550675 GEORGIA 58-2053632 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 4401 NORTHSIDE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30327 (Address of principal executive offices -- zip code) (404) 846-5000 (Registrant's telephone number, including area code) ---------------------------- Securities registered pursuant to section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ---------------------------- ------------------------ Common Stock, $.01 par value New York Stock Exchange 8 1/2% Series A Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value 7 5/8% Series B Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value 7 5/8% Series C Cumulative New York Stock Exchange Redeemable Preferred Shares, $.01 par value Securities registered pursuant to Section 12(g) of the Act: None NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ---------------------------- ------------------------ Units of Limited Partnership None ---------------------------- Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Post Properties, Inc.: YES [x] NO [ ] Post Apartment Homes, L.P.: YES [x] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on March 13, 2001 was approximately $1,437,365,412. As of March 13, 2001, there were 38,763,900 shares of common stock, $.01 par value, outstanding. ---------------------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement in connection with its Annual Meeting of Shareholders to be held May 22, 2001 are incorporated by reference in Part III. ================================================================================ POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. 2 TABLE OF CONTENTS
ITEM FINANCIAL INFORMATION PAGE NO. NO. - ---- ---- PART I 1. Business............................................................................. 1 2. Properties........................................................................... 7 3. Legal Proceedings.................................................................... 10 4. Submission of Matters to a Vote of Security Holders.................................. 10 X. Executive Officers of the Registrant................................................. 10 PART II 5. Market Price of the Registrant's Common Stock and Related Stockholder Matters........ 12 6. Selected Financial Data.............................................................. 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 17 7A. Quantitative and Qualitative Disclosures about Market Risk........................... 36 8. Financial Statements and Supplementary Data.......................................... 38 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................... 38 PART III 10. Directors and Executive Officers of the Registrant................................... 39 11. Executive Compensation............................................................... 39 12. Security Ownership of Certain Beneficial Owners and Management....................... 39 13. Certain Relationships and Related Transactions....................................... 39 PART IV 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.................... 40
3 PART I ITEM 1. BUSINESS THE COMPANY Post Properties, Inc. (the "Company") is one of the largest developers and operators of upscale multifamily apartment communities in the Southeastern and Southwestern United States. The Company currently owns 87 stabilized communities (the "Communities") containing 30,522 apartment units located primarily in metropolitan Atlanta, Georgia; Dallas, Texas and Tampa and Orlando, Florida. In addition, the Company currently has under construction or in initial lease-up 12 new communities and additions to three existing communities in the Atlanta, Georgia; Dallas, Houston and Austin, Texas; Tampa, Florida; Denver, Colorado; Charlotte, North Carolina; Phoenix, Arizona; Pasadena, California and Washington D. C. metropolitan areas that will contain an aggregate of 4,661 apartment units upon completion. For the year ended December 31, 2000, the average economic occupancy rate (defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent) of the 75 Communities stabilized for the entire year was 96.7%. The average monthly rental rate per apartment unit at these Communities for December 2000 was $933. The Company also manages through affiliates 15,651 additional apartment units owned by third parties. The Company is a fully integrated organization with multifamily development, acquisition, operation and asset management expertise. The Company has approximately 2,036 employees, none of whom is a party to a collective bargaining agreement. Since its founding in 1971, the Company has pursued three distinctive core business strategies that have remained substantially unchanged: Investment Building Investment building means taking a long-term view of the assets the Company creates. The Company develops communities with the intention of operating them for periods that are relatively long by the standards of the apartment industry. Key elements of the Company's investment building strategy include instilling a disciplined team approach to development decisions, selecting sites in urban infill locations in strong primary markets, consistently constructing new apartment communities with a uniformly high quality, and conducting ongoing property improvements. Promotion of the Post(R) Brand Name The Post(R) brand name strategy has been integral to the success of the Company and, to the knowledge of the Company, has not been successfully duplicated within the multifamily real estate industry in any major U.S. market. For such a strategy to work, a company must develop and implement systems to achieve uniformly high quality and value throughout its operations. As a result of the Company's efforts in developing and maintaining its communities, the Company believes that the Post(R) brand name is synonymous with quality upscale apartment communities that are situated in desirable locations and provide superior resident service. Key elements in implementing the Company's brand name strategy include extensively utilizing the trademarked brand name, adhering to quality in all aspects of the Company's operations, developing and implementing leading edge training programs, and coordinating the Company's advertising programs to increase brand name recognition. Service Orientation The Company's mission statement is: "To provide the superior apartment living experience for our residents." By striving to provide a superior product and superior service, the Company believes that it will be able to achieve its long-term goals. The Company believes that it provides its residents with superior product and superior service through its uniformly high quality construction, selective urban infill locations, award winning landscaping and numerous amenities, including on site business centers, on site courtesy officers, urban vegetable gardens and state of the art fitness centers. The Company believes that with the implementation of these strategies, multifamily properties in its primary markets have the potential over the long term to provide investment returns that exceed national averages. According to recent market surveys, employment growth, population growth and household formation growth in the Company's primary markets have exceeded, and are forecasted to continue to exceed, national averages. 1 4 The Company is a self-administered and self-managed equity real estate investment trust (a "REIT"). In 1993, the Company completed an initial public offering of its Common Stock (the "Initial Offering") and a business combination involving entities under varying common ownership. Proceeds from the Initial Offering were used by the Company, in part, to acquire a controlling interest in Post Apartment Homes, L.P. (the "Operating Partnership"), the Company's principal operating subsidiary, which was formed to succeed to substantially all of the ownership interest in a portfolio of 40 Post(R) multifamily apartment communities, all of which were developed by the Company and owned by affiliates of the Company, and to the development, leasing, landscaping and management business of the Company and certain other affiliates. The Company, through wholly owned subsidiaries, is the sole general partner of, and controls a majority of the limited partnership interests in, the Operating Partnership. The Company conducts all of its business through the Operating Partnership and its subsidiaries. The Company's and the Operating Partnership's executive offices are located at 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and their telephone number is (404) 846-5000. Post Properties, Inc., a Georgia corporation, was incorporated on January 25, 1984, and is the successor by merger to the original Post Properties, Inc., a Georgia corporation, which was formed in 1971. The Operating Partnership is a Georgia limited partnership that was formed in July 1993 for the purpose of consolidating the operating and development businesses of the Company and the Post(R) apartment portfolio described herein. THE OPERATING PARTNERSHIP The Operating Partnership, through the operating divisions and subsidiaries described below, is the entity through which all of the Company's operations are conducted. At December 31, 2000, the Company, through wholly owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 88.2% of the common units in the Operating Partnership ("Units") and 64.1% of the preferred Units (the "Perpetual Preferred Units"). The other limited partners of the Operating Partnership, who hold units, are those persons (including certain officers and directors of the Company) who, at the time of the Initial Offering, elected to hold all or a portion of their interest in the form of Units rather than receiving shares of Common Stock. Each Unit may be redeemed by the holder thereof for either one share of Common Stock or cash equal to the fair market value thereof at the time of such redemption, at the option of the Operating Partnership. The Operating Partnership presently anticipates that it will cause shares of Common Stock to be issued in connection with each such redemption rather than paying cash (as has been done in all redemptions to date). With each redemption of outstanding Units for Common Stock, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues shares of stock, the Company will contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership will issue an equivalent number of Units or Perpetual Preferred Units, as appropriate, to the Company. As the sole shareholder of the Operating Partnership's sole general partner, the Company has the exclusive power under the agreement of limited partnership of the Operating Partnership to manage and conduct the business of the Operating Partnership, subject to the consent of the holders of the Units in connection with the sale of all or substantially all of the assets of the Operating Partnership or in connection with a dissolution of the Operating Partnership. The board of directors of the Company manages the affairs of the Operating Partnership by directing the affairs of the Company. The Operating Partnership cannot be terminated, except in connection with a sale of all or substantially all of the assets of the Company, for a period of 50 years without a vote of limited partners of the Operating Partnership. The Company's indirect limited and general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to the Company's percentage interest therein and indirectly entitle the Company to vote on all matters requiring a vote of the limited partners. As part of the formation of the Operating Partnership, a new holding company, Post Services, Inc. ("Post Services") was organized as a separate corporate subsidiary of the Operating Partnership. Post Services, in turn, owns all the outstanding stock of its principal two operating subsidiaries, RAM Partners, Inc. ("RAM") and Post Landscape Services, Inc. ("Post Landscape"). Certain officers and directors of the Company received 99%, collectively, of the voting common stock of Post Services, and the Operating Partnership 2 5 received 1% of the voting common stock and 100% of the nonvoting common stock of Post Services. The voting and nonvoting common stock of Post Services held by the Operating Partnership represents 99% of the equity interests therein. The voting common stock held by officers and directors in Post Services is subject to an agreement that is designed to ensure that the stock will be held by one or more officers of Post Services. The by-laws of Post Services provide that a majority of the board of directors of Post Services must be persons who are not employees, members of management or affiliates of the Company or its subsidiaries. This by-law provision cannot be amended without the vote of 100% of the outstanding voting common stock of Post Services. Post Services currently has the same board of directors as the Company. For taxable years ending on or before December 31, 2000, the Operating Partnership could not own more than 10% of the voting stock of Post Services without causing the Company to fail to qualify as a REIT for federal income tax purposes. This restriction no longer applies to the voting stock of a "taxable REIT subsidiary" as defined in the Internal Revenue Code. The Company and Post Services have filed a joint election to have Post Services treated as a taxable REIT subsidiary of the Company. This will enable the Operating Partnership to acquire all of the voting stock of Post Services without jeopardizing the company's status as a REIT. Management believes the Operating Partnership will acquire the remaining interest of Post Services in 2001. OPERATING DIVISIONS The major operating divisions of the Operating Partnership include: Post Apartment Management Post Apartment Management is responsible for the day-to-day operations of all the Post(R) communities including community leasing, property management and personnel recruiting, training and development, maintenance and security. Post Apartment Management also conducts short-term corporate apartment leasing activities and is the largest division in the Company. Post Apartment Development Post Apartment Development conducts the development and construction activities of the Company. These activities include site selection, zoning and regulatory approvals, project design, and the full range of construction management services. Post Corporate Services Post Corporate Services provides executive direction and control to the Company's other divisions and subsidiaries and has responsibility for the creation and implementation of all Company financing and capital strategies. All accounting, management reporting, information systems, human resources, legal and insurance services required by the Company and all of its affiliates are centralized in Post Corporate Services. OPERATING SUBSIDIARIES The operating subsidiaries of the Operating Partnership, each of which is wholly owned by Post Services, include: RAM RAM provides third party asset management and leasing services for multifamily properties that do not operate under the Post(R) name. RAM's clients include pension funds, independent private investors, financial institutions and insurance companies. RAM's asset management contracts generally are subject to annual renewal or are terminable upon specified notice. As of December 31, 2000, RAM managed 72 properties (located in Georgia, Florida, Tennessee, Kansas, South Carolina, North Carolina, Texas, Maryland, Missouri, Alabama and Virginia) with 15,651 units under management. Post Landscape Group As a result of the reputation the Company developed in connection with the landscaping of Post(R) communities, in 1990, the Company began providing third party design landscape services for clients other than Post(R) communities. Projects with third parties include the design, installation and maintenance of the landscape for golf courses, office 3 6 parks, commercial buildings and other commercial enterprises, and private residences. Post Landscape Group provides such third party landscape services. See Note 14 to the Company's Consolidated Financial Statements for information regarding the industry segments into which the Company organizes its operations. HISTORY OF POST PROPERTIES, INC. During the five-year period from January 1, 1996 through December 31, 2000, the Company and affiliates have developed and completed 11,152 apartment units in 27 apartment communities, acquired 7,186 units in 28 apartment communities (26 communities containing 6,296 apartment units were as a result of the merger with Columbus Realty Trust (the "Merger")) and sold 11 apartment communities containing an aggregate of 2,778 apartment units. Historically, the Company has primarily developed its apartment communities to the Company's specifications as opposed to buying or refurbishing existing properties built by others. The Company and its affiliates have sold apartment communities after holding them for investment periods that typically have been seven to twelve years after development. The following table shows the results of the Company's developments during this period:
2000 1999 1998 1997 1996 --------- ---------- -------- ---------- --------- Units completed 2,786 1,955 2,025 2,128 2,258 Units acquired(1) -- -- -- 6,296 890 Units sold (1,984) (198) -- (416) (180) Total units owned by Company affiliates 30,522 29,720 27,963 25,938 17,930 Total apartment rental income (in thousands) $ 365,895 $ 318,697 $275,755 $ 185,732 $ 158,618
(1) As part of the Merger, the Company acquired 26 communities containing 6,296 units. Of the communities acquired in the Merger, 14 communities containing 3,916 units were built by Columbus and 12 communities containing 2,380 units were acquired by Columbus. 4 7 CURRENT DEVELOPMENT ACTIVITY The Company currently has under construction or in initial lease-up 12 new communities and additions to three existing communities that will contain an aggregate of 4,661 units upon completion. The Company's communities under development or in initial lease-up are summarized in the following table:
ESTIMATED ESTIMATED ESTIMATED QUARTER OF QUARTER OF QUARTER OF # OF CONSTRUCTION FIRST UNITS STABILIZED METROPOLITAN AREA UNITS START AVAILABLE OCCUPANCY - ----------------- ----- ------------ ----------- --------- ATLANTA, GA Post Spring(TM) 452 3Q'99 2Q'00 3Q'01 Post Peachtree(TM) 121 2Q'00 4Q'01 2Q'02 Post Biltmore(TM) 276 3Q'00 4Q'01 3Q'02 ----- 849 ----- CHARLOTTE, NC Post Uptown Place(TM) 226 3Q'98 1Q'00 2Q'01 Post Gateway Place(TM) 232 3Q'99 3Q'00 3Q'01 Post Gateway Place II(TM) 204 3Q'00 3Q'01 1Q'02 ----- 662 ----- TAMPA, FL Post Harbour Place(TM)Phase II 319 4Q'98 2Q'00 1Q'01 ----- DALLAS, TX Post Legacy 384 3Q'99 3Q'00 4Q'01 Post Addison Circle(TM)III 264 3Q'99 3Q'00 2Q'01 ----- 648 ----- HOUSTON, TX Post Midtown Square(TM)Phase II 193 1Q'00 4Q'00 4Q'01 ----- DENVER, CO Post Uptown Square(TM)I 449 1Q'98 3Q'99 3Q'01 Post Uptown Square(TM)Phase II 247 1Q'00 4Q'01 3Q'02 ----- 696 ----- PHOENIX, AZ Post Roosevelt Square(TM) 403 4Q'98 1Q'00 4Q'01 ----- GREATER WASHINGTON AREA Post Pentagon Row(TM) 504 2Q'99 2Q'01 2Q'02 ----- PASADENA, CA Post Paseo Colorado(TM) 387 2Q'00 2Q'02 2Q'03 ----- TOTAL 4,661 =====
The Company is also currently conducting feasibility and other pre-development studies for possible new Post(R) communities in selected market areas. 5 8 COMPETITION All of the Communities are located in developed areas that include other upscale apartments. The number of competitive upscale apartment properties in a particular area could have a material effect on the Company's ability to lease apartment units at the Communities or at any newly developed or acquired communities and on the rents charged. The Company may be competing with others that have greater resources than the Company. In addition, other forms of residential properties, including single family housing, provide housing alternatives to potential residents of upscale apartment communities. AMERICANS WITH DISABILITIES ACT The Communities and any newly acquired apartment communities must comply with Title III of the Americans with Disabilities Act (the "ADA") to the extent that such properties are "public accommodations" and/or "commercial facilities" as defined by the ADA. Compliance with the ADA requirements could require removal of structural barriers to handicapped access in certain public areas of the Company's Communities where such removal is readily achievable. The ADA does not, however, consider residential properties, such as apartment communities, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public. The Company believes that its properties comply with all present requirements under the ADA and applicable state laws. Noncompliance could result in imposition of fines or an award of damages to private litigants. If required to make material additional changes, the Company's results of operations could be adversely affected. ENVIRONMENTAL REGULATIONS The Company is subject to Federal, state and local environmental regulations that apply to the development of real property, including construction activities, the ownership of real property, and the operation of multifamily apartment communities. In developing properties and constructing apartments, the Company utilizes environmental consultants to determine whether there are any flood plains, wetlands or environmentally sensitive areas that are part of the property to be developed. If flood plains are identified, development and construction is planned so that flood plain areas are preserved or alternative flood plain capacity is created in conformance with Federal and local flood plain management requirements. Storm water discharge from a construction facility is evaluated in connection with the requirements for storm water permits under the Clean Water Act. This is an evolving program in most states. The Company currently anticipates it will be able to obtain storm water permits for existing or new development. The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws subject the owner of real property to claims or liability for the costs of removal or remediation of hazardous substances that are disposed of on real property in amounts that require removal or remediation. Liability under CERCLA and applicable state superfund laws can be imposed on the owner of real property or the operator of a facility without regard to fault or even knowledge of the disposal of hazardous substances on the property or at the facility. The presence of hazardous substances in amounts requiring response action or the failure to undertake remediation where it is necessary may adversely affect the owner's ability to sell real estate or borrow money using such real estate as collateral. In addition to claims for cleanup costs, the presence of hazardous substances on a property could result in a claim by a private party for personal injury or a claim by an adjacent property owner for property damage. The Company has instituted a policy that requires an environmental investigation of each property that it considers for purchase or that it owns and plans to develop. The environmental investigation is conducted by a qualified environmental consultant. If there is any indication of contamination, sampling of the property is performed by the environmental consultant. The environmental investigation report is reviewed by the Company and counsel prior to purchase of any property. If necessary, remediation of contamination, including underground storage tanks, is undertaken prior to development. 6 9 The Company has not been notified by any governmental authority of any noncompliance, claim, or liability in connection with any of the Communities. The Company has not been notified of a claim for personal injury or property damage by a private party in connection with any of the Communities in connection with environmental conditions. The Company is not aware of any other environmental condition with respect to any of the Communities that could be considered to be material. ITEM 2. PROPERTIES At February 3, 2001, the Communities consisted of 87 stabilized Post(R) multifamily apartment communities located in the following metropolitan areas: METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL ----------------- ----------- ---------- ---------- Atlanta, GA .................... 40 16,102 52.8% Dallas, TX ..................... 29 7,846 25.7% Houston, TX .................... 1 309 1.0% Tampa, FL ...................... 9 3,504 11.5% Orlando, FL .................... 3 1,493 4.9% Fairfax, VA .................... 2 700 2.3% Nashville, TN .................. 2 166 0.5% Charlotte, NC .................. 1 402 1.3% ------ ------ ----- 87 30,522 100.0% ====== ====== =====
The Company or its predecessors developed all but 14 of the Post(R) Communities and currently manages all of the Communities. Fifty-two of the Communities have in excess of 300 apartment units, with the largest Community having a total of 916 apartment units. Eighty of the eighty-seven Communities, comprising approximately 92% of the Communities' apartment units, were completed after January 1, 1986. The average age of the Communities is approximately nine years. The average economic occupancy rate was 96.8% and 96.4%, respectively, and the average monthly rental rate per apartment unit was $897 and $862, respectively, for communities stabilized for each of the entire years ended December 31, 2000 and 1999. See "Selected Financial Information." 7 10 COMMUNITY INFORMATION
DECEMBER 2000 2000 AVERAGE NUMBER AVERAGE AVERAGE YEAR UNIT SIZE OF RENTAL RATES ECONOMIC COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2) - ----------- ----------- --------- ------------- ------ ------------- ------------ GEORGIA Post Ashford(R) ......................... Atlanta 1987 872 222 $ 873 97.3% Post Briarcliff(TM) ..................... Atlanta 1999 1,062 688 1,137 N/A (3) Post Bridge(R) .......................... Atlanta 1986 847 354 747 96.8% Post Brookhaven(R) ...................... Atlanta 1990-92 (4) 991 735 1,037 96.6% Post Canyon(R) .......................... Atlanta 1986 899 494 775 97.5% Post Chase(R) ........................... Atlanta 1987 938 410 759 96.7% Post Chastain(R) ........................ Atlanta 1990 965 558 1,066 96.2% Post Collier Hills(R) ................... Atlanta 1997 967 396 1,085 97.4% Post Corners(R) ......................... Atlanta 1986 860 460 765 96.8% Post Court(R) ........................... Atlanta 1988 838 446 723 97.4% Post Creek(R) ........................... Atlanta 1983 (5) 1,180 810 972 97.1% Post Crest(R) ........................... Atlanta 1996 1,073 410 1,076 97.2% Post Crossing(R) ........................ Atlanta 1995 1,067 354 1,121 96.5% Post Dunwoody(R) ........................ Atlanta 1989-96 (4) 941 530 1,005 95.7% Post Gardens(R) ......................... Atlanta 1998 1,066 397 1,290 95.7% Post Glen(R) ............................ Atlanta 1997 1,113 314 1,262 96.8% Post Lane(R) ............................ Atlanta 1988 840 166 792 97.6% Post Lenox Park(R) ...................... Atlanta 1995 1,030 206 1,153 95.3% Post Lindbergh(R) ....................... Atlanta 1998 960 396 1,107 95.2% Post Mill(R) ............................ Atlanta 1985 952 398 800 97.9% Post Oak(TM) ............................ Atlanta 1993 1,003 182 1,107 97.1% Post Oglethorpe(R) ...................... Atlanta 1994 1,205 250 1,355 96.0% Post Park(R) ............................ Atlanta 1988-90 (4) 904 770 848 96.7% Post Parkside(TM) ....................... Atlanta 2000 903 188 1,355 N/A (3) Post Peachtree Hills(R) ................. Atlanta 1992-94 (4) 982 300 1,108 96.2% Post Pointe(R) .......................... Atlanta 1988 835 360 740 95.4% Post Renaissance(R)(6) .................. Atlanta 1992-94 (4) 890 342 1,051 95.5% Post Ridge(R) ........................... Atlanta 1998 1,045 434 1,092 96.2% Post Stratford(TM) ...................... Atlanta 2000 1,013 250 1,365 N/A (3) Post Summit(R) .......................... Atlanta 1990 957 148 960 96.8% Post Valley(R) .......................... Atlanta 1988 854 496 756 96.8% Post Village(R) ......................... Atlanta 798 98.0% The Arbors ............................. 1983 1,063 301 The Fountains .......................... 1987 850 352 The Gardens ............................ 1986 891 494 The Hills .............................. 1984 953 241 The Meadows ............................ 1988 817 350 Post Vinings(R) ......................... Atlanta 1989-91 (4) 964 403 882 96.5% Post Walk(R) ............................ Atlanta 1984-87 (4) 932 476 888 96.4% Post Woods(R) ........................... Atlanta 1977-83 (4) 1,057 494 972 96.4% Post Riverside(TM) ...................... Atlanta 1998 989 527 1,532 N/A (3) ----- ------ ------- ------- Subtotal/Average-- Georgia ............. 964 16,102 980 96.7% ----- ------ ------- ------- TEXAS Addison Circle Apartment Homes by Post(R)- Phase I ................... Dallas 1998 896 460 968 95.4% Addison Circle Apartment Homes by Post(R)- Phase II .................. Dallas 2000 898 610 1,058 N/A (3) Post American Beauty Mill(TM) ........... Dallas 1998 980 80 1,016 96.1% Post Block 588(TM) ...................... Dallas 2000 1,570 127 1,874 N/A Post Cole's Corner(TM) .................. Dallas 1998 796 186 983 96.1% Post Columbus Square by Post(TM) ........ Dallas 1996 861 218 1,129 97.3% Post Gallery(TM) ........................ Dallas 1999 2,307 34 3,735 N/A (3) Post Midtown Square(R)(7) ............... Dallas 2000 940 672 1,230 N/A (3) Post Parkwood(R) ........................ Dallas 1962-70 (4) 1,042 96 983 97.7% Post Ascension(R) ....................... Dallas 1985-95 (4) 929 167 847 96.5% Post Hackberry Creek(R) ................. Dallas 1988-96 (4) 865 432 820 96.7% Post Lakeside(TM) ....................... Dallas 1986 791 327 845 97.0% Post Townlake(R)/Parks .................. Dallas 1986-87 (4) 869 398 775 96.6% Post White Rock(R) ...................... Dallas 1988 659 207 770 97.2% Post Winsted(R) ......................... Dallas 1996 728 314 802 96.3% Post Shores(TM) ......................... Dallas 1988-97 (4) 874 908 943 96.7% The Abbey of State-Thomas by Post(TM) ... Dallas 1996 1,276 34 1,951 97.2% The Commons at Turtle Creek by Post(TM).. Dallas 1985 645 158 776 96.9% The Heights of State-Thomas by Post(TM).. Dallas 1998 813 198 1,024 95.5%
8 11
DECEMBER 2000 2000 AVERAGE NUMBER AVERAGE AVERAGE YEAR UNIT SIZE OF RENTAL RATES ECONOMIC COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2) - ----------- ----------- --------- ------------- ------ ------------- ------------ TEXAS CONTINUED The Heights of State-Thomas II by ............. Dallas 1999 894 170 1,061 93.7% Post(TM) The Meridian of State-Thomas by Post(TM)....... Dallas 1991 798 132 1,073 96.1% The Residences on McKinney by Post(TM) ........ Dallas 1986 749 196 1,026 95.0% The Rice by Post .............................. Houston 1998 977 309 1,436 97.4% The Vineyard by Post(TM) ...................... Dallas 1996 728 116 949 96.8% The Vintage by Post(TM) ....................... Dallas 1993 781 161 934 96.9% Post Wilson Building(TM) ...................... Dallas 1999 1,015 143 1,352 N/A (3) Post Worthington(TM) .......................... Dallas 1993 818 332 1,147 96.0% Post Uptown Village(TM) ....................... Dallas 1995 767 300 929 96.2% Post Uptown Village II(TM) .................... Dallas 2000 730 196 834 N/A (3) Post Windhaven(TM)(8) ......................... Dallas 1991 825 474 615 100.0% ----- ------ ------ ----- Subtotal/Average-- Texas ..................... 927 8,155 1,001 91.5% ----- ------ ------ ----- FLORIDA Post Bay(R) ................................... Tampa 1988 782 312 727 97.5% Post Court(R) ................................. Tampa 1991 1,018 228 822 96.2% Post Fountains at Lee Vista(R) ................ Orlando 1988 835 508 680 96.4% Post Harbour Place(TM)(7) ..................... Tampa 1999 1,037 525 1,166 N/A (3) Post Hyde Park(R) ............................. Tampa 1996 1,009 389 1,064 97.2% Post Lake(R) .................................. Orlando 1988 850 740 687 97.6% Post Parkside(TM) ............................. Orlando 1999 891 245 1,103 N/A (3) Post Rocky Point(R) ........................... Tampa 1996-98 (4) 1,018 916 1,019 96.2% Post Village(R) ............................... Tampa 764 95.8% The Arbors ................................... 1991 967 304 The Lakes .................................... 1989 895 360 The Oaks ..................................... 1991 968 336 Post Walk(TM) at Old Hyde Park Village ........................ Tampa 1997 984 134 1,260 96.6% ----- ------ -------- ----- Subtotal/Average-- Florida ................... 938 4,997 887 96.5% ----- ------ -------- ----- VIRGINIA Post Corners at Trinity Centre ................ Fairfax 1996 1,030 336 1,154 99.6% Post Forest(R) ................................ Fairfax 1990 889 364 1,109 99.2% ----- ------ -------- ----- Subtotal/Average-- Virginia .................. 960 700 1,131 99.4% ----- ------ -------- ----- NORTH CAROLINA Post Park at Phillips Place(R) ................ Charlotte 1998 912 402 1,272 95.0% ----- ------ -------- ----- TENNESSEE Post Bennie Dillon(TM) ........................ Nashville 1999 719 86 944 96.6% The Lee Apartments ............................ Nashville 1924 (9) 808 80 731 98.5% ----- ------ -------- ----- Subtotal/Average-- Tennessee ................. 764 166 842 97.3% ----- ------ -------- ----- TOTAL ...................................... 911 30,522 $ 977 96.7% ===== ====== ======== =====
(1) Refers to greater metropolitan areas of cities indicated. (2) Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. (3) During 2000, this community or a phase in this community was in lease-up and, therefore, is not included. (4) These dates represent the respective completion dates for multiple phases of a community. (5) This community was completed by the Company in 1983, sold during 1986, managed by the Company through 1993 and reacquired by the Company in 1996. (6) The Company has a leasehold interest in the land underlying Post Renaissance pursuant to a ground lease that expires on January 1, 2040. (7) These communities are comprised of two phases. Only the first phase of each of these communities is stabilized as of February 3, 2001. (8) Post Windhaven(TM) is subject to a master lease with Electronic Data Systems. (9) The Company acquired this community in 1996. 9 12 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT The persons who are executive officers of the Company and its affiliates and their positions are as follows:
NAME POSITIONS AND OFFICES HELD ---- -------------------------- John A. Williams........................ Chairman of the Board, Chief Executive Officer and Director John T. Glover.......................... Vice Chairman and Director David P. Stockert....................... President and Chief Operating Officer W. Daniel Faulk, Jr..................... President-- Post Apartment Development and Chief Development Officer Thomas L. Wilkes........................ President-- Post Management Services and Chief Management Officer R. Gregory Fox.......................... Executive Vice President-- Post Corporate Services and Chief Financial Officer Sherry W. Cohen......................... Executive Vice President and Secretary-- Post Corporate Services Douglas S. Gray......................... Senior Vice President-- Post Corporate Services
The following is a biographical summary of the experience of the executive officers of the Company: John A. Williams. Mr. Williams is the Chairman of the Board and Chief Executive Officer of the Company and is a Director. Mr. Williams founded the business of the Company in 1971 and since that time has acted as Chairman and Chief Executive Officer. Mr. Williams is currently serving on the board of directors of Crawford & Co. and the Atlanta Regional Commission and was formerly Chairman of the Metro Atlanta Chamber of Commerce. Mr. Williams is 58 years old. John T. Glover. Mr. Glover has been the Vice Chairman of the Company since February 29, 2000 and a Director since 1984. From 1984 through February 29, 2000, Mr. Glover was President, Chief Operating Officer, and Treasurer of the Company. Mr. Glover is a Director of SunTrust Bank, Haverty's Furniture Companies, Inc. and Emory Healthcare, Inc. Mr. Glover is 54 years old. David P. Stockert. Mr. Stockert joined the Company January 1, 2001 as President and Chief Operating Officer. From July 1999 to October 2000, Mr. Stockert was Executive Vice President of Duke-Weeks Realty Corporation, a publicly traded real estate company. From June 1995 to July 1999, Mr. Stockert was Senior Vice President and Chief Financial Officer of Weeks Corporation, also a publicly traded real estate company that was a predecessor by merger to Duke-Weeks Realty Corporation. From August 1990 to May 1995, Mr. Stockert was an investment banker in the Real Estate Group at Dean Witter Reynolds Inc. (now Morgan Stanley Dean Witter). Mr. Stockert is 38 years old. 10 13 W. Daniel Faulk, Jr. Mr. Faulk has been with the Company for fourteen years and is currently President of Post Apartment Development and Chief Development Officer. From April 1993 to December 1999, he was President of Post Apartment Development, which is responsible for the development and construction of all Post(R)apartment communities. Prior thereto, Mr. Faulk was President of Post Atlanta since February 1987. Mr. Faulk is currently on the board of directors of Mountain National Bank. Mr. Faulk is 58 years old. Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 and, since January 2001, has been the President of Post Apartment Management and the Company's Chief Management Officer. From December 1998 through December 2000, he was an Executive Vice President and Director of Operations for Post Apartment Management responsible for the operations of Post(R)communities in the Western United States. From October 1997 to December 1998 he was an Executive Vice President and Director of Operations of Post West. Mr. Wilkes was a Senior Vice President of Columbus from October 1993 through October 1997. Mr. Wilkes served as President of CRH Management Company, a multifamily property management firm and a member of the Columbus Group, since its formation in October 1990 to December 1993. Mr. Wilkes is a Certified Property Manager. Mr. Wilkes is 41 years old. R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and, since October 2000 has served as the Company's Chief Financial Officer. From December 1998 through September 2000, he served as Executive Vice President of Post Corporate Services and the Company's Chief Accounting Officer responsible for financial reporting and planning, accounting, management information systems and human resources. From February 1996 to December 1998, Mr. Fox was a Senior Vice President. Prior to joining the Company, he was a senior manager in the audit division of Price Waterhouse LLP where he was employed for ten years. Mr. Fox is a Certified Public Accountant and is currently on the board of directors of Realeum, Inc. Mr. Fox is 41 years old. Sherry W. Cohen. Ms. Cohen has been with the Company for sixteen years. Since October 1997, she has been an Executive Vice President of Post Corporate Services responsible for supervising and coordinating legal affairs and insurance. Since April 1990, Ms. Cohen had also been Corporate Secretary. She was a Senior Vice President with Post Corporate Services from July 1993 to October 1997. Prior thereto, Ms. Cohen was a Vice President of Post Properties, Inc. since April 1990. Ms. Cohen is 46 years old. Douglas S. Gray. Mr. Gray joined the Company in December 1997 and, since January 1999, has been a Senior Vice President of Post Corporate Services responsible for dispositions and asset management. He was a Vice President of Post Corporate Services from December 1997 to December 1998. Prior to joining Post, Mr. Gray was Vice President of Dutch Institutional Holding Co. from July 1994 to November 1997. Prior thereto, he was Director of Property Services for The Landmarks Group from June 1988 to June 1994. Mr. Gray is a Certified Public Accountant and holds the CCIM designation. Mr. Gray is 41 years old. 11 14 PART II ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "PPS." The following table sets forth the quarterly high and low closing sales prices per share reported on the NYSE, as well as the quarterly dividends declared per share:
DIVIDENDS QUARTER ENDED HIGH LOW DECLARED ------------- --------- --------- --------- 1999 First Quarter $ 38.8125 $ 35.2500 $ 0.700 Second Quarter 42.0625 35.3750 0.700 Third Quarter 41.0000 38.8750 0.700 Fourth Quarter 39.7500 36.7500 0.700 2000 First Quarter $ 40.3125 $ 36.5000 $ 0.760 Second Quarter 46.0938 39.9375 0.760 Third Quarter 46.7500 42.0312 0.760 Fourth Quarter 38.2500 33.9375 0.760
On February 12, 2001, the Company had 1,735 common shareholders of record. The Company pays regular quarterly dividends to holders of shares of Common Stock. Future distributions by the Company will be at the discretion of the board of directors and will depend on the actual funds from operations of the Company, the Company's financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code") and such other factors as the board of directors deems relevant. For a discussion of the Company's credit agreements and their restrictions on dividend payments, see Liquidity and Capital Resources at Management's Discussion and Analysis of Financial Condition and Results of Operations. During 2000, the Company did not sell any unregistered securities. There is no established public trading market for the Units. As of February 12, 2001, the Operating Partnership had 109 holders of record of Units of the Operating Partnership. For each quarter during 1999 and 2000, the Operating Partnership paid a cash distribution to holders of Units equal in amount to the dividend paid on the Company's common stock for such quarter. During 2000, the Operating Partnership did not sell any unregistered securities. 12 15 ITEM 6. SELECTED FINANCIAL DATA POST PROPERTIES, INC. (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- OPERATING DATA: Revenue: Rental ......................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618 Property management - third-party (1) .......... 3,826 3,368 3,164 2,421 2,828 Landscape services - third-party (1) ........... 11,423 9,118 7,252 5,148 4,882 Other .......................................... 18,688 14,744 12,734 6,815 5,247 --------- --------- --------- --------- --------- Total revenue .............................. 399,832 345,927 298,905 200,116 171,575 --------- --------- --------- --------- --------- Property operating and maintenance expense (exclusive of depreciation and amortization) ............................ 131,349 113,152 99,717 67,515 58,202 Depreciation ................................... 71,113 58,013 46,646 29,048 23,603 Property management expenses - third-party (1) 3,099 2,925 2,499 1,959 2,055 Landscape services expenses - third-party (1) .. 9,993 7,904 6,264 4,284 3,917 Interest expense ............................... 50,303 33,192 31,297 24,658 22,131 Amortization of deferred loan costs ............ 1,636 1,496 1,185 980 1,352 General and administrative ..................... 10,066 7,788 8,495 7,364 7,716 Minority interest in consolidated property partnerships ................................. (1,695) 511 397 -- -- --------- --------- --------- --------- --------- Total expense ............................. 275,864 224,981 196,500 135,808 118,976 --------- --------- --------- --------- --------- Income before net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office, other charges, minority interest of unitholders, and extraordinary item ........................... 123,968 120,946 102,405 64,308 52,599 Net gain (loss) on sale of assets ................ 3,208 (1,522) -- 3,270 854 Loss on unused treasury locks .................... -- -- (1,944) -- -- Loss on relocation of corporate office ........... -- -- -- (1,500) -- Project abandonment, employee severance and impairment charges (2) ........................... (9,365) -- -- -- -- Minority interest of preferred unitholders in Operating Partnership ........................ (5,600) (1,851) -- -- -- Minority interest of common unitholders in Operating Partnership ........................ (11,691) (12,598) (11,511) (11,131) (9,984) --------- --------- --------- --------- --------- Income before extraordinary item ................. 100,520 104,975 88,950 54,947 43,469 Extraordinary item, net of minority interest (3) ................................. -- (458) -- (75) -- --------- --------- --------- --------- --------- Net income ....................................... 100,520 104,517 88,950 54,872 43,469 Dividends to preferred shareholders .............. (11,875) (11,875) (11,473) (4,907) (1,063) --------- --------- --------- --------- --------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS ............................ $ 88,645 $ 92,642 $ 77,477 $ 49,965 $ 42,406 ========= ========= ========= ========= ========= PER COMMON SHARE DATA: Income before extraordinary item (net of preferred dividends) - basic ........... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95 Net income available to common shareholders - basic ........................... 2.25 2.41 2.21 2.11 1.95 Income before extraordinary item (net of preferred dividends) - diluted ......... 2.22 2.39 2.18 2.09 1.94 Net income available to common shareholders - diluted ......................... 2.22 2.38 2.18 2.09 1.94 Dividends declared ............................... 3.04 2.80 2.60 2.38 2.16
13 16
DECEMBER 31, ------------------------------------------------------------ 2000 1999 1998 1997 1996 ---------- ---------- ----------- ---------- ------- BALANCE SHEET DATA: Real estate, before accumulated depreciation................................... $2,827,094 $2,582,785 $2,255,074 $ 1,936,011 $ 1,109,342 Real estate, net of accumulated depreciation................................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670 Total assets..................................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675 Total debt....................................... 1,213,309 989,583 800,008 821,209 434,319 Shareholders' equity............................. 1,028,610 1,058,862 1,051,686 756,920 398,993
DECEMBER 31, ------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 ------------ ------------- ------------ ------------ ------------ OTHER DATA: Cash flow provided from (used in): Operating activities ............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966 Investing activities ............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762) Financing activities ............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021 Funds from operations (4) ........... $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212 Weighted average common shares outstanding - basic .............. 39,317,725 38,460,689 35,028,596 23,664,044 21,787,648 Weighted average common shares and units outstanding - basic ........ 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723 Weighted average common shares outstanding - diluted ............ 39,852,514 38,916,987 35,473,587 23,887,906 21,879,248 Weighted average common shares and units outstanding - diluted ...... 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323 Total stabilized communities (at end of period) ............... 82 85 83 78 49 Total stabilized apartment units (at end of period) ............... 28,736 29,032 27,568 25,938 17,930 Average economic occupancy (fully stabilized communities)(5). 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties. (2) Project abandonment, employee severance and impairment charges consisted of the following: Write-off of pursuit costs on abandoned development projects - $4,389 Severance cost related to management changes - $3,066 Impairment reserves on for-sale housing - $407 Write-off of investment in Darwin Networks - $1,503. (3) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. The extraordinary item has been reduced by the portion related to the minority interest of the unitholders calculated on the basis of weighted average Units outstanding for the year. (4) The Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its definition of FFO to include in FFO all non-recurring transactions, except those that are defined as extraordinary under generally accepted accounting principles. ("GAAP"). The Company adopted this new definition effective January 1, 2000. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition. The Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. FFO for 1998 and 1997 has been restated to reflect the requirements of the new NAREIT definition. (5) Amount represents average economic occupancy for communities stabilized for both the current and prior respective periods. Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts (average economic occupancy, taking account of these amounts, would have been 94.9% for both years ended December 31, 2000 and 1999). Concessions were $3,250 and $2,745 and employee discounts were $1,143 and $599 for the years ended December 31, 2000 and 1999, respectively. A community is considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month, or (ii) one year after completion of construction. 14 17 POST APARTMENT HOMES, L.P. (DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- OPERATING DATA: Revenue: Rental ..................................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618 Property management - third-party (1) ...................... 3,826 3,368 3,164 2,421 2,828 Landscape services - third-party (1) ....................... 11,423 9,118 7,252 5,148 4,882 Other ...................................................... 18,688 14,744 12,734 6,815 5,247 --------- --------- --------- --------- --------- Total revenue ............................................ 399,832 345,927 298,905 200,116 171,575 --------- --------- --------- --------- --------- Property operating and maintenance expense (exclusive of depreciation and amortization) .......................................... 131,349 113,152 99,717 67,515 58,202 Depreciation (real estate and non-real estate assets)......... 71,113 58,013 46,646 29,048 23,603 Property management expenses - third-party (1) ............... 3,099 2,925 2,499 1,959 2,055 Landscape services expenses - third-party (1) ................ 9,993 7,904 6,264 4,284 3,917 Interest expense ............................................. 50,303 33,192 31,297 24,658 22,131 Amortization of deferred loan costs .......................... 1,636 1,496 1,185 980 1,352 General and administrative ................................... 10,066 7,788 8,495 7,364 7,716 Minority interest in consolidated ............................ property partnerships ...................................... (1,695) 511 397 -- -- --------- --------- --------- --------- --------- Total expenses ........................................... 275,864 224,981 196,500 135,808 118,976 --------- --------- --------- --------- --------- Income before net gain (loss) on sale of assets, loss on unused treasury locks, loss on relocation of corporate office, other charges and extraordinary item ............... 123,968 120,946 102,405 64,308 52,599 Net gain (loss) on sale of assets ............................ 3,208 (1,522) -- 3,270 854 Loss on unused treasury locks ................................ -- -- (1,944) -- -- Loss on relocation of corporate office ....................... -- -- -- (1,500) -- Project abandonment, employee severance and impairment charges (2) ....................................... (9,365) -- -- -- -- --------- --------- --------- --------- --------- Income before extraordinary item ............................. 117,811 119,424 100,461 66,078 53,453 Extraordinary item (3) ....................................... -- (521) -- (93) -- --------- --------- --------- --------- --------- Net income ................................................... 117,811 118,903 100,461 65,985 53,453 Distributions to preferred unitholders ....................... (17,475) (13,726) (11,473) (4,907) (1,063) --------- --------- --------- --------- --------- NET INCOME AVAILABLE TO COMMON UNITHOLDERS ......................................... $ 100,336 $ 105,177 $ 88,988 $ 61,078 $ 52,390 ========= ========= ========= ========= ========= PER COMMON UNIT DATA: Income before extraordinary item (net of preferred distributions) - basic ................... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95 Net income available to common unitholders - basic ........................................ 2.25 2.41 2.21 2.11 1.95 Income before extraordinary item (net of preferred distributions) - diluted ................. 2.22 2.39 2.18 2.09 1.94 Net income available to common unitholders - diluted ...................................... 2.22 2.38 2.18 2.09 1.94 Distributions declared ....................................... 3.04 2.80 2.60 2.38 2.16
15 18
DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ----------- BALANCE SHEET DATA: Real estate, before accumulated depreciation .................. $2,827,094 $2,582,785 $2,255,074 $1,936,011 $1,109,342 Real estate, net of accumulated depreciation................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670 Total assets ................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675 Total debt ..................... 1,213,309 989,583 800,008 821,209 434,319 Partners' equity ............... 1,216,701 1,251,342 1,177,051 869,304 482,434
DECEMBER 31, ------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 ------------ ------------ ----------- ------------ ------------ OTHER DATA: Cash flow provided from (used in): Operating activities .............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966 Investing activities .............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762) Financing activities .............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021 Funds from operations (4) ............. $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212 Weighted average common Units outstanding - basic ............... 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723 Weighted average common Units outstanding - diluted ............. 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323 Total stabilized communities (at end of period) ................ 82 85 83 78 49 Total stabilized apartment units (at end of period) ................ 28,736 29,032 27,568 25,938 17,930 Average economic occupancy (fully stabilized communities)(5).. 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties. (2) Project abandonment, employee severance and impairment charges consisted of the following: Write-off of pursuit costs on abandoned development projects - $4,389 Severance cost related to management changes - $3,066 Impairment reserves on for-sale housing - $407 Write-off of investment in Darwin Networks - $1,503. (3) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. The extraordinary item has been reduced by the portion related to the minority interest of the unitholders calculated on the basis of weighted average Units outstanding for the year. (4) The Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its definition of FFO to include in FFO all non-recurring transactions, except those that are defined as extraordinary under generally accepted accounting principles. ("GAAP"). The Company adopted this new definition effective January 1, 2000. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition. The Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. FFO for 1998 and 1997 has been restated to reflect the requirements of the new NAREIT definition. (5) Amount represents average economic occupancy for communities stabilized for both the current and prior respective periods. Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts (average economic occupancy, taking account of these amounts, would have been 94.9% for each of the years ended December 31, 2000 and 1999). Concessions were $3,250 and $2,745 and employee discounts were $1,143 and $599 for the years ended December 31, 2000 and 1999, respectively. A community is considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month, or (ii) one-year after completion of construction. 16 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA) OVERVIEW The following discussion should be read in conjunction with all of the financial statements appearing elsewhere in this report. The following discussion is based primarily on the Consolidated Financial Statements of Post Properties, Inc. (the "Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except for the effect of minority interest in the Operating Partnership, the following discussion with respect to the Company is the same for the Operating Partnership. As of December 31, 2000, there were 44,035,007 Units outstanding, of which 38,853,596 or 88.2%, were owned by the Company and 5,181,411, or 11.8% were owned by other limited partners (including certain officers and directors of the Company). As of December 31, 2000, there were 7,800,000 preferred units outstanding, of which 5,000,000 were owned by the Company. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 The Operating Partnership recorded net income available to common unitholders of $100,336, $105,177, and $88,988 for the years ended December 31, 2000, 1999 and 1998, respectively. The Company recorded net income available to common shareholders of $88,645, $92,642 and $77,477 for the years ended December 31, 2000, 1999 and 1998, respectively. The Company's decrease in net income available to common shareholders of $3,997 from 1999 to 2000 was primarily related to project abandonment, employee severance and impairment charges, increased interest expense resulting from higher interest rates, and increased general and administrative expenses, partially offset by a gain on the sale of assets, increased rental rates for fully stabilized communities and an increase in units placed in service. The Company's increase in net income available to common shareholders of $15,165 from 1998 to 1999 is primarily related to increased rental rates for fully stabilized communities and an increase in units placed in service. COMMUNITY OPERATIONS The Company's net income is generated primarily from the operation of its apartment communities. For purposes of evaluating comparative operating performance, the Company categorizes its operating communities based on the period each community reaches stabilized occupancy. A community is generally considered by the Company to have achieved stabilized occupancy on the earlier to occur of (i) attainment of 95% physical occupancy on the first day of any month or (ii) one year after completion of construction. At December 31, 2000, the Company's portfolio of apartment communities consisted of the following: (i) 63 communities that were completed and stabilized for all of the current and prior year, (ii) eight communities that achieved full stabilization during the prior year, (iii) nine communities which reached stabilization during 2000, (iv) 16 communities and additions to three existing communities currently in the development or lease-up stage, and (v) four stabilized communities that are currently held for sale. For communities with respect to which construction is completed and the community has become fully operational, all property operating and maintenance expenses are expensed as incurred and those recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset are capitalized. (See "Capitalization of Fixed Assets and Community Improvements"). The Company has adopted an accounting policy related to communities in the development and lease-up stage whereby substantially all operating expenses (including pre-opening marketing expenses) are expensed as incurred. The Company treats each unit in an apartment community separately for cost accumulation, capitalization and expense recognition purposes. Prior to the commencement of leasing activities, interest and other construction costs are capitalized and reflected on the balance sheet as construction in progress. Once a unit is placed in service, all 17 20 operating expenses allocated to that unit, including interest, are expensed as incurred. During the lease-up phase, the sum of interest expense on completed units and other operating expenses (including pre-opening marketing expenses) will initially exceed rental revenues, resulting in a "lease-up deficit," which continues until such time as rental revenues exceed such expenses. Lease up deficits for the years ended December 31, 2000, 1999, and 1998 were $2,665, $2,798 and $2,063, respectively. In order to evaluate the operating performance of its communities, the Company has presented financial information which summarizes the revenue in excess of specified expense on a comparative basis for all of its operating communities combined and for fully stabilized communities. ALL OPERATING COMMUNITIES The operating performance for all of the Company's apartment communities combined for the years ended December 31, 2000, 1999 and 1998 is summarized as follows:
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------------- ----------------------------------- % % 2000 1999 CHANGE 1999 1998 CHANGE -------- -------- ------- -------- -------- ------- Rental and other revenue: Fully stabilized communities (1) ......... $232,435 $221,901 4.7% $221,901 $213,043 4.2% Communities stabilized during 1999 ....... 42,710 38,097 12.1% 38,097 20,845 82.8% Development and lease-up communities (2).. 54,486 17,408 213.0% 17,408 2,106 726.6% Communities held for sale (3) ............ 19,706 18,552 6.2% 18,552 18,359 1.1% Sold communities (4) ..................... 15,928 24,285 (34.4)% 24,285 24,004 1.2% Other revenue (5) ........................ 17,396 12,434 39.9% 12,434 9,660 28.7% -------- -------- -------- -------- 382,661 332,677 15.0% 332,677 288,017 15.5% -------- -------- -------- -------- Property operating and maintenance expense (exclusive of depreciation and amortization): Fully stabilized communities (1) ......... 70,238 67,841 3.5% 67,841 66,612 1.8% Communities stabilized during 1999 ....... 13,957 11,898 17.3% 11,898 8,176 45.5% Development and lease-up communities (2).. 20,802 7,729 169.1% 7,729 2,290 237.5% Communities held for sale (3) ............ 7,314 6,748 8.4% 6,748 6,463 4.4% Sold communities (4) ..................... 4,471 6,118 (26.9)% 6,118 6,790 (9.9)% Other expense (6) ........................ 14,568 12,818 13.7% 12,818 9,386 36.6% -------- -------- -------- -------- 131,350 113,152 16.1% 113,152 99,717 13.5% -------- -------- -------- -------- Revenue in excess of specified expense ..... $251,311 $219,525 14.5% $219,525 $188,300 16.6% ======== ======== ======== ======== Recurring capital expenditures: (7) Carpet ................................... $ 2,890 $ 2,864 0.9% $ 2,864 $ 2,550 12.3% Other .................................... 6,267 5,777 8.5% 5,777 4,929 17.2% -------- -------- -------- -------- Total ................................. $ 9,157 $ 8,641 6.0% $ 8,641 $ 7,479 15.5% ======== ======== ======== ======== Average apartment units in service ......... 31,722 29,304 8.3% 29,304 27,416 6.9% ======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 1999. Includes fully stabilized communities acquired as a result of the Merger. (2) Communities in the "construction", "development" or "lease-up" stage during 2000 and, therefore, not considered fully stabilized for all of the periods presented. (3) Includes one community in Tennessee and three communities and two commercial properties in Texas. (4) Includes one community containing 213 units, which was sold on February 4, 2000, three communities containing 983 units which were sold September 6, 2000, two communities containing 367 units which were sold on November 9, 2000, one community containing 296 units which was sold on December 21, 2000 and one community containing 125 units which was sold on December 28, 2000. (5) Other revenue includes revenue on furnished apartment rentals above the unfurnished rental rates and any revenue not directly related to property operations. (6) Other expenses includes certain indirect central office operating expenses related to management, grounds maintenance, and costs associated with furnished apartment rentals. (7) In addition to those expenses which relate to property operations, the Company incurs recurring and non- recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. For the year ended December 31, 2000, rental and other revenue increased $49,984 or 15.0% compared to 1999, primarily as a result of the completion of new communities and increased rental rates for existing communities. 18 21 For the year ended December 31, 1999, rental and other revenue increased $44,660 or 15.5% compared to 1998, primarily as a result of the completion of new communities and increased rental rates for existing communities. Property operating and maintenance expenses (exclusive of depreciation and amortization) increased from 1999 to 2000 and from 1998 to 1999 primarily due to an increase in the number of units placed in service through the development of communities. For the years ended December 31, 2000 and 1999, recurring capital expenditures increased $516 or 6.0% and $1,162 or 15.5%, respectively, compared to the prior years, primarily due to additional units placed in service and the timing and extent of scheduled capital improvements. FULLY STABILIZED COMMUNITIES The Company defines fully stabilized communities as those which have reached stabilization prior to the beginning of the previous calendar year. The operating performance of the 63 communities containing an aggregate of 21,591 units which were stabilized as of January 1, 1999, are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------------ ----------------------------------- % % 2000 1999 CHANGE 1999 1998 CHANGE -------- -------- ------- -------- -------- ------- Rental and other revenue (1) ............ $232,435 $221,901 4.7% $221,901 $213,043 4.2% Property operating and maintenance expense (exclusive of depreciation and amortization) (2) ................. 70,238 67,841 3.5% 67,841 66,612 1.8% -------- -------- -------- -------- Revenue in excess of specified expense .. $162,197 $154,060 5.3% $154,060 $146,431 5.2% ======== ======== ======== ======== Average economic occupancy (3) .......... 96.8% 96.4% 0.4% 96.4% 96.5% (0.1)% Average monthly rental rate per apartment unit (4) .............................. $ 897 $ 862 4.1% $ 862 $ 836 3.1% ======== ======== ======== ======== Apartment units in service .............. $ 21,591 21,591 21,591 21,591 ======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 1999. (2) In addition to those expenses which relate to property operations, the Company incurs recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. For the years ended December 31, 2000 and 1999, recurring expenditures were $7,573 and $7,768, or $351 and $360 on a per unit basis, respectively. (3) Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage. The calculation of average economic occupancy does not include a deduction for concessions and employee discounts. (Average economic occupancy, taking account of these amounts would have been 94.9% for both years ended December 31, 2000 and 1999.) Concessions were $3,250 and $2,745 and employee discounts were $1,143 and $599 for the years ended December 31, 2000 and 1999, respectively. (4) Average monthly rental rate is defined as the average of the gross actual rental rates for leased units and the average of the anticipated rental rates for unoccupied units. Rental and other revenue increased from 1999 to 2000 primarily due to increased rental rates. The increase in property and maintenance expense (exclusive of depreciation and amortization) from 1999 to 2000 was primarily due to increased personnel and property tax expenses. Rental and other revenue increased from 1998 to 1999 due to increased rental rates. The increase in property and maintenance expenses (exclusive of depreciation and amortization) from 1998 to 1999 was primarily due to an increase in personnel and property tax expenses, partially offset by a decline in utilities expense as a result of water sub-metering and lower repairs and maintenance expense. 19 22 THIRD PARTY SERVICES THIRD PARTY MANAGEMENT SERVICES The Company provides asset management, leasing and other consulting services to non-related owners of apartment communities through its subsidiary, RAM. The operating performance of RAM for the years ended December 31, 2000, 1999 and 1998 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------- -------------------------------- % % 2000 1999 CHANGE 1999 1998 CHANGE ------- ------- ------- ------- ------- ------ Property management and other revenue .................. $ 3,826 $ 3,368 13.6% $ 3,368 $ 3,164 6.4% Property management expense ..... 3,099 2,925 5.9% 2,925 2,499 17.0% Depreciation expense ............ 27 27 0.0% 27 34 (20.6)% ------- ------- ------- ------- Revenue in excess of specified expense ........................ 700 $ 416 68.3% $ 416 $ 631 (34.1)% ======= ======= ======= ======= Average apartment units managed... 14,422 12,572 14.7% 12,572 11,046 13.8% ======= ======= ======= =======
The increase in revenue in excess of specified expense from 1999 to 2000 is primarily attributable to an increase in the average number of units managed. The change from 1998 to 1999 is primarily attributable to management of more communities in lease-up phases as a result of turnover in management contracts. THIRD PARTY LANDSCAPE SERVICES The Company provides landscape maintenance, design and installation services to non-related parties through a subsidiary, Post Landscape Group, Inc., formerly Post Landscape Services, Inc. ("Post Landscape Group"). The operating performance of Post Landscape Group for the years ended December 31, 2000, 1999 and 1998 are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------- ------------------------------ % % 2000 1999 CHANGE 1999 1998 CHANGE ------- ------- ------- ------- ------- ------ Landscape services and other revenue .............. $11,423 $9,118 25.3% $9,118 $7,252 25.7% Landscape services expense ... 9,993 7,904 26.4% 7,904 6,264 26.2% Depreciation expense ......... 374 293 27.6% 293 173 69.4% ------- ------ ------ ------ Revenue in excess of specified expense .................... $ 1,056 $ 921 14.7% $ 921 $ 815 13.0% ======= ====== ====== ======
The change in landscape services revenue and landscape services expense from 1999 to 2000 and 1998 to 1999 is primarily due to an increase in landscape contracts. 20 23 OTHER INCOME AND EXPENSES Depreciation expense increased from 1999 to 2000 and from 1998 to 1999 primarily as a result of an increase in units in service, additional leasehold improvements and technology expenditures. Interest expense increased from 1999 to 2000 and from 1998 to 1999 primarily due to an increase in debt used to fund the development of new communities and increased interest rates (1999 to 2000 only). Amortization of deferred loan costs increased from 1999 to 2000 due primarily to three unsecured debt issues and two secured debt issues completed by the Company in 2000. Amortization of deferred loan costs increased from 1998 to 1999 due primarily to two secured debt issues completed by the Company in 1999. See "Liquidity and Capital Resources" below. General and administrative expenses increased from 1999 to 2000 primarily due to increased personnel costs and a reduction in development support. General and administrative expenses decreased from 1998 to 1999 as a result of a reduction in personnel related expenditures and an increase in development support. The net gain on sale of assets in 2000 resulted from the sale of eight communities, reduced by management's best estimate of the effect of the anticipated sale of communities currently held for sale. The net loss on sale of assets in 1999 resulted from the net loss on the sale of one community and two tracts of land. In the fourth quarter of 2000, management decided to restrict its development activities to fewer markets, refine its development investment strategy, exit the for-sale housing business and make changes in its executive management team. As a result of this decision, the Company wrote off $4,389 of costs it had incurred in markets it will no longer pursue for development opportunities and on individual development deals that are no longer consistent with management's revised strategy. At December 31, 2000, all employees included in the severance charge of $3,066 had been notified of their termination and severance agreement. As of February 15, 2001, these employees were no longer providing any service to the Company. The employees included in the accrual at December 31, 2000, were primarily four executives and five accounting department employees in the Dallas regional office. At December 31, 2000, the accrual for unpaid severance charges was $2,250. In addition to these charges, the Company also recorded an impairment charge of $407 to adjust the cost of for-sale housing in Atlanta and Dallas to its estimated net sales proceeds. Additionally, the Company recorded a charge of $1,503 to write off its investment in Darwin Networks, a high-speed Internet provider that filed for Chapter 11 bankruptcy in January 2001. The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. The extraordinary item in 1999, net of the minority interest portion, resulted from the costs associated with the early retirement of debt. LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company's net cash provided by operating activities increased from $148,618 in 1998 to $153,038 in 1999, primarily due to increased net income partially offset by a net decrease in cash from changes in current assets. The change in current assets is primarily attributable to $7,750 of employee loans, $9,500 in tax increment financing receivables with public/private development projects and additional expenditures for pre-development activities. 21 24 Net cash provided by operating activities increased from $153,038 in 1999 to $185,073 in 2000 primarily due to changes in working capital and an increase in net income before depreciation. Net cash used in investing activities decreased from $328,216 in 1998 to $317,960 in 1999 primarily due to proceeds from the sale of one community in March 1999 and reduced capital expenditures. Net cash used in investing activities decreased from $317,960 in 1999 to $255,986 in 2000 primarily due to proceeds from the sale of eight communities partially offset by increased spending on construction and acquisition of real estate assets. Net cash provided by financing activities decreased from $189,873 in 1998 to $149,638 in 1999 primarily due to reduced proceeds from debt and equity offerings partially offset by reduced debt payments. Net cash provided by financing activities decreased from $149,638 in 1999 to $72,502 in 2000 primarily due to increased debt payments and treasury stock purchases partially offset by increased debt proceeds. The Company has elected to be taxed as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of the Code commencing with its taxable year ended December 31, 1993. REITs are subject to a number of organizational and operational requirements, including a requirement that they currently distribute 95% of their ordinary taxable income (90% beginning in 2001). As a REIT, the Company generally will not be subject to Federal income tax on net income. The discussion in this Liquidity section is the same for the Company and the Operating Partnership, except that all indebtedness described herein has been incurred by the Operating Partnership. At December 31, 2000, the Company had total indebtedness of $1,213,309 and cash and cash equivalents of $7,459. The Company's indebtedness includes approximately $232,504 in conventional mortgages payable and $235,880 in tax-exempt bond indebtedness secured by communities, senior unsecured notes of $720,000, and other unsecured debt and borrowings under unsecured lines of credit totaling approximately $24,925. A schedule of indebtedness is included in Item 7. The Company expects to meet its short-term liquidity requirements generally through its net cash provided by operations and borrowings under credit arrangements and expects to meet certain of its long-term liquidity requirements, such as scheduled debt maturities, repayment of financing of construction and development activities and possible property acquisitions, through long-term secured and unsecured borrowings, possible sale of properties and the issuance of debt securities or additional equity securities of the Company or Units of the Operating Partnership in connection with acquisitions of land or improved properties. The Company believes that its net cash provided by operations will continue to be adequate to meet both operating requirements and payment of dividends by the Company in accordance with REIT requirements in both the short and the long term. The budgeted expenditures for improvements and renovations to certain of the communities are expected to be funded from property operations. Lines of Credit On January 12, 2001, the Company closed a $320,000 three-year syndicated revolving line of credit (the "Revolver") which matures in April 2004. This line of credit bears interest of LIBOR plus .75% or prime minus .25% and replaces the Company's previous line. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short-term funds up to $160,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. Also in January 2001, the Company reached an agreement with a syndicated group of banks for an incremental $185,000, 364 day facility at terms substantially equal to the Revolver. 22 25 On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March 31, 2002. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Company with an automatic daily sweep which applies all available cash to reduce the outstanding balance. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. Other Unsecured Debt On March 1, 1998, the Company entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Company $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. Tax Exempt Bonds On June 29, 1995, the Company replaced the bank letters of credit providing credit enhancement for its outstanding tax-exempt bonds. Under an agreement with the Federal National Mortgage Association ("FNMA"), FNMA now provides, directly or indirectly through other bank letters of credit, credit enhancement with respect to such bonds. Under the terms of such agreement, FNMA has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Secured Debt On March 30, 1999, the Company issued $50,000 of secured notes to The Northwestern Mutual Life Insurance Company. These notes bear interest at 6.5% with an effective rate of 7.3% after consideration of a terminated swap agreement, mature on March 1, 2009 and are secured by two apartment communities. Net proceeds of $49,933 were used to repay outstanding indebtedness. On July 23, 1999, the Company issued $104,000 of secured notes to FNMA. Net proceeds of $101,988 were used to repay outstanding indebtedness. These notes bear interest at 30-day LIBOR plus credit enhancement, liquidity and service fees of .935%, mature on July 23, 2029 and are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the principal amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Company has an option to call these notes after ten years from the issuance date. In December 2000, the Company entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. On October 3, 2000, the Company issued two secured notes totaling $80,000 to The Northwestern Mutual Life Insurance Company. The notes bear interest at 7.69% and mature on October 1, 2007. Each note is secured by an apartment community. Net proceeds of $79,334 were used to repay outstanding indebtedness. Senior Unsecured Debt Offerings On June 7, 1995, the Company issued $50,000 of unsecured senior notes with The Northwestern Mutual Life Insurance Company. The notes were in two tranches; the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to repay outstanding indebtedness. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. On September 30, 1996, the Company completed a public offering of $125,000 senior unsecured debt comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316%, or 71 basis points over the rate on U.S. Treasury securities with a comparable maturity. The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 23 26 Notes, the "Notes"), was priced at 99.694% to yield 7.544%, or 83 basis points over the rate on U.S. Treasury securities with a comparable maturity. Proceeds from the Notes were used to repay outstanding indebtedness. On December 20, 2000, the Company issued $185,000 of unsecured senior notes. The notes bear interest at 7.70% and mature on December 20, 2010. Net proceeds of approximately $183,798 were used to repay outstanding indebtedness. Medium Term Notes and Mandatory Par Put Remarketed Securities On January 29, 1997, the Company established a program for the sale of Medium-Term Notes due three months or more from the date of issue (the "MTNs"). As of December 31, 2000, the Company had $360,000 aggregate principal amount of notes outstanding under the MTN Program. Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) repay outstanding indebtedness. On March 12, 1998, the Company issued $100,000 of 6.85% Mandatory Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Company entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). On May 9, 2000, the Company sold $25,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at the London Interbank Offer Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net proceeds of $24,875 were used to repay outstanding indebtedness. In October 2000, the Company entered into a swap transaction that fixed the rate on the notes at 7.28%, inclusive of credit enhancement and other fees, through maturity. On June 16, 2000, the Company sold $150,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at 8.12% and mature on June 15, 2005. Net proceeds of $148,865 were used to repay outstanding indebtedness. Preferred Unit Offerings On September 3, 1999, the Operating Partnership issued $70,000 of Series D Cumulative Redeemable Preferred Units of limited partnership interest (the "Series D Preferred Units") to an institutional investor in a private placement meeting the requirements of Regulation D promulgated under the Securities Act of 1933, as amended. Net proceeds to the Operating Partnership of approximately $68,000 were used to repay outstanding indebtedness. Perpetual Preferred Stock Offerings On February 9, 1998, the Company sold two million non-convertible 7 5/8% Series C Cumulative Redeemable Shares (the "Series C Perpetual Preferred Shares") with a liquidation preference of $25 per share. Net proceeds of $48,284 from the sale of Series C Perpetual Shares were contributed to the Operating Partnership in exchange for two million Perpetual Preferred Units and used by the Operating Partnership to repay outstanding indebtedness. Common Stock Offerings On December 8, 1998, the Company issued 730,000 shares of common stock at a price of $37 per share. The net proceeds of approximately $27,000 were contributed to the Operating Partnership and used to repay outstanding indebtedness. On November 4, 1998, the Company issued 1.15 million shares of common stock at a price of $38.6875 per share. The net proceeds of approximately $42,200 were contributed to the Operating Partnership and used to repay outstanding indebtedness. 24 27 On May 28, 1998, the Company issued 373,250 shares of its common stock at a price of $40.1875 per share. The shares were deposited into a registered unit investment trust, the Paine Webber Equity Trust Reit Series 1. Net proceeds of $13,662 were contributed to the Operating Partnership and were used to fund development and other operating cash flow needs. On April 29, 1998, the Company issued approximately 1.1 million shares of its common stock at a price of $40.5625 per share. The shares were deposited into a registered unit investment trust, the Equity Investor Fund Cohen & Steers Realty Majors Portfolio. Net proceeds of $44,059 were used to repay outstanding indebtedness. On March 4, 1998, the Company issued 3.5 million shares of common stock at a price of $39 per share. Net proceeds of $129,179 were used to repay outstanding indebtedness. Stock Repurchase Program The Company's Board of Directors has approved the purchase of up to $100,000 of the Company's common stock. In the fourth quarter of 2000, the Company began repurchasing shares of its common stock in accordance with the announced stock repurchase program using funds from operating cash flow and the sale of properties. Purchases will be made from time to time in the open market and it is expected that funding of the program will come from operating cash flow, existing bank facilities, and proceeds from asset sales. Through December 31, 2000, the Company had repurchased 757,500 shares of its common stock at a total cost of $26,620. From January 1, 2001 through February 10, 2001, the Company has repurchased an additional 255,000 shares of its common stock at a total cost of $9,451. Treasury stock activity for the year ended December 31, 2000 was as follows:
TREASURY STOCK SHARES AMOUNT -------- -------- Balance at December 31, 1999 ............ -- $ -- Acquisitions of common stock ......... 757,500 26,620 Other additions ...................... 54,497 2,435 Distribution under Employee Stock Plan (3,401) (152) -------- -------- Balance at December 31, 2000 ............ 808,596 $ 28,903 ======== ========
Amounts in thousands, except share data There were 100,000,000 shares of common stock authorized and 38,853,596 and 38,834,323 shares of common stock outstanding at December 31, 2000 and 1999, respectively. Sale of Properties In February 2000, the Company sold a 213-unit property located in Atlanta, Georgia for $32,350. Net proceeds of approximately $31,500 were used to repay outstanding indebtedness. In September 2000, the Company sold three communities in Jackson, Mississippi containing a total of 983 units, for $44,600. Net proceeds of approximately $42,903 were used to repay outstanding indebtedness. In November 2000, the Company sold two properties located in Nashville, Tennessee, containing a total of 367 units, for $36,885. Net proceeds of approximately $36,290 were used to repay outstanding indebtedness. In December 2000, the Company sold two properties located in Atlanta, Georgia, containing a total of 421 units, for $47,250. Net proceeds of approximately $46,651 were used to repay outstanding indebtedness and to repurchase the Company's common stock. 25 28 Schedule of Indebtedness The following table reflects the Company's indebtedness at December 31, 2000:
MATURITY PRINCIPAL DESCRIPTION LOCATION INTEREST RATE DATE (1) BALANCE ----------- ---------- ------------- -------- ---------- CONVENTIONAL FIXED RATE (SECURED) Parkwood Townhomes(TM) ................ Dallas, TX 7.375% 04/01/14 $ 799 Northwestern Mutual Life .............. N/A 6.50% (2) 03/01/09 48,601 Northwestern Mutual Life .............. Dallas, TX 7.69% 10/01/07 28,666 Northwestern Mutual Life .............. Dallas, TX 7.69% 10/01/07 51,238 FNMA .................................. Atlanta, GA 6.975% (3) 07/23/29 103,200 ---------- 232,504 ---------- TAX EXEMPT FLOATING RATE (SECURED) Post Ashford(R) Series 1995............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 9,895 Post Valley(R) Series 1995.............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 18,600 Post Brook(R) Series 1995............... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 4,300 Post Village(R) (Atlanta) Hills Series 1995........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 7,000 Post Mill(R) Series 1995................ Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 12,880 Post Canyon(R) Series 1996.............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 16,845 Post Corners(R) Series 1996............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 14,760 Post Bridge(R).......................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 12,450 Post Village(R) (Atlanta) Gardens....... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 14,500 Post Chase(R)........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 15,000 Post Walk(R)............................ Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 15,000 Post Lake(R)............................ Orlando, FL "AAA" NON-AMT + .515% (4)(5) 06/01/25 28,500 Post Fountains at Lee Vista(R).......... Orlando, FL "AAA" NON-AMT + .515% (4)(5) 06/01/25 21,500 Post Village(R) (Atlanta) Fountains and Meadows.......................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 26,000 Post Court(R)........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 18,650 ---------- 235,880 ---------- SENIOR NOTES (UNSECURED) Northwestern Mutual Life................ N/A 8.21% 06/07/01 30,000 Medium Term Notes....................... N/A 7.02% 04/02/01 37,000 Northwestern Mutual Life................ N/A 8.37% 06/07/02 20,000 Senior Notes............................ N/A 7.25% 10/01/03 100,000 Medium Term Notes....................... N/A 7.30% 04/01/04 13,000 Medium Term Notes....................... N/A 6.69% 09/22/04 10,000 Medium Term Notes....................... N/A 6.78% 09/22/05 25,000 Senior Notes............................ N/A 7.50% 10/01/06 25,000 Mandatory Par Put Remarketed Securities............................. N/A 6.85% (6) 03/16/15 100,000 Medium Term Notes....................... N/A 7.28% (7) 02/01/05 25,000 Medium Term Notes....................... N/A 8.12% 06/15/05 150,000 Senior Notes............................ N/A 7.70% 12/20/10 185,000 ---------- 720,000 ---------- LINES OF CREDIT & OTHER UNSECURED DEBT City of Phoenix......................... N/A 5.00% (8) 03/01/21 2,000 Revolver ............................... N/A LIBOR + .825% or prime minus .25% (9) 04/30/03 18,000 Cash Management Line.................... N/A LIBOR + .675% or prime minus .25% 03/31/01 4,925 ---------- 24,925 ---------- TOTAL................................... $1,213,309 ==========
(1) All of the mortgages can be prepaid at any time, subject to certain prepayment penalties. 26 29 (2) This note bears interest at 6.50% with an effective rate of 7.30% after consideration of a terminated swap agreement. (3) In December 2000, the Company entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. (4) Bond financed (interest rate on bonds + credit enhancement fees effective October 1, 1998). The Company pays credit enhancement fees of .515% of the amount of such bonds or the amount of the letters of credit, as the case may be. (5) These bonds are cross-collateralized. The Company has purchased an interest rate cap that limits the Company's exposure to increases in the base rate to 5%. (6) The annual interest rate on these securities to March 16, 2005 (the "Remarketing Date") is 6.85%. On the Remarketing Date, they are subject to mandatory tender for remarketing. (7) In October 2000, the Company entered into a swap transaction that fixed the rate on the note at 7.28%, inclusive of credit enhancement and other fees, through maturity. (8) This loan is interest free for the first three years, with interest at 5.00% thereafter. Repayment is to commence on March 1, 2001 subject to the conditions set forth in the Agreement. (9) Represents stated rate. The Company may also make "money market" loans of up to $175,000 at rates below the stated rate. At December 31, 2000, the outstanding balance of the Revolver consisted of "money market" loans with an average interest rate of 7.49%. Effective January 12, 2001, the interest rate is LIBOR plus .75% or prime minus .25% and the debt matures April 30, 2004. Also effective January 12, 2001, the Company may make "money market" loans of up to $160,000 at rates below the stated rate. Capitalization of Fixed Assets and Community Improvements The Company has established a policy of capitalizing those expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset. All expenditures necessary to maintain a community in ordinary operating condition are expensed as incurred. During the first five years of a community (which corresponds to the estimated depreciable life), carpet replacements are expensed as incurred. Thereafter, carpet replacements are capitalized. Acquisition of assets and community improvement expenditures for the years ended December 31, 2000 and 1999 are summarized as follows:
YEAR ENDED DECEMBER 31, --------------------------------- 2000 1999 --------- --------- New community development and acquisition activity..... $387,649 $320,081 Revenue generating additions and improvements: Property renovations ............................... 6,638 7,826 Submetering of water service ....................... 32 185 Nonrecurring capital expenditures: Vehicle access control gates ....................... 403 794 Other community additions and improvements ......... 5,173 2,177 Recurring capital expenditures: Carpet replacements ................................ 2,890 2,864 Other community additions and improvements ......... 6,267 5,777 Corporate additions and improvements ............... 3,441 6,811 -------- -------- $412,493 $346,515 ======== ========
INFLATION Substantially all of the leases at the Communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable the Company to seek increases in rents. The substantial majority of these leases are for one year or less and the remaining leases are for up to two years. At the expiration of a lease term, the Company's lease agreements provide that the term will be extended unless either the Company or the lessee gives at least sixty (60) days written notice of termination; in addition, the Company's policy permits the earlier termination of a lease by a lessee upon thirty (30) days written notice to the Company and the payment of one month's additional rent as compensation for early termination. The short-term nature of these leases generally serves to reduce the risk to the Company of the adverse effect of inflation. NEW ACCOUNTING PRONOUNCEMENTS See Note 1 to Consolidated Financial Statements of the Company. FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION Historical Funds from Operations The Company considers funds from operations ("FFO") a useful measure of performance of an equity REIT. FFO is defined to mean net income available to common shareholders determined in accordance with GAAP, excluding 27 30 gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. Cash available for distribution ("CAD") is defined as FFO less capital expenditures funded by operations and loan amortization payments. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO and CAD should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO and CAD for the years ended December 31, 2000, 1999 and 1998 presented on a historical basis are summarized in the following table: Calculations of Funds from Operations and Cash Available for Distribution
YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Net income available to common shareholders ......................... $ 88,645 $ 92,642 $ 77,477 Extraordinary item, net of minority interest ........................ -- 458 -- Minority interest ................................................... 11,691 12,598 11,511 Net (gain) loss on sale of assets ................................... (3,208) 1,522 -- ------------ ------------ ------------ Adjusted net income ................................................. 97,128 107,220 88,988 Depreciation of real estate assets .................................. 66,283 55,361 45,214 ------------ ------------ ------------ Funds from Operations (1) ........................................... 163,411 162,581 134,202 Recurring capital expenditures (2) .................................. (9,157) (8,641) (7,479) Non-recurring capital expenditures (3) .............................. (5,576) (2,971) (1,423) Loan amortization payments .......................................... (1,869) (81) (75) ------------ ------------ ------------ Cash Available for Distribution ..................................... $ 146,809 $ 150,888 $ 125,225 ============ ============ ============ Revenue generating capital expenditures (4) ......................... $ 6,670 $ 8,011 $ 13,614 ============ ============ ============ Cash Flow Provided From (Used In): Operating activities .............................................. $ 185,073 $ 153,038 $ 148,618 Investing activities .............................................. $ (255,986) $ (317,960) $ (328,216) Financing activities .............................................. $ 72,502 $ 149,638 $ 189,873 Weighted average common shares outstanding - basic .................. 39,317,725 38,460,689 35,028,596 ============ ============ ============ Weighted average common shares outstanding - diluted ................ 39,852,514 38,916,987 35,473,587 ============ ============ ============ Weighted average common shares and units outstanding - basic ........ 44,503,290 43,663,373 40,244,351 ============ ============ ============ Weighted average common shares and units outstanding - diluted ...... 45,038,079 44,119,671 40,689,342 ============ ============ ============
(1) The Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its definition of FFO to include in FFO all non-recurring transactions, except those that are defined as extraordinary under generally accepted accounting principles ("GAAP"). The Company adopted this new definition effective January 1, 2000. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition. The Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. FFO for 1998 has been restated to reflect the requirements of the new NAREIT definition. (2) Recurring capital expenditures consisted primarily of $2,890, $2,864 and $2,550 of carpet replacement and $6,267, $5,777 and $4,929 of other community additions and improvements to existing communities for the years ended December 31, 2000, 1999 and 1998, respectively. Since the Company does not add back the depreciation of non-real estate assets in its calculation of FFO, capital expenditures of $3,441, $6,811, and $8,576 are excluded from the calculation of CAD for the years ended December 31, 2000, 1999 and 1998, respectively. (3) Non-recurring capital expenditures consisted of the additions of vehicle access control gates to communities of $403, $794, and $377 and other community additions and improvements of $5,173, $2,177 and $1,046 for the years ended December 31, 2000, 1999 and 1998, respectively. (4) Revenue generating capital expenditures included major renovations of communities in the amount of $6,638, $7,826, and $12,896 for the years ended December 31, 2000, 1999 and 1998, respectively, and sub-metering of water service to communities in the amounts of $32, $185, and $718 for the years ended December 31, 2000, 1999 and 1998, respectively. 28 31 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of such statements in this report include descriptions of our plans with respect to the development of new apartment communities, our plans to enter new markets and our expectations relating to our continuing growth. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Additional information concerning the risk and uncertainties listed above, and other factors that you may wish to consider, is contained elsewhere in the Company's filings with the Securities and Exchange Commission. The following are some of the factors that could cause the Company's actual results to differ materially from the expected results described in the Company's forward-looking statements: - - conditions affecting the acquisition, development and ownership of residential real estate, including local zoning and land use issues, environmental regulations, the Americans with Disabilities Act, the Fair Housing Amendments Act of 1988 and general conditions in the multi-family residential real estate market. - - adverse or unanticipated weather conditions, which may affect the Company's overall level of development. - - the Company's ability to obtain financing for the development of additional apartment communities. - - the impact of competition, including competition for tenants and locations and in other important aspects of the Company's business. The Company's primary competitors include other regional or national apartment communities. The multifamily apartment community business is highly competitive. - - general economic conditions which affected consumer confidence and purchases of new homes, including interest rates, the overall level of economic activity, the availability of consumer credit and mortgage financing, unemployment rates, and other factors. - - the Company's ability to continue to qualify as a real estate investment trust under the Code. - - changes in laws and regulations, including changes in accounting standards, tax statutes or regulations, and environmental and land use regulations, and uncertainties of litigation. 29 32 RISK FACTORS THE FOLLOWING RISK FACTORS APPLY TO THE COMPANY AND THE OPERATING PARTNERSHIP. ALL INDEBTEDNESS DESCRIBED IN THE RISK FACTORS HAS BEEN INCURRED BY THE OPERATING PARTNERSHIP. UNFAVORABLE CHANGES IN APARTMENT MARKETS AND ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OCCUPANCY LEVELS AND RENTAL RATES. Market and economic conditions in the various metropolitan areas of the United States where the Company operates may significantly affect occupancy levels and rental rates and therefore profitability. Factors that may adversely affect these conditions include the following: - the economic climate, which may be adversely impacted by a reduction in jobs, industry slowdowns and other factors; - local conditions, such as oversupply of, or reduced demand for, apartment homes; - a future economic downturn that simultaneously affects one or more of the Company's geographic markets; - declines in household formation; - rent control or stabilization laws, or other laws regulating rental housing, which could prevent the Company from raising rents to offset increases in operating costs; and - competition from other available apartments and changes in market rental rates. Any of these factors could adversely affect the Company's ability to achieve desired operating results from its communities. DEVELOPMENT AND CONSTRUCTION RISKS COULD IMPACT THE COMPANY'S PROFITABILITY. The Company intends to continue to develop and construct apartment communities. Development activities may be conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. The Company's development and construction activities may be exposed to the following risks: - the Company may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could result in increased development costs; - the Company may incur construction costs for a property that exceed original estimates due to increased materials, labor or other costs, which could make completion of the property uneconomical, and the Company may not be able to increase rents to compensate for the increase in construction costs; - the Company intends to concentrate its attention on fewer markets and reduce annual development expenditures, and it may abandon development opportunities that it has already begun to explore, and it may fail to recover expenses already incurred in connection with exploring those opportunities; - the Company has been and may continue to be unable to complete construction and lease-up of a community on schedule and meet financial goals for development projects; 30 33 - because occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, the Company may be unable to meet its profitability goals for that community; and - construction costs have been increasing in the Company's existing markets, and may continue to increase in the future and, in some cases, the costs of upgrading acquired communities have, and may continue to, exceed original estimates and the Company may be unable to charge rents that would compensate for these increases in costs. FAILURE TO SUCCEED IN NEW MARKETS MAY LIMIT THE COMPANY'S GROWTH. The Company may from time to time commence development activity or make acquisitions outside of its existing market areas if appropriate opportunities arise. The Company's historical experience in its existing markets does not ensure that it will be able to operate successfully in new markets. The Company may be exposed to a variety of risks if it chooses to enter new markets. These risks include, among others: - an inability to evaluate accurately local apartment market conditions and local economies; - an inability to obtain land for development or to identify appropriate acquisition opportunities; - an inability to hire and retain key personnel; and - lack of familiarity with local governmental and permitting procedures. POSSIBLE DIFFICULTY OF SELLING APARTMENT COMMUNITIES COULD LIMIT THE COMPANY'S OPERATIONAL AND FINANCIAL FLEXIBILITY. Although the Company has experienced success in disposing of apartment communities that no longer meet its strategic objectives, market conditions could change and purchasers may not be willing to pay acceptable prices. A weak market may limit the Company's ability to change its portfolio promptly in response to changing economic conditions. Also, if the Company is unable to sell apartment communities or if it can only sell apartment communities at prices lower than are generally acceptable, then the Company may not have adequate capital to execute its development and construction strategy. Furthermore, a significant portion of the proceeds from the Company's overall property sales may be held in escrow accounts in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code so that any related capital gain can be deferred for federal income tax purposes. As a result, the Company may not have immediate access to all of the cash flow generated from property sales. CHANGING INTEREST RATES COULD INCREASE INTEREST COSTS AND COULD AFFECT THE MARKET PRICE OF THE COMPANY'S SECURITIES. The Company has incurred, and expects to continue to incur, debt bearing interest at rates that vary with market interest rates. Therefore, if interest rates increase, the Company's interest costs will rise to the extent its variable rate debt is not hedged effectively. In addition, an increase in market interest rates may lead purchasers of the Company's securities to demand a higher annual yield, which could adversely affect the market price of the Company's common and preferred stock and debt securities. FAILURE TO GENERATE SUFFICIENT CASH FLOWS COULD AFFECT THE COMPANY'S DEBT FINANCING AND CREATE REFINANCING RISK. The Company is subject to the risks normally associated with debt financing, including the risk that its cash flow will be insufficient to make required payments of principal and interest. Although the Company may be able to use cash flow to make future principal payments, it cannot assure investors that sufficient cash flow will be available to make all required principal payments and still satisfy the distribution requirements that the Company must satisfy in order to maintain its status as a real estate investment trust or "REIT" for federal income tax purposes. The following factors, among others, may affect the cash flows generated by the Company's apartment communities: - the national and local economies; - local real estate market conditions, such as an oversupply of apartment homes; - the perceptions by prospective residents of the safety, convenience and attractiveness of the Company's communities and the neighborhoods in which they are located; - the Company's ability to provide adequate management, maintenance and insurance; and - rental expenses, including real estate taxes and utilities. 31 34 Expenses associated with the Company's investment in a community, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in cash flows from operations from that community. If a community is mortgaged to secure payment of debt and the Company is unable to make the mortgage payments, the Company could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgagee. The Company is likely to need to refinance at least a portion of its outstanding debt as it matures. There is a risk that the Company may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt. As of December 31, 2000, the Company had outstanding mortgage indebtedness of approximately $468 million and senior unsecured debt of approximately $720 million and outstanding indebtedness under its lines of credit aggregating $25 million. THE COMPANY COULD BECOME MORE HIGHLY LEVERAGED WHICH COULD RESULT IN AN INCREASED RISK OF DEFAULT AND IN AN INCREASE IN ITS DEBT SERVICE REQUIREMENTS. The Company's board of directors has adopted a policy of limiting indebtedness to approximately 60% of the undepreciated book value of its assets, but the Company's organizational documents do not contain any limitation on the amount or percentage of indebtedness, funded or otherwise, that it might incur. If this policy were changed, the Company could become more highly leveraged, resulting in an increase in debt service that could adversely affect funds from operations and the Company's ability to make expected distributions to its shareholders and the Operating Partnership's ability to make expected distributions to its limited partners and in an increased risk of default on the obligations of the Company and the Operating Partnership. In addition, the Company's and the Operating Partnership's ability to incur debt is limited by covenants in bank and other credit agreements. The Company manages its debt to be in compliance with its stated policy and with these debt covenants, but subject to compliance with these covenants, the Company may increase the amount of outstanding debt at any time without a concurrent improvement in the Company's ability to service the additional debt. Accordingly, the Company could become more leveraged, resulting in an increased risk of default on its obligations and in an increase in debt service requirements, both of which could adversely affect the Company's financial condition and ability to access debt and equity capital markets in the future. DEBT FINANCING MAY NOT BE AVAILABLE AND EQUITY ISSUANCES COULD BE DILUTIVE TO THE COMPANY'S SHAREHOLDERS. The Company's ability to execute its business strategy depends on its access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity. Debt financing may not be available in sufficient amounts, or on favorable terms or at all. If the Company issues additional equity securities to finance developments and acquisitions instead of incurring debt, the interests of existing shareholders could be diluted. ACQUIRED COMMUNITIES MAY NOT ACHIEVE ANTICIPATED RESULTS. The Company intends to continue to selectively acquire apartment communities that meet its investment criteria. The Company's acquisition activities and their success may be exposed to the following risks: - an acquired community may fail to achieve expected occupancy and rental rates and may fail to perform as expected; - the Company may not be able to successfully integrate acquired properties and operations; and - the Company's estimates of the costs of repositioning or redeveloping the acquired property may prove inaccurate, causing the Company to fail to meet its profitability goals. 32 35 INCREASED COMPETITION COULD LIMIT THE COMPANY'S ABILITY TO LEASE APARTMENT HOMES OR INCREASE OR MAINTAIN RENTS. The Company's apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities and single-family rental homes, as well as owner occupied single- and multi-family homes. Competitive housing in a particular area could adversely affect the Company's ability to lease apartment homes and increase or maintain rents. LIMITED INVESTMENT OPPORTUNITIES COULD ADVERSELY AFFECT THE COMPANY'S GROWTH. The Company expects that other real estate investors will compete to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment companies and other apartment REITs. This competition could increase prices for properties of the type that the Company would likely pursue, and competitors may have greater resources than the Company. As a result, the Company may not be able to make attractive investments on favorable terms, which could adversely affect its growth. INTEREST RATE HEDGING CONTRACTS MAY BE INEFFECTIVE AND MAY RESULT IN MATERIAL CHARGES. From time to time when the Company anticipates issuing debt securities, it may seek to limit exposure to fluctuations in interest rates during the period prior to the pricing of the securities by entering into interest rate hedging contracts. The Company may do this to increase the predictability of its financing costs. Also, from time to time the Company may rely on interest rate hedging contracts to limit its exposure under variable rate debt to unfavorable changes in market interest rates. If the pricing of new debt securities is not within the parameters of, or market interest rates produce a lower interest cost than the Company incurs under, a particular interest rate hedging contract, the contract is ineffective. Furthermore, the settlement of interest rate hedging contracts has involved and may in the future involve material charges. These charges are typically related to the extent and timing of fluctuations in interest rates. Despite the Company's efforts to minimize its exposure to interest rate fluctuations, the Company cannot guarantee that it will maintain coverage for all of its outstanding indebtedness at any particular time. If the Company does not effectively protect itself from this risk, it may be subject to increased interest costs resulting from interest rate fluctuations. 33 36 LOSSES FROM NATURAL CATASTROPHES MAY EXCEED INSURANCE COVERAGE. The Company carries comprehensive liability, fire, flood, extended coverage and rental loss insurance on its properties, which are believed to be of the type and amount customarily obtained on real property assets. The Company intends to obtain similar coverage for properties acquired in the future. However, some losses, generally of a catastrophic nature, such as losses from floods or earthquakes, may be subject to limitations. The Company exercises discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on its investments at a reasonable cost and on suitable terms. If the Company suffers a substantial loss, its insurance coverage may not be sufficient to pay the full current market value or current replacement value of the lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed. POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION COULD RESULT IN SUBSTANTIAL COSTS. The Company is in the business of acquiring, developing, owning, operating and from time to time selling real estate. Under various federal, state and local environmental laws, as a current or former owner or operator, the Company could be required to investigate and remediate the effects of contamination of currently or formerly owned real estate by hazardous or toxic substances, often regardless of its knowledge of or responsibility for the contamination and solely by virtue of its current or former ownership or operation of the real estate. In addition, the Company could be held liable to a governmental authority or to third parties for property damage and for investigation and clean-up costs incurred in connection with the contamination. These costs could be substantial, and in many cases environmental laws create liens in favor of governmental authorities to secure their payment. The presence of such substances or a failure to properly remediate any resulting contamination could materially and adversely affect the Company's ability to borrow against, sell or rent an affected property. COMPLIANCE OR FAILURE TO COMPLY WITH LAWS REQUIRING ACCESS TO THE COMPANY'S PROPERTIES BY DISABLED PERSONS COULD RESULT IN SUBSTANTIAL COST. The Americans with Disabilities Act, the Fair Housing Act of 1988 and other federal, state and local laws generally require that public accommodations be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require the Company to modify its existing properties. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require the Company to add other structural features that increase construction costs. Legislation or regulations adopted in the future may impose further burdens or restrictions on the Company with respect to improved access by disabled persons. The Company cannot ascertain the costs of compliance with these laws, which may be substantial. THE COMPANY MAY FAIL TO QUALIFY AS A REIT FOR FEDERAL INCOME TAX PURPOSES. The Company's qualification as a REIT for federal income tax purposes depends upon its 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 upon REITs under the Internal Revenue Code. The Company believes that it has qualified for taxation as a REIT for federal income tax purposes commencing with its taxable year ended December 31, 1993, and plans to continue to meet the requirements to qualify as a REIT in the future. Many of these requirements, however, are highly technical and complex. The Company cannot guarantee, therefore, that it has qualified or will continue to qualify in the future as a REIT. The determination that the Company qualifies as a REIT for federal income tax purposes requires an analysis of various factual matters that may not be totally within the Company's control. Even a technical or inadvertent mistake could jeopardize the Company's REIT status. Furthermore, Congress and the IRS 34 37 might make changes to the tax laws and regulations, and the courts might issue new decisions that make it more difficult, or impossible, for the Company to remain qualified as a REIT. The Company does not believe, however, that any pending or proposed tax law changes would jeopardize its REIT status. If the Company were to fail to qualify for taxation as a REIT in any taxable year, and certain relief provisions of the Internal Revenue Code did not apply, the Company would be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates, leaving less money available for distributions to its shareholders. In addition, distributions to shareholders in any year in which the Company failed to qualify would not be deductible by the Company for federal income tax purposes nor would they be required to be made. Unless entitled to relief under specific statutory provisions, the Company also would 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 the Company would be entitled to such statutory relief. The Company's failure to qualify as a REIT likely would have a significant adverse effect on the value of its securities. THE OPERATING PARTNERSHIP MAY FAIL TO BE TREATED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES. Management believes that the Operating Partnership qualifies, and has so qualified since its formation, as a partnership for federal income tax purposes and not as a publicly traded partnership taxable as a corporation. No assurance can be provided, however, that the IRS will not challenge the treatment of the Operating Partnership as a partnership for federal income tax purposes or that a court would not sustain such a challenge. If the IRS were successful in treating the Operating Partnership as a corporation for federal income tax purposes, then the taxable income of the Operating Partnership would be taxable at regular corporate income tax rates. In addition, the treatment of the Operating Partnership as a corporation would cause the Company to fail to qualify as a REIT. See "--The Company may fail to qualify as a REIT for federal income tax purposes" above. THE COMPANY'S SHAREHOLDERS MAY NOT BE ABLE TO EFFECT A CHANGE OF CONTROL. The articles of incorporation and bylaws of the Company, the partnership agreement of the Operating Partnership, and the Georgia Business Corporation Code contain a number of provisions that could delay, defer or prevent a transaction or a change of control that might involve a premium price for the Company's shareholders or otherwise be in their best interests, including the following: Ownership limit. One of the requirements for maintenance of the Company's qualification as a REIT for federal income tax purposes is that no more than 50% in value of its outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Internal Revenue Code, during the last half of any taxable year. Primarily to facilitate maintenance of its qualification as a REIT for federal income tax purposes, the ownership limit under the Company's articles of incorporation prohibits ownership, directly or by virtue of the attribution provisions of the Internal Revenue Code, by any person or persons acting as a group of more than 6.0% of the issued and outstanding shares of the Company's common stock, subject to an exception for shares of common stock held by Mr. Williams and Mr. Glover, the Company's Chairman and Vice Chairman. Together, these limitations are referred to as the "ownership limit." Further, the Company's articles of incorporation include provisions allowing it to stop transfers of and redeem its shares that are intended to assist the Company in complying with these requirements. These provisions may have the effect of delaying, deferring or preventing someone from taking control, even though a change of control might involve a premium price for the Company's shareholders or might otherwise be in the shareholders' best interests. Staggered board. The Company's articles of incorporation provides that the board of directors will consist of eight members and can be increased or decreased after that according to its bylaws, provided that the 35 38 total number of directors is not less than three nor more than 15. Pursuant to the Company's bylaws, the number of directors will be fixed by the board of directors within the limits in its articles of incorporation. The board of directors is divided into three classes of directors. Directors for each class are chosen for a three-year term. The staggered terms for directors may affect the Company's shareholders' ability to effect a change of control, even if a change of control would be in the interest of the shareholders. Preferred shares; classification or reclassification of unissued shares of capital stock without shareholder approval. The Company's articles of incorporation provide that the total number of shares of stock of all classes which it has authority to issue is 120,000,000, consisting of 100,000,000 shares of common stock and 20,000,000 shares of preferred stock, of which 5,000,000 had been issued as of December 31, 2000. The board of directors has the authority, without a vote of shareholders, to classify or reclassify any unissued shares of stock, including common stock into preferred stock or vice versa, and to establish the preferences and rights of any preferred or other class or series of shares to be issued. The issuance of preferred stock or other shares having special preferences or rights could delay or prevent a change of control even if a change of control would be in the interests of the shareholders. Because the board of directors has the power to establish the preferences and rights of additional classes or series of shares without a shareholder vote, the board of directors may give the holders of any class or series preferences, powers and rights, including voting rights, senior to the rights of holders of the Company's common stock. Consent rights of the Unitholders. Under the partnership agreement of the Operating Partnership, the Company may not merge or consolidate with another entity unless the merger includes the merger of the Operating Partnership, which requires the approval of the holders of a majority of the outstanding units of limited partnership. If the Company were to ever hold less than a majority of the units, this voting requirement might limit the possibility for an acquisition or a change of control. Georgia Anti-Takeover Statutes. The Georgia Business Corporation Code generally restricts a company from entering into certain business combinations with an interested shareholder for a period of five years after the date on which the shareholder becomes an interested shareholder unless (1) the transaction is approved by the board of directors of the company prior to the date the person becomes an interested shareholder, (2) the interested shareholder acquires 90% of the company's voting stock in the same transaction in which it exceeds 10% or (3) subsequent to becoming an interested shareholder, the shareholder acquires 90% of the company's voting stock and the business combination is approved by the holders of a majority of the voting stock entitled to vote on the business combination. An interested shareholder is defined as any person or entity that is the beneficial owner of at least 10% of the company's voting stock. This business combination statute will not apply unless the bylaws of the corporation specifically provides that the statute is applicable to the corporation. The Company has not elected to be covered by this statute, but it could so by action of the board of directors at any time. Georgia Fair Price Statute. The Georgia Fair Price Statute imposes fair price and procedural requirements applicable to business combinations with any person who owns 10% or more of the common stock. These statutory requirements restrict business combinations with, and accumulations of shares of voting stock of, certain Georgia corporations. This fair price statute will not apply unless the bylaws of the corporation specifically provides that the statute is applicable to the corporation. The Company has not elected to be covered by this statute, but it could do so by action of the board of directors at any time. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE SENSITIVITY The Company's primary market risk exposure is interest rate risk. At December 31, 2000, the Company had $151,125 of variable rate debt tied to LIBOR. In addition, the Company had $235,880 in variable tax-exempt debt tied to "AAA" NON-AMT. In addition, the Company has interest rate risk associated with fixed rate debt at maturity. The discussion in this Interest Rate Sensitivity section is the same for the Company and the Operating Partnership, except that all indebtedness described herein has been incurred by the Operating Partnership. Management has and will continue to manage interest rate risk as follows: - - maintain a conservative ratio of fixed rate, long-term debt to total debt such that variable rate exposure is kept at an acceptable level; - - fix certain long-term variable rate debt through the use of interest rate swaps or interest rate caps with appropriately matching maturities; - - use treasury locks where appropriate to fix rates on anticipated debt transactions, and 36 39 - - take advantage of favorable market conditions for long-term debt and/or equity. Management uses various financial models and advisors to achieve these objectives. The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by (expected) contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based upon implied forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency.
EXPECTED MATURITY DATE ----------------------------------------------------------------------------------------------------- THERE- FAIR 2001 2002 2003 2004 2005 AFTER TOTAL VALUE --------- -------- --------- --------- --------- --------- ---------- ---------- (IN MILLIONS) ----------------------------------------------------------------------------------------------------- Long-term Debt: Fixed Rate ............... $ 69,066 $ 22,316 $ 102,480 $ 25,654 $ 177,848 $ 428,940 $ 826,304 $ 822,043 --------- -------- --------- --------- --------- --------- ---------- ---------- Average interest rate.... 7.49% 7.47% 7.50% 7.52% 7.36% 6.83% 7.49% to 7.39% Floating Rate (1) LIBOR-based: Cash Management Line (2)................ 4,925 4,925 4,925 MTN...................... 25,000 25,000 25,000 Revolver (2)............. 18,000 18,000 18,000 FNMA (3)................. 103,200 103,200 103,200 --------- -------- --------- --------- --------- --------- ---------- ---------- Total LIBOR-based....... 4,925 -- 18,000 25,000 103,200 151,125 151,125 Tax-exempt (4).............. 235,880 235,880 235,880 --------- -------- --------- --------- --------- --------- ---------- ---------- Total floating rate Debt................... -- 4,925 -- 18,000 25,000 339,080 387,005 387,005 --------- -------- --------- --------- --------- --------- ---------- ---------- Total debt.................. $ 69,066 $ 27,241 $ 102,480 $ 43,654 $ 202,848 $ 768,020 $1,213,309 $1,209,048 ========= ======== ========= ========= ========= ========= ========== ==========
(1) Interest on these debt instruments is based on LIBOR ranging from LIBOR plus .675% to .750% above LIBOR. At December 31, 2000, the LIBOR rate was 6.561%. See Schedule of Indebtedness in Management's Discussion and Analysis for rates on individual debt instruments. (2) Assumes the Company's Revolver and Cash Management Line are repaid at the maturity date. Management believes these lines will be renewed at maturity with similar terms. Maturity dates reflect new terms which are effective January 12, 2001. (3) In December 2000, the Company entered into a swap transaction that fixed the rate on the note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. (4) At December 31, 2000, the "AAA" NON-AMT rate was 5.00%. Interest on these debt instruments is equal to the "AAA" NON-AMT rate plus .515%. The Company has purchased an interest rate cap that limits the Company's exposure to increases in the base rate to 5.00%.
AVERAGE EXPECTED PAY RATE/ AVERAGE SETTLEMENT FAIR INTEREST RATE DERIVATIVES NOTIONAL AMOUNT CAPRATE RECEIVE RATE DATE VALUE - ------------------------------- ------------------- ---------- ------------- ---------- --------- Interest Rate Swaps $104,000 amortizing 1 month Variable to fixed........... to $90,270 6.04% LIBOR 7/31/09 $ (793) 3 month Variable to fixed........... 25,000 6.53% LIBOR 2/01/05 (679) Interest rate cap.............. 76,000 5.00% -- 2/01/03 11 Interest rate cap.............. 141,230 5.00% -- 2/01/03 20 Interest rate cap.............. $ 18,650 5.00% -- 2/01/03 3 -------- $ (1,438) ========
37 40 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements are listed under Item 14(a) and are filed as part of this report on the pages indicated. The supplementary data are included in Note 13 of the Notes to Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 38 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections under the headings "Election of Directors" entitled "Nominees for Election," "Incumbent Directors -- Term Expiring 2002," and "Incumbent Directors - -- Term Expiring 2003" of the Proxy Statement for Annual Meeting of Shareholders to be held May 22, 2001 (the "Proxy Statement") are incorporated herein by reference for information on Directors of the Registrant. See Item X in Part I hereof for information regarding executive officers of the Registrant. The section under the heading "Other Matters" entitled "Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The section under the heading "Election of Directors" entitled "Compensation of Directors" of the Proxy Statement and the sections under the heading titled "Executive Compensation" entitled "Summary Compensation Table," "Option Grants Table," "Fiscal Year-End Option Value Table," "Profit Sharing Plan," "Noncompetition and Employment Contract," and "Compensation Committee Interlocks and Insider Participation" of the Proxy Statement are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section under the heading "Common Stock Ownership by Management and Principal Shareholders" of the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section under the heading "Certain Transactions" of the Proxy Statement is incorporated herein by reference. 39 42 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (A) 1. AND 2. FINANCIAL STATEMENTS AND SCHEDULES The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. INDEX TO FINANCIAL STATEMENTS
PAGE POST PROPERTIES, INC. Consolidated Financial Statements: Report of Independent Accountants...................................................................... 41 Consolidated Balance Sheets as of December 31, 2000 and 1999........................................... 42 Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............. 43 Consolidated Statements of Shareholders' Equity and Accumulated Earnings for the Years Ended December 31, 2000, 1999 and 1998......................................................... 44 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............. 45 Notes to Consolidated Financial Statements............................................................. 46 POST APARTMENT HOMES, L.P. Consolidated Financial Statements: Report of Independent Accountants...................................................................... 62 Consolidated Balance Sheets as of December 31, 2000 and 1999........................................... 63 Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............. 64 Consolidated Statements of Partners' Equity for the Years Ended December 31, 2000, 1999 and 1998....... 65 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............. 66 Notes to Consolidated Financial Statements............................................................. 67 Schedule III: Real Estate and Accumulated Depreciation............................................................... 83 All other schedules are omitted because they are either not applicable or not required. POST PROPERTIES, INC. -- 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN Financial Statements: Report of Independent Accountants...................................................................... 86 Statement of Net Assets Available for Plan Benefits as of December 31, 2000 and 1999................... 87 Statement of Changes in Net Assets Available for Plan Benefits for the Years Ended December 31, 2000 and 1999........................................................................... 88 Notes to Financial Statements.......................................................................... 89
40 43 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Post Properties, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders' equity and accumulated earnings, and of cash flows, present fairly, in all material respects, the financial position of Post Properties, Inc. at December 31, 2000 and December 31, 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP (signed) Atlanta, Georgia February 16, 2001 41 44 POST PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ----------------------------- 2000 1999 ----------- ----------- ASSETS Real estate assets Land ......................................................................... $ 281,525 $ 277,784 Building and improvements .................................................... 1,681,798 1,574,158 Furniture, fixtures and equipment ............................................ 190,968 137,602 Construction in progress ..................................................... 509,702 576,361 Land held for future development ............................................. 28,995 16,880 ----------- ----------- 2,692,988 2,582,785 Less: accumulated depreciation ............................................... (345,121) (303,016) Assets held for sale ....................................................... 122,047 -- ----------- ----------- Real estate assets ......................................................... 2,469,914 2,279,769 Cash and cash equivalents ...................................................... 7,459 5,870 Restricted cash ................................................................ 1,272 1,380 Deferred charges, net .......................................................... 21,700 20,820 Other assets ................................................................... 50,892 42,334 ----------- ----------- Total assets ............................................................ $ 2,551,237 $ 2,350,173 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable .................................................................. $ 1,213,309 $ 989,583 Accrued interest payable ....................................................... 10,751 9,160 Dividend and distribution payable .............................................. 33,933 31,285 Accounts payable and accrued expenses .......................................... 67,136 59,780 Security deposits and prepaid rents ............................................ 9,407 9,023 ----------- ----------- Total liabilities ....................................................... 1,334,536 1,098,831 ----------- ----------- Minority interest of preferred unitholders in Operating Partnership ............ 70,000 70,000 ----------- ----------- Minority interest of common unitholders in Operating Partnership ............... 118,091 122,480 ----------- ----------- Commitments and contingencies .................................................. -- -- Shareholders' equity Preferred stock, $.01 par value, 20,000,000 authorized: 8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50 per share, 1,000,000 shares issued and outstanding ........... 10 10 7 5/8% Series B Cumulative Redeemable Shares, liquidation preference $25 per share, 2,000,000 shares issued and outstanding ................................................................. 20 20 7 5/8% Series C Cumulative Redeemable Shares, liquidation preference $25 per share, 2,000,000 shares issued and outstanding ................................................................. 20 20 Common stock, $.01 par value, 100,000,000 authorized, 39,662,192 and 38,834,323 shares issued, 38,853,596 and 38,834,323 shares outstanding at December 31, 2000 and 1999, respectively ... 396 388 Additional paid-in capital ................................................... 1,057,067 1,058,424 Accumulated earnings ......................................................... -- -- ----------- ----------- 1,057,513 1,058,862 Less common stock in treasury at cost, 808,596 shares ................... (28,903) -- ----------- ----------- Total shareholders' equity .............................................. 1,028,610 1,058,862 ----------- ----------- Total liabilities and shareholders' equity .............................. $ 2,551,237 $ 2,350,173 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 42 45 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, -------------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ REVENUES Rental .................................................................... $ 365,895 $ 318,697 $ 275,755 Property management - third party ......................................... 3,826 3,368 3,164 Landscape services - third party .......................................... 11,423 9,118 7,252 Interest .................................................................. 1,922 764 472 Other ..................................................................... 16,766 13,980 12,262 ------------ ------------ ------------ Total revenue ......................................................... 399,832 345,927 298,905 ------------ ------------ ------------ EXPENSES Property operating and maintenance (exclusive of items shown separately below) ................................................. 131,349 113,152 99,717 Depreciation .............................................................. 71,113 58,013 46,646 Property management - third party ......................................... 3,099 2,925 2,499 Landscape services - third party .......................................... 9,993 7,904 6,264 Interest .................................................................. 50,303 33,192 31,297 Amortization of deferred loan costs ....................................... 1,636 1,496 1,185 General and administrative ................................................ 10,066 7,788 8,495 Minority interest in consolidated property partnerships ................... (1,695) 511 397 ------------ ------------ ------------ Total expenses ........................................................ 275,864 224,981 196,500 ------------ ------------ ------------ Income before net gain (loss) on sale of assets, loss on unused treasury locks, other charges, minority interest of unitholders in Operating Partnership and extraordinary item ...................................... 123,968 120,946 102,405 Net gain (loss) on sale of assets ......................................... 3,208 (1,522) -- Loss on unused treasury locks ............................................. -- -- (1,944) Project abandonment, employee severance and impairment charges ............ (9,365) -- -- Minority interest of preferred unitholders in Operating Partnership ....... (5,600) (1,851) -- Minority interest of common unitholders in Operating Partnership .......... (11,691) (12,598) (11,511) ------------ ------------ ------------ Income before extraordinary item .......................................... 100,520 104,975 88,950 Extraordinary item, net of minority interest of unitholders in Operating Partnership ................................................ -- (458) -- ------------ ------------ ------------ Net income ................................................................ 100,520 104,517 88,950 Dividends to preferred shareholders ....................................... (11,875) (11,875) (11,473) ------------ ------------ ------------ Net income available to common shareholders ............................... $ 88,645 $ 92,642 $ 77,477 ============ ============ ============ EARNINGS PER COMMON SHARE - BASIC Income before extraordinary item (net of preferred dividends) ............. $ 2.25 $ 2.42 $ 2.21 Extraordinary item ........................................................ -- (0.01) -- ------------ ------------ ------------ Net income available to common shareholders ............................... $ 2.25 $ 2.41 $ 2.21 ============ ============ ============ Weighted average common shares outstanding ................................ 39,317,725 38,460,689 35,028,596 ============ ============ ============ Dividends declared ........................................................ $ 3.04 $ 2.80 $ 2.60 ============ ============ ============ EARNINGS PER COMMON SHARE - DILUTED Income before extraordinary item (net of preferred dividends) ............. $ 2.22 $ 2.39 $ 2.18 Extraordinary item ........................................................ -- (0.01) -- ------------ ------------ ------------ Net income available to common shareholders ............................... $ 2.22 $ 2.38 $ 2.18 ============ ============ ============ Weighted average common shares outstanding ................................ 39,852,514 38,916,987 35,473,587 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 43 46 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (DOLLARS IN THOUSANDS)
ADDITIONAL PREFERRED COMMON PAID-IN TREASURY ACCUMULATED SHARES SHARES CAPITAL STOCK EARNINGS TOTAL ---------- ---------- ---------- ---------- ----------- ---------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1997 ............................. $ 30 $ 306 $ 756,584 $ -- $ -- $ 756,920 Proceeds from Preferred Shares, net of underwriting discount and offering costs of $1,716 .............................. 20 -- 48,264 -- -- 48,284 Proceeds from Common Shares, net of Underwriting discount and offering Costs of $13,592 ........................... -- 69 255,838 -- -- 255,907 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans ............... -- 5 18,855 -- -- 18,860 Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions ............ -- -- (15,031) -- -- (15,031) Net income .................................... -- -- -- -- 88,950 88,950 Dividends to preferred shareholders ........... -- -- -- -- (11,473) (11,473) Dividends declared and paid to common Shareholders ................................ -- -- (13,254) -- (55,752) (69,006) Dividends declared to common shareholders ..... -- -- -- -- (21,725) (21,725) ---------- ---------- ---------- ---------- ---------- ---------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1998 ............................. $ 50 $ 380 $1,051,256 $ -- $ -- $1,051,686 Offering cost of redeemable preferred units ... -- -- (1,810) -- -- (1,810) Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans ............... -- 8 23,304 -- -- 23,312 Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions ............ -- -- 857 -- -- 857 Net income .................................... -- -- -- -- 104,517 104,517 Dividends to preferred shareholders ........... -- -- -- -- (11,875) (11,875) Dividends declared and paid to common Shareholders ................................. -- -- (15,183) -- (65,458) (80,641) Dividends declared to common shareholders ..... -- -- -- -- (27,184) (27,184) ---------- ---------- ---------- ---------- ---------- ---------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1999 ............................. $ 50 $ 388 $1,058,424 $ -- $ -- $1,058,862 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans and Employee Stock Plan .................................. -- 8 29,029 152 -- 29,189 Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions ............ -- -- 320 -- -- 320 Net income .................................... -- -- -- -- 100,520 100,520 Acquisition of treasury stock ................. -- -- -- (29,055) -- (29,055) Dividends to preferred shareholders ........... -- -- -- -- (11,875) (11,875) Dividends to common shareholders .............. -- -- (30,706) -- (88,645) (119,351) ---------- ---------- ---------- ---------- ---------- ---------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 2000 ............................. $ 50 $ 396 $1,057,067 $ (28,903) $ -- $1,028,610 ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 44 47 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------------- 2000 1999 1998 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ............................................................. $ 100,520 $ 104,517 $ 88,950 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest of preferred unitholders in Operating Partnership .... 5,600 1,851 -- Minority interest of common unitholders in Operating Partnership ....... 11,691 12,598 11,511 Net (gain) loss on sale of assets ...................................... (3,208) 1,522 -- Loss on unused treasury locks .......................................... -- -- 1,944 Extraordinary item, net of minority interest of unitholders in Operating Partnership ................................................. -- 458 -- Depreciation ........................................................... 71,113 58,013 46,623 Amortization of deferred loan costs .................................... 1,636 1,496 1,209 Other .................................................................. -- -- 168 Changes in assets, (increase) decrease in: Restricted cash ....................................................... 108 (32) 194 Deferred charges ...................................................... (1,591) (4,106) (7,115) Other assets .......................................................... (8,904) (24,735) 2,998 Changes in liabilities, increase (decrease) in: Accrued interest payable .............................................. 1,591 1,551 104 Accounts payable and accrued expenses ................................. 6,133 (402) 1,433 Security deposits and prepaid rents ................................... 384 307 599 --------- --------- --------- Net cash provided by operating activities .............................. 185,073 153,038 148,618 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables ....................................................... (362,981) (286,696) (279,473) Net proceeds from sale of assets ....................................... 157,265 16,587 -- Payment for unused treasury locks ...................................... -- -- (1,944) Capitalized interest ................................................... (25,426) (21,417) (15,707) Recurring capital expenditures ......................................... (9,157) (8,641) (7,479) Corporate capital expenditures ......................................... (3,441) (6,811) (8,576) Non-recurring capital expenditures ..................................... (5,576) (2,971) (1,423) Revenue generating capital expenditures ................................ (6,670) (8,011) (13,614) --------- --------- --------- Net cash used in investing activities .................................. (255,986) (317,960) (328,216) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs ............................................. (3,128) (1,495) -- Debt proceeds .......................................................... 440,001 279,000 253,930 Debt payments .......................................................... (216,275) (89,425) (275,131) Proceeds from preferred units, net of offering costs ................... -- 68,190 -- Offering proceeds, net of underwriters discount and offering costs .................................................... -- -- 255,907 Proceeds from Preferred Shares ......................................... -- -- 48,284 Purchase of treasury stock ............................................. (24,912) -- -- Proceeds from Dividend Reinvestment Plan ............................... 26,754 23,312 18,860 Capital distributions to common unitholders ............................ (15,458) (14,318) (13,277) Distributions paid to preferred unitholders ............................ (5,600) (1,384) -- Dividends paid to preferred shareholders ............................... (11,875) (11,875) (11,473) Dividends paid to common shareholders .................................. (117,005) (102,367) (87,227) --------- --------- --------- Net cash provided by financing activities .............................. 72,502 149,638 189,873 --------- --------- --------- Net increase (decrease) in cash and cash equivalents ................... 1,589 (15,284) 10,275 Cash and cash equivalents, beginning of period ......................... 5,870 21,154 10,879 --------- --------- --------- Cash and cash equivalents, end of period ............................... $ 7,459 $ 5,870 $ 21,154 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 45 48 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. ORGANIZATION AND FORMATION OF THE COMPANY ORGANIZATION AND FORMATION OF THE COMPANY Post Properties, Inc. (the "Company" or "PPI") through its majority owned subsidiary, Post Apartment Homes, L.P. (the "Operating Partnership") currently owns and manages or is in the process of developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando, Washington, D.C., Nashville, Houston, Austin, Phoenix, Denver, Pasadena and Charlotte metropolitan areas. At December 31, 2000, approximately 52.8%, 25.7% and 11.5% (on a unit basis) of the Company's communities are located in the Atlanta, Dallas and Tampa metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Company and the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. Since units can be redeemed for shares of the Company on a one-for-one basis at the Operating Partnership's option, minority interest of unitholders in the operations of the Operating Partnership is calculated based on the weighted average of shares and units outstanding during the period. Certain items in the 1999 and 1998 consolidated financial statements were reclassified for comparative purposes with the 2000 consolidated financial statements. NEW ACCOUNTING PRONOUNCEMENTS SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" The Company will adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by Statement No. 137 on January 1, 2001. This standard establishes accounting and reporting standards for derivatives and hedging activities and will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that do not qualify as hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings or be recognized in other comprehensive income until the hedged item affects earnings. If the change in fair value or cash flows of a derivative designated as a hedge is not effectively offset, as defined, by the change in value or cash flows of the item it is hedging, this difference will be immediately recognized in earnings. Upon adoption of SFAS 133 on January 1, 2001, the Company will record a net transition adjustment loss in the statement of operations of $728 and a net transition adjustment of $1,472 in other comprehensive income (equity). Adoption of this standard will also result in the recording of a derivative instrument liability of $1,472. The Company only utilizes qualifying cash flow hedges that are designated specifically to reduce exposure to interest rate risk by locking in the expected future cash payments on certain designated liabilities. This is typically accomplished using an interest rate swap or interest rate cap. For financial reporting purposes, the gain or loss on the effective portion of the cash flow hedge will be recorded as a component of other comprehensive income. The ineffective portion of the cash flow hedge will be recorded immediately in earnings. On the date the Company enters into a derivative contract, management will designate the derivative as a hedge of the identified cash flow exposure. The Company will formally document all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. In this documentation, the Company will specifically identify the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and will state how the hedging instrument is expected to hedge the risks related to the hedged item. The Company will formally measure effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company may discontinue hedge accounting 46 49 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; when the derivative expires or is sold, terminated or exercised; or when the derivative is re-designated to no longer be a hedge instrument. STAFF ACCOUNTING BULLETIN NO. 101, "REVENUE RECOGNITION" The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition," which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was implemented in the fourth quarter of 2000 by the Company and the adoption had no effect on its results of operations or financial position. REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5 - 10 years). REVENUE RECOGNITION Rental -- Residential properties are leased under operating leases with terms of generally one year or less. Rental income is recognized when earned, which is not materially different from revenue recognition on a straight line basis. Property management and landscaping services -- Income is recognized when earned for property management and landscaping services provided to third parties. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents. RESTRICTED CASH Restricted cash generally is comprised of resident security deposits for communities located in Florida and Tennessee and required maintenance reserves for communities located in DeKalb County, Georgia. DEFERRED FINANCING COSTS Deferred financing costs are amortized using the interest method over the terms of the related debt. INTEREST AND REAL ESTATE TAXES Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the lives of the constructed assets. Interest paid (including capitalized amounts of $25,426, $21,417, and $15,707 during 2000, 1999 and 1998, respectively), aggregated $74,419, $51,337 and $46,889 for the years ended December 31, 2000, 1999 and 1998, respectively. DERIVATIVES The Company has entered into various interest rate swap and interest rate cap agreements. These arrangements are used to manage the Company's exposure to fluctuations in interest rates. Premiums paid to purchase interest rate protection agreements (i.e. interest rate caps) have been deferred and are being amortized over the terms of those agreements using the interest method. Unamortized premiums are included in deferred charges in the consolidated balance sheet. Amounts 47 50 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) receivable under the interest rate protection agreements are accrued as a reduction of interest expense. Interest rate swaps qualifying for hedge accounting treatment are recorded on an accrual basis as an adjustment of the interest rate yield. Interest rate swaps not qualifying for hedge accounting treatment are recorded at fair value and recognized through the statement of operations. PER SHARE DATA Basic earnings per common share with respect to the Company for the years ended December 31, 2000, 1999 and 1998 is computed based upon the weighted average number of shares outstanding during the period. Diluted earnings per common share is based upon the weighted average number of shares outstanding during the period and includes the effect of the potential issuance of additional shares if stock options were exercised or converted into common stock. USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, ---------------------------- 2000 1999 -------- -------- Deferred financing costs ........... $ 36,068 $ 31,148 Other .............................. 5,240 5,394 -------- -------- 41,308 36,542 Less: accumulated amortization ..... (19,608) (15,722) -------- -------- $ 21,700 $ 20,820 ======== ========
48 51 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 3. NOTES PAYABLE At December 31, 2000 and 1999, the Company's indebtedness consisted of the following:
12/31/00 12/31/99 PAYMENT MATURITY PRINCIPAL PRINCIPAL DESCRIPTION TERMS INTEREST RATE DATE (1) BALANCE BALANCE - ---------------------------------- ---------------------- ------------------------ ----------------- ----------- ----------- CONVENTIONAL FIXED RATE (SECURED) Parkwood Townhomes(TM) ........... Principal and Interest 7.375% 4/01/14 $ 799 $ 833 Post Hillsboro Village and The Lee Apartments ............... Principal and Interest 9.20% 10/01/01 -- 2,915 Northwestern Mutual Life ......... Principal and Interest 6.50%(2) 3/01/09 48,601 49,462 Northwestern Mutual Life ......... Principal and Interest 7.69% 10/01/07 28,666 -- Northwestern Mutual Life ......... Principal and Interest 7.69% 10/01/07 51,238 -- FNMA ............................. Principal and Interest 6.975%(3) 7/23/29 103,200 -- -------- ------- 232,504 53,210 -------- ------- CONVENTIONAL FLOATING RATE (SECURED) Addison Circle Apartment Homes by Post(R)- Phase I........ Principal and Interest LIBOR + .75% 6/15/00 -- 22,067 FNMA ............................. Principal and Interest LIBOR + .935%(3) 7/23/29 -- 104,000 -------- ------- -- 126,067 -------- ------- TAX EXEMPT FLOATING RATE (SECURED) "AAA" NON-AMT + .515% Interest only (4)(5) 6/01/25 235,880 235,880 -------- ------- SENIOR NOTES (UNSECURED) Northwestern Mutual Life.......... Interest only 8.21% - 8.37% 6/07/01-6/07/02 50,000 50,000 Senior Notes...................... Interest only 7.25% - 7.70% 10/01/03-12/20/10 310,000 125,000 Medium Term Notes................. Interest only 6.69% - 8.12%(6)(7) 4/02/01-3/16/15 360,000 215,000 -------- ------- 720,000 390,000 -------- ------- LINES OF CREDIT & OTHER UNSECURED DEBT LIBOR + .825% or prime - Revolver ......................... N/A .25% (8) 4/30/03 18,000 165,000 LIBOR + .675% or prime - Cash Management Line.............. N/A .25% 3/31/01 4,925 17,426 City of Phoenix................... N/A 5.00% (9) 3/01/21 2,000 2,000 ---------- ---------- 24,925 184,426 ---------- ---------- TOTAL............................. $1,213,309 $ 989,583 ========== ==========
(1) All of the mortgages can be prepaid at any time, subject to certain prepayment penalties. (2) This note bears interest at 6.50% with an effective rate of 7.30% after consideration of a terminated swap agreement. (3) In December 2000, the Company entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. (4) Bond financed (interest rate on bonds + credit enhancement fees effective October 1, 1998). The Company pays credit enhancement fees of .515% of the amount of such bonds or the amount of the letters of credit, as the case may be. "AAA" NON-AMT rate was 5.00% at December 31, 2000. (5) These bonds are cross-collateralized. The Company has purchased an interest rate cap that limits the Company's exposure to increases in the base rate to 5%. (6) Contains $100,000 of Mandatory Par Put Remarketed Securities. The annual interest rate on these securities to March 16, 2005 (the "Remarketing Date") is 6.85%. On the Remarketing Date, they are subject to mandatory tender for remarketing. (7) In October 2000, the Company entered into a swap transaction that fixed the rate on a $25,000 MTN at 7.28%, inclusive of credit enhancement and other fees. 49 52 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (8) Represents stated rate. The Company may also make "money market" loans of up to $175,000 at rates below the stated rate. At December 31, 2000, the outstanding balance of the Revolver consisted of "money market" loans with an average interest rate of 7.49%. Effective January 12, 2001, the interest rate is LIBOR plus .75% or prime minus .25% and the debt matures April 30, 2004. Also effective January 12, 2001, the Company may make "money market" loans of up to $160,000 at rates below the stated rate. (9) This loan is interest free for the first three years, with interest at 5.00% thereafter. Repayment is to commence on March 1, 2001 subject to the conditions set forth in the Agreement. CONVENTIONAL FIXED RATE MORTGAGES PAYABLE (SECURED) Conventional mortgages payable were comprised of five loans at December 31, 2000 and 1999, each of which is collateralized by certain apartment communities located in Atlanta and Dallas which are included in real estate assets. On July 23, 1999, the Company issued $104,000 of secured notes to FNMA. Net proceeds of $101,988 were used to repay outstanding indebtedness. These notes are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the principal amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Company has an option to call these notes after ten years from the issuance date. In December 2000, the Company entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED) Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit enhanced debt maturing in 2025. The Federal National Mortgage Association ("FNMA") has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. SENIOR NOTES (UNSECURED) NORTHWESTERN MUTUAL LIFE NOTES On June 7, 1995, the Company issued $50,000 of unsecured senior notes with the Northwestern Mutual Life Insurance Company. The notes were in two tranches: the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to repay outstanding indebtedness. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. SENIOR NOTES On September 30, 1996, the Company completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to repay outstanding indebtedness. On December 20, 2000, the Company issued $185,000 of unsecured senior notes. These notes bear interest at 7.70% and mature on December 20, 2010. Net proceeds of approximately $183,798 were used to repay outstanding indebtedness. 50 53 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) MEDIUM TERM NOTES The Company has established a program for the sale of Medium-Term Notes due three months or more from the date of issue (the "MTNs"). Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) repay outstanding indebtedness. The following table sets forth MTNs issued and outstanding as of December 31, 2000:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ------------------ --------- ---------- ------------------ March 31, 1997 $ 37,000 7.02% April 2, 2001 March 31, 1997 13,000 7.30% April 1, 2004 September 22, 1997 10,000 6.69% September 22, 2004 September 22, 1997 25,000 6.78% September 22, 2005 March 12, 1998 100,000 6.85% March 16, 2015 May 9, 2000 25,000 (1) 7.28% February 1, 2005 June 15, 2000 150,000 8.12% June 15, 2005 --------- $ 360,000 =========
(1) In October 2000, the Company entered into a swap transaction that fixed the rate on the note at 7.28%, inclusive of credit enhancement and other fees, through maturity. On March 12, 1998, the Company issued $100,000 of 6.85% Mandatory Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds in the amount of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Company entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). On April 8, 1998, the Company sold $50,000 of Remarketed Reset Notes due April 7, 2009 under the MTN program. The notes bear an interest rate of LIBOR plus the applicable spread with the spread being reset from time to time. The initial spread is equal to .40% for a period of one year. The Company has entered into an interest rate swap for the entire term of the notes to fix the interest rate index. Under the terms of the swap, the Company paid a fixed rate of 6.02% and received LIBOR. This swap was settled in February 1999 at a loss of $1,495. This loss was deferred to amortize over the remaining term of the Remarketed Reset Notes. On April 7, 1999, the Company repaid the Remarketed Reset Notes with the proceeds of conventional fixed rate secured debt. The remaining unamortized balance of the deferred swap loss was redesignated to the new debt and will be amortized over the remaining term of the new debt. On May 9, 2000, the Company sold $25,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at the London Interbank Offer Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net proceeds of $24,875 were used to repay outstanding indebtedness. In October 2000, the Company entered into a swap transaction that fixed the rate on the notes at 7.28%, inclusive of credit enhancement and other fees, through maturity. On June 16, 2000, the Company sold $150,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at 8.12% and mature on June 15, 2005. Net proceeds of $148,865 were used to repay outstanding indebtedness. 51 54 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The aggregate maturities of the Company's indebtedness are as follows (1): 2001................................................... $ 67,000 2002................................................... 20,000 2003................................................... 100,000 2004................................................... 23,000 2005................................................... 200,000 Thereafter............................................. 778,384 ---------- $1,188,384 ==========
(1) Excludes principal amortization payments and payments on lines of credit and other unsecured debt. LINES OF CREDIT AND OTHER (UNSECURED) On January 12, 2001, the Company closed a $320,000 three-year syndicated revolving line of credit (the "Revolver"), which matures April 2004. This line of credit bears interest at LIBOR plus .75% or prime minus .25% and replaces the Company's previous line. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short-term funds up to $160,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restrict the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. Also in January 2001, the Company reached an agreement with a syndicated group of banks for an incremental $185,000, 364 day facility at terms substantially equal to the Revolver. On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March 31, 2002. Management believes the Cash Management Line will be renewed at maturity with similar terms. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Company with an automatic daily sweep which applies all available cash to reduce the outstanding balance. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. At December 31, 2000, the outstanding balances on the Revolver and Cash Management Line were $18,000 and $4,925, respectively. There were no outstanding balances on any of the other facilities at December 31, 2000. On March 1, 1998 the Company entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Company $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. All repayment terms are subject to the conditions set forth in the Agreement. 52 55 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) PLEDGED ASSETS The aggregate net book value at December 31, 2000 of property pledged as collateral for indebtedness amounted to approximately $469,473. UNUSED TREASURY LOCKS The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1999 was due to the write off of loan costs resulting from the early extinguishment of debt. The extraordinary item is net of $63 in minority interest of the unitholders calculated on the basis of weighted average units and common shares outstanding for the year ended December 31, 1999. All indebtedness described in this Note 3 has been incurred by the Operating Partnership. 4. INCOME TAXES The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% (90% beginning in 2001) of its REIT taxable income, as defined in the Code, to its shareholders and satisfy certain other requirements. As a result, the Company generally will not be subject to Federal income taxation at the corporate level on the income it distributes to the shareholders. Although Post Properties, Inc. has elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed as a subsidiary of the Operating Partnership to provide through its subsidiaries asset management, leasing and landscaping services to third parties. The consolidated taxable income of Post Services, if any, will be subject to tax at regular corporate rates. As of December 31, 2000, the net basis for Federal income tax purposes taking into account the special allocation of gain to the partners contributing property to the Operating Partnership and including minority interest in the Operating Partnership was lower than the net assets as reported in the Company's consolidated financial statements by $29,794. 5. RELATED PARTY TRANSACTIONS The Company provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 2000, 1999 and 1998, the Company received landscaping fees of $667, $610 and $961 for such services. These amounts include reimbursements of direct expenses in the amount of $11, $10 and $295, which are not included in landscape services revenue. Accordingly, these transactions resulted in the Company recording landscape services net fees in excess of direct expenses of $656, $600, and $666 in the accompanying financial statements for the years ended December 31, 2000, 1999 and 1998, respectively. The Company provides accounting and administrative services to entities controlled by certain executive officers of the Company. Fees under this arrangement aggregated $25 for each year ended December 31, 2000, 1999 and 1998, respectively. The Company was contracted to assist in the development of apartment complexes constructed by a former executive and current shareholder. Fees under this arrangement were $29, $100, and $349 for the years ended December 31, 2000, 1999 and 1998, respectively. On February 15, 2000 and December 10, 1999, the Company loaned $1,500 and $7,750, respectively, to certain executives. These loans are payable ten years from the issue date and bear interest at a rate of 6.32% per annum. Proceeds from these loans were used by these executives to acquire the Company's common shares on the open market. As of February 10, 2001, $2,000 of the loans have been repaid. 53 56 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 6. SALE OF ASSETS AND ASSETS HELD FOR SALE During the first quarter of 2000, the Company authorized the sale of five communities: one community in Atlanta, Georgia, three communities in Jackson, Mississippi and one commercial property in Dallas, Texas. During the third quarter of 2000, the Company authorized the sale of two communities in Nashville, Tennessee. During the fourth quarter of 2000, the Company authorized the sale of one tract of land in Dallas, Texas and seven communities: two communities in Atlanta, Georgia, one community in Nashville, Tennessee and three communities and one commercial property in Dallas, Texas. In February 2000, the Company sold the 213 community in Atlanta, Georgia, for $32,350. Net proceeds of approximately $31,500 were used to pay down outstanding indebtedness. In September 2000, the Company sold the three communities in Jackson, Mississippi, containing a total of 983 units for $44,600. Net proceeds of approximately $42,903 were used to pay down outstanding indebtedness. In November 2000, the Company sold two properties located in Nashville, Tennessee containing a total of 367 units for $36,885. Net proceeds of approximately $36,290 were used to repay outstanding indebtedness. In December 2000, the Company sold two properties located in Atlanta, Georgia, containing a total of 421 units for $47,250. Net proceeds of approximately $46,651 were used to repay outstanding indebtedness and to repurchase the Company's common stock. At December 31, 2000, the remaining tract of land, four communities and two commercial properties held for sale, consisting of land, building and improvements and furniture, fixtures and equipment were recorded at $122,047, which represented the lower of cost or fair value less costs to sell. The Company has recorded a net gain on the sale of the Atlanta, Jackson and Nashville assets in the statement of operations, reduced by its best estimate of the effect of the anticipated sale of the remaining communities and commercial properties, as a net gain on the sale of assets of $3,208. The Company expects the sale of the remaining properties to occur in 2001. For the years ended December 31, 2000 and 1999, the consolidated statements of operations include net income of $12,392 and $11,804, respectively, from communities held for sale at December 31, 2000. Through December 31, 2000, depreciation expense totaling $4,109 was recognized on these assets prior to the assets being classified as held for sale. Depreciation expense has not been recognized subsequent to the date of held for sale classification. 7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES In the fourth quarter of 2000, management decided to restrict its development activities to fewer markets, refine its development investment strategy, exit the for-sale housing business and make changes in its executive management team. As a result of these decisions, the Company wrote off $4,389 of costs it had incurred in markets it will no longer pursue for development opportunities and on individual development deals that are no longer consistent with management's revised strategy. In connection with the management changes at December 31, 2000, all employees included in the severance charge of $3,066 had been notified of their termination and severance agreement. As of February 15, 2001, these employees were no longer providing any service to the Company. The employees included in the accrual at December 31, 2000, were primarily four executives and five accounting department employees in the Dallas regional office. At December 31, 2000, the accrual for unpaid severance charges was $2,250. In addition to these charges, the Company also recorded an impairment charge of $407 to adjust the cost of for-sale housing in Atlanta and Dallas to its estimated net sales proceeds. Additionally, the Company recorded a charge of $1,503 54 57 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) to write off its investment in Darwin Networks, a high-speed Internet provider that filed for Chapter 11 bankruptcy in January 2001. 8. EMPLOYEE BENEFIT PLANS The employees of the Company are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Company contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Company contribution, the maximum employee contribution included in the calculation is 3% of salary. Company contributions of $514, $346 and $179 were made in 2000, 1999 and 1998, respectively. The Company maintains an Employee Stock Purchase Plan ("ESPP") to encourage stock ownership by eligible directors and employees. To participate in the ESPP, (i) directors must not be employed by the Company or the Operating Partnership and must have been a member of the Board of Directors for at least one month and (ii) an employee must have been employed full or part-time by the Company or the Operating Partnership for at least one month. The purchase price of shares of Common Stock under the ESPP is equal to 85% of the lesser of the closing price per share of Common Stock on the first or last day of the trading period, as defined. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 2000, the Company had two stock-based compensation plans, the Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the "ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as described below. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for its plans. Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is required to be recognized for the Stock Plan and the ESPP. The compensation cost which is required to be charged against income for the Grant Plan, was $138, $205 and $182 for 2000, 1999 and 1998, respectively. Had compensation cost for the Company's Stock Plan and ESPP been determined based on the fair value at the grant dates for awards under the Plans consistent with the method of FASB Statement 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
2000 1999 1998 ------- ------- ------- Net income available to common shareholders..................... As reported..... $88,645 $92,642 $77,477 Pro forma....... $86,463 $90,459 $76,589 Net income per common share - basic............................ As reported..... $ 2.25 $ 2.41 $ 2.21 Pro forma....... $ 2.20 $ 2.35 $ 2.19 Net income per common share - diluted.......................... As reported..... $ 2.22 $ 2.38 $ 2.18 Pro forma....... $ 2.17 $ 2.32 $ 2.16
For purposes of the pro forma presentation, the fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. The weighted-average of all assumptions used in the calculation for various grants under all of the Company's plans during 2000, 1999, and 1998, are as follows: 55 58 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999 1998 -------------- -------------- -------------- Dividend yield............................ 8.0% 7.3% 7.0% Expected volatility....................... 24.8% 15.4% 15.3% Risk-free interest rate................... 6.7% to 6.9% 4.5% to 6.6% 4.7% to 5.8% Expected option life...................... 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant to its employees and directors options to purchase up to 6,000,000 shares of common stock. Of this amount, 550,000 shares are available for grants of restricted stock. Options granted to any key employee or officer cannot exceed 100,000 shares a year (500,000 shares if such key employee or officer is a member of the Company's Executive Committee). The exercise price of each option may not be less than the market price on the date of grant and all options have a maximum term of ten years from the grant date. A summary of the status of the Company's Stock Plan as of December 31, 2000, 1999 and 1998, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
2000 1999 1998 --------------------------- ---------------------------- ------------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ---------- --------------- ---------- -------------- ---------- -------------- Outstanding at beginning of year ........ 4,054,876 $34 3,030,852 $31 2,237,551 $31 Granted ................................. 740,538 38 1,288,232 36 1,440,784 39 Exercised ............................... (334,194) 32 (164,053) 30 (67,326) 31 Forfeited ............................... (189,612) 38 (100,155) 37 (580,157) 39 ---------- ---------- ---------- Outstanding at end of year .............. 4,271,608 35 4,054,876 35 3,030,852 34 ========== ========== ========== Options exercisable at year-end ......... 2,413,595 2,290,143 2,065,438 ========== ========== ========== Weighted-average fair value of options granted during the year ............... $ 4.76 $ 2.08 $ 2.54 ========== ========== ==========
At December 31, 2000, the range of exercise prices for options outstanding was $27.625 - $44.125 and the weighted-average remaining contractual life was 7 years. 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Company is party to two ground leases with terms expiring in years 2040 and 2043 relating to a single operating community, one ground lease expiring in 2038 for a second operating community, three ground leases expiring in 2066, 2069 and 2074 for three communities under development and to office, equipment and other operating leases with terms expiring in years 2001 through 2004. Future minimum lease payments for non-cancelable land, office, equipment and other leases at December 31, 2000 are as follows: 2001......................... $ 2,122 2002......................... 1,392 2003......................... 1,300 2004......................... 1,274 2005......................... 1,279 2006 and thereafter.......... 159,456
56 59 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The Company incurred $5,935, $5,109 and $4,915 of rent expense for the years ended December 31, 2000, 1999 and 1998, respectively. CONTINGENCIES The Company is party to various legal actions which are incidental to its business. Management believes that these actions will not have a material adverse affect on the consolidated balance sheets and statements of operations. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, rents and landscape service receivables, accounts payable, accrued expenses, notes payable and other liabilities are carried at amounts which reasonably approximate their fair values. The fair value of fixed rate debt was approximately $822,043 at December 31, 2000. The fair values of interest rate protection agreements and interest rate swaps (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 2000, carrying amounts related to these arrangements in the consolidated balance sheet were approximately $728. As of December 31, 2000, the net cost to terminate these contracts was approximately $1,438. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2000. Although management is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 57 60 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 12. EARNINGS PER SHARE For the years ended December 31, 2000, 1999 and 1998, basic and diluted earnings per common share for income before extraordinary item, net of preferred dividends, and net income available to common shareholders before extraordinary item has been computed as follows:
YEAR ENDED 2000 ------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Income before extraordinary item .................................. $ 100,520 Less: Preferred stock dividends ................................... (11,875) --------- BASIC EPS Income available to common shareholders before extraordinary item .............................................. 88,645 39,317,725 $ 2.25 ========= EFFECT OF DILUTIVE SECURITIES Options ........................................................... -- 534,789 --------- ---------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ........................... $ 88,645 39,852,514 $ 2.22 ========= ========== ========= YEAR ENDED 1999 ------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Income before extraordinary item .................................. $ 104,975 Less: Preferred stock dividends ................................... (11,875) --------- BASIC EPS Income available to common shareholders before extraordinary item .............................................. 93,100 38,460,689 $ 2.42 ========= EFFECT OF DILUTIVE SECURITIES Options ........................................................... -- 456,298 --------- ---------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ........................... $ 93,100 38,916,987 $ 2.39 ========= ========== ========= YEAR ENDED 1998 ------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- Income before extraordinary item .................................. $ 88,950 Less: Preferred stock dividends ................................... (11,473) --------- BASIC EPS Income available to common shareholders before extraordinary item .............................................. 77,477 35,028,596 $ 2.21 ========= EFFECT OF DILUTIVE SECURITIES Options ........................................................... -- 444,991 --------- ---------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item ........................... $ 77,477 35,473,587 $ 2.18 ========= ========== =========
13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 2000, 1999 and 1998 are as follows: (a) On the date of the Second Offering and Third Offering, holders of 5,401,185 and 5,139,243 Units of the Operating Partnership, respectively, were allocated capital on a pro rata basis in proportion to their Units over total Units 58 61 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) outstanding in the Operating Partnership. During 2000, 1999 and 1998, holders of 12,014, 22,299 and 750 Units in the Operating Partnership, respectively, exercised their option to convert their Units to shares of the Company on a one-for-one basis. The net effect of the capital allocated to the unitholders of the Operating Partnership on the dates of the offerings, the subsequent conversion of Units of the Operating Partnership to shares of the Company, and the adjustments to minority interest for the dilutive impact of the Dividend Reinvestment and Employee Stock Purchase Plans, decreased minority interest and increased shareholders' equity in the amounts of $320 and $857 for the years ended December 31, 2000 and 1999, respectively, and increased minority interest and decreased shareholders' equity in the amount of $15,031 for the year ended December 31, 1998. (b) The Operating Partnership committed to distribute $33,466, $30,818, and $25,115 for the quarters ended December 31, 2000, 1999 and 1998, respectively. As a result, the Company declared dividends of $29,528, $27,184, and $21,725 for the quarters ended December 31, 2000, 1999 and 1998, respectively. The remaining distributions from the Operating Partnership in the amount of $3,938, $3,634, and $3,390 for the quarters ended December 31, 2000, 1999 and 1998, respectively, are distributed to minority interest unitholders in the Operating Partnership. (c) For cash flow purposes, treasury stock is net of $2,435 of donated stock, $1,708 of treasury stock transactions settled in 2001, less $152 of shares re-issued from treasury stock. 14. SEGMENT INFORMATION SEGMENT DESCRIPTION In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise and Related Information," the Company presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on substantially the same basis as the internally reported information used by the Company's chief operating decision makers to manage the business. The Company's chief operating decision makers focus on the Company's primary sources of income which are property rental operations and third party services. Third party services are designated as one segment. Property rental operations are broken down into five segments based on the various stages in the property ownership lifecycle. The Company's six segments are further described as follows: Property Rental Operations - Fully stabilized communities - those apartment communities which have been stabilized (the earlier of the point at which a property reaches 95% occupancy or one year after completion of construction) for both the current and prior year. - Communities stabilized during 1999 - communities which reached stabilized occupancy in the prior year. - Development and lease up communities - those communities that are in lease-up but were not stabilized by the beginning of the current year, including communities that stabilized during the current year. - Communities held for sale - those communities that are being marketed for sale. - Sold communities - communities which were sold in the current or prior year. Third Party Services - fee income and related expenses from the Company's apartment community management, landscaping and corporate apartment rental services. SEGMENT PERFORMANCE MEASURE Management uses contribution to funds from operations ("FFO") as the performance measure for its segments. Effective January 1, 2000, FFO is defined by the National Association of Real Estate Investment Trusts as net income available to common shareholders determined in accordance with generally accepted accounting principles ("GAAP"), excluding 59 62 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. FFO for 1998 has been restated to reflect the requirements of the new NAREIT definition. SEGMENT INFORMATION The following table reflects each segment's contribution to consolidated revenues and FFO together with a reconciliation of segment contribution to FFO, total FFO and income before extraordinary item and preferred dividends. Additionally, substantially all of the Company's assets relate to the Company's property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally.
YEAR ENDED DECEMBER 31, ------------------------------------ 2000 1999 1998 --------- --------- --------- REVENUES Fully stabilized communities................................. $ 232,435 $ 221,901 $ 213,043 Communities stabilized during 1999........................... 42,710 38,097 20,845 Development and lease-up communities......................... 54,486 17,408 2,106 Communities held for sale.................................... 19,706 18,552 18,359 Sold communities............................................. 15,928 24,285 24,004 Third party services......................................... 15,249 12,486 10,416 Other........................................................ 19,318 13,198 10,132 --------- --------- --------- Consolidated revenues........................................ $ 399,832 $ 345,927 $ 298,905 ========= ========= ========= CONTRIBUTION TO FUNDS FROM OPERATIONS Fully stabilized communities................................. $ 162,197 $ 154,060 $ 146,431 Communities stabilized during 1999........................... 28,753 26,199 12,669 Development and lease-up communities......................... 33,684 9,679 (184) Communities held for sale.................................... 12,392 11,804 11,896 Sold communities............................................. 11,457 18,167 17,213 Third party services......................................... 2,157 1,657 1,653 --------- --------- --------- Contribution to FFO.......................................... 250,640 221,566 189,678 --------- --------- --------- Other operating income, net of expense....................... (3,274) (2,161) (1,197) Depreciation on non-real estate assets....................... (2,405) (1,962) (1,432) Minority interest in consolidated property Partnerships...... 1,695 (511) (397) Project abandonment, employee severance and impairment charges.................................................... (9,365) -- -- Interest expense............................................. (50,303) (33,192) (31,297) Amortization of deferred loan costs.......................... (1,636) (1,496) (1,185) General and administrative................................... (10,066) (7,788) (8,495) Dividends to preferred shareholders.......................... (11,875) (11,875) (11,473) --------- --------- --------- Total FFO.................................................... 163,411 162,581 134,202 --------- --------- --------- Depreciation on real estate assets........................... (66,283) (55,361) (45,214) Net gain (loss) on sale of assets............................ 3,208 (1,522) -- Minority interest of common unitholders in Operating Partnership...................................... (11,691) (12,598) (11,511) Dividends to preferred shareholders.......................... 11,875 11,875 11,473 --------- --------- --------- Income before extraordinary item and preferred dividends.................................... $ 100,520 $ 104,975 $ 88,950 ========= ========= =========
60 63 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 2000 and 1999 are as follows:
YEAR ENDED DECEMBER 31, 2000* ------------------------------------------------- FIRST SECOND THIRD FOURTH --------- -------- --------- --------- Revenues ................................................................. $ 95,443 $ 99,482 $ 101,342 $ 103,565 --------- -------- --------- --------- Net income before net gain (loss) on sale of assets, other charges and minority interest of unitholders in Operating Partnership .............. 31,965 33,734 30,676 27,593 Net gain (loss) on sale of assets ........................................ 687 (19) 959 1,581 Project abandonment, employee severance and impairment charges ........... -- -- -- (9,365) Minority interest of preferred unitholders in Operating Partnership ...... (1,400) (1,400) (1,400) (1,400) Minority interest of common unitholders in Operating Partnership ......... (3,321) (3,421) (3,156) (1,793) --------- -------- --------- --------- Net income ............................................................... 27,931 28,894 27,079 16,616 Dividends to preferred shareholders ...................................... (2,968) (2,969) (2,969) (2,969) --------- -------- --------- --------- Net income available to common shareholders .............................. $ 24,963 $ 25,925 $ 24,110 $ 13,647 ========= ======== ========= ========= Earnings per common share: Net income available to common shareholders - basic ...................... $ 0.64 $ 0.66 $ 0.61 $ 0.35 Net income available to common shareholders - diluted .................... $ 0.63 $ 0.65 $ 0.60 $ 0.34 YEAR ENDED DECEMBER 31, 1999* ------------------------------------------------- FIRST SECOND THIRD FOURTH --------- -------- --------- --------- Revenues ................................................................. $ 80,891 $ 85,503 $ 88,158 $ 91,375 --------- -------- --------- --------- Net income before net gain (loss) on sale of assets, minority interest of unitholders in Operating Partnership and extraordinary items .................................... 29,406 29,624 30,626 31,290 Net gain (loss) on sale of assets ........................................ (1,567) 476 (246) (185) Minority interest of preferred unitholders in Operating Partnership .................................................. -- -- (435) (1,416) Minority interest of common unitholders in Operating Partnership ......... (2,992) (3,237) (3,206) (3,163) Extraordinary items ...................................................... (458) -- -- -- --------- -------- --------- --------- Net income ............................................................... 24,389 26,863 26,739 26,526 Dividends to preferred shareholders ...................................... (2,969) (2,969) (2,969) (2,968) --------- -------- --------- --------- Net income available to common shareholders .............................. $ 21,420 $ 23,894 $ 23,770 $ 23,558 ========= ======== ========= ========= Earnings per common share: Net income available to common shareholders - basic ...................... $ 0.56 $ 0.62 $ 0.62 $ 0.61 Net income available to common shareholders - diluted .................... $ 0.56 $ 0.61 $ 0.61 $ 0.60
* The total of the four quarterly amounts for minority interest of unitholders in Operating Partnership, extraordinary item, net income and earnings per share may not equal the total for the year. These differences result from the use of a weighted average to compute minority interest in the Operating Partnership and average number of shares outstanding. 61 64 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Post Apartment Homes, L.P.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders' equity and accumulated earnings, and of cash flows, present fairly, in all material respects, the financial position of Post Apartment Homes, L.P. at December 31, 2000 and December 31, 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP (signed) Atlanta, Georgia February 16, 2001 62 65 POST APARTMENT HOMES, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ----------------------------------- 2000 1999 ------------ ------------ ASSETS Real estate assets Land ................................................................... $ 281,525 $ 277,784 Building and improvements .............................................. 1,681,798 1,574,158 Furniture, fixtures and equipment ...................................... 190,968 137,602 Construction in progress ............................................... 509,702 576,361 Land held for future development ....................................... 28,995 16,880 ------------ ------------ 2,692,988 2,582,785 Less: accumulated depreciation ......................................... (345,121) (303,016) Assets held for sale ................................................. 122,047 -- ------------ ------------ Real estate assets ................................................... 2,469,914 2,279,769 Cash and cash equivalents ................................................ 7,459 5,870 Restricted cash .......................................................... 1,272 1,380 Deferred charges, net .................................................... 21,700 20,820 Other assets ............................................................. 50,892 42,334 ------------ ------------ Total assets ...................................................... $ 2,551,237 $ 2,350,173 ============ ============ LIABILITIES AND PARTNERS' EQUITY Notes payable ............................................................ $ 1,213,309 $ 989,583 Accrued interest payable ................................................. 10,751 9,160 Distribution payable ..................................................... 33,933 31,285 Accounts payable and accrued expenses .................................... 67,136 59,780 Security deposits and prepaid rents ...................................... 9,407 9,023 ------------ ------------ Total liabilities ................................................. 1,334,536 1,098,831 ------------ ------------ Partners' equity ......................................................... 1,216,701 1,251,342 ------------ ------------ Total liabilities and Partners' equity ............................ $ 2,551,237 $ 2,350,173 ============ ============
The accompanying notes are an integral part of these consolidated financial statements 63 66 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2000 1999 1998 ------------- ------------- ------------- REVENUES Rental ............................................................. $ 365,895 $ 318,697 $ 275,755 Property management - third party .................................. 3,826 3,368 3,164 Landscape services - third party ................................... 11,423 9,118 7,252 Interest ........................................................... 1,922 764 472 Other .............................................................. 16,766 13,980 12,262 ------------- ------------- ------------- Total revenue .................................................. 399,832 345,927 298,905 ------------- ------------- ------------- EXPENSES Property operating and maintenance (exclusive of items shown separately below) .......................................... 131,349 113,152 99,717 Depreciation ....................................................... 71,113 58,013 46,646 Property management - third party .................................. 3,099 2,925 2,499 Landscape services - third party ................................... 9,993 7,904 6,264 Interest ........................................................... 50,303 33,192 31,297 Amortization of deferred loan costs ................................ 1,636 1,496 1,185 General and administrative ......................................... 10,066 7,788 8,495 Minority interest in consolidated property partnerships ............ (1,695) 511 397 ------------- ------------- ------------- Total expenses ................................................. 275,864 224,981 196,500 ------------- ------------- ------------- Income before net gain (loss) on sale of assets, loss on unused treasury locks, other charges, and extraordinary item ............ 123,968 120,946 102,405 Net gain (loss) on sale of assets .................................. 3,208 (1,522) -- Loss on unused treasury locks ...................................... -- -- (1,944) Project abandonment, employee severance and impairment charges .......................................................... (9,365) -- -- ------------- ------------- ------------- Income before extraordinary item ................................... 117,811 119,424 100,461 Extraordinary item ................................................. -- (521) -- ------------- ------------- ------------- Net income ......................................................... 117,811 118,903 100,461 Distributions to preferred Unitholders ............................. (17,475) (13,726) (11,473) ------------- ------------- ------------- Net income available to common Unitholders ......................... $ 100,336 $ 105,177 $ 88,988 ============= ============= ============= EARNINGS PER COMMON UNIT - BASIC Income before extraordinary item (net of preferred distributions) ................................. $ 2.25 $ 2.42 $ 2.21 Extraordinary item ................................................. -- (.01) -- ------------- ------------- ------------- Net income available to common Unitholders ......................... $ 2.25 $ 2.41 $ 2.21 ============= ============= ============= Weighted average common Units outstanding .......................... 44,503,290 43,663,373 40,244,351 ============= ============= ============= Distributions declared ............................................. $ 3.04 $ 2.80 $ 2.60 ============= ============= ============= EARNINGS PER COMMON UNIT - DILUTED Income before extraordinary item (net of preferred distributions) ................................. $ 2.22 $ 2.39 $ 2.18 Extraordinary item ................................................. -- (.01) -- ------------- ------------- ------------- Net income available to common Unitholders ......................... $ 2.22 $ 2.38 $ 2.18 ============= ============= ============= Weighted average common Units outstanding .......................... 45,038,079 44,119,671 40,689,342 ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 64 67 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DOLLARS IN THOUSANDS)
GENERAL LIMITED PARTNER PARTNERS TOTAL --------- ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1997 .................................. 9,085 860,219 869,304 Contributions from PPI related to Preferred Shares ................... -- 48,284 48,284 Contributions from PPI related to Common Shares ...................... 2,559 253,348 255,907 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans ................................. 189 18,671 18,860 Distributions to preferred Unitholders ............................... -- (11,473) (11,473) Distributions to common Unitholders .................................. (792) (78,385) (79,177) Distributions declared to common Unitholders ......................... (251) (24,864) (25,115) Net income ........................................................... 1,005 99,456 100,461 --------- ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1998 .................................. 11,795 1,165,256 1,177,051 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans ................................. 233 23,079 23,312 Proceeds from issuance of preferred units, net of offering costs ..... -- 68,190 68,190 Distributions to preferred Unitholders ............................... -- (13,726) (13,726) Distributions to common Unitholders .................................. (916) (90,654) (91,570) Distributions declared to common Unitholders ......................... (308) (30,510) (30,818) Net income ........................................................... 1,189 117,714 118,903 --------- ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 1999 .................................. $ 11,993 $ 1,239,349 $ 1,251,342 Contributions from the Company related to Dividend Reinvestment and Employee Stock Purchase Plans ................................. 290 28,747 29,037 Purchase of units .................................................... -- (28,903) (28,903) Distributions to preferred Unitholders ............................... -- (17,475) (17,475) Distributions to common Unitholders .................................. (1,351) (133,760) (135,111) Net income ........................................................... 1,178 116,633 117,811 --------- ------------ ------------ PARTNERS' EQUITY, DECEMBER 31, 2000 .................................. $ 12,110 $ 1,204,591 $ 1,216,701 ========= ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 65 68 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................... $ 117,811 $ 118,903 $ 100,461 Adjustments to reconcile net income to net cash provided by operating activities: Net (gain) loss on sale of assets ............................ (3,208) 1,522 -- Loss on unused treasury locks ................................ -- -- 1,944 Extraordinary item ........................................... -- 521 -- Depreciation ................................................. 71,113 58,013 46,623 Amortization of deferred loan costs .......................... 1,636 1,496 1,209 Other ........................................................ -- -- 168 Changes in assets, (increase) decrease in: Restricted cash ............................................ 108 (32) 194 Deferred charges ........................................... (1,591) (4,106) (7,115) Other assets ............................................... (8,904) (24,735) 2,998 Changes in liabilities, increase (decrease) in: Accrued interest payable ................................... 1,591 1,551 104 Accounts payable and accrued expenses ...................... 6,133 (402) 1,433 Security deposits and prepaid rents ........................ 384 307 599 ------------ ------------ ------------ Net cash provided by operating activities .................... 185,073 153,038 148,618 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables ............................................ (362,981) (286,696) (279,473) Proceeds from sale of assets ................................. 157,265 16,587 -- Payment for unused treasury locks ............................ -- -- (1,944) Capitalized interest ......................................... (25,426) (21,417) (15,707) Recurring capital expenditures ............................... (9,157) (8,641) (7,479) Corporate capital expenditures ............................... (3,441) (6,811) (8,576) Non-recurring capital expenditures ........................... (5,576) (2,971) (1,423) Revenue generating capital expenditures ...................... (6,670) (8,011) (13,614) ------------ ------------ ------------ Net cash used in investing activities ........................ (255,986) (317,960) (328,216) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs ................................... (3,128) (1,495) -- Debt proceeds ................................................ 440,001 279,000 253,930 Debt payments ................................................ (216,275) (89,425) (275,131) Offering proceeds, net of underwriters discount and offering costs ......................................... -- -- 255,907 Proceeds from issuance of preferred units, net of offering costs ...................................... -- 68,190 -- Proceeds from contributions from PPI related to Preferred Shares ........................................ -- -- 48,284 Purchase of units ............................................ (24,912) -- -- Proceeds from contributions from PPI related to Dividend Reinvestment Plan .............................. 26,754 23,312 18,860 Capital distributions to preferred Unitholders ............... (17,475) (13,259) (11,473) Capital distributions to common Unitholders .................. (132,463) (116,685) (100,504) ------------ ------------ ------------ Net cash provided by financing activities .................... 72,502 149,638 189,873 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents ......... 1,589 (15,284) 10,275 Cash and cash equivalents, beginning of period ............... 5,870 21,154 10,879 ------------ ------------ ------------ Cash and cash equivalents, end of period ..................... $ 7,459 $ 5,870 $ 21,154 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements 66 69 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 1. ORGANIZATION AND FORMATION OF THE COMPANY ORGANIZATION AND FORMATION OF THE COMPANY Post Apartment Homes, L.P. (the "Operating Partnership"), a Georgia limited partnership, was formed on January 22, 1993, to conduct the business of developing, leasing and managing upscale multi-family apartment communities for its general partner, Post Properties, Inc. (the "Company" or "PPI"). The Operating Partnership, through its operating divisions and subsidiaries, is the entity through which all of the Company's operations are conducted. At December 31, 2000, the Company, through wholly owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 88.2% of the common units in the Operating Partnership ("Units") and 64.1% of the Perpetual Preferred Units. The other limited partners of the Operating Partnership, who hold Units, are those persons (including certain officers and directors of the Company) who, at the time of the Initial Offering, elected to hold all or a portion of their interest in the form of Units rather than receiving shares of Common Stock. Each Unit may be redeemed by the holder thereof for either one share of Common Stock or cash equal to the fair market value thereof at the time of such redemption, at the option of the Operating Partnership. The Operating Partnership presently anticipates that it will cause shares of Common Stock to be issued in connection with each such redemption rather than paying cash (as has been done in all redemptions to date). With each redemption of outstanding Units for Common Stock, the Company's percentage ownership interest in the Operating Partnership will increase. In addition, whenever the Company issues shares of Common Stock, the Company will contribute any net proceeds therefrom to the Operating Partnership and the Operating Partnership will issue an equivalent number of Units to the Company. The Company elected to be taxed as a real estate investment trust ("REIT") for Federal income tax purposes beginning with the year ended December 31, 1993. A REIT is a legal entity which holds real estate interest and, through payments of dividends to shareholders, in practical effect is not subject to Federal income taxes at the corporate level. The Operating Partnership currently owns and manages or is in the process of developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando, Northern Virginia, Nashville, Houston, Phoenix, Denver and Charlotte metropolitan areas. At December 31, 2000, approximately 52.8%, 25.7% and 11.5% (on a unit basis) of the Company's communities are located in the Atlanta, Dallas and Tampa metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain items in the 1999 and 1998 consolidated financial statements were reclassified for comparative purposes with the 2000 consolidated financial statements. NEW ACCOUNTING PRONOUNCEMENTS SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" The Operating Partnership will adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by Statement No. 137 on January 1, 2001. This standard establishes accounting and reporting standards for derivatives and hedging activities and will require the Operating Partnership to recognize all derivatives on the balance sheet at fair value. Derivatives that do not qualify as hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings or be recognized in other comprehensive income until the hedged item affects earnings. If the change in fair value or cash flows of a derivative designated as a hedge is not effectively offset, as defined, by the change in value or cash flows of the item it is hedging, this difference will be immediately recognized in earnings. Upon adoption of SFAS 133 on January 1, 2001, the Operating Partnership will record a net transition adjustment loss in the statement of operations of $728 and a net transition adjustment of $1,472 in accumulated other comprehensive income (equity). Adoption of this standard will also result in the recording of a derivative instrument liability of $1,472. 67 70 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) The Operating Partnership only utilizes qualifying cash flow hedges that are designated specifically to reduce exposure to interest rate risk by locking in the expected future cash payments on certain designated liabilities. This is typically accomplished using an interest rate swap or interest rate cap. For financial reporting purposes, the gain or loss on the effective portion of the cash flow hedge is recorded as a component of other comprehensive income. The ineffective portion of the cash flow hedge will be recorded immediately in earnings. On the date the Operating Partnership enters into a derivative contract, management will designate the derivative as a hedge of the identified cash flow exposure. The Operating Partnership will formally document all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. In this documentation, the Operating Partnership will specifically identify the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and will state how the hedging instrument is expected to hedge the risks related to the hedged item. The Operating Partnership will formally measure effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Operating Partnership may discontinue hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; when the derivative is re-designated to no longer be a hedge instrument. STAFF ACCOUNTING BULLETIN NO. 101, "REVENUE RECOGNITION" The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition," which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was implemented in the fourth quarter of 2000 by the Operating Partnership and the adoption had no effect on its results of operations or financial position. REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5 - 10 years). PREFERRED UNITS On September 3, 1999, the Operating Partnership issued $70,000 of Series D Cumulative Redeemable Preferred Units to an institutional investor in a private placement meeting the requirements of Regulation D promulgated under the Securities Act of 1933, as amended. The $25 preferred units may be redeemed by the Company after five years at par, but are otherwise perpetual in term. The preferred units may also be exchanged, under certain circumstances, for shares of the Company's 8 percent Series D Cumulative Redeemable Preferred Stock. Net proceeds to the Operating Partnership of approximately $68,000 were used to repay outstanding indebtedness. REVENUE RECOGNITION Rental -- Residential properties are leased under operating leases with terms of generally one year or less. Rental income is recognized when earned, which is not materially different from revenue recognition on a straight line basis. Property management and landscaping services -- Income is recognized when earned for property management and landscaping services provided to third parties. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents. 68 71 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) RESTRICTED CASH Restricted cash generally is comprised of resident security deposits for communities located in Florida and Tennessee and required maintenance reserves for communities located in DeKalb County, Georgia. DEFERRED FINANCING COSTS Deferred financing costs are amortized using the interest method over the terms of the related debt. INTEREST AND REAL ESTATE TAXES Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the lives of the constructed assets. Interest paid (including capitalized amounts of $25,426, $21,417, and $15,707 during 2000, 1999 and 1998, respectively), aggregated $74,419, $51,337, and $46,889 for the years ended December 31, 2000, 1999 and 1998, respectively. DERIVATIVES The Operating Partnership has entered into various interest rate swap and interest rate cap agreements. These arrangements are used to manage the Operating Partnership's exposure to fluctuations in interest rates. Premiums paid to purchase interest rate protection agreements (i.e. interest rate caps) have been deferred and are being amortized over the terms of those agreements using the interest method. Unamortized premiums are included in deferred charges in the consolidated balance sheet. Amounts receivable under the interest rate protection agreements is accrued as a reduction of interest expense. Interest rate swaps qualifying for hedge accounting treatment are recorded on an accrual basis as an adjustment of the interest rate yield. Interest rate swaps not qualifying for hedge accounting treatment are recorded at fair value and recognized through the statement of operations. PER UNIT DATA Basic earnings per common Unit with respect to the Operating Partnership for the years ended December 31, 2000, 1999 and 1998 is computed based upon the weighted average number of units outstanding during the period. Diluted earnings per common Unit is based upon the weighted average number of Units outstanding during the period and includes the effect of the potential issuance of additional Units if stock options were exercised or converted into common stock of the Company. USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, -------------------------- 2000 1999 --------- --------- Deferred financing costs.............................. $ 36,068 $ 31,148 Other................................................. 5,240 5,394 --------- --------- 41,308 36,542 Less: accumulated amortization........................ (19,608) (15,722) --------- --------- $ 21,700 $ 20,820 ========= =========
69 72 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 3. NOTES PAYABLE At December 31, 2000 and 1999, the Operating Partnership's indebtedness consisted of the following:
12/31/00 12/31/99 PAYMENT MATURITY PRINCIPAL PRINCIPAL DESCRIPTION TERMS INTEREST RATE DATE (1) BALANCE BALANCE ----------- ----- ------------- -------- ------- ------- CONVENTIONAL FIXED RATE (SECURED) Parkwood Townhomes(TM)........ Principal and Interest 7.375% 4/01/14 $ 799 $ 833 Post Hillsboro Village and The Lee Apartments............ Principal and Interest 9.20% 10/01/01 -- 2,915 Northwestern Mutual Life...... Principal and Interest 6.50%(2) 3/01/09 48,601 49,462 Northwestern Mutual Life...... Principal and Interest 7.69% 10/01/07 28,666 -- Northwestern Mutual Life...... Principal and Interest 7.69% 10/01/07 51,238 -- FNMA.......................... Principal and Interest 6.975%(3) 7/23/29 103,200 -- ---------- -------- 232,504 53,210 ---------- -------- CONVENTIONAL FLOATING RATE (SECURED) Addison Circle Apartment Homes by Post(R)- Phase I .... Principal and Interest LIBOR + .75% 6/15/00 -- 22,067 FNMA.......................... Principal and Interest LIBOR + .935% (3) 7/23/29 -- 104,000 ---------- -------- -- 126,067 ---------- -------- TAX EXEMPT FLOATING RATE (SECURED) Interest only "AAA" NON-AMT + .515%(4)(5) 6/01/25 235,880 235,880 ---------- -------- SENIOR NOTES (UNSECURED) Northwestern Mutual Life...... Interest only 8.21% - 8.37% 6/07/01-6/07/02 50,000 50,000 Senior Notes.................. Interest only 7.25% - 7.70% 10/01/03-12/20/10 310,000 125,000 Medium Term Notes............. Interest only 6.69% -8.12% (6) (7) 4/02/01-3/16/15 360,000 215,000 ---------- -------- 720,000 390,000 ---------- -------- LINES OF CREDIT & OTHER UNSECURED DEBT Revolver ..................... N/A LIBOR + .825% or prime - .25%(8) 4/30/03 18,000 165,000 Cash Management Line.......... N/A LIBOR + .675% or prime - .25% 3/31/01 4,925 17,426 City of Phoenix............... N/A 5.00% (9) 3/01/21 2,000 2,000 ---------- -------- 24,925 184,426 ---------- -------- TOTAL......................... $1,213,309 $989,583 ========== ========
(1) All of the mortgages can be prepaid at any time, subject to certain prepayment penalties. (2) This note bears interest at 6.50% with an effective rate of 7.30% after consideration of a terminated swap agreement. (3) In December 2000, the Operating Partnership entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. (4) Bond financed (interest rate on bonds + credit enhancement fees effective October 1, 1998). The Operating Partnership pays credit enhancement fees of .515% of the amount of such bonds or the amount of the letters of credit, as the case may be. "AAA" NON-AMT rate was 5.00% at December 31, 2000. (5) These bonds are cross-collateralized. The Operating Partnership has purchased an interest rate cap that limits the Operating Partnership's exposure to increases in the base rate to 5%. (6) Contains $100,000 of Mandatory Par Put Remarketed Securities. The annual interest rate on these securities to March 16, 2005 (the "Remarketing Date") is 6.85%. On the Remarketing Date, they are subject to mandatory tender for remarketing. (7) In October 2000, the Operating Partnership entered into a swap transaction that fixed the rate on a $25,000 MTN at 7.28%, inclusive of credit enhancement and other fees. 70 73 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) (8) Represents stated rate. The Operating Partnership may also make "money market" loans of up to $175,000 at rates below the stated rate. At December 31, 2000, the outstanding balance of the Revolver consisted of "money market" loans with an average interest rate of 7.49%. Effective January 12, 2001, the interest rate is LIBOR plus .75% or prime minus .25% and the debt matures April 30, 2004. Also effective January 12, 2001, the Operating Partnership may make "money market" loans of up to $160,000 at rates below the stated rate. (9) This loan is interest free for the first three years, with interest at 5.00% thereafter. Repayment is to commence on March 1, 2001 subject to the conditions set forth in the Agreement. CONVENTIONAL FIXED RATE MORTGAGES PAYABLE (SECURED) Conventional mortgages payable were comprised of five loans at December 31, 2000 and 1999, each of which is collateralized by certain apartment communities located in Atlanta and Dallas which are included in real estate assets. On July 23, 1999, the Operating Partnership issued $104,000 of secured notes to FNMA. Net proceeds of $101,988 were used to repay outstanding indebtedness. These notes are secured by five apartment communities. The notes include a prepayment penalty that is an amount equal to a percentage of the principal amount remaining under the notes at the time of prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth year. The Operating Partnership has an option to call these notes after ten years from the issuance date. In December 2000, the Operating Partnership entered into a swap transaction that fixed the rate of interest on this note at 6.975%, inclusive of credit enhancement and other fees, from January 1, 2001 through July 31, 2009. TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED) Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit enhanced debt maturing in 2025. The Federal National Mortgage Association ("FNMA") has provided replacement credit enhancement through 2025 for the bond issues, aggregating $235,880, which were reissued. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. SENIOR NOTES (UNSECURED) NORTHWESTERN MUTUAL LIFE NOTES On June 7, 1995, the Operating Partnership issued $50,000 of unsecured senior notes with the Northwestern Mutual Life Insurance Company. The notes were in two tranches: the first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to repay outstanding indebtedness. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. SENIOR NOTES On September 30, 1996, the Operating Partnership completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to repay outstanding indebtedness. On December 20, 2000, the Operating Partnership issued $185,000 of unsecured senior notes. These notes bear interest at 7.70% and mature on December 20, 2010. Net proceeds of approximately $183,798 were used to repay outstanding indebtedness. 71 74 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) MEDIUM TERM NOTES The Operating Partnership has established a program for the sale of Medium-Term Notes due three months or more from the date of issue (the "MTNs"). Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) repay outstanding indebtedness. The following table sets forth MTNs issued and outstanding as of December 31, 2000:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ----- ---------- -------- -------- March 31, 1997 $ 37,000 7.02% April 2, 2001 March 31, 1997 13,000 7.30% April 1, 2004 September 22, 1997 10,000 6.69% September 22, 2004 September 22, 1997 25,000 6.78% September 22, 2005 March 12, 1998 100,000 6.85% March 16, 2015 May 9, 2000 25,000 (1) 7.28% February 1, 2005 June 15, 2000 150,000 8.12% June 15, 2005 ---------- $ 360,000 ==========
(1) In October 2000, the Operating Partnership entered into a swap transaction that fixed the rate on the note at 7.28%, inclusive of credit enhancement and other fees, through maturity. On March 12, 1998, the Operating Partnership issued $100,000 of 6.85% Mandatory Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds in the amount of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through the Remarketing Date to 6.59%. In anticipation of the offering, the Operating Partnership entered into forward-treasury-lock agreements in the fall of 1997. As a result of the termination of these agreements, the effective borrowing rate was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM). On April 8, 1998, the Operating Partnership sold $50,000 of Remarketed Reset Notes due April 7, 2009 under the MTN program. The notes bear an interest rate of LIBOR plus the applicable spread with the spread being reset from time to time. The initial spread is equal to .40% for a period of one year. The Operating Partnership has entered into an interest rate swap for the entire term of the notes to fix the interest rate index. Under the terms of the swap, the Operating Partnership paid a fixed rate of 6.02% and received LIBOR. This swap was settled in February 1999 at a loss of $1,495. This loss was deferred to amortize over the remaining term of the Remarketed Reset Notes. On April 7, 1999, the Operating Partnership repaid the Remarketed Reset Notes with the proceeds of conventional fixed rate secured debt. The remaining unamortized balance of the deferred swap loss was redesignated to the new debt and will be amortized over the remaining term of the new debt. On May 9, 2000, the Operating Partnership sold $25,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at the London Interbank Offer Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net proceeds of $24,875 were used to repay outstanding indebtedness. In October 2000, the Operating Partnership entered into a swap transaction that fixed the rate on the notes at 7.28%, inclusive of credit enhancement and other fees, through maturity. On June 16, 2000, the Operating Partnership sold $150,000 aggregate principal amount of notes under the MTN Program. These notes bear interest at 8.12% and mature on June 15, 2005. Net proceeds of $148,865 were used to repay outstanding indebtedness. 72 75 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) The aggregate maturities of the Company's indebtedness are as follows (1): 2001................................................... $ 67,000 2002................................................... 20,000 2003................................................... 100,000 2004................................................... 23,000 2005................................................... 200,000 Thereafter............................................. 778,384 ------------ $ 1,188,384 ============
(1) Excludes principal amortization payments and payments on lines of credit and other unsecured debt. LINES OF CREDIT AND OTHER (UNSECURED) On January 12, 2001, the Operating Partnership closed a $320,000 three-year syndicated revolving line of credit (the "Revolver"), which matures April 2004. This line of credit bears interest at LIBOR plus .75% or prime minus .25% and replaces the Operating Partnership's previous line. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Operating Partnership's senior unsecured debt. The Revolver also includes a money market competitive bid option for short-term funds up to $160,000 at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restrict the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. Also in January 2001, the Operating Partnership reached an agreement with a syndicated group of banks for an incremental $185,000, 364 day facility at terms substantially equal to the Revolver. On July 26, 1996, the Operating Partnership closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March 31, 2002. Management believes the Cash Management Line will be renewed at maturity with similar terms. The Revolver requires three days advance notice to repay borrowings whereas the Cash Management Line provides the Operating Partnership with an automatic daily sweep which applies all available cash to reduce the outstanding balance. In addition, the Operating Partnership has a $3,000 facility to provide letters of credit for general business purposes. At December 31, 2000, the outstanding balances on the Revolver and Cash Management Line were $18,000 and $4,925, respectively. There were no outstanding balances on any of the other facilities at December 31, 2000. On March 1, 1998 the Operating Partnership entered into a Disposition and Development Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the City of Phoenix loaned the Operating Partnership $2,000. This loan is interest-free for the first three years, with a 5.00% interest rate thereafter. Repayment of the loan commences on March 1, 2001 with equal semi-annual payments due on March 1 and September 1 of each year through March 1, 2021. All repayment terms are subject to the conditions set forth in the Agreement. 73 76 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) PLEDGED ASSETS The aggregate net book value at December 31, 2000 of property pledged as collateral for indebtedness amounted to approximately $469,473. UNUSED TREASURY LOCKS The loss on unused treasury locks in 1998 resulted from the termination of treasury locks intended for debt securities that were not issued by the Operating Partnership. EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1999 was due to the write off of loan costs resulting from the early extinguishment of debt. The extraordinary item for the year ended December 31, 1997 resulted from the write-off of deferred financing costs on the mortgage debt satisfied. 4. INCOME TAXES Income or losses of the Operating Partnership are allocated to the partners of the Operating Partnership for inclusion in their respective income tax returns. Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% (90% beginning in 2001) of its REIT taxable income, as defined in the Code, to its shareholders and satisfy certain other requirements. As a result, the Operating Partnership generally will not be subject to Federal income taxation at the corporate level on the income the Company distributes to the shareholders. Although the Company has elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed as a subsidiary of the Operating Partnership to provide through its subsidiaries asset management, leasing and landscaping services to third parties. The consolidated taxable income of Post Services, if any, will be subject to tax at regular corporate rates. As of December 31, 2000, the net basis for Federal income tax purposes, taking into account the special allocation of gain to the partners contributing property to the Operating Partnership, was lower than the net assets as reported in the Operating Partnership's consolidated financial statements by $29,794. 5. RELATED PARTY TRANSACTIONS The Operating Partnership provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 2000, 1999 and 1998, the Operating Partnership received landscaping fees of $667, $610, and $961 for such services. These amounts include reimbursements of direct expenses in the amount of $11, $10, and $295, which are not included in landscape services revenue. Accordingly, these transactions resulted in the Operating Partnership recording landscape services net fees in excess of direct expenses of $656, $600, and $666 in the Operating Partnership financial statements for the years ended December 31, 2000, 1999 and 1998, respectively. The Operating Partnership provides accounting and administrative services to entities controlled by certain executive officers of the Operating Partnership. Fees under this arrangement aggregated $25 for each year ended December 31, 2000, 1999 and 1998, respectively. The Operating Partnership was contracted to assist in the development of apartment complexes constructed by a former executive and current shareholder. Fees under this arrangement were $29, $100, and $349 for the years ended December 31, 2000, 1999 and 1998, respectively. On February 15, 2000 and December 10, 1999, the Company loaned $1,500 and $7,750, respectively, to certain executives. These loans are payable ten years from the issue date, and bear interest at a rate of 6.32% per annum. 74 77 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) Proceeds from these loans were used by these executives to acquire the Company's common shares on the open market. As of February 10, 2001, $2,000 of the loans have been repaid. 6. SALE OF ASSETS AND ASSETS HELD FOR SALE During the first quarter of 2000, the Operating Partnership authorized the sale of five communities: one community in Atlanta, Georgia, three communities in Jackson, Mississippi and one commercial property in Dallas, Texas. During the third quarter of 2000, the Operating Partnership authorized the sale of two communities in Nashville, Tennessee. During the fourth quarter of 2000, the Operating Partnership authorized the sale of one tract of land in Dallas, Texas and seven communities: two communities in Atlanta, Georgia, one community in Nashville, Tennessee and three communities and one commercial property in Dallas, Texas. In February 2000, the Operating Partnership sold the 213 community in Atlanta, Georgia, for $32,350. Net proceeds of approximately $31,500 were used to pay down outstanding indebtedness. In September 2000, the Operating Partnership sold the three communities in Jackson, Mississippi, containing a total of 983 units for $44,600. Net proceeds of approximately $42,903 were used to pay down outstanding indebtedness. In November 2000, the Operating Partnership sold two properties located in Nashville, Tennessee containing a total of 367 units for $36,885. Net proceeds of approximately $36,290 were used to repay outstanding indebtedness. In December 2000, the Operating Partnership sold two properties located in Atlanta, Georgia, containing a total of 421 units for $47,250. Net proceeds of approximately $46,651 were used to repay outstanding indebtedness and to repurchase the Company's common stock. At December 31, 2000, the remaining tract of land, four communities and two commercial properties consisting of land, building and improvements and furniture, fixtures and equipment were recorded at $122,047, which represented the lower of cost or fair value less costs to sell. The Operating Partnership has recorded a net gain on the sale of the Atlanta, Jackson and Nashville assets in the statement of operations, reduced by its best estimate of the effect of the anticipated sale of the remaining communities and commercial properties, as a net gain on the sale of assets of $3,208. The Operating Partnership expects the sale of the remaining properties to occur in 2001. For the years ended December 31, 2000 and 1999, the consolidated statements of operation include net income of $12,392 and $11,804, respectively, from communities held for sale at December 31, 2000. Through December 31, 2000, depreciation expense totaling $4,109 was recognized on these assets prior to the assets being classified as held for sale. Depreciation expense has not been recognized subsequent to the date of held for sale classification. 7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES In the fourth quarter of 2000, management decided to restrict its development activities to fewer markets, refine its development investment strategy, exit the for-sale housing business and make changes in its executive management team. As a result of this decision, the Operating Partnership wrote off $4,389 of costs it had incurred in markets it will no longer pursue for development opportunities and on individual development deals that are no longer consistent with management's revised strategy. In connection with the management changes at December 31, 2000, all employees included in the severance charge of $3,066 had been notified of their termination and severance agreement. As of February 15, 2001, these employees were no longer providing any service to the Operating Partnership. The employees included in the accrual at December 31, 2000, were primarily four executives and five accounting department employees in the Dallas regional office. At December 31, 2000, the accrual for unpaid severance charges was $2,250. In addition to these charges, the Operating Partnership also recorded an impairment charge of $407 to adjust the cost of for-sale housing in Atlanta and Dallas to its estimated net sales proceeds. Additionally, the Operating Partnership 75 78 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) recorded a charge of $1,503 to write off its investment in Darwin Networks, a high-speed Internet provider that filed for Chapter 11 bankruptcy in January 2001. 8. EMPLOYEE BENEFIT PLANS Through a plan adopted by the Company, the employees of the Operating Partnership are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Operating Partnership contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Operating Partnership contribution, the maximum employee contribution included in the calculation is 3% of salary. Operating Partnership contributions of $514, $346, and $179 were made in 2000, 1999 and 1998, respectively. During 1995, the Company adopted the Employee Stock Purchase Plan ("ESPP") to encourage stock ownership by eligible directors and employees. To participate in the ESPP, (i) directors must not be employed by the Company or the Operating Partnership and must have been a member of the Board of Directors for at least one month and (ii) an employee must have been employed full-time by the Company or the Operating Partnership for at least one month. The purchase price of shares of Common Stock under the ESPP is equal to 85% of the lesser of the closing price per share of Common Stock on the first or last day of the trading period, as defined. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 2000, the Company had two stock-based compensation plans, the Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the "ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as described below. The Operating Partnership applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is required to be recognized for the Stock Plan and the ESPP. The compensation cost which is required to be charged against income for the Grant Plan was $138, $205, and $182 for 2000, 1999 and 1998, respectively. Had compensation cost for the Company's Stock Plan and ESPP been determined based on the fair value at the grant dates for awards under the Plans consistent with the method of FASB Statement 123, the Operating Partnership's net income and earnings per Unit would have been reduced to the pro forma amounts indicated below:
2000 1999 1998 ---------- ---------- --------- Net income available to common unitholders .............................. As reported ... $ 100,336 $ 105,177 $ 88,988 Pro forma ..... $ 98,154 $ 102,994 $ 88,100 Net income per common Unit - basic .................................... As reported ... $ 2.25 $ 2.41 $ 2.21 Pro forma ..... $ 2.21 $ 2.36 $ 2.19 Net income per common Unit - diluted .................................. As reported ... $ 2.22 $ 2.39 $ 2.18 Pro forma ..... $ 2.18 $ 2.33 $ 2.16
For purposes of the pro forma presentation, the fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. The weighted-average of all assumptions used in the calculation for various grants under all of the Company's plans during 2000, 1999 and 1998, are as follows: 76 79 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
2000 1999 1998 ------------ ------------ ------------ Dividend yield............................. 8.0% 7.3% 7.0% Expected volatility........................ 24.8% 15.4% 15.3% Risk-free interest rate.................... 6.7% to 6.9% 4.5% to 6.6% 4.7% to 5.8% Expected option life....................... 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant to its employees and directors options to purchase up to 6,000,000 shares of common stock. Of this amount, 550,000 shares are available for grants of restricted stock. Options granted to any key employee or officer cannot exceed 100,000 shares a year (500,000 shares if such key employee or officer is a member of the Company's Executive Committee). The exercise price of each option may not be less than the market price on the date of grant and all options have a maximum term of ten years from the grant date. A summary of the status of the Company's Stock Plan as of December 31, 2000, 1999 and 1998, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
2000 1999 1998 ------------------------ ------------------------ ------------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ----------- -------- ----------- -------- ------------ -------- Outstanding at beginning of year .... 4,054,876 $ 34 3,030,852 $ 31 $ 2,237,551 31 Granted ............................. 740,538 38 1,288,232 36 1,440,784 39 Exercised ........................... (334,194) 32 (164,053) 30 (67,326) 31 Forfeited ........................... (189,612) 38 (100,155) 37 (580,157) 39 ----------- ----------- ------------ Outstanding at end of year .......... 4,271,608 35 4,054,876 35 3,030,852 34 =========== =========== ============ Options exercisable at year-end...... 2,413,595 2,290,143 2,065,438 =========== =========== ============ Weighted-average fair value of options granted during the year...... $ 4.76 $ 2.08 $ 2.54 =========== =========== ============
At December 31, 2000, the range of exercise prices for options outstanding was $27.625 - $44.125 and the weighted-average remaining contractual life was 7 years. 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Operating Partnership is party to two ground leases with terms expiring in years 2040 and 2043 relating to a single operating community, one ground lease expiring in 2038 for a second operating community, three ground leases expiring in 2066, 2069 and 2074 for three communities under development and to office, equipment and other operating leases with terms expiring in years 2001 through 2004. Future minimum lease payments for non-cancelable land, office, equipment and other leases at December 31, 2000 are as follows: 77 80 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 2001......................... $ 2,122 2002......................... 1,392 2003......................... 1,300 2004......................... 1,274 2005......................... 1,279 2006 and thereafter.......... 159,456
The Operating Partnership incurred $5,935, $5,109, and $4,915 of rent expense for the years ended December 31, 2000, 1999 and 1998, respectively. CONTINGENCIES The Operating Partnership is party to various legal actions which are incidental to its business. Management believes that these actions will not have a material adverse affect on the consolidated balance sheets and statements of operations. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, rents and landscape service receivables, accounts payable, accrued expenses, and other liabilities are carried at amounts which reasonably approximate their fair values. The fair value of fixed rate debt was approximately $822,043 at December 31, 2000. The fair values of interest rate protection agreements and interest rate swaps (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 2000, carrying amounts related to these arrangements in the consolidated balance sheet were approximately $728. As of December 31, 2000, the net cost to terminate these contracts was approximately $1,438. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2000. Although management is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 78 81 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 12. EARNINGS PER UNIT For the years ended December 31, 2000, 1999 and 1998, basic and diluted earnings per common Unit for income before extraordinary item, net of preferred distributions, and net income available to common Unitholders before extraordinary item has been computed as follows:
YEAR ENDED 2000 -------------------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item............................... $ 117,811 Less: Preferred stock distributions............................ (17,475) ----------- BASIC EPS Income available to common Unitholders before extraordinary item ... 100,336 44,503,290 $ 2.25 ======= EFFECT OF DILUTIVE SECURITIES Options........................................................ -- 534,789 ---------- ------------ DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item ............................ $ 100,336 45,038,079 $ 2.22 ========== ============ =======
YEAR ENDED 1999 -------------------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item................................ $ 119,424 Less: Preferred stock distributions............................. (13,726) ---------- BASIC EPS Income available to common Unitholders before extraordinary item ... 105,698 43,663,373 $ 2.42 ======= EFFECT OF DILUTIVE SECURITIES Options......................................................... -- 456,298 --------- ------------ DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item ............................ $ 105,698 44,119,671 $ 2.39 ========== ============ =======
YEAR ENDED 1998 -------------------------------------------------- INCOME UNITS PER-UNIT (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- -------- Income before extraordinary item................................ $ 100,461 Less: Preferred stock distributions............................. (11,473) ---------- BASIC EPS Income available to common Unitholders before extraordinary item ... 88,988 40,244,351 $ 2.21 ======= EFFECT OF DILUTIVE SECURITIES Options......................................................... -- 444,991 ---------- ------------ DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item ............................ $ 88,988 40,689,342 $ 2.18 ========== ============ =======
13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 2000, 1999 and 1998 are as follows: (a) The Operating Partnership committed to distribute $33,466, $30,818, and $25,115 for the quarters ended December 31, 2000, 1999 and 1998, respectively. (b) For cash flow purposes, treasury stock is net of $2,435 of donated stock, $1,708 of treasury stock transactions settled in 2001, less $152 of shares re-issued from treasury stock. 79 82 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 14. SEGMENT INFORMATION SEGMENT DESCRIPTION In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise and Related Information," the Operating Partnership presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on substantially the same basis as the internally reported information used by the Operating Partnership's chief operating decision makers to manage the business. The Operating Partnership's chief operating decision makers focus on the Operating Partnership's primary sources of income which are property rental operations and third party services. Third party services are designated as one segment. Property rental operations are broken down into five segments based on the various stages in the property ownership lifecycle. The Operating Partnership's six segments are further described as follows: Property Rental Operations - Fully stabilized communities - those apartment communities which have been stabilized (the earlier of the point at which a property reached 95% occupancy or one year after completion of construction) for both the current and prior year. - Communities stabilized during 1999 - communities which reached stabilized occupancy in the prior year. - Development and Lease up Communities - those communities which are in lease-up but were not stabilized by the beginning of the current year including communities which stabilized during the current year. - Communities held for sale - those communities that are being marketed for sale. - Sold communities - communities which were sold in the current or prior year. Third Party Services - fee income and related expenses from the Operating Partnership's apartment community management, landscaping and corporate apartment rental services. SEGMENT PERFORMANCE MEASURE Management uses contribution to funds from operations ("FFO") as the performance measure for its segments. Effective January 1, 2000, FFO is defined by the National Association of Real Estate Investment Trusts as net income available to common shareholders determined in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Operating Partnership's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Operating Partnership's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Operating Partnership's needs. SEGMENT INFORMATION The following table reflects each segment's contribution to consolidated revenues and FFO together with a reconciliation of segment contribution to FFO, total FFO and income before extraordinary item. Additionally, substantially all of the Operating Partnership's assets relate to the Operating Partnership's property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally. 80 83 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, --------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- REVENUES Fully stabilized communities ......................................... $ 232,435 $ 221,901 $ 213,043 Communities stabilized during 1999 ................................... 42,710 38,097 20,845 Development and lease-up communities ................................. 54,486 17,408 2,106 Communities held for sale ............................................ 19,706 18,552 18,359 Sold communities ..................................................... 15,928 24,285 24,004 Third party services ................................................. 15,249 12,486 10,416 Other ................................................................ 19,318 13,198 10,132 ----------- ----------- ----------- Consolidated revenues ................................................ $ 399,832 $ 345,927 $ 298,905 =========== =========== =========== CONTRIBUTION TO FUNDS FROM OPERATIONS Fully stabilized communities ......................................... $ 162,197 $ 154,060 $ 146,431 Communities stabilized during 1999 ................................... 28,753 26,199 12,669 Development and lease-up communities ................................. 33,684 9,679 (184) Communities held for sale ............................................ 12,392 11,804 11,896 Sold communities ..................................................... 11,457 18,167 17,213 Third party services ................................................. 2,157 1,657 1,653 ----------- ----------- ----------- Contribution to FFO .................................................. 250,640 221,566 189,678 ----------- ----------- ----------- Other operating income, net of expense ............................... 2,326 (310) (1,197) Depreciation on non-real estate assets ............................... (2,405) (1,962) (1,432) Minority interest in consolidated property partnerships ...................................................... 1,695 (511) (397) Project abandonment, employee severance and impairment charges ....... (9,365) -- -- Interest expense ..................................................... (50,303) (33,192) (31,297) Amortization of deferred loan costs .................................. (1,636) (1,496) (1,185) General and administrative ........................................... (10,066) (7,788) (8,495) Distributions to preferred unitholders ............................... (17,475) (13,726) (11,473) ----------- ----------- ----------- Total FFO ............................................................ 163,411 162,581 134,202 ----------- ----------- ----------- Depreciation on real estate assets ................................... (66,283) (55,361) (45,214) Net gain (loss) on sale of assets .................................... 3,208 (1,522) -- Distributions to preferred unitholders................................ 17,475 13,726 11,473 ----------- ----------- ----------- Income before extraordinary item and preferred distributions ......... $ 117,811 $ 119,424 $ 100,461 =========== =========== ===========
81 84 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 2000 and 1999 are as follows:
YEAR ENDED DECEMBER 31, 2000* -------------------------------------------------------- FIRST SECOND THIRD FOURTH --------- --------- ---------- ---------- Revenues ............................................................ $ 95,443 $ 99,482 $ 101,342 $ 103,565 --------- --------- ---------- ---------- Net income before net gain (loss) on sale of assets and other charges ................................................... 31,965 33,734 30,676 27,593 Net gain (loss) on sale of assets ................................... 687 (19) 959 1,581 Project abandonment, employee severance and impairment charges .................................................. -- -- -- (9,365) --------- --------- ---------- ---------- Net income .......................................................... 32,652 33,715 31,635 19,809 Distributions to preferred Unitholders .............................. (4,368) (4,369) (4,369) (4,369) --------- --------- ---------- ---------- Net income available to common Unitholders .......................... $ 28,284 $ 29,346 $ 27,266 $ 15,440 ========= ========= ========== ========== Earnings per common Unit: Net income available to common Unitholders - basic ............................................................. $ 0.64 $ 0.66 $ 0.61 $ 0.35 Net income available to common Unitholders - diluted ........................................................... $ 0.63 $ 0.65 $ 0.60 $ 0.34
YEAR ENDED DECEMBER 31, 1999* -------------------------------------------------------- FIRST SECOND THIRD FOURTH --------- --------- ---------- ---------- Revenues ............................................................ $ 80,891 $ 85,503 $ 88,158 $ 91,375 --------- --------- ---------- ---------- Net income before gain (loss) on sale of assets and extraordinary items ................................................. 29,406 29,624 30,626 31,290 Net gain (loss) on sale of assets ................................... (1,567) 476 (246) (185) Extraordinary items ................................................. (521) -- -- -- --------- --------- ---------- ---------- Net income .......................................................... 27,318 30,100 30,380 31,105 Distributions to preferred Unitholders .............................. (2,969) (2,969) (3,404) (4,384) --------- --------- ---------- ---------- Net income available to common Unitholders .......................... $ 24,349 $ 27,131 $ 26,976 $ 26,721 ========= ========= ========== ========== Earnings per common Unit: Net income available to common Unitholders - basic ............................................................. $ 0.56 $ 0.62 $ 0.62 $ 0.61 Net income available to common Unitholders - diluted ........................................................... $ 0.56 $ 0.61 $ 0.61 $ 0.60
* The total of the four quarterly amounts for earnings per Unit may not equal the total for the year. These differences result from the use of a weighted average to compute average number of Units outstanding. 82 85 SCHEDULE III POST PROPERTIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
GROSS AMOUNTS AT WHICH INITIAL COSTS CARRIED AT CLOSE OF PERIOD --------------------- ------------------------------------- COST CAPITALIZED SUBSEQUENT RELATED BUILDING AND TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL (1) ----------- ------------ -------- ------------ ----------- ---------- ------------ --------- GEORGIA Post Ashford................. Apartments $ 9,895 (2) $ 1,906 $ -- $ 8,578 $ 1,906 $ 8,578 $ 10,484 Post Biltmore................ Apartments -- 4,470 -- 4,831 4,470 4,831 9,301 Post Briarcliff.............. Apartments -- 18,785 -- 40,957 13,310 46,432 59,742 Post Bridge.................. Apartments 12,450 (2) 868 -- 12,273 869 12,272 13,141 Post Brookhaven.............. Apartments -- 7,921 -- 31,317 7,921 31,317 39,238 Post Canyon.................. Apartments 16,845 (2) 931 -- 18,184 931 18,184 19,115 Post Chase................... Apartments 15,000 (2) 1,438 -- 15,978 1,438 15,978 17,416 Post Chastain................ Apartments 30,573 6,352 -- 40,312 6,779 39,885 46,664 Post Collier Hills........... Apartments -- 6,487 -- 25,210 7,183 24,514 31,697 Post Corners................. Apartments 14,760 (2) 1,473 -- 15,216 1,473 15,216 16,689 Post Court................... Apartments 18,650 (2) 1,769 -- 17,386 1,769 17,386 19,155 Post Creek................... Apartments -- 10,406 36,756 6,403 10,442 43,123 53,565 Post Crest................... Apartments 24,461 4,733 -- 24,725 4,763 24,695 29,458 Post Crossing................ Apartments -- 3,951 -- 19,496 3,951 19,496 23,447 Post Dunwoody................ Apartments -- 4,917 -- 28,590 4,961 28,546 33,507 Post Gardens................. Apartments -- 5,859 -- 33,809 5,931 33,737 39,668 Post Glen.................... Apartments 24,140 5,591 -- 21,657 5,784 21,464 27,248 Post Lane.................... Apartments -- 1,512 -- 8,302 2,067 7,747 9,814 Post Lenox Park.............. Apartments 10,908 3,132 -- 10,795 3,132 10,795 13,927 Post Lindbergh............... Apartments -- 6,268 -- 28,013 6,652 27,629 34,281 Post Mill.................... Apartments 12,880 (2) 915 -- 12,938 922 12,931 13,853 Post Oak..................... Apartments -- 2,028 -- 8,295 2,027 8,296 10,323 Post Oglethorpe.............. Apartments -- 3,662 -- 17,045 3,662 17,045 20,707 Post Park.................... Apartments -- 6,253 -- 40,106 8,830 37,529 46,359 Post Parkside................ Mixed Use -- 3,402 -- 20,030 3,465 19,967 23,432 Post Peachtree............... Apartments -- 2,024 -- 6,995 2,024 6,995 9,019 Post Peachtree Hills......... Apartments -- 4,215 -- 13,868 4,857 13,226 18,083 Post Pointe.................. Apartments -- 2,417 -- 15,914 3,027 15,304 18,331 Post Renaissance............. Apartments -- -- -- 19,835 -- 19,835 19,835 Post Ridge................... Apartments -- 11,332 -- 25,427 5,150 31,609 36,759 Post Spring.................. Apartments -- 3,316 -- 32,791 3,316 32,791 36,107 Post Summit.................. Apartments -- 1,575 -- 6,376 1,575 6,376 7,951 Post Valley.................. Apartments 18,600 (2) 1,117 -- 18,965 1,117 18,965 20,082 Post Vinings................. Apartments -- 4,322 -- 21,783 5,668 20,437 26,105 Post Village The Arbors.................. Apartments -- 384 -- 16,196 373 16,207 16,580 The Fountains The Meadows... Apartments 26,000 (2) 611 -- 38,401 878 38,134 39,012 The Gardens................. Apartments 14,500 (2) 187 -- 28,097 637 27,647 28,284 The Hills................... Apartments 7,000 (2) 91 -- 13,563 307 13,347 13,654 Post Walk.................... Apartments 19,300 (2) 2,954 -- 17,722 2,954 17,722 20,676 Post Woods................... Apartments 16,716 1,378 -- 27,416 3,070 25,724 28,794 3400 Stratford............... Apartments -- 328 -- 24,023 485 23,866 24,351 Post Riverside............... Mixed Use -- 11,130 -- 108,311 12,434 107,007 119,441 TEXAS Addison Circle Apartment Homes by Post - Phase I..... Mixed Use 28,666 2,885 41,482 5,327 3,243 46,451 49,694 Addison Circle Apartment Homes by Post - Phase II.... Mixed Use 51,238 3,417 1,128 80,662 3,759 81,448 85,207 Addison Circle Apartment Homes by Post - Phase III... Mixed Use -- 752 -- 20,062 532 20,282 20,814 Post American Beauty Mill.... Apartments -- 234 2,786 3,446 571 5,895 6,466 Post Block 588............... Apartments -- 1,278 48 21,047 1,415 20,958 22,373 Clyde Lane................... Apartments -- 1,628 895 1,833 1,628 2,728 4,356 Post Cole's Corner........... Mixed Use -- 1,886 18,006 1,401 2,086 19,207 21,293 Post Columbus Square ........ Mixed Use -- 4,565 24,595 525 4,565 25,120 29,685 Heights of State-Thomas...... Mixed Use -- 5,455 15,559 28,667 5,803 43,878 49,681 Legacy at Town Center........ Apartments -- 684 -- 29,955 684 29,955 30,639 Post Midtown - Phase I....... Apartments -- 2,456 1,134 34,926 2,648 35,868 38,516 Post Midtown - Phase II...... Apartments -- 865 278 20,488 865 20,766 21,631 Post Midtown - Phase III..... Apartments -- 1,087 -- 1,008 1,087 1,008 2,095 Post Parkwood................ Apartments 799 306 2,592 4,574 864 6,608 7,472 Post Ascension............... Apartments -- 1,230 8,976 488 1,253 9,441 10,694 Post Hackberry Creek......... Apartments -- 7,269 23,579 944 7,269 24,523 31,792 Post Lakeside................ Apartments -- 3,924 20,334 1,394 3,924 17,663 (7) 21,587 Post Town Lake/Parks......... Apartments -- 2,985 19,464 1,597 2,985 21,061 24,046 Post White Rock.............. Apartments -- 1,560 9,969 1,343 1,560 11,312 12,872 Post Winsted................. Apartments -- 2,826 18,632 389 2,826 16,590 (7) 19,416 Post Windhaven............... Apartments -- 4,029 23,385 553 4,029 23,938 27,967 Post Shores.................. Apartments -- 11,572 69,794 4,828 11,572 62,445 (7) 74,017 The Abbey of State-Thomas.... Apartments -- 575 6,276 1,608 575 7,884 8,459 The Commons at Turtle Creek.. Apartments -- 1,406 7,938 534 1,406 8,472 9,878 The Meridian at State-Thomas. Apartments -- 1,535 11,605 597 1,535 12,202 13,737 The Residences on McKinney... Mixed Use -- 1,494 18,022 1,568 1,494 19,590 21,084 DEPRECIABLE ACCUMULATED DATE OF DATE LIVES DEPRECIATION CONSTRUCTION ACQUIRED YEARS ------------ --------------- --------------- ------------ GEORGIA Post Ashford................... Apartments $ 3,350 4/86 - 6/87 6/87 5 - 40 Years Post Biltmore.................. Apartments -- 9/00 (4) 12/99 -- Post Briarcliff................ Apartments 1,393 12/96 9/96 5 - 40 Years Post Bridge.................... Apartments 5,210 9/84 - 12/86 9/84 5 - 40 Years Post Brookhaven................ Apartments 11,143 7/89 - 12/92 3/89 5 - 40 Years Post Canyon.................... Apartments 7,703 4/84 - 4/86 10/81 5 - 40 Years Post Chase..................... Apartments 6,349 6/85 - 4/87 6/85 5 - 40 Years Post Chastain.................. Apartments 13,512 6/88 - 10/90 6/88 5 - 40 Years Post Collier Hills............. Apartments 3,629 10/95 6/95 5 - 40 Years Post Corners................... Apartments 6,503 8/84 - 4/86 8/84 5 - 40 Years Post Court..................... Apartments 6,684 6/86 - 4/88 12/85 5 - 40 Years Post Creek..................... Apartments 7,122 9/81 - 8/83 5/96 5 - 40 Years Post Crest..................... Apartments 4,396 9/95 10/94 5 - 40 Years Post Crossing.................. Apartments 3,576 4/94 - 8/95 11/93 5 - 40 Years Post Dunwoody.................. Apartments 6,686 11/88 12/84 & 8/94 (6) 5 - 40 Years Post Gardens................... Apartments 2,494 7/96 5/96 5 - 40 Years Post Glen...................... Apartments 2,514 7/96 5/96 5 - 40 Years Post Lane...................... Apartments 3,150 4/87 - 5/88 1/87 5 - 40 Years Post Lenox Park................ Apartments 2,099 3/94 - 5/95 3/94 5 - 40 Years Post Lindbergh................. Apartments 1,983 11/96 8/96 5 - 40 Years Post Mill...................... Apartments 5,866 5/83 - 5/85 5/81 5 - 40 Years Post Oak....................... Apartments 2,413 9/92 - 12/93 9/92 5 - 40 Years Post Oglethorpe................ Apartments 3,395 3/93 - 10/94 3/93 5 - 40 Years Post Park...................... Apartments 14,003 6/87 - 9/90 6/87 5 - 40 Years Post Parkside.................. Mixed Use 318 2/99 12/97 5 - 40 Years Post Peachtree................. Apartments -- 6/00 (4) 5/00 -- Post Peachtree Hills........... Apartments 3,257 2/92 - 9/94 2 & 11/92 (6) 5 - 40 Years Post Pointe.................... Apartments 6,363 4/87 - 12/88 12/86 5 - 40 Years Post Renaissance............... Apartments 5,263 7/91 - 12/94 6/91 & 1/94 (6) 5 - 40 Years Post Ridge..................... Apartments 1,957 10/96 7/96 5 - 40 Years Post Spring.................... Apartments -- 9/99 (4) 9/99 -- Post Summit.................... Apartments 2,406 1/90 - 12/90 1/90 5 - 40 Years Post Valley.................... Apartments 7,322 3/86 - 4/88 12/85 5 - 40 Years Post Vinings................... Apartments 7,613 5/88 - 9/91 5/88 5 - 40 Years Post Village The Arbors................... Apartments 5,729 4/82 - 10/83 3/82 5 - 40 Years The Fountains The Meadows Apartments 13,479 8/85 - 5/88 8/85 5 - 40 Years The Gardens.................. Apartments 9,772 6/88 - 7/89 5/84 5 - 40 Years The Hills.................... Apartments 4,718 5/84 - 4/86 4/83 5 - 40 Years Post Walk...................... Apartments 7,450 3/86 - 8/87 6/85 5 - 40 Years Post Woods..................... Apartments 10,667 3/76 - 9/83 6/76 5 - 40 Years 3400 Stratford................. Apartments -- 4/99(4) 1/99 -- Post Riverside................. Mixed Use 2,695 7/96 1/96 5 - 40 Years TEXAS Addison Circle Apartment Homes by Post - Phase I....... Mixed Use 5,517 10/97 10/97 5 - 40 Years Addison Circle Apartment Homes by Post - Phase II...... Mixed Use 3,858 10/97(4) 10/97 5 - 40 Years Addison Circle Apartment Homes by Post - Phase III..... Mixed Use 14 7/99(4) 10/97 5 - 40 Years Post American Beauty Mill...... Apartments 428 10/97 10/97 5 - 40 Years Block 588...................... Apartments 2 10/97 10/97 5 - 40 Years Clyde Lane..................... Apartments -- 10/97(4) 10/97 -- Cole's Corner.................. Mixed Use 2,443 n/a 10/97 5 - 40 Years Post Columbus Square........... Mixed Use 2,099 n/a 10/97 5 - 40 Years Heights of State-Thomas........ Mixed Use 3,403 10/97 10/97 5 - 40 Years Legacy at Town Center.......... Apartments -- (4) -- Post Midtown - Phase I......... Apartments 548 10/97 10/97 5 - 40 Years Post Midtown - Phase II........ Apartments -- 10/97 (4) 10/97 -- Post Midtown - Phase III....... Apartments -- -- (4) 2/00 -- Post Parkwood.................. Apartments 629 n/a 10/97 5 - 40 Years Post Ascension................. Apartments 964 n/a 10/97 5 - 40 Years Post Hackberry Creek........... Apartments 2,359 n/a 10/97 5 - 40 Years Post Lakeside.................. Apartments 2,433 n/a 10/97 5 - 40 Years Post Town Lake/Parks........... Apartments 2,353 n/a 10/97 5 - 40 Years Post White Rock................ Apartments 1,171 n/a 10/97 5 - 40 Years Post Winsted................... Apartments 1,583 n/a 10/97 5 - 40 Years Post Windhaven................. Apartments 2,297 n/a 10/97 5 - 40 Years Post Shores.................... Apartments 6,870 n/a 10/97 5 - 40 Years The Abbey of State-Thomas...... Apartments 653 n/a 10/97 5 - 40 Years The Commons at Turtle Creek.... Apartments 1,017 n/a 10/97 5 - 40 Years The Meridian at State-Thomas... Apartments 1,179 n/a 10/97 5 - 40 Years The Residences on McKinney..... Mixed Use 2,238 n/a 10/97 5 - 40 Years
83 86
The Rice..................... Mixed Use -- -- 13,393 24,192 -- 37,585 37,585 The Vineyard of Uptown....... Apartments -- 1,133 8,560 128 1,133 8,688 9,821 The Vintage of Uptown........ Apartments -- 2,614 12,188 264 2,614 12,452 15,066 West Avenue Lofts............ Apartments -- 4,454 16,490 -- 4,454 16,490 20,944 The Worthington of State-Thomas................ Mixed Use -- 3,744 34,700 959 3,744 35,659 39,403 Uptown Village I & II........ Mixed Use 22,608 3,955 22,120 17,694 6,551 37,218 43,769 Post Wilson Building......... Mixed Use -- 2,766 689 14,313 -- 17,768 17,768 Campus Circle................ Retail -- 1,045 3,084 734 1,045 3,631 (7) 4,676 Towne Crossing............... Retail -- 3,703 10,721 897 3,703 11,618 15,321 Post & Paddock............... Retail -- 2,352 7,383 560 2,352 6,820 (7) 9,172 FLORIDA Post Bay..................... Apartments -- 2,203 -- 15,481 2,573 15,111 17,684 Post Court................... Apartments -- 2,083 -- 10,185 2,083 10,185 12,268 Post Fountains............... Apartments 21,500 (2) 3,856 -- 24,063 3,856 24,063 27,919 Post Harbour Place........... Apartments -- 3,854 -- 64,929 16,183 52,600 68,783 Post Hyde Park............... Apartments -- 3,498 -- 25,891 5,108 24,281 29,389 Post Lake.................... Apartments 28,500 (2) 6,113 -- 32,144 6,724 31,533 38,257 Post Parkside (Orlando) Mixed Use -- 8,673 -- 23,108 2,493 29,288 31,781 Post Rocky Point............. Apartments -- 10,510 -- 59,406 10,510 59,406 69,916 Post Village The Arbors.................. Apartments -- 2,063 -- 14,668 2,906 13,825 16,731 The Lakes Apartments -- 2,813 -- 17,265 3,488 16,590 20,078 The Oaks.................... Apartments -- 3,229 -- 15,733 3,294 15,668 18,962 Post Walk at Hyde Park....... Apartments -- 1,943 -- 10,841 1,974 10,810 12,784 VIRGINIA Post Corners at Trinity Centre Apartments 22,395 4,404 -- 23,568 4,493 23,479 27,972 Post Forest.................. Apartments -- 8,590 -- 24,663 9,106 24,147 (3) 33,253 NEW YORK 1499 Mass. Avenue..... Apartments -- 19,199 -- 1,051 19,199 1,051 20,250 CALIFORNIA Post Paseo............ Apartments -- 8,524 -- 4,324 8,524 4,324 12,848 WASHINGTON, D.C. Post Pentagon Row..... Mixed Use -- -- 7,659 39,457 -- 47,116 47,116 NORTH CAROLINA Uptown Place.......... Apartments -- 2,336 -- 27,485 2,336 27,485 29,821 Gateway............... Apartments -- 2,424 -- 28,762 2,424 28,762 31,186 Post Park at Phillips Place.. Mixed Use -- 4,305 -- 36,583 4,307 36,581 40,888 ARIZONA Roosevelt Sq. I....... Mixed Use -- 1,920 -- 42,181 1,680 42,421 44,101 Roosevelt Sq. II...... Mixed Use -- 1,175 -- 2,017 1,800 1,392 3,192 TENNESSEE Bennie Dillon......... Mixed Use -- 145 -- 8,324 -- 8,469 8,469 The Lee Apartments.... Apartments -- 720 2,125 532 761 2,616 3,377 COLORADO Uptown Denver I & II.. Apartments -- 3,257 580 71,399 2,963 72,273 75,236 MISCELLANEOUS INVESTMENTS -- 18,129 4,035 38,378 32,848 27,694 60,542 --------- --------- ---------- ---------- --------- ---------- ---------- TOTAL $ 468,384 $ 382,045 $ 526,960 $1,938,072 $ 409,917 $2,417,177 $2,827,094 ========= ========= ========== ========== ========== ========== ========== The Rice..................... Mixed Use 1,522 10/97 10/97 5 - 40 Years The Vineyard of Uptown....... Apartments 724 n/a 10/97 5 - 40 Years The Vintage of Uptown........ Apartments 1,160 n/a 10/97 5 - 40 Years West Avenue Lofts............ Apartments -- 9/99 (4) 8/99 -- The Worthington of State-Thomas................ Mixed Use 3,324 n/a 10/97 5 - 40 Years Uptown Village I & II........ Mixed Use 1,996 n/a 10/97 5 - 40 Years Post Wilson Building......... Mixed Use 287 10/97 10/97 -- Campus Circle................ Retail 427 n/a 10/97 5 - 40 Years Towne Crossing............... Retail 922 n/a 10/97 5 - 40 Years Post & Paddock............... Retail 469 n/a 10/97 5 - 40 Years FLORIDA Post Bay..................... Apartments 5,661 5/87 - 12/88 5/87 5 - 40 Years Post Court................... Apartments 3,673 4/90 - 5/91 10/87 5 - 40 Years Post Fountains............... Apartments 8,503 12/85 - 3/88 12/85 5 - 40 Years Post Harbour Place........... Apartments 826 3/97 (4) 1/97 5 - 40 Years Post Hyde Park............... Apartments 2,967 9/94 7/94 5 - 40 Years Post Lake.................... Apartments 12,240 11/85 - 3/88 10/85 5 - 40 Years Post Parkside (Orlando) Mixed Use 2 3/99 3/99 5 - 40 Years Post Rocky Point............. Apartments 6,580 4/94 - 11/96 2/94 & 9/96 (6) 5 - 40 Years Post Village The Arbors.................. Apartments 4,814 6/90 - 12/91 11/90 5 - 40 Years The Lakes Apartments 5,777 7/88 - 12/89 5/88 5 - 40 Years The Oaks.................... Apartments 5,456 11/89 - 7/91 12/89 5 - 40 Years Post Walk at Hyde Park....... Apartments 1,943 10/95 - 9/97 9/95 5 - 40 Years VIRGINIA Post Corners at Trinity Centre Apartments 3,688 6/94 6/94 5 - 40 Years Post Forest.................. Apartments 9,935 1/89 - 12/90 3/88 5 - 40 Years NEW YORK 1499 Mass. Avenue..... Apartments -- -- 9/00 -- CALIFORNIA Post Paseo............ Apartments -- 6/00(4) 4/00 -- WASHINGTON, D.C. Post Pentagon Row..... Mixed Use -- 6/99(4) 2/99 -- NORTH CAROLINA Uptown Place.......... Apartments 1 9/98(4) 9/98 5 - 40 Years Gateway............... Apartments -- 9/99(4) 6/99 -- Post Park at Phillips Place.. Mixed Use 4,701 1/96 11/95 5 - 40 Years ARIZONA Roosevelt Sq. I....... Mixed Use 1 2/99(4) 2/99 5 - 40 Years Roosevelt Sq. II...... Mixed Use -- 2/99(4) 2/99 -- TENNESSEE Bennie Dillon......... Mixed Use 208 7/98 7/98 5 - 40 Years The Lee Apartments.... Apartments 277 n/a(5) 8/96 5 - 40 Years COLORADO Uptown Denver I & II.. Apartments 1 10/97 (4) 10/97 5 - 40 Years MISCELLANEOUS INVESTMENTS 10,855 5 - 40 Years ---------- TOTAL $ 357,180 ==========
(1) The aggregate cost for Federal Income Tax purposes to the Company was approximately $2,440,712 at December 31, 2000, taking into account the special allocation of gain to the partners contributing property to the Operating Partnership. (2) These properties serve as collateral for the Federal National Mortgage Association credit enhancement. (3) Balance includes an allowance for possible loss of $3,700, which was taken in prior years. (4) Construction still in process as of December 31, 2000. (5) The Company acquired this community during 1996. The Company is operating the community while evaluating whether to hold, renovate or sell the community. (6) Additional land was acquired for construction of a second phase. (7) These properties are currently held for sale. The carrying value of the assets has been adjusted based on management's best estimate of the expected proceeds from sales. 84 87 A summary of activity for real estate investments and accumulated depreciation is as follows:
YEAR ENDED DECEMBER 31, --------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Real estate investments: Balance at beginning of year .................. $ 2,582,785 $ 2,255,074 $ 1,936,011 Improvements ............................... 380,856 345,994 319,408 Disposition of property .................... (136,547) (18,283) (345) ----------- ----------- ----------- Balance at end of year ........................ $ 2,827,094 $ 2,582,785 $ 2,255,074 =========== =========== =========== Accumulated depreciation: Balance at beginning of year .................. $ 303,016 $ 247,148 $ 201,095 Depreciation ................................ 71,605 (a) 57,136 (a) 46,288 (a) Joint Venture Depreciation .................. (2,425) (690) -- Depreciation on disposed property ........... (15,016) (578) (235) ----------- ----------- ----------- Balance at end of year ........................... $ 357,180 (b) $ 303,016 $ 247,148 =========== =========== ===========
(a) Depreciation expense in the Consolidated Statements for the years ended December 31, 2000, 1999 and 1998, includes $492, $877 and $335, respectively, of depreciation expense on other assets. (b) Accumulated depreciation on the balance sheet is net of $12,059 of accumulated depreciation on assets held for sale. 85 88 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the Post Properties, Inc. 1995 Non-Qualified Employee Stock Purchase Plan In our opinion, the accompanying statements of net assets available for plan benefits and of changes in net assets available for plan benefits present fairly, in all material respects, the net assets of the Post Properties, Inc. 1995 Non-Qualified Employee Stock Purchase Plan at December 31, 2000 and 1999 and the changes in net assets available for plan benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Atlanta, Georgia February 16, 2001 86 89 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 ---------- ---------- ASSETS Receivable from Post Apartment Homes, L.P. .............................. $ 473,017 $ 492,698 ========== ========== NET ASSETS AVAILABLE FOR PLAN BENEFITS Net assets available for plan benefits .................................. $ 473,017 $ 492,698 ========== ==========
87 90 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 ---------- ---------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1 ......................... $ 492,698 $ 563,764 DEDUCTIONS: Purchase of participants' shares ........................................ (898,218) (974,817) Payment for payroll taxes on behalf of participants ....................................................... (69,322) (49,104) ADDITIONS: Participant contributions ............................................... 947,859 952,855 ---------- ---------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31 ....................... $ 473,017 $ 492,698 ========== ==========
88 91 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Post Properties, Inc. (the "Company") established the 1995 Non-Qualified Employee Stock Purchase Plan (the "Plan") to encourage stock ownership by eligible directors and employees. (B) The financial statements have been prepared on the accrual basis of accounting. (C) All expenses incurred in the administration of the Plan are paid by the Company and are excluded from these financial statements. NOTE 2 - THE PLAN The Plan became effective as of January 1, 1995. Under the Plan, eligible participating employees and directors of the Company can purchase Common Stock at a discount (up to 15% as set by the Compensation Committee of the Company's Board of Directors) from the Company through salary withholding or cash contributions. The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, nor is it intended to qualify for special tax treatment under Section 401(a) of the Internal Revenue Code. Directors who have been a member of the Board of Directors for at least one full calendar month and full-time employees who have been employed a full calendar month are eligible to participate in the Plan. Eligible directors and employees (the "Participants") may contribute in cash or as a specified dollar amount or percentage of their compensation to the Plan. The minimum payroll deduction for a Participant for each payroll period for purchases under the Plan is $10.00. The maximum contribution which a Participant can make for purchases under the Plan for any calendar year is $100,000. All contributions to the Plan are held in the general assets of Post Apartment Homes, L.P., the Company's operating partnership. Shares of the Company's Common Stock are purchased by an investment firm semi-annually after the end of each six-month period, as defined, and credited to each Participant's individual account. The purchase price of the Common Stock purchased pursuant to the Plan is currently equal to 85% of the closing price on either the first or last trading day of each purchase period, whichever is lower. All Common Stock of the Company purchased by Participants pursuant to the Plan may be voted by the Participants or as directed by the Participants. The Plan does not discriminate, in scope, terms, or operation, in favor of officers or directors of the Company and is available, subject to the eligibility rules of the Plan, to all employees of the Company on the same basis. NOTE 3 - FEDERAL INCOME TAXES The Plan is not subject to Federal income taxes. The difference between the fair market value of the shares acquired under the Plan, and the amount contributed by the Participants is treated as ordinary income to the Participants' for Federal income tax purposes. Accordingly, the Company withholds all applicable taxes from the employee contributions. The fair market value of the shares is determined as of the stock purchase date. 89 92 3. EXHIBITS Certain of the exhibits required by Item 601 of Regulation S-K have been filed with previous reports by the registrant and are herein incorporated by reference thereto. The Registrants agree to furnish a copy of all agreements relating to long-term debt upon request of the Commission.
EXHIBIT NO. DESCRIPTION 3.1(a) -- Articles of Incorporation of the Company 3.2(b) -- Articles of Amendment to the Articles of Incorporation of the Company 3.3(c) -- Articles of Amendment to the Articles of Incorporation of the Company 3.4(d) -- Articles of Amendment to the Articles of Incorporation of the Company 3.5(e) -- Articles of Amendment to the Articles of Incorporation of the Company 3.6(a) -- Bylaws of the Company 4.1(f) -- Indenture between the Company and SunTrust Bank, as Trustee 4.2(f) -- First Supplemental Indenture to the Indenture between the Company and SunTrust Bank, as Trustee 10.1(g) -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership 10.2(g) -- First Amendment to Second Amended and Restated Partnership Agreement 10.3(g) -- Second Amendment to Second Amended and Restated Partnership Agreement 10.4(k) -- Third Amendment to Second Amended and Restated Partnership Agreement 10.5(k) -- Fourth Amendment to Second Amended and Restated Partnership Agreement 10.6(e) -- Fifth Amendment to the Second Amended and Restated Partnership Agreement 10.7 -- Sixth Amendment to Amended and Restated Partnership Agreement 10.8(h) -- Employee Stock Plan 10.9(g) -- Amendment to Employee Stock Plan 10.10(g) -- Amendment No. 2 to Employee Stock Plan 10.11(g) -- Amendment No. 3 to Employee Stock Plan 10.12(g) -- Amendment No. 4 to Employee Stock Plan 10.13(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams 10.14(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover 10.15(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams dated as of June 1, 1998 10.16(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover dated as of June 1, 1998 10.17(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John A. Williams dated June 1, 1998 10.18(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John T. Glover dated as of June 1, 1998 10.19(e) -- Option and Transfer Agreement among the Operating Partnership, Post Services, John A. Williams and John T. Glover 10.20(h) -- Promissory Note made by Post Services, Inc. in favor of RAM Partners, Inc. 10.21(g) -- Form of officers and directors Indemnification Agreement 10.22(a) -- Form of Option Agreement to be entered into between the Operating Partnership and the owners of four parcels of undeveloped land 10.23(a) -- Profit Sharing Plan of the Company 10.24(g) -- Amendment Number One to Profit Sharing Plan 10.25(g) -- Amendment Number Two to Profit Sharing Plan
90 93 10.26(g) -- Amendment Number Three to Profit Sharing Plan 10.27(g) -- Amendment Number Four to Profit Sharing Plan 10.28(h) -- Form of General Partner 1% Exchange Agreement 10.29(i) -- Employee Stock Purchase Plan 10.30(g) -- Amendment to Employee Stock Purchase Plan 10.31(i) -- Amended and Restated Dividend Reinvestment and Stock Purchase Plan 10.32 -- Fifth Amended and Restated Credit Agreement dated as of January 1, 2001 among Post Apartment Homes, L.P., Wachovia Bank of Georgia, N.A., and the banks listed on the signature pages there to (the "Fifth Credit Agreement") 10.33(l) -- Deferred Compensation Plan for Directors and Executive Committee Members 21.1 -- List of Subsidiaries 23.1 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-62243) 23.2 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-70689) 23.3 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 33-81772) 23.4 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-36595) 23.5 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-47399) 23.6 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 33-00020) 23.7 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-94121) 23.8 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-80427) 23.9 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-44722) 23.10 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-42884) 23.11 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-55994)
- --------------- (a) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-61936), as amended, of the Company. (b) Filed as an exhibit to the Current Report on Form 8-K, dated as of October 1, 1996, of the Company. (c) Filed as an exhibit to the Current Report on Form 8-K, dated as of October 28, 1997, of the Company. (d) Filed as an exhibit to the Current Report on Form 8-K, dated as of February 9, 1998, of the Company. (e) Filed as an exhibit to the Quarterly Report on Form 10-Q, dated as of November 15, 1999, of the Company. (f) Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No. 333-42884) of the Company. (g) Filed as an exhibit to the Annual Report on Form 10-K of the Company for the year ended December 31, 1997. (h) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-71650), as amended, of the Company. (i) Filed as an exhibit to the Registration Statement on Form S-8 (SEC File No. 33-86674) of the Company. (j) Filed as part of the Registration Statement on Form S-3 (SEC File No. 333-39461) of the Company. (k) Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for the year ended December 31, 1998. (l) Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for the year ended December 31, 1999. (b) Reports on Form 8-K During the fourth quarter of fiscal 2000 the Company and the Operating Partnership each filed Reports on Form 8-K on October 2, 2000, November 30, 2000 and December 20, 2000. 91 94 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POST PROPERTIES, INC. (Registrant) /s/ John T. Glover March 21, 2001 -------------------------------------------- John T. Glover, Vice Chairman and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE /s/ John A. Williams ------------------------------ Chairman of the Board, Chief Executive Officer John A. Williams and Director (Principal Executive Officer) /s/ John T. Glover ------------------------------ Vice Chairman and Director John T. Glover /s/ R. Gregory Fox ------------------------------ Executive Vice President, Chief Financial Officer R. Gregory Fox /s/ Robert Anderson ------------------------------ Director Robert 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
92 95 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POST APARTMENT HOMES, L.P. By: Post G.P. Holdings, Inc., as General Partner March 21, 2001 By: /s/ John T. Glover ---------------------------------------- John T. Glover, Vice Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE /s/ John A. Williams ------------------------------ Chief Executive Officer John A. Williams /s/ John T. Glover ------------------------------ Vice Chairman John T. Glover /s/ R. Gregory Fox ------------------------------ Executive Vice President, Chief Financial Officer R. Gregory Fox
93 EX-10.7 2 g67475ex10-7.txt AMENDED AND RESTATED PARTNERSHIP 1 EXHIBIT 10.7 SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF POST APARTMENT HOMES, L.P. This Sixth Amendment to Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P. (this "Amendment") is entered into as of September 22, 2000, by and among Post GP Holdings, Inc. (the "General Partner") and the Limited Partners of Post Apartment Homes, L.P. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings given to them in the Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated October 24, 1997, as amended to date (the "Partnership Agreement"). WHEREAS, the Fifth Amendment to Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P. (the "Fifth Amendment") was entered into as of September 3, 1999 (the "Fifth Amendment Effective Date"); WHEREAS, Section 5(a) of the Fifth Amendment substituted a new Exhibit C to the Partnership Agreement in place of the then-existing exhibit relating to special allocation rules; and WHEREAS, the General Partner and the Limited Partners now wish to make a correction to the language of the last sentence of Section 1.F. of Exhibit C to the Partnership Agreement so that such language is consistent with the original intent and agreement of the General Partner and the Limited Partners in adopting the Fifth Amendment; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: Exhibit C to the Partnership Agreement is hereby deleted in its entirety and the attached Exhibit C is substituted therefor. The attached Exhibit C shall be effective as of the Fifth Amendment Effective Date. 2 IN WITNESS WHEREOF, the parties hereto have executed the Amendment under seal as of the date first written above. GENERAL PARTNER: POST GP HOLDINGS, INC., a Georgia corporation By: John T. Glover ----------------------------------- Name: John T. Glover Title: Vice Chairman Attest: Sherry W. Cohen ------------------------------- Name: Sherry W. Cohen Title: Executive Vice President LIMITED PARTNERS: POST LP HOLDINGS, INC., a Georgia corporation, as attorney-in-fact for the Limited Partners By: John T. Glover ----------------------------------- Name: John T. Glover Title: Vice Chairman Attest: Sherry W. Cohen ------------------------------- Name: Sherry W. Cohen Title: Executive Vice President 2 3 EXHIBIT C SPECIAL ALLOCATION RULES 1. Special Allocation Rules Notwithstanding any other provision of the Agreement or this Exhibit C, the following special allocations shall be made in the following order: A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there is a net decrease in Partnership Minimum Gain during any Partnership Year, each Partner shall be specially allocated items of Partnership gross income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each Partner's Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of this Agreement with respect to such Partnership Year and without regard to any decrease in Partner Minimum Gain during such Partnership Year. B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of Section 6.1 of the Agreement or any other provisions of this Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership Year, each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership gross income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such Partnership Year, other than allocations pursuant to Section 1.A hereof. C. Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704- 4 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital Account Deficit, items of Partnership gross income and gain shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership Year shall be allocated to the Partners in accordance with their respective Percentage Interests in Common Partnership Units. If the General Partner determines in its good faith discretion that Nonrecourse Deductions for any Partnership Year must be allocated in a different ratio to satisfy the safe harbor requirements of the Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio for such Partnership Year to the numerically closest ratio which does satisfy such requirements. E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(2). F. Priority Allocation With Respect To Preferred Partnership Units. All or a portion of the remaining items of Partnership gross income or gain for the Partnership Year, if any, shall be specially allocated to the Partners holding Preferred Partnership Units in an amount equal to the excess, if any, of the cumulative distributions received by each such Partner pursuant to Section 5.1(i) hereof for the current Partnership Year and all prior Partnership Years (other than any distributions that are treated as being in satisfaction of the Liquidation Preference Amount for any Preferred Partnership Units) over the cumulative allocations of Partnership gross income and gain to such Partner under this Section 1.F for all prior Partnership Years (such allocations being made in proportion to the respective excess amounts for each such Partner). For purposes of making the priority allocation required by this Section 1.F., all Partnership distributions payable in respect of any series of Preferred Partnership Units which are declared by the General Partner on or before the end of a Partnership Year but which are paid within 31 calendar days after the end of such Partnership Year shall be deemed to have been paid on the last day of such Partnership Year. G. Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which 5 their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations. 2. Allocations for Tax Purposes A. Except as otherwise provided in this Section 2, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. B. In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for federal income tax purposes among the Partners as follows: 1. In the case of a Contributed Property, such items attributable thereto shall be allocated a. among the Partners in a manner consistent with the principles of Section 704(c) of the Code that takes into account the variation between the 704(c) Value of such property and its adjusted basis at the time of contribution; and b. any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. 2. In the case of an Adjusted Property, such items attributable thereto shall be allocated, a. first, among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Exhibit B; b. second, in the event such property was originally a Contributed Property, among the Partners in a manner consistent with Section 2.B.(1) of this Exhibit C; and c. any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or 6 loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. 3. All other items of income, gain, loss and deduction shall be allocated among the Partners in the same manner as their correlative item of "book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C. C. To the extent Regulations promulgated pursuant to Section 704(c) of the Code permit a partnership to utilize alternative methods to eliminate the disparities between the agreed value of property and its adjusted basis (including, without limitation, the implementation of curative allocations), the General Partner shall have the authority to elect the method to be used by the Partnership and such election shall be binding on all Partners. Without limiting the foregoing, the General Partner shall take all steps (including, without limitation, implementing curative allocations) that it determines are necessary or appropriate to ensure that the amount of taxable gain required to be recognized by the General Partner upon a disposition by the Partnership of any Contributed Property or Adjusted Property does not exceed the sum of (i) the gain that would be recognized by the General Partner if such Property had an adjusted tax basis at the time of disposition equal to the 704(c) Value of such property; plus (ii) the deductions for depreciation, amortization or other cost recovery actually allowed to the General Partner with respect to such property for federal income tax purposes (after giving effect to the "ceiling rule"). EX-10.32 3 g67475ex10-32.txt AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.32 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT among POST APARTMENT HOMES, L.P. The Banks Listed Herein, WACHOVIA BANK, N.A., as Administrative Agent and FIRST UNION NATIONAL BANK, as Syndication Agent and SUNTRUST BANK as Documentation Agent Dated as of January 12, 2001 2 TABLE OF CONTENTS FIFTH AMENDED AND RESTATED CREDIT AGREEMENT
Page ARTICLE I DEFINITIONS ............................................................................................ 1 SECTION 1.01. Definitions ..................................................................................... 1 SECTION 1.02. Accounting Terms and Determinations ............................................................. 18 SECTION 1.03. References ...................................................................................... 19 SECTION 1.04. Use of Defined Terms ............................................................................ 19 SECTION 1.05. Terminology ..................................................................................... 19 ARTICLE II THE CREDITS ........................................................................................... 19 SECTION 2.01. Commitments to Lend Loans ....................................................................... 19 SECTION 2.02. Method of Borrowing Loans other than Transaction Rate Loans ..................................... 21 SECTION 2.03. Money Market Loans .............................................................................. 23 SECTION 2.04. Notes ........................................................................................... 26 SECTION 2.05. Maturity of Loans ............................................................................... 27 SECTION 2.06. Interest Rates .................................................................................. 28 SECTION 2.07. Fees ............................................................................................ 30 SECTION 2.08. Optional Termination or Reduction of Commitments ................................................ 31 SECTION 2.09. Mandatory Termination of Commitments ............................................................ 31 SECTION 2.10. Optional Prepayments ............................................................................ 31 SECTION 2.11. Mandatory Prepayments ........................................................................... 32 SECTION 2.12. General Provisions as to Payments ............................................................... 32 SECTION 2.13. Computation of Interest and Fees ................................................................ 35 SECTION 2.14. Changes to Commitments .......................................................................... 35 SECTION 2.15. Additional Banks and Commitments ................................................................ 35 ARTICLE III CONDITIONS TO BORROWINGS ............................................................................. 36 SECTION 3.01. Conditions to First Borrowing ................................................................... 36 SECTION 3.02. Conditions to All Borrowings .................................................................... 37 ARTICLE IV REPRESENTATIONS AND WARRANTIES ........................................................................ 38 SECTION 4.01. Partnership or Corporate Existence and Power .................................................... 38 SECTION 4.02. Partnership or Corporate and Governmental Authorization; No Contravention ................................................................................ 38 SECTION 4.03. Binding Effect .................................................................................. 38 SECTION 4.04. Financial and Property Information .............................................................. 38 SECTION 4.05. No Litigation ................................................................................... 39 SECTION 4.06. Compliance with ERISA ........................................................................... 39
i 3 SECTION 4.07. Compliance with Laws; Payment of Taxes .......................................................... 39 SECTION 4.08. Subsidiaries .................................................................................... 40 SECTION 4.09. Investment Company Act .......................................................................... 40 SECTION 4.10. Public Utility Holding Company Act .............................................................. 40 SECTION 4.11. Ownership of Property ........................................................................... 40 SECTION 4.12. No Default ...................................................................................... 40 SECTION 4.13. Full Disclosure ................................................................................. 40 SECTION 4.14. Environmental Matters ........................................................................... 40 SECTION 4.15. Partner Interests and Capital Stock ............................................................. 41 SECTION 4.16. Margin Stock .................................................................................... 41 SECTION 4.17. Insolvency ...................................................................................... 41 SECTION 4.18. Insurance ....................................................................................... 42 SECTION 4.19. Real Estate Investment Trust .................................................................... 42 ARTICLE V COVENANTS .............................................................................................. 42 SECTION 5.01. Information ..................................................................................... 42 SECTION 5.02. Inspection of Property, Books and Records ....................................................... 43 SECTION 5.03. Consolidated Total Secured Debt ................................................................. 44 SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets ................................... 44 SECTION 5.05. Interest Coverage ............................................................................... 44 SECTION 5.06. Restricted Payments ............................................................................. 44 SECTION 5.07. Consolidated Fixed Charges Coverage Ratio ....................................................... 44 SECTION 5.08. Unsecured Fixed Charges Coverage ................................................................ 44 SECTION 5.09. Unencumbered Assets ............................................................................. 44 SECTION 5.10. Investments ..................................................................................... 45 SECTION 5.11. Dissolution; Redemptions ........................................................................ 45 SECTION 5.12. Consolidations, Mergers and Sales of Assets ..................................................... 45 SECTION 5.13. Use of Proceeds ................................................................................. 46 SECTION 5.14. Compliance with Laws; Payment of Taxes .......................................................... 47 SECTION 5.15. Insurance ....................................................................................... 47 SECTION 5.16. Change in Fiscal Year ........................................................................... 47 SECTION 5.17. Maintenance of Property; Principal Business ..................................................... 48 SECTION 5.18. Environmental Notices ........................................................................... 48 SECTION 5.19. Environmental Matters ........................................................................... 48 SECTION 5.20. Environmental Release ........................................................................... 48 SECTION 5.21. Transactions with Affiliates .................................................................... 48 SECTION 5.22. Qualification as a Real Estate Investment Trust; General Partner ................................ 48 SECTION 5.23. Certain Covenants Concerning Subsidiaries ....................................................... 49 ARTICLE VI DEFAULTS .............................................................................................. 50 SECTION 6.01. Events of Default ............................................................................... 50 SECTION 6.02. Notice of Default ............................................................................... 52
ii 4 ARTICLE VII THE ADMINISTRATIVE AGENT ............................................................................. 52 SECTION 7.01. Appointment; Powers and Immunities .............................................................. 52 SECTION 7.02. Reliance by Administrative Agent ................................................................ 53 SECTION 7.03. Defaults ........................................................................................ 53 SECTION 7.04. Rights of Administrative Agent as a Bank ........................................................ 53 SECTION 7.05. Indemnification ................................................................................. 53 SECTION 7.06. Consequential Damages ........................................................................... 54 SECTION 7.07. Payee of Note Treated as Owner .................................................................. 54 SECTION 7.08. Nonreliance on Administrative Agent and Other Banks ............................................. 54 SECTION 7.09. Failure to Act .................................................................................. 55 SECTION 7.10. Resignation or Removal of Administrative Agent .................................................. 55 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION ............................................................... 55 SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ........................................ 55 SECTION 8.02. Illegality ...................................................................................... 56 SECTION 8.03. Increased Cost and Reduced Return ............................................................... 56 SECTION 8.04. Base Rate Loans or Other Euro-Dollar Loans Substituted for Affected Euro-Dollar Loans ........... 58 SECTION 8.05. Compensation .................................................................................... 58 ARTICLE IX MISCELLANEOUS ......................................................................................... 59 SECTION 9.01. Notices ......................................................................................... 59 SECTION 9.02. No Waivers ...................................................................................... 59 SECTION 9.03. Expenses; Documentary Taxes ..................................................................... 59 SECTION 9.04. Indemnification ................................................................................. 60 SECTION 9.05. Setoff; Sharing of Setoffs ...................................................................... 60 SECTION 9.06. Amendments and Waivers .......................................................................... 61 SECTION 9.07. No Margin Stock Collateral ...................................................................... 62 SECTION 9.08. Successors and Assigns .......................................................................... 62 SECTION 9.09. Confidentiality ................................................................................. 65 SECTION 9.10. Representation by Banks ......................................................................... 65 SECTION 9.11. Obligations Several ............................................................................. 66 SECTION 9.12. Georgia Law ..................................................................................... 66 SECTION 9.13. Severability .................................................................................... 66 SECTION 9.14. Interest ........................................................................................ 66 SECTION 9.15. Interpretation .................................................................................. 67 SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction ................................................... 67 SECTION 9.17. Counterparts .................................................................................... 67 SECTION 9.18. Source of Funds--ERISA .......................................................................... 67 SECTION 9.19. No Bankruptcy Proceedings ....................................................................... 67
iii 5 EXHIBIT A-1 Form of Syndicated Loan Note EXHIBIT A-2 Form of Swing Loan Note EXHIBIT A-3 Form of Money Market Loan Note EXHIBIT B Form of Opinion of Counsel for the Borrower and Guarantor EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent EXHIBIT D Form of Assignment and Acceptance EXHIBIT E Form of Notice of Borrowing EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Closing Certificate EXHIBIT H Form of Guaranty EXHIBIT I Form of Money Market Quote Request EXHIBIT J Form of Money Market Quote EXHIBIT K Form of Designation Agreement EXHIBIT L Form of Contribution Agreement Schedule 4.08 Subsidiaries
iv 6 FIFTH AMENDED AND RESTATED CREDIT AGREEMENT FIFTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 12, 2001 among POST APARTMENT HOMES, L.P., the BANKS listed on the signature pages hereof, FIRST UNION NATIONAL BANK (formerly First Union National Bank of Georgia), as Syndication Agent, WACHOVIA BANK, N.A. (formerly Wachovia Bank of Georgia, N.A.), as Administrative Agent and SUNTRUST BANK, as Documentation Agent. This Fifth Amended and Restated Credit Agreement is an amendment and restatement of the Amended and Restated Credit Agreement by and among the Borrower, Wachovia Bank of Georgia, N.A., First Union National Bank of Georgia, SunTrust Bank, Corestates Bank, and Commerzbank AG, Atlanta Agency, as Banks, First Union National Bank of Georgia, as Co-Agent, and Wachovia Bank of Georgia, N.A., as Administrative Agent, dated as of April 9, 1997, as amended by First Amendment to Amended and Restated Credit Agreement dated December 17, 1997, Second Amendment to Amended and Restated Credit Agreement dated July 31, 1998, as amended and restated by Second Amended and Restated Credit Agreement by and among the Borrower, Wachovia Bank, N.A., First Union National Bank, SunTrust Bank, Commerzbank AG, Atlanta Agency, Four Winds Funding Corporation, Bank One, Texas, N.A., and Chase Bank of Texas, National Association, as Banks, Wachovia Bank, N.A., as Administrative Agent, First Union National Bank, as Syndication Agent, and SunTrust Bank, as Documentation Agent, dated as of November 20, 1998, as amended by First Amendment to Second Amended and Restated Credit Agreement dated February 18, 1999, as amended by Third Amended and Restated Credit Agreement dated as of May 7, 1999, by and among the Borrower, Wachovia Bank, N.A., First Union National Bank, SunTrust Bank, Atlanta, NationsBank, N.A., SouthTrust Bank, Bank One, Texas, N.A., Commerzbank, A.G., Atlanta Agency, Four Winds Funding Corporation, Chase Bank of Texas, N.A. and PNC Bank, National Association, as Banks, and Wachovia Bank, as Administrative Agent, as amended by Fourth Amended and Restated Credit Agreement by and among the Borrower, Wachovia Bank, N.A., First Union National Bank, SunTrust Bank, Bank of America, N.A., SouthTrust Bank, Commerzbank, A.G., New York and Cayman Branches, Bank One, NA, Chase Bank of Texas, National Association. and PNC Bank, National Association, as Banks, and Wachovia Bank, as Administrative Agent, First Union National Bank, as Syndication Agent and SunTrust Bank, as Documentation Agent, dated as of April 3, 2000, as amended by letter agreement dated as of October 4, 2000 (collectively, the "Original Agreement"), all of which are superseded hereby. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: 7 "Adjusted Consolidated Income Available For Debt Service" means Consolidated Income Available For Debt Service plus Borrower's Joint Venture Share of Consolidated Income Available For Debt Service from Joint Ventures. "Adjusted Consolidated Interest Expense" means Consolidated Interest Expense plus Borrower's Joint Venture Share of interest expense of Joint Ventures. "Adjusted Fixed Charges" means the sum of (A) interest expense for Unsecured Funded Debt for the just ended Fiscal Quarter and three prior quarters, plus (B) scheduled principal payments on such Unsecured Funded Debt (excluding balloon payments payable at maturity ) for the Fiscal Quarter just ended and the prior three quarters. "Adjusted Total Asset Value" means Consolidated Total Asset Value; provided, that in calculating Adjusted Total Asset Value, clauses (v), (vi) and (vii) of the definition of Consolidated Total Asset Value shall be excluded. "Administrative Agent" means Wachovia Bank, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Banks hereunder, and its successors and permitted assigns in such capacity "Affiliate" of any relevant Person means (i) any Person that directly, or indirectly through one or more intermediaries, controls the relevant Person (a "Controlling Person"), (ii) any Person (other than the relevant Person or a Subsidiary of the relevant Person) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary of the relevant Person) of which the relevant Person owns, directly or indirectly, 20% or more of the voting common stock, general partnership interest in a general or limited partnership or equivalent equity interests in any other Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Fifth Amended and Restated Credit Agreement, together with all amendments and supplements hereto. "Applicable Margin" has the meaning set forth in Section 2.06(a). "Approved Unit Redemption Transactions" means the transactions in which (i) the Borrower will organize one or more direct or indirect wholly owned Subsidiaries (collectively the "New Subsidiaries") for the purpose of purchasing and holding certain real and/or personal property (the "New Assets") currently owned or controlled, directly or indirectly, by one or more Affiliates of the Borrower and PPI (such Affiliates, together with the Persons through which such Affiliates own or control the New Assets, being collectively referred to as the "Sellers"); (ii) the Borrower may borrow from the Banks or will borrow from certain other lenders, and will contribute to the New Subsidiaries, cash in an aggregate amount not to exceed $40,000,000; (iii) the New Subsidiaries will purchase the New Assets from the Sellers in one or more transactions for an aggregate cash amount not to exceed $40,000,000 for all such transactions (the "Aggregate Purchase Price"), such Aggregate Purchase Price to be determined based on the current fair market values for the New Assets and actual transaction costs; (iv) the Borrower will 2 8 redeem or otherwise acquire from certain Affiliates of the Borrower and PPI (such Affiliates, together with the Persons through which such Affiliates own or control the Partner Interests, being collectively referred to as the "Unit Holders") in one or more transactions the Partner Interests having an aggregate fair market value based on the fair market value of the Capital Stock of PPI into which such Partner Interests may be converted or for which they may be exchanged (referred to herein as the "Aggregate Partner Interests Value"); and (v) in consideration for such redemption or acquisition, the Borrower shall convey to the Unit Holders all ownership interests in the New Subsidiaries, and certain Unit Holders shall assume (as between the New Subsidiaries and the Borrower) and indemnify the Borrower with respect to indebtedness of the Borrower in an aggregate amount substantially equal to the difference between the Aggregate Purchase Price and the Aggregate Partner Interests Value. "Arranger" means Wachovia Securities, Inc. "Arranger's Letter Agreement" means that certain letter agreement, dated as of November 20, 2000 between the Borrower, the Arranger and the Administrative Agent relating to the structure of the Loans, and certain fees from time to time payable by the Borrower to the Arranger and the Administrative Agent, together with all amendments and supplements thereto. "Assignee" has the meaning set forth in Section 9.08(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.08(c) in the form attached hereto as Exhibit D. "Authority" has the meaning set forth in Section 8.02. "Bank" means each bank listed on the signature pages hereof as having a Commitment, and its successors and its assigns permitted hereby; provided, however, that the term "Bank" shall exclude each Designated Bank when used in reference to a Syndicated Loan, the Commitments or terms relating to the Syndicated Loans and the Commitments. "Base Rate" means for any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent above the Federal Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change. "Base Rate Loan" means a Loan to be made as a Base Rate Loan pursuant to the applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as applicable. "Borrower" means Post Apartment Homes, L.P., a Georgia limited partnership and its successors and its permitted assigns. "Borrowing" means a borrowing hereunder consisting of (i) Syndicated Loans made to the Borrower at the same time by all of the Banks, (ii) a Swing Loan made to the Borrower by Wachovia or (iii) a Money Market Loan made to the Borrower separately by one or more Banks, in each case pursuant to Article II. A Borrowing is a "Euro-Dollar Borrowing" if such Loans are made as Euro-Dollar Loans. A Borrowing is a "Base Rate Borrowing" if such Loan is made as a 3 9 Base Rate Loan. A Borrowing is a "Transaction Rate Borrowing" if such Loan is made as a Transaction Rate Loan. A Borrowing is a "Syndicated Loan Borrowing" if such Loans are made as Syndicated Loans. A Borrowing is a "Swing Loan Borrowing" if such Loans are made as Swing Loans. A Borrowing is a "Money Market Borrowing" if such Loans are made pursuant to Section 2.03. A Borrowing is a "Fixed Rate Borrowing" if such Loans are made as Fixed Rate Loans. "Capital Stock" means any capital stock issued by any Person, whether common or preferred, excluding Redeemable Preferred Stock. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.ss. 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. "Change in Control" shall mean the occurrence of either of the following: (i) more than 50% of the outstanding voting common stock of PPI is owned, directly or indirectly, by less than 6 "individuals" (as provided in Section 542(a)(2) of the Code); or (ii) a majority of the Persons comprising the Board of Directors of PPI shall during any 12 month period cease to serve on the Board of Directors of PPI for any reason other than disability or death. "Change of Law" shall have the meaning set forth in Section 8.02. "Closing Certificate" has the meaning set forth in Section 3.01(e). "Closing Date" means January 12, 2001. "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. "Commitment" means, with respect to each Bank, (i) the amount set forth opposite the name of such Bank on the signature pages hereof (the aggregate amount of all Commitments on the Closing Date being $320,000,000), and (ii) as to any Bank which enters into any Assignment and Acceptance (whether as transferor Bank or as Assignee thereunder), the amount of such Bank's Commitment after giving effect to such Assignment and Acceptance, in each case as such amount may be reduced from time to time pursuant to Sections 2.08 and 2.09 or increased from time to time pursuant to Sections 2.14 and 2.15. "Compliance Certificate" has the meaning set forth in Section 5.01(c). "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Fixed Charges" for any period means the sum of the following of the Borrower and its Subsidiaries, determined on a consolidated basis (i) Consolidated Interest Expense, plus (ii) all scheduled principal payments (excluding balloon payments payable at maturity), plus (iii) all preferred dividends paid or accrued (without duplication), plus (iv) 4 10 Borrower's Joint Venture Share of interest expense and scheduled principal payments (excluding balloon payments payable) of Joint Ventures. "Consolidated Fixed Charges Coverage Ratio" means, at any date, for the Fiscal Quarter most recently ended and the immediately preceding 3 Fiscal Quarters, the ratio of: (i) Adjusted Consolidated Income Available For Debt Service; to (ii) Consolidated Fixed Charges. "Consolidated Income Available For Debt Service" shall mean, for any period for the Borrower or the respective Joint Ventures, as the case may be, calculated on a consolidated basis, the sum of the following for such period for such Person and its Subsidiaries: (i) net income (including those portions of the earnings of such Persons' Joint Ventures actually paid in cash to such Persons during such period, but otherwise excluding such Persons' equity in the income and losses of such Persons' Joint Ventures) before minority interests and extraordinary items in accordance with GAAP, plus (ii) depreciation and amortization, plus (iii) losses from sales or from such Person's Joint Ventures, plus (iv) increases in deferred taxes and other non-cash items, minus (v) gains from sales or from such Persons' Joint Ventures, minus (vi) decreases in deferred taxes and other non-cash items, plus (vii) interest expense and fees of letters credit issued to support bonds, and plus (viii) taxes (excluding ad valorem taxes). "Consolidated Income Available For Debt Service From Eligible Properties" means Consolidated Income Available For Debt Service, but limited to such income which is derived from Eligible Properties (other than from Subsidiary Excluded Properties). "Consolidated Income Available for Distribution" means, in any calendar year, the sum of the following for such calendar year, calculated on a consolidated basis for the Borrower and its Subsidiaries: (i) Consolidated Income Available For Debt Service, less (ii) Consolidated Interest Expense, and less (iii) taxes (excluding ad valorem taxes and taxes on gains described in clause (v) of the definition of Consolidated Income Available For Debt Service). "Consolidated Interest Expense" for any period means interest expensed during such period, determined on a consolidated basis for the Borrower and its Subsidiaries. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Asset Value" means the sum of: (i) the quotient of (x) the Net Operating Income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Property which either was on average at least 90% Economically Occupied during, or with respect to which the Construction Period Termination Date occurred prior to the commencement of, such 12 month period, divided by (y) 0.0875; provided, that if a Property satisfies the criteria set forth in both this clause (i) and in clause (ii) below, it shall be included in the calculations only in clause (ii) below; plus (ii) an amount equal to the quotient of (x) 400% of the Net Operating Income for the 3 month period ending on the last day of the month just ended prior to the date of 5 11 determination, from each Property with respect to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period ending on the last day of the month just ended prior to the date of determination, divided by (y) 0.0875; plus (iii) an amount equal to 100% of the aggregate amount of cash expenditures (including indirect costs internally allocated in accordance with GAAP) as of the last day of the month just ended prior to the date of determination on all Properties as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended; plus (iv) an amount equal to 100% of all unrestricted cash and cash equivalents held by the Borrower and its Subsidiaries, including amounts on deposit with banks or other financial institutions and Investments of the types described in clause (A) of Section 5.10, provided, with respect to Investments described in clause (A)(iv), that such Investments are readily marketable; plus (v) the quotient of (x) the Joint Venture Share of the net operating income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Joint Venture Property which either was on average at least 90% Economically Occupied during, or with respect to which the Construction Period Termination Date occurred prior to the commencement of, such 12 month period, divided by (y) 0.0875; plus (vi) an amount equal to the Joint Venture Share of the aggregate amount of the quotient of (x) 400% of the net operating income for the 3 month period ending on the last day of the month just ended prior to the date of determination, from each Joint Venture Property with respect to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period ending on the last day of the month just ended prior to the date of determination, divided by (y) 0.0875; plus (vii) an amount equal to the Joint Venture Share of the aggregate amount of cash expenditures (including indirect costs internally allocated in accordance with GAAP) as of the last day of the month just ended prior to the date of determination on each Joint Venture Property as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended. "Consolidated Total Assets" shall mean (i) all Undepreciated Real Estate Assets plus (ii) all other tangible assets of the Borrower and its Subsidiaries. "Consolidated Total Debt" shall mean ( i ) the total liabilities of the Borrower, its Subsidiaries and the Guarantors (without duplication), on a consolidated basis (excluding liabilities on account of dividends which have been declared but not paid), plus (ii) the aggregate amount of Debt Guaranteed by the Borrower, the Guarantors and the other Subsidiaries (other than the debt of any of them), plus (iii) the Borrower's Joint Venture Share of the aggregate amount of Debt of all Joint Ventures, less (iv) the aggregate amount of all tenant deposits which are maintained in segregated accounts, and the Joint Venture Share of such amounts reflected on 6 12 the Joint Ventures' balance sheets, and classified as restricted cash in accordance with GAAP, and less (v) amounts maintained in escrow deposits with banks or other financial institutions for payment of real estate property taxes reflected on PPI's consolidated balance sheet, and the Joint Venture Share of such amounts reflected on the Joint Ventures' balance sheets, reflected as restricted cash in accordance with GAAP at the end of the most recent Fiscal Quarter. "Consolidated Total Secured Debt" shall mean, without duplication, all Debt of the Borrowers, its Subsidiaries and the Guarantors, and the Joint Venture Share of Debt of Joint Ventures, in each case consisting of: (i) capitalized leases; (ii) money borrowed or the deferred purchase price of real property which is also secured by a Mortgage on any real property owned by the Borrower, its Subsidiaries, any Guarantor or any Joint Venture; or (iii) Debt of the type described in clause (vii) of the definition thereof arising from letters of credit issued in support of Debt whose reimbursement obligations are secured by a Mortgage on any real property owned by the Borrower, its Subsidiaries, any Guarantor or any Joint Venture. "Construction Period Termination Date" means, with respect to construction of Properties and Joint Venture Properties, the date which is 3 months after the issuance of a permanent certificate of occupancy for the last unit of such Property or Joint Venture Property. "Contribution Agreement" means the Contribution Agreement in substantially the form of Exhibit L to be executed by the Borrower, PPI and any Significant Subsidiary which becomes a Guarantor. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Current Maturities of Long-Term Debt" means all payments in respect of Long-Term Debt (other than Debt under this Agreement) that are required to be made within one year from the date of determination, whether or not the obligation to make such payments would constitute a current liability of the obligor under GAAP, excluding, however, any such payment required to be made on the ultimate maturity date of such Debt. "Debt" of any Person means at any date, without duplication, ( i ) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to reimburse any bank or any other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person (other than amounts which are fully cash collateralized) to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument issued to assure the payment of Debt (but while such reimbursement obligation remains contingent due to there having been no presenting and honoring of a draft under any such letter of credit or similar instrument, only the principal component of the underlying Debt shall be included as Debt under this clause (vii)), (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is 7 13 assumed by such Person, and (ix) all Debt of others Guaranteed by such Person; provided, however, that the term Debt shall not include (A) any such obligations to the extent such obligations have been in substance defeased in accordance with GAAP, or (B) obligations under Redeemable Preferred Stock to the extent that any sinking fund payments have been made in connection therewith. "Debt Rating" means at any time whichever is the higher of the rating of the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, its prospective or implied credit rating for debt of such type) by Moody's Investor Service or Standard and Poor's (as such rating may change from time to time) or if only one of them rates the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, has in effect a prospective or implied rating for such debt), such rating. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (after giving effect to the Applicable Margin) which may be applicable to any Loans hereunder. "Designated Bank" means a special purpose corporation sponsored by its Designating Bank that is identified as such on the signature pages hereto next to the caption "Designated Bank" as well as each special purpose corporation sponsored by its Designating Bank that (i) shall have become a party to this Agreement pursuant to Section 9.08(g), and (ii) is not otherwise a Bank. "Designated Bank Note" means a Money Market Loan Note, evidencing the obligation of the Borrower to repay Money Market Loans made by a Designated Bank, and "Designated Bank Notes" means any and all such Money Market Loan Notes to Designated Banks issued hereunder. "Designating Bank" shall mean each Bank that is identified as such on the signature pages hereto next to the caption "Designating Bank" and immediately above the signature of its Designated Bank as well as each Bank that shall designate a Designated Bank pursuant to Section 9.08(g). "Designation Agreement" means a designation agreement in substantially the form of Exhibit K, entered into by a Bank and a Designated Bank and acknowledged by the Borrower and the Administrative Agent. "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized by law to close. "Economically Occupied" means, with respect to any Property or Joint Venture Property and in reference to a specified percentage, that tenants paying rental obligations are occupying at 8 14 least the specified percentage of the total number of units at such Property or Joint Venture Property, as the case may be. "Eligible Property" means a Property of the Borrower or any Subsidiary (other than Subsidiary Excluded Properties) consisting of real estate as to which there is no Mortgage in existence encumbering such Property and as to which the Borrower or such Subsidiary holds 100% of the fee title, leasehold interest or right to use or occupy such property. "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent, or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or order. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "Environmental Requirements" means any legal requirement relating to health, safety or the environment and applicable to the Borrower, any Subsidiary or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law, including without limitation, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, or the Federal Occupational Safety and Health Act of 1970, each as amended. 9 15 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Euro-Dollar Business Day" means any Domestic Business Day on which dealings in Dollar deposits are carried out in the London interbank market. "Euro-Dollar Loan" means a Syndicated Loan to be made as a Euro-Dollar Loan pursuant to the applicable Notice of Borrowing. "Euro-Dollar Reserve Percentage" means, for any Bank which is a member bank of the Federal Reserve System, on any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirement for such Bank in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Executive Officer" means any of the following officers of the General Partner: the Chairman, the President, the Chief Financial Officer, the Chief Accounting Officer, the Senior Vice President-Capital Markets and the Secretary. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such transactions, as determined by the Administrative Agent. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means, with reference to PPI, any fiscal year of PPI, and with reference to the Borrower, any fiscal year of the Borrower. "Fixed Rate Borrowing" means a Euro-Dollar Borrowing, a Transaction Rate Borrowing or a Money Market Borrowing, or any or all of them, as the context requires. "Fixed Rate Loan" means any Euro-Dollar Loan, Transaction Rate Loan or Money Market Loan, or any or all of them, as the context shall require. 10 16 "Funded Debt" means, without duplication, Long-Term Debt plus Current Maturities of Long-Term Debt of the Borrower and the Subsidiaries. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "GP Sub" means Post GP Holdings, Inc., a Georgia corporation which is a Wholly Owned Subsidiary of PPI, the General Partner and the owner of a 1% general partner interest in the Borrower as of the Closing Date. "General Partner" means the sole general partner of the Borrower (which, on the Closing Date, is GP Sub) or, if there is more than one such general partner, the managing general partner of the Borrower. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means, individually and collectively, as the context shall require: (i) PPI; (ii) any Significant Subsidiary which becomes a Guarantor pursuant to Section 5.23(d); and (iii) any other Subsidiary which elects to become a Guarantor pursuant to the last sentence of Section 5.23(d). "Guaranty" means the Guaranty Agreement of even date herewith in substantially the form of Exhibit "H" to be executed by PPI and any Significant Subsidiary or other Subsidiary which becomes a Guarantor, unconditionally guaranteeing payment of the Loans, the Notes and all other obligations of the Borrower to the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks hereunder, including without limitation all principal, interest, fees, costs, and compensation and indemnification amounts. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof, or (d) pesticides, as defined in the 11 17 Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the first, second, third or sixth month thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period (subject to paragraph (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall, subject to paragraph (c) below, end on the last Euro-Dollar Business Day of the appropriate subsequent calendar month; and (c) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. (2) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter (or any lesser number of days ending on the Termination Date); provided that: (a) any Interest Period (subject to paragraph (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) no Interest Period which begins before the Termination Date and would otherwise end after the Termination Date may be selected. (3) with respect to each Transaction Rate Borrowing, any period up to 14 days mutually agreeable to the Borrower and Wachovia which ends on or prior to the Termination Date. (4) with respect to each Money Market Borrowing, the period commencing on the date of such Borrowing and ending on the Stated Maturity Date or such other date or dates as may be specified in the applicable Money Market Quote; provided that: (c) any Interest Period (subject to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (d) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. 12 18 "Investment" means any investment in any Person, whether by means of purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "Joint Venture" means a Person (i) whose primary business is the development or ownership of multi-family properties, (ii) in which the Borrower or any of its Consolidated Subsidiaries owns a legal and beneficial ownership interest and (iii) whose accounts at any date are not consolidated with those of the Borrower in its consolidated financial statements as of such date in accordance with GAAP. "Joint Venture Property" means a real property owned, leased or otherwise used or occupied by a Joint Venture, wherever located. "Joint Venture Share" means, with respect to any Joint Venture, the percentage of legal and beneficial ownership interest in such Joint Venture held by PPI or by any of its Consolidated Subsidiaries. "LP Sub" means Post LP Holdings, Inc., a Georgia corporation which is a Wholly Owned Subsidiary of PPI, and the owner (as of the Closing Date) of a majority of the limited partnership interests in the Borrower. "Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such other office as such Bank may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, or preferential arrangement which has the practical effect of constituting any of the foregoing in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Liquidity Bank" means for any Designated Bank, at any date of determination, the collective reference to the financial institutions which at such date are providing liquidity or credit support facilities to or for the account of such Designated Bank to fund such Designated Bank's obligations hereunder or to support the securities, if any, issued by such Designated Bank to fund such obligations. "Loans" means, as the context shall require, either (i) Syndicated Loans, which may be either Base Rate Loans or Euro-Dollar Loans made pursuant to the terms and conditions set forth in Section 2.01(a), (ii) Swing Loans, which may be either Base Rate Loans or Transaction Rate Loans made pursuant to the terms and conditions set forth in Section 2.01(b) or (iii) Money Market Loans made pursuant to the terms and conditions set forth in 2.03. 13 19 "Loan Documents" means this Agreement, the Notes, the Guaranty, any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes or the Loans, as such documents and instruments may be amended or supplemented from time to time. "London Interbank Offered Rate" has the meaning set forth in Section 2.06(c). "Long-Term Debt" means at any date any Consolidated Debt which matures (or the maturity of which may at the option of the Borrower or any Subsidiary be extended such that it matures) more than one year after such date. "Margin Stock" means "margin stock" as defined in Regulations T, U or X. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business or properties of PPI, the Borrower, and the Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or the Banks under the Loan Documents, or the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or enforceability of any Loan Document. "Maximum Commitment" has the meaning set forth in Section 2.14. "Minority Interests" shall mean the minority interests of unit holders as shown on the then most recently available Form 10-K or 10-Q of PPI. "Money Market Borrowing Date" has the meaning specified in Section 2.03. "Money Market Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-3, including any Designated Bank Notes, evidencing the obligation of the Borrower to repay the Money Market Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Money Market Loans" means Loans made pursuant to the terms and conditions set forth in Section 2.03. "Money Market Quote" has the meaning specified in Section 2.03. "Money Market Quote Request" has the meaning specified in Section 2.03(b). "Money Market Rate" has the meaning specified in Section 2.03(c)(ii)(C). "Mortgage" means a mortgage, deed to secure debt, deed of trust or similar instrument. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. 14 20 "Net Operating Income" means, for any Property, the portion of Consolidated Income Available For Debt Service derived from such Property. "Notes" means the Syndicated Loan Notes, the Swing Loan Note or Money Market Loan Notes, or any one, or more, or all of them, as the context shall require. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Original Agreement" has the meaning set forth in the preamble hereto. "Original Notes" means the Notes executed and delivered pursuant to the Original Agreement. "Participant" has the meaning set forth in Section 9.08(b). "Partner Interests" means any partner interests in the Borrower, whether limited or general. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Performance Pricing Determination Date" has the meaning set forth in Section 2.06(a). "Person" means an individual, a corporation, a partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "PPI" means Post Properties, Inc., a Georgia corporation, and its successors and assigns. "Prime Rate" refers to that interest rate so denominated and set by Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Properties" means all real property owned, leased or otherwise used or occupied by the Borrower, the Guarantors or any Subsidiary, wherever located. "Recourse Mortgage" means a Mortgage which does not by its terms exculpate the mortgagor or grantor from personal liability with respect to the Debt secured by such Mortgage (other than customary limitations and exceptions as to such exculpation). 15 21 "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Termination Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Refunding Loan" means a new Loan made on the day on which an outstanding Loan is maturing or a Base Rate Borrowing is being converted to a Euro-Dollar Borrowing or a Transaction Rate Borrowing, if and to the extent that the proceeds thereof are used entirely for the purpose of paying such maturing Loan or Loan being converted, excluding any difference between the amount of such maturing Loan or Loan being converted and any greater amount being borrowed on such day and actually either being made available to the Borrower pursuant to Section 2.02(c) or remitted to the Administrative Agent as provided in Section 2.12, in each case as contemplated in Section 2.02(d). "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding principal amount of the sum of the (i) Syndicated Loans and (ii) Money Market Loans. "Restricted Payment" means (i) any distribution on any Partner Interests (other than distributions consisting solely of additional Partner Interests) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any Partner Interests or (b) any option, warrant or other right to acquire Partner Interests. "Significant Subsidiary" means any Subsidiary (other than GP Sub or LP Sub) which either (x) has assets which constitute more than 5% of Consolidated Total Assets at the end of the most recent Fiscal Quarter, or (y) contributed more than 5% of Consolidated Income Available For Debt Service during the most recent Fiscal Quarter and the 3 Fiscal Quarters immediately preceding such Fiscal Quarter (or, with respect to any Subsidiary which existed during the entire 4 Fiscal Quarter period but was acquired by the Borrower during such period, which would have contributed more than 5% of Consolidated Income Available For Debt Service during such period had it been a Subsidiary for the entire period). "Stated Maturity Date" means, with respect to any Money Market Loans, the Stated Maturity Date therefor specified by the Bank in the applicable Money Market Quote. 16 22 "Subsidiary" means (i) any corporation or other entity (other than the Borrower) the majority of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and the majority of the shares of the voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower, PPI, another Subsidiary, and/or one or more of John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary, and (ii) any other entity (other than PPI or the Borrower) the accounts of which are consolidated with the accounts of the Borrower. "Subsidiary Excluded Properties" means, with respect to any Subsidiary of the Borrower that (i) owns one or more Properties that are secured by a Recourse Mortgage on such Property or Properties, and (ii) has not executed and delivered to the Administrative Agent a joinder agreement with respect to the Guaranty and the other items described in clauses (x), (y) and (z) of Section 5.23(d), any other Properties of such Subsidiary that would otherwise have constituted Eligible Properties as provided in this Agreement. "Swing Loan" means a Loan made by Wachovia pursuant to Section 2.01(b), which must be a Base Rate Loan or a Transaction Rate Loan. "Swing Loan Note" means the promissory note of the Borrower, substantially in the form of Exhibit A-2, evidencing the obligation of the Borrower to repay the Swing Loans, together with all amendments, consolidations, modifications, renewals, and supplements thereto. "Syndicated Loan Notes" means the promissory notes of the Borrower, substantially in the form of Exhibit A-1, evidencing the obligation of the Borrower to repay Syndicated Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto. "Taxes" has the meaning set forth in Section 2.12(c). "Termination Date" means whichever is applicable of (i) April 30, 2004, or such later date to which it is extended by the Banks pursuant to Section 2.05(b) or (ii) any earlier date which constitutes the Termination Date pursuant to the provisions of and under the circumstances contained in Sections 2.08 or 2.09. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business. "Total Unencumbered Asset Value" means Adjusted Total Asset Value of Eligible Properties (other than Subsidiary Excluded Properties), but with respect to clause (iii) of Consolidated Total Asset Value shall be amended by replacing 100% with 50%. "Transaction Rate" has the meaning set forth in Section 2.01(b)(ii). "Transaction Rate Loan" means a Swing Loan to be made as a Transaction Rate Loan pursuant to Section 2.01(b). 17 23 "Transaction Rate Request" has the meaning set forth in Section 2.01(b)(ii). "Transferee" has the meaning set forth in Section 9.08(d). "Undepreciated Real Estate Assets" shall mean the cost (original cost plus capital improvements, if any) of real estate assets of the Borrower and its Subsidiaries, before depreciation and amortization, in accordance with GAAP. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "Unsecured Funded Debt" means any Funded Debt which is not secured by a Mortgage on any Property. "Unused Commitment" means at any date, with respect to any Bank, an amount equal to its Commitment less the aggregate outstanding principal amount of its Syndicated Loans (but not, with respect to Wachovia, its Swing Loans, or with respect to any Bank, its Money Market Loans). "Wachovia" means Wachovia Bank, N.A., a national banking association, and its successors. "Wholly Owned Subsidiary" means any Subsidiary all of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and all of the shares of the voting capital stock or other equivalent ownership interests of which are at the time directly or indirectly owned by the Borrower, PPI, another Wholly Owned Subsidiary, and/or one or more of John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by PPI's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of PPI or the Borrower and its Consolidated Subsidiaries, as applicable, delivered to the Banks unless with respect to any such change concurred in by PPI's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Banks shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the 18 24 latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04). SECTION 1.03. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other Subdivisions are references to articles, exhibits, schedules, sections and other subdivisions hereof. SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.05. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend Loans Loans. Each Bank severally agrees, on the terms and conditions set forth herein, to make Syndicated Loans to the Borrower from time to time before the Termination Date; provided that, immediately after each such Syndicated Loan is made, (i) the aggregate principal amount of Syndicated Loans by such Bank shall not exceed the amount of its Commitment, and (ii) the aggregate outstanding amount of all Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the aggregate amount of the Commitments. Each Syndicated Loan Borrowing under this Section shall be in an aggregate principal amount of $5,000,000 or any larger multiple of $250,000 (except that any such Syndicated Loan Borrowing may be in the aggregate amount of the Unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.10, prepay Syndicated Loans and reborrow under this Section at any time before the Termination Date. (b) Swing Loans. (i) In addition to the foregoing, Wachovia shall from time to time, upon the request of the Borrower, if the applicable conditions precedent in Article III have been satisfied, make Swing Loans to the Borrower in an aggregate principal amount at any time outstanding not exceeding $5,000,000; provided that, immediately after such Swing Loan is made, the outstanding amount of the Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the aggregate amount of the Commitments. Within the foregoing limits, the Borrower may borrow under this Section 2.01(b), prepay and reborrow under this Section 19 25 2.01(b) at any time before the Termination Date. All Swing Loans shall be made as either Base Rate Loans or, subject to the provisions of clause (ii) below, Transaction Rate Loans. (ii) Swing Loans may be Transaction Rate Loans, if the Administrative Agent shall have determined that such Transaction Rate Loan, including the principal amount thereof, the Interest Period and the Transaction Rate applicable thereto, has been expressly agreed to by the Borrower and Wachovia (such agreement may be obtained by telephone, confirmed promptly to the Administrative Agent in writing) pursuant to the following procedures. If the Borrower desires a Transaction Rate Loan, (a) the Borrower shall provide Wachovia, with a copy to the Administrative Agent, with notice of a request (a "Transaction Rate Request") for a quote for a Transaction Rate Borrowing prior to 1:00 p.m. (Atlanta, Georgia time) on the date (which shall be a Domestic Business Day) of the proposed Transaction Rate Borrowing, which Transaction Rate Request shall include the principal amount and proposed Interest Period of the relevant Transaction Rate Borrowing, (b) prior to 1:30 p.m. (Atlanta, Georgia time) on such date, Wachovia shall furnish the Borrower, with a copy to the Administrative Agent, with its rate quote (a "Transaction Rate Quote") via facsimile transmission, (c) the Borrower shall immediately inform Wachovia and the Administrative Agent of its decision as to whether to request a Transaction Rate Borrowing at the Transaction Rate specified in such Transaction Rate Quote (a "Transaction Rate") (which may be done by telephone and promptly confirmed in writing, and which decision shall be irrevocable), and (d) if the Borrower has so informed Wachovia and the Administrative Agent that it does desire a Transaction Rate Borrowing at the Transaction Rate specified in such Transaction Rate Quote, then by 2:00 p.m. (Atlanta, Georgia time) on the date of such decision, Wachovia shall make such Transaction Rate Borrowing, with interest accruing thereon at such Transaction Rate, available to the Administrative Agent in accordance with the procedures set forth herein. The Administrative Agent shall notify the Banks of any Transaction Rate Borrowing pursuant hereto. (iii) At any time on or after the occurrence of an Event of Default, upon the request of Wachovia, each Bank other than Wachovia shall, on the third Domestic Business Day after such request is made, purchase a participating interest in Swing Loans in an amount equal to its ratable share (based upon its respective Commitment) of such Swing Loans, and Wachovia shall furnish each Bank with a certificate evidencing such participating interest. On such third Domestic Business Day, each Bank will immediately transfer to Wachovia, in immediately available funds, the amount of its participation. Whenever, at any time after Wachovia has received from any such Bank its participating interest in a Swing Loan, the Administrative Agent receives any payment on account thereof, the Administrative Agent will distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Administrative Agent is required to be returned, such Bank will return to the Administrative Agent any portion thereof previously distributed by the Administrative Agent to it. Each Bank's obligation to purchase such participating interests shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: (1) any set-off, counterclaim, recoupment, defense or other right 20 26 which such Bank or any other Person may have against Wachovia requesting such purchase or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments; (3) any adverse change in the condition (financial or otherwise) of the Borrower, PPI or any other Person; (4) any breach of this Agreement by the Borrower or any other Bank; or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.02. Method of Borrowing Loans other than Transaction Rate Loans. For all Loans other than Transaction Rate Loans (which shall be governed by the provisions of Section 2.01(b)(ii)): (a) The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing"), which shall be substantially in the form of Exhibit E, executed by the President of the General Partner or any person authorized in writing by the President of the General Partner, prior to noon (Atlanta, Georgia time) on the same Domestic Business Day for each Base Rate Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing; (ii) the aggregate amount of such Borrowing; (iii) whether the Loans comprising such Borrowing are to be Syndicated Dollar Loans or Swing Loans, and whether they are to be Base Rate Loans or Euro-Dollar Loans; (iv) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; and (v) the amount available to be borrowed under Section 2.01. (b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly, and not later than 1:00 P.M., (Atlanta, Georgia time), notify each Bank of the contents thereof and, if it is a Syndicated Loan Borrowing, of such Bank's ratable share of such Borrowing and such Notice of Borrowing, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. (c) Not later than 3:00 P.M. (Atlanta, Georgia time) on the date of each Borrowing, each Bank (or Wachovia, with respect to Swing Loans) shall (except as provided in paragraph (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address determined pursuant to Section 9.01. Unless the Administrative Agent determines in its reasonable business judgment that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. Unless the Administrative Agent receives notice from a Bank, at the Administrative Agent's address referred to in or specified pursuant to Section 21 27 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Borrowing stating that such Bank will not make a Syndicated Loan in connection with such Borrowing, the Administrative Agent shall be entitled to assume that such Bank will make a Syndicated Loan in connection with such Borrowing and, in reliance on such assumption, the Administrative Agent may (but shall not be obligated to) make available such Bank's ratable share of such Borrowing to the Borrower for the account of such Bank. If the Administrative Agent makes such Bank's ratable share available to the Borrower and such Bank does not in fact make its ratable share of such Borrowing available on such date, the Administrative Agent shall be entitled to recover such Bank's ratable share from such Bank or the Borrower (and for such purpose shall be entitled to charge such amount to any account of the Borrower maintained with the Administrative Agent), together with interest thereon for each day during the period from the date of such Borrowing until such sum shall be paid in full at a rate per annum equal to the rate at which the Administrative Agent determines that it obtained (or could have obtained) overnight Federal funds to cover such amount for each such day during such period, provided that (i) any such payment by the Borrower of such Bank's ratable share and interest thereon shall be without prejudice to any rights that the Borrower may have against such Bank and (ii) until such Bank has paid its ratable share of such Borrowing, together with interest pursuant to the foregoing, it will have no interest in or rights with respect to such Borrowing for any purpose hereunder. If the Administrative Agent does not exercise its option to advance funds for the account of such Bank, it shall forthwith notify the Borrower of such decision. (d) If any Bank makes a new Syndicated Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Syndicated Loan from such Bank, such Bank shall apply the proceeds of its new Syndicated Loan to make such repayment as a Refunding Loan and only an amount equal to the difference (if any) between the amount being borrowed and the amount of such Refunding Loan shall be made available by such Bank to the Administrative Agent as provided in paragraph (c) of this Section, or remitted by the Borrower to the Administrative Agent as provided in Section 2.12, as the case may be. (e) Notwithstanding anything to the contrary contained in this Agreement, the Borrower shall not be entitled to, and the Administrative Agent shall not knowingly fund, a Fixed Rate Borrowing if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived. (f) In the event that a Notice of Borrowing fails to specify whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement to repay any Loans maturing at the end of an Interest Period applicable thereto with the proceeds of a new Borrowing, and the Borrower fails to repay such Loans using its own moneys and fails to give a Notice of Borrowing in connection with such new Borrowing, a new Borrowing shall be deemed to be made on the date such Loans mature in an amount equal to the principal amount of the Loans so maturing, and the Loans comprising such new Borrowing shall be Base Rate Loans. (g) Notwithstanding anything to the contrary contained herein, there shall not be more than 8 Euro-Dollar Loans and Money Market Loans outstanding at any given time. 22 28 SECTION 2.03. Money Market Loans. (a) In addition to making Syndicated Loan Borrowings, the Borrower may, as set forth in this Section 2.03, request the Banks to make offers to make Money Market Borrowings available to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.03, provided that: (i) the number of interest rates applicable to Money Market Loans which may be outstanding at any given time is subject to the provisions of Section 2.02(g); (ii) the aggregate outstanding amount of all Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the aggregate amount of the Commitments; (iii) the Money Market Loans of any Bank will be deemed to be usage of the Commitments for the purpose of calculating availability pursuant to Section 2.01(a)(ii), 2.01(b)(ii) and 2.03(a)(ii) but will not reduce such Bank's obligation to lend its pro rata share of the remaining Unused Commitment; and (iv) the aggregate principal amount of all Money Market Loans outstanding at any time shall not exceed fifty percent (50%) of the aggregate amount of the Commitments of all the Banks at such time. (b) When the Borrower wishes to request offers to make Money Market Loans, it shall give the Administrative Agent (which shall promptly notify the Banks) notice substantially in the form of Exhibit I hereto (a "Money Market Quote Request") so as to be received no later than 10:00 A.M. (Atlanta, Georgia time) at least 2 Domestic Business Days prior to the date of the Money Market Borrowing proposed therein (or such other time and date as the Borrower and the Administrative Agent, with the consent of the Required Banks, may agree), specifying: (i) the proposed date of such Money Market Borrowing, which shall be a Domestic Business Day (the "Money Market Borrowing Date"); (ii) the maturity date (or dates) (each a "Stated Maturity Date") for repayment of each Money Market Loan to be made as part of such Money Market Borrowing (which Stated Maturity Date shall be that date occurring not less than 7 days but not greater than 180 days from the date of such Money Market Borrowing); provided that the Stated Maturity Date for any Money Market Loan may not extend beyond the Termination Date (as in effect on the date of such Money Market Quote Request); and (iii) the aggregate amount of principal to be received by the Borrower as a result of such Money Market Borrowing, which shall be at least $5,000,000 (and in larger integral multiples of $250,000) but shall not cause the limits specified in Section 2.03(a) to be violated. The Borrower may request offers to make Money Market Loans having up to 3 different Stated Maturity Dates in a single Money Market Quote Request; provided that the request for each separate Stated Maturity Date shall be deemed to be a separate Money Market Quote Request for a separate Money Market Borrowing. Except as otherwise provided in the immediately preceding sentence, after the first Money Market Quote Request has been given hereunder, no 23 29 Money Market Quote Request shall be given until at least 5 Domestic Business Days after all prior Money Market Quote Requests have been fully processed by the Administrative Agent, the Banks and the Borrower pursuant to this Section 2.03. (c)(i) Each Bank may, but shall have no obligation to, submit a response containing an offer to make a Money Market Loan substantially in the form of Exhibit J hereto (a "Money Market Quote") in response to any Money Market Quote Request; provided that, if the Borrower's request under Section 2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but shall have no obligation to, make a single submission containing a separate offer for each such Stated Maturity Date and each such separate offer shall be deemed to be a separate Money Market Quote. Each Money Market Quote must be submitted to the Administrative Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date; provided that any Money Market Quote submitted by Wachovia may be submitted, and may only be submitted, if Wachovia notifies the Borrower of the terms of the offer contained therein not later than 9:45 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date (or 15 minutes prior to the time that the other Banks must have submitted their respective Money Market Quotes). Subject to Section 6.01, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall specify: (A) the proposed Money Market Borrowing Date and the Stated Maturity Date therefor; (B) the principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Money Market Quote, which principal amounts (x) may be greater than or less than the Commitment of the quoting Bank, (y) shall be at least $5,000,000 or a larger integral multiple of $250,000, and (z) may not exceed the principal amount of the Money Market Borrowing for which offers were requested; (C) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) offered for each such Money Market Loan (such amounts being hereinafter referred to as the "Money Market Rate"); and (D) the identity of the quoting Bank. Unless otherwise agreed by the Administrative Agent and the Borrower, no Money Market Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Money Market Quote Request (other than setting forth the maximum principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Interest Period) and, in particular, no Money Market Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Money Market Loan for which such Money Market Quote is being made. 24 30 (d) The Administrative Agent shall as promptly as practicable after the Money Market Quote is submitted (but in any event not later than 10:30 A.M. (Atlanta, Georgia time)) on the Money Market Borrowing Date, notify the Borrower of the terms (i) of any Money Market Quote submitted by a Bank that is in accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the principal amounts of the Money Market Borrowing for which offers have been received and (B) the respective principal amounts and Money Market Rates so offered by each Bank (identifying the Bank that made each Money Market Quote). (e) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, the Borrower shall notify the Administrative Agent of its acceptance or nonacceptance of the offers so notified to it pursuant to Section 2.03(d) and the Administrative Agent shall promptly (but in no event later than 11:30 A.M. on the Money Market Borrowing Date) notify each affected Bank. In the case of acceptance, such notice shall specify the aggregate principal amount of offers (for each Stated Maturity Date) that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the aggregate principal amount of each Money Market Loan comprising a Money Market Borrowing shall be at least $5,000,000 (and in larger multiples of $250,000) but shall not cause the limits specified in Section 2.03(a) to be violated; (iii) acceptance of offers may only be made in ascending order of Money Market Rates; and (iv) the Borrower may not accept any offer where the Administrative Agent has advised the Borrower that such offer fails to comply with Section 2.03(c)(ii) or otherwise fails to comply with the requirements of this Agreement (including without limitation, Section 2.03(a)). If offers are made by 2 or more Banks with the same Money Market Rates for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Stated Maturity Date, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amount of such offers. Determinations by the Borrower of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. (f) any Bank whose offer to make any Money Market Loan has been accepted shall, not later than 3:00 P.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, make the appropriate amount of such Money Market Loan available to the Administrative Agent at its 25 31 address referred to in Section 9.01 in immediately available funds. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower on such date by depositing the same, in immediately available funds, not later than 4:00 P.M. (Atlanta, Georgia time), in an account of such Borrower maintained with the Administrative Agent. (g) For any Bank which is a Designating Bank, any Money Market Loan to be made by such Bank may from time to time be made by its Designated Bank in such Designated Bank's sole discretion, and nothing herein shall constitute a commitment to make Money Market Loans by such Designated Bank; provided that if any Designated Bank elects not to, or fails to, make any such Money Market Loan pursuant to a Money Market Quote that has been accepted by the Borrower in accordance with the foregoing, its Designating Bank hereby agrees that it shall make such Money Market Loan pursuant to the terms hereof on the date such Money Market Loan is otherwise required to be made to the Borrower hereunder. SECTION 2.04. Notes (a) The Syndicated Loans of each Bank shall be evidenced by a single Syndicated Loan Note payable to the order of such Bank for the account of its Lending Office in an amount equal to the original principal amount of such Bank's Commitment. The Swing Loans shall be evidenced by a single Swing Loan Note payable to the order of Wachovia in the original principal amount of $5,000,000. Loans outstanding under the Original Agreement on the Closing Date shall be deemed to have been made hereunder and shall be evidenced by the Notes. (b) The Money Market Loans made by any Bank to the Borrower shall be evidenced by a single Money Market Loan Note payable to the order of such Bank for the account of its Lending Office in an amount equal to 50% of the original principal amount of the aggregate Commitments. (c) Upon receipt of each Bank's Syndicated Loan Notes, Wachovia's Swing Loan Note and each Bank's Money Market Loan Notes pursuant to Section 3.01, the Administrative Agent shall deliver such Syndicated Loan Notes to such Bank, the Swing Loan Note to Wachovia and such Money Market Loan Notes to such Bank. Each Bank, as to the Syndicated Loans or the Money Market Loans (or Wachovia, as to the Swing Loans), shall record, and prior to any transfer of its Syndicated Loan Notes or Money Market Loan Notes (or Swing Loan Note) shall endorse on the schedules forming a part thereof appropriate notations to evidence, the date, amount and maturity of, and effective interest rate for, each Syndicated Loan or Money Market Loan (or Swing Loan) made by it, the date and amount of each payment of principal made by the Borrower with respect thereto, and such schedules of each such Bank's Syndicated Loan Notes or Money Market Loan Notes (or Wachovia's Swing Loan Note) shall constitute rebuttable presumptive evidence of the respective principal amounts owing and unpaid on such Bank's Syndicated Loan Notes or Money Market Loan Notes (or Wachovia's Swing Loan Note); provided that the failure of any Bank (or Wachovia) to make any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Syndicated Loan Notes or the Money Market Loan Notes (or Swing Loan Note) or the ability of any Bank to assign its Syndicated Loan Notes or Money Market Loan Notes or Wachovia to assign its Swing Loan Note. Each Bank (and Wachovia, with respect to the Swing Loan) is hereby irrevocably 26 32 authorized by the Borrower so to endorse its Syndicated Loan Notes or Money Market Loan Notes (or Swing Loan Note) and to attach to and make a part of any Syndicated Loan Note or Money Market Loan Note (or Swing Loan Note) a continuation of any such schedule as and when required. SECTION 2.05. Maturity of Loans (a) Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing.(b) Notwithstanding the foregoing, the outstanding principal amount of the Loans, if any, together with all accrued but unpaid interest thereon, if any, shall be due and payable on April 30, 2004, unless the Termination Date is otherwise extended by the Banks, in their sole and absolute discretion. Upon the written request of the Borrower, which request shall be delivered to the Administrative Agent at least 60 days prior to April 30, 2003 (the "Extension Date"), the Banks shall have the option (without any obligation whatsoever so to do) of extending the Termination Date for an additional one-year period. In the event that a Bank chooses not to extend the Termination Date for such an additional one-year period, notice shall be given by such Bank to the Borrower and the Administrative Agent at least 30 days prior to the Extension Date; provided, that the Termination Date shall not be extended with respect to any of the Banks unless the Required Banks are willing to extend the Termination Date. If less than all the Banks deliver favorable extension notices, but at least the Required Banks do so, then: (1) The Administrative Agent shall promptly notify those Banks that have delivered favorable extension notices (each an "Extending Bank") as to the amount of Commitments held by those Banks that have elected not to extend the Termination Date (each a "Terminating Bank"). Each Extending Bank shall be entitled to commit, effective as of the Extension Date, to purchase (at par) from the Terminating Banks, at any time after the Extension Date and on or before the Termination Date (prior to its extension hereunder), a ratable portion of the Commitments and outstanding Loans of the Terminating Banks in accordance with the Extending Bank's respective percentage of the remaining aggregate Commitments. In such event, the Terminating Banks shall be required to sell to such Extending Bank all or any portion of their respective Commitments and outstanding Loans, at the times specified by the Extending Banks after the Extension Date (but without causing the Terminating Banks to incur any unreimbursed funding losses) and on or prior to the Termination Date (prior to its extension hereunder). Each Extending Bank desiring to purchase a portion of such Commitments and outstanding Loans shall notify the Administrative Agent and the Borrower of such election and shall deliver, in form satisfactory to the Administrative Agent and the Borrower, a commitment to effect such purchase, not later than five (5) Domestic Business Days after receipt of such notice from the Administrative Agent. If any of the Extending Banks elect not to commit to make such a purchase, the Administrative Agent shall again notify the other Extending Banks as to the amount of Commitments available to be purchased by them in the same manner as 27 33 set forth in this paragraph, with any commitment with respect to such purchase to be delivered to the Administrative Agent and the Borrower prior to the Extension Date. (2) If on the Extension Date, commitments to purchase all Commitments and outstanding Loans of the Terminating Banks pursuant to paragraph (1) above have not been delivered to the Administrative Agent and the Borrower, the Borrower shall be entitled to designate another bank or banks, acceptable to the Administrative Agent, to purchase any remaining Commitments and outstanding Loans from any Terminating Bank at any time after the Extension Date and on or prior to the Termination Date (prior to its extension hereunder). In such event, the Terminating Bank shall be required to sell to such designated bank or banks all or any portion of its Commitment and outstanding Loans, at the time specified by the Borrower after the Extension Date and on or prior to the Termination Date (prior to its extension hereunder). (3) If 30 days prior to the Termination Date (prior to its extension hereunder) any Terminating Banks hold Commitments that are not subject to purchase commitments from Extending Banks or banks designated by the Borrower pursuant to paragraph (2) above, then the Administrative Agent shall again notify the Extending Banks of the Commitments available to be purchased, and the Extending Banks shall be entitled to purchase such Commitments in accordance with the procedure set forth in paragraph (1) above. (4) If on the Termination Date (prior to its extension hereunder) any Commitments of any Terminating Banks are not purchased as set forth above, the Aggregate Commitments under the Facility shall be reduced by the aggregate amount of such Commitments of such Terminating Banks, and the Loans of such Terminating Banks shall be paid in full. On the Extension Date on which the Termination Date is extended pursuant to the foregoing, the Borrower shall pay the extension fee as required by Section 2.07(a). SECTION 2.06. Interest Rates. (a) "Applicable Margin" means: (i) until the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, (y) for each Euro-Dollar Loan, 0.75%; provided, however, that Euro-Dollar Loans made under the Original Agreement which are outstanding on the Closing Date shall be adjusted to reflect the provisions of this Section 2.06 for the remainder of their respective Interest Periods; and (ii) from and after the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, and (y) for each Euro-Dollar Loan, the percentage determined on each Performance Pricing Determination Date by reference to the table set 28 34 forth below as to such type of Loan and the Debt Rating in effect on the last day of the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that if there is no Debt Rating, the Applicable Margin for Euro-Dollar Loans shall be based upon Level V of the table below.
============================= ============= ============= ============= =============== ============== Level Level Level Level Level I II III IV V ============================= ============= ============= ============= =============== ============== Debt Rating Above BBB+/Baa1 BBB/Baa2 BBBa-/Baa3 Below BBB+/Baa1 BBB-/Baa3 - ----------------------------- ------------- ------------- ------------- --------------- -------------- Applicable Margin 0.65% 0.75% .85% 1.10% 1.40% ============================= ============= ============= ============= =============== ==============
In determining the amounts to be paid by the Borrower pursuant to Sections 2.06(a), the Borrower and the Banks shall refer to PPI's Debt Rating from time to time. For purposes hereof, "Performance Pricing Determination Date" shall mean each date on which the Debt Rating changes. Each change in interest and fees as a result of a change in Debt Rating shall be effective only for Loans (including Refunding Loans) which are made on or after the relevant Performance Pricing Determination Date. All determinations hereunder shall be made by the Administrative Agent unless the Required Banks shall object to any such determination. The Borrower shall promptly notify the Administrative Agent of any change in the Debt Rating. (b) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day less the Applicable Margin. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (c) Each Euro Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable London Interbank Offered Rate for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 1 month, at intervals of 1 month after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Euro Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rates appear on Telerate Page 3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, provided that if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the arithmetic 29 35 average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York City, selected by the Administrative Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, for deposits in Dollars offered by leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Euro-Dollar Loan. (d) Each Money Market Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Money Market Loan is made until it becomes due, at a rate per annum equal to the applicable Money Market Rate set forth in the relevant Money Market Quote. Such interest shall be payable on the Stated Maturity Date thereof, and, if the Stated Maturity Date occurs more than 90 days after the date of the relevant Money Market Loan, at intervals of 90 days after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks by telecopier of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) After the occurrence and during the continuance of an Event of Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) may, at the election of the Required Banks, bear interest at the Default Rate. SECTION 2.07. Fees (a) If the Termination Date is extended pursuant to Section 2.05 (b), on the Extension Date on which the Termination Date is extended, the Borrower shall pay to the Administrative Agent, for the ratable account of each Bank which is an Extending Bank pursuant to such Section, a fully earned and non-refundable extension fee in the amount of 0.10% of the aggregate amount of the Commitments so extended (after giving effect to the amount of any Commitment which each such Extending Bank has committed to purchase pursuant to such Section). (b) The Borrower shall pay to the Administrative Agent for the ratable account of each Bank a facility fee (the "Facility Fee") on the maximum amount of the aggregate Commitments in effect for any relevant period, irrespective of usage, calculated in the manner provided in Section 2.06(a)(ii), at a rate per annum equal to the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below and the Debt Rating for the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that (i) until the first Performance Pricing Determination Date, the Facility Fee shall be based on Level II of the table below, and (ii) if there is no Debt Rating, the Facility Fee shall be based upon Level V of the table below. The Facility Fee shall accrue at all times from and including the Closing Date to but excluding the Termination Date and shall be payable, in arrears, on each March 31, June 30, September 30 and December 31 and on the Termination Date. 30 36
============================ ============= ============= ============= =============== ============== Level Level Level Level Level I II III IV V ---------------------------- ------------- ------------- ------------- --------------- -------------- Debt Rating Above BBB+/Baa1 BBB/Baa2 BBBa-/Baa3 Below BBB+/Baa1 BBB-/Baa3 ---------------------------- ------------- ------------- ------------- --------------- -------------- Facility Fee 0.125% 0.15% 0.20% 0.25% 0.35% ============================ ============= ============= ============= =============== ==============
(c) The Borrower shall pay to the Administrative Agent, for the account and sole benefit of the Administrative Agent and the Arranger, such fees and other amounts at such times as set forth in the Arranger's Letter Agreement. SECTION 2.08. Optional Termination or Reduction of Commitments. The Borrower may, upon at least 3 Domestic Business Days' notice to the Administrative Agent, terminate at any time, or proportionately reduce the Unused Commitments from time to time by an aggregate amount of at least $5,000,000 or any larger multiple of $1,000,000. If the Commitments are terminated in their entirety, the date of such termination shall be the Termination Date for all purposes hereunder, and all Loans then outstanding, together with accrued interest thereon and any amounts payable pursuant to Section 8.05(a) in connection therewith, and all fees payable on the Termination Date, shall be due and payable on such date. SECTION 2.09. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date and any Loans then outstanding, together with accrued interest thereon and any amounts payable pursuant to Section 8.05(a) in connection therewith, and all fees payable on the Termination Date, shall be due and payable on such date. In the event of a Change in Control, the Administrative Agent (acting at the direction of the Required Banks) may terminate the Commitments on a date specified in a notice to the Borrower, which date (i) must be at least 3 Domestic Business Days following the date of such notice, and (ii) shall constitute the Termination Date for all purposes hereunder. SECTION 2.10. Optional Prepayments (a) The Borrower may, upon at least 1 Domestic Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 for Syndicated Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Banks (or of Wachovia, as to Swing Loans) included in such Base Rate Borrowing. (b) Subject to the provisions of Section 8.05(a) with respect to any prepayment not made on the last day of the relevant Interest Period, the Borrower may, upon at least 2 Euro-Dollar Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Fixed Rate Borrowing in whole at any time, or from time to 31 37 time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 as to Syndicated Borrowings and Money Market Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment, together with any amount required to be paid pursuant to Section 8.05(a). Each such optional prepayment shall be applied to prepay ratably the Fixed Rate Loans of the several Banks (or of Wachovia, as to Swing Loans which are Transaction Rate Loans,) included in such Fixed Rate Borrowing. (c) Upon receipt of a notice of prepayment pursuant to this Section 2.10, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice, once received by the Administrative Agent, shall not thereafter be revocable by the Borrower. SECTION 2.11. Mandatory Prepayments (a) On each date on which the Commitments are reduced pursuant to Section 2.08, the Borrower shall repay or prepay such principal amount of the outstanding Loans, if any (together with interest accrued thereon and any amount required to be paid pursuant to Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the aggregate amount of the Commitments as then reduced. On the Termination Date, the Borrower shall make the payments required to be made pursuant to Section 2.09. (b) Each such payment or prepayment shall be applied to the Swing Loans or ratably to the Loans of the Banks outstanding on the date of payment or prepayment in the following order of priority: (i) first, to Swing Loans which are Base Rate Loans; (ii) secondly, to Transaction Rate Loans; (iii) thirdly, to Syndicated Loans which are Base Rate Loans; (iv) fourthly, to Euro-Dollar Loans; and (v) lastly, to Money Market Loans. SECTION 2.12. General Provisions as to Payments (a) The Borrower shall make each payment of principal of, and interest on, the Syndicated Loans, Money Market Loans and Swing Loans and of fees hereunder, not later than noon (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks, and to Wachovia such payment received by the Administrative Agent on account of the Swing Loans. If the Administrative Agent fails to distribute to any Bank its ratable share of any such payment (i) on the day received, if received not later than 1:00 p.m. (Atlanta, Georgia time) or (ii) on the next Domestic Business Day, if received after 1:00 p.m. (Atlanta, Georgia time) on such day, then such Bank shall be entitled to recover such Bank's ratable share of such payment from the Administrative Agent, together with interest thereon for each day during the period from the date such Bank's ratable share of such payment shall have become due until such distribution shall be made, at a rate per annum equal to the rate at which the Administrative Agent determines that it obtained (or could have obtained) overnight federal funds in such amount for each such day during such period. 32 38 (b) Whenever any payment of principal of, or interest on, the Base Rate Loans, Transaction Rate Loans or the Money Market Loans or of fees hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. (c) All payments of principal, interest and fees and all other amounts to be made by the Borrower pursuant to this Agreement with respect to any Loan or fee relating thereto shall be paid without deduction for, and free from, any taxes, imposts, levies, deductions, or withholdings now or hereafter imposed by any governmental authority or by any taxing authority thereof or therein, excluding in the case of each Bank, (1) any taxes imposed by the United States or any political subdivision thereof on the effectively connected net income of any Bank or any Bank's Lending Office or any franchise taxes imposed by such jurisdiction, (2) taxes imposed on the net income of, or franchise taxes imposed upon, any Bank by the jurisdiction under the laws of which such Bank is organized or by any political subdivision thereof, (3) taxes imposed on the net income of such Bank's Lending Office, and franchise taxes imposed on it, by the jurisdiction of such Bank's Lending Office, or any political subdivision thereof, (4) any taxes imposed on any Bank by Section 884(a) of the Internal Revenue Code of 1986, as amended (and any successor statute to Section 884(a)), and (5) any United States withholding tax payable with respect to any payments to such Bank under the laws (including, without limitation, any treaty, ruling, judicial or administrative determination or regulation) in effect on the "Initial Date" (as hereinafter defined) or as a result of the Bank having voluntarily changed the jurisdiction of its Lending Office from a jurisdiction in which payments made to such Bank are exempt from United States withholding tax to a jurisdiction in which such payments are not so exempt, but not excluding any United States withholding tax payable or increased as a result of any change in any law, treaty, ruling, judicial or administrative determination or regulation, or interpretation thereof occurring after the Initial Date (all such non-excluded taxes, levies, imposts, deductions, and withholdings hereinafter referred to as "Taxes"). For purposes hereof, the term "Initial Date" shall mean, in the case of each Bank party hereto on the date hereof, the Closing Date, and in the case of each other Bank, the effective date of the Assignment and Acceptance pursuant to which it became a Bank hereunder. In the event that the Borrower is required by applicable law to make any such withholding or deduction of Taxes with respect to any Loan or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to any Bank in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment, and shall pay to such Bank additional amounts as may be necessary in order that the amount received by such Bank after the required withholding or other payment shall equal the amount such Bank would have received had no such withholding or other payment been made. If no withholding or deduction of Taxes are payable in respect to any Loan or fee relating thereto, the Borrower shall furnish any Bank, at such Bank's written request, a certificate from each applicable taxing authority or an opinion of counsel reasonably acceptable to such Bank, in either case stating that such payments are exempt from or not subject to withholding or deduction of Taxes. If the Borrower fails to provide such original or certified 33 39 copy of a receipt evidencing payment of Taxes or certificate(s) or opinion of counsel described in the preceding sentence, the Borrower hereby agrees to compensate such Bank for, and indemnify it with respect to, the tax consequences of the Borrower's failure to provide evidence of tax payments or tax exemption; provided, however, that the Borrower shall not be obligated to indemnify any party for penalties, additions to tax, interest or expenses associated with the payment of Taxes if the Bank's liability for such Taxes has arisen as a result of the fault of such Bank; and provided, further, that the Borrower shall not be obligated to indemnify any Bank for Taxes, penalties, additions to tax, interest or expenses incurred as a result of such Bank having voluntarily changed its Lending Office from a jurisdiction in which payments made to such Bank are exempt from United States withholding tax to a jurisdiction in which such payments are not so exempt. Such compensation or indemnification payment shall be made within 30 days from the date such Bank makes written request therefor. Any such request shall be made within 90 days after the date on which such payment of Taxes was made. Each such request shall be accompanied by a copy of the statement from the taxing authority demanding payment by such Bank of such Taxes or by a certificate from such Bank which certificate shall set forth in reasonable detail the basis for any additional amount payable to such party under this Section 2.12 (together with reasonable evidence of payment of such Taxes). Any Bank entitled to claim any additional amounts payable pursuant to this Section 2.12 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if the making of such change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and the making of such a change would not, in the reasonable judgment of such Bank, be otherwise materially disadvantageous to such Bank. Each Bank which is not organized under the laws of the United States or any state thereof agrees, as soon as practicable after receipt by it of a request by the Borrower to do so, to file all appropriate forms and take other appropriate action to obtain a certificate or other appropriate document from the appropriate governmental authority in the jurisdiction imposing the relevant Taxes, establishing that it is entitled to receive payments of principal and interest under this Agreement and the Notes without deduction and free from withholding of any Taxes imposed by such jurisdiction; provided, that if it is unable, for any reason, to establish such exemption, or to file such forms and, in any event, during such period of time as such request for exemption is pending, the Borrower shall nonetheless remain obligated under the terms of the immediately preceding paragraph. In the event any Bank receives a refund of any Taxes paid by the Borrower pursuant to this Section 2.12(c), it will pay to the Borrower the amount of such refund promptly upon receipt thereof; provided, however, if at any time thereafter it is required to return such refund, the Borrower shall promptly repay to it the amount of such refund. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and the Banks contained in this Section 2.12(c) shall be applicable with respect to any Transferee, subject to Section 9.08(e) as to any Participant, and any calculations required by such provisions (i) shall be made based upon the circumstances of such Transferee, and (ii) constitute a continuing agreement and shall survive the termination of this Agreement and the payment in full or cancellation of the Notes. 34 40 SECTION 2.13. Computation of Interest and Fees. Interest on Base Rate Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Interest on Euro-Dollar Loans and Money Market Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.14. Changes to Commitments. So long as the Borrower has not reduced the Commitments, the Borrower may request that the Commitments be increased to $350,000,000 (the "Maximum Commitment"). If the Borrower requests that the total Commitments from the Banks then parties to this Agreement be increased, the Administrative Agent shall promptly give notice of such request (the "Commitment Increase Notice") to each Bank. Within five Business Days of its receipt of a Commitment Increase Notice from the Administrative Agent, each Bank that desires to increase its Commitment in response to such request (each such Bank, a "Consenting Bank") shall deliver notice to the Administrative Agent of its election to increase its Commitment and the maximum amount of such increase to its Commitment (for each Consenting Bank, its "Additional Commitment"), which may not be larger than the excess of (a) the Maximum Commitment, over (b) the Commitments then in effect. The failure of any Bank to so notify the Administrative Agent of its election and its Additional Commitment, if any, shall be deemed to be a refusal to increase its Commitment. If the sum of the Commitments then in effect plus the aggregate Additional Commitments does not exceed the Maximum Commitment, the Commitment of each Consenting Bank shall be increased by its Additional Commitment. If the sum of the Commitments then in effect plus the aggregate Additional Commitments exceeds the Maximum Commitment, the Commitment of each Consenting Bank shall be increased by an amount equal to the product of (i) such Consenting Bank's Additional Commitment multiplied by (ii) the quotient of (a) the excess of (A) the Maximum Commitment, over (B) the Commitments then in effect, divided by (b) the aggregate Additional Commitments of all Consenting Banks. Any increase in the Commitments shall be effective as of the tenth Business Day after the delivery of the Commitment Increase Notice; provided, that the Commitments may not at any time exceed the Maximum Commitment. SECTION 2.15. Additional Banks and Commitments. Upon (i) the execution of a signature page to this Agreement by a new bank or financial institution (a "New Bank") and acceptance thereof by the Administrative Agent,(ii) execution and delivery by the Borrower of a Syndicated Loan Note and a Money Market Loan Note in favor of the New Bank, and (iii) delivery of notice to the Banks by the Administrative Agent setting forth the effective date of the addition of the New Bank hereunder and the amount of such New Bank's Commitment, such New Bank shall be for all purposes a Bank party to this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth on the signature page executed by the New Bank; provided, however, (i) the total Commitments of all Banks (including any New Banks) shall not exceed in the aggregate the Maximum Commitment, and (ii) the Commitments and obligations of all Banks party hereto prior to the addition of any New Bank shall not be affected by the addition of such New Bank. 35 41 ARTICLE III CONDITIONS TO BORROWINGS SECTION 3.01. Conditions to First Borrowing. The obligation of each Bank to make a Loan on the occasion of the first Borrowing is subject to the satisfaction of the conditions set forth in Section 3.02 and receipt by the Administrative Agent of the following (as to the documents described in paragraphs (a), (c), (d) and (e) below, in sufficient number of counterparts for delivery of a counterpart to each Bank and retention of one counterpart by the Administrative Agent): (a) from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission stating that such party has duly executed a counterpart of this Agreement and sent such counterpart to the Administrative Agent; (b) a duly executed Syndicated Loan Note for the account of each Bank, a duly executed Swing Loan Note for the account of Wachovia and a duly executed Money Market Loan Note for the account of each Bank, complying with the provisions of Section 2.04, and from each Bank which holds any of the Original Notes, such Original Notes, and a duly executed Guaranty; (c) an opinion letter of King & Spalding, counsel for the Borrower and the initial Guarantor, dated as of a date which is on or before the date of the first Borrowing hereunder, substantially in the form of Exhibit B and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Bank may reasonably request; (d) an opinion of Jones, Day, Reavis & Pogue, special counsel for the Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit C and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request; (e) a certificate (the "Closing Certificate") substantially in the form of Exhibit G, dated as of the Closing Date, signed by an Executive Officer (other than the Secretary) to the effect that (i) no Default has occurred and is continuing on the date of the first Borrowing and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the date of the first Borrowing hereunder; (f) all documents which the Administrative Agent or any Bank may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement, the Notes, the Guaranty, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent, including, without limitation, certificates of incumbency of the General Partner and of the Guarantor, signed by the Secretary or an Assistant Secretary of the General Partner and the Guarantor, certifying as to the names, true signatures and incumbency of the officer or officers of the General Partner and the Guarantor authorized to execute and deliver the Loan Documents on behalf of the Borrower or the Guarantor, and certified copies of the following items: (i) the Borrower's Certificate of Limited Partnership; (ii) the Borrower's Partnership Agreement, (iii) for each of the General Partner and the Guarantor, its 36 42 Certificate of Incorporation, (iv) for each of the General Partner and the Guarantor, its Bylaws, (v) for each of the Borrower, the General Partner and the Guarantor, a certificate of the Secretary of State of Georgia as to the valid existence of the Borrower, the General Partner or the Guarantor as a Georgia limited partnership or corporation, as the case may be, and (vi) the action taken by the Board of Directors of the General Partner and the Guarantor authorizing (A) on behalf of the Borrower, the execution, delivery and performance of this Agreement, the Notes, the Contribution Agreement and the other Loan Documents to which the Borrower is a party, and (B) on behalf of the Guarantor, the execution, delivery and performance of the Guaranty and the Contribution Agreement; (g) a Notice of Borrowing or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable, if a Borrowing is desired; and (h) receipt of by the Administrative Agent: (1) for the ratable account of each Bank, a fully earned and non-refundable amendment fee in the amount of 0.05% of the aggregate amount of the Commitments; and (2) the fees then due and payable to the Administrative Agent pursuant to the Arranger's Letter Agreement. In addition, if the Borrower desires funding of a Euro-Dollar Loan on the Closing Date, the Administrative Agent shall have received, the requisite number of days prior to the Closing Date, a funding indemnification letter satisfactory to it, pursuant to which (i) the Administrative Agent and the Borrower shall have agreed upon the interest rate, amount of Borrowing and Interest Period for such Euro-Dollar Loan, and (ii) the Borrower shall indemnify the Banks from any loss or expense arising from the failure to close on the anticipated Closing Date identified in such letter or the failure to borrow such Euro-Dollar Loan on such date. If any Money Market Loans are outstanding under the Original Agreement on the Closing Date, they shall be deemed to have been made under this Agreement and shall be evidenced by the Money Market Loan Note of the Bank or Banks which made such Loans. SECTION 3.02. Conditions to All Borrowings. The obligation of each Bank to make a Syndicated Loan or of Wachovia to make a Swing Loan on the occasion of each Borrowing (other than a Borrowing which consists solely of a Refunding Loan) is subject to the satisfaction of the following conditions, except as expressly provided in the last sentence of this Section 3.02: (a) receipt by the Administrative Agent of a Notice of Borrowing, acceptance of a Transaction Rate Quote or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; (b) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (c) the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement shall be true on and as of the date of such Borrowing; and (d) the fact that, immediately after such Borrowing, the conditions set forth in clauses (i) and (ii) of Section 2.01 shall have been satisfied. 37 43 Each Borrowing (Syndicated, Swing and Money Market) hereunder (other than a Borrowing which consists solely of a Refunding Loan) shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in paragraphs (b), (c) and (d) of this Section, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d). ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower and (by incorporation by reference in the Guaranty) the Guarantors, as expressly stated, each represent and warrant that: SECTION 4.01. Partnership or Corporate Existence and Power. The Borrower is a limited partnership, and PPI and each Subsidiary is a corporation, duly organized, validly existing and in good standing under the laws of Georgia, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all partnership powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where any such failure does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.02. Partnership or Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents and by the Guarantors of the Guaranty (i) are within the Borrower's partnership powers and each Guarantor's respective corporate powers, (ii) have been duly authorized by all necessary partnership or corporate action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, other than filings required by federal or state securities laws with respect to this Agreement (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of limited partnership or partnership agreement of the Borrower or the articles of incorporation or by-laws of the Guarantors or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower, the Guarantors or any Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower, the Guarantors or any Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes, the Guaranty and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower and the Guarantors parties thereto, enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. SECTION 4.04. Financial and Property Information (a) The balance sheet of PPI and the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1999 and the related consolidated statements of 38 44 income, shareholders' equity and cash flows for the Fiscal Year then ended, in the case of PPI reported on by PriceWaterhouseCoopers LLP, copies of which have been delivered to each of the Banks, fairly present, in all material respects, in conformity with GAAP, the consolidated financial position of PPI and the Borrower and its Consolidated Subsidiaries, respectively, as of such date and their consolidated results of operations and cash flows for such periods stated. (b) Since December 31, 1999, there has been no event, act, condition or occurrence having a Material Adverse Effect. (c) All material information concerning the Properties which has been furnished to the Banks is true and correct in all material respects. SECTION 4.05. No Litigation. There is no action, suit or proceeding pending, or to the knowledge of the Executive Officers, threatened, against or affecting the Borrower, the Guarantors or any Subsidiaries before any court or arbitrator or any governmental body, agency or official which has or is reasonably expected to cause a Material Adverse Effect or which in any manner draws into question the validity of or is reasonably expected to impair the ability of the Borrower or the Guarantors to perform its obligations under, this Agreement, the Notes, the Guaranty or any of the other Loan Documents. SECTION 4.06. Compliance with ERISA (a) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA, except where any such failure does not involve an aggregate amount in excess of $2,500,000. (b) Neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. SECTION 4.07. Compliance with Laws; Payment of Taxes. The Borrower, the Guarantors and the Subsidiaries are in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where (i) such compliance is being contested in good faith through appropriate proceedings or (ii) any failure to comply does not have and is not reasonably expected to cause a Material Adverse Effect. There have been filed on behalf of the Borrower, the Guarantors and the Subsidiaries all Federal, state and local income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower, the Guarantors or any Subsidiary have been paid, except: (A) ad valorem taxes not in excess of an aggregate amount of $500,000; and (B) other liabilities, if (1) they are being contested in good faith and against which the Borrower, the Guarantors or Subsidiary has set up reserves in accordance with GAAP, or (2) the aggregate amount involved is not in excess of $2,500,000. The charges, accruals and reserves on the books of the Borrower, the Guarantors and the Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower and the Guarantors, adequate. As of the Closing Date, United States income tax 39 45 returns of PPI have not been examined for any taxable year commencing with its taxable year ending December 31, 1993 when it was initially qualified as a real estate investment trust through its taxable year ending December 31, 2000. SECTION 4.08. Subsidiaries. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08, as supplemented from time to time, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. SECTION 4.09. Investment Company Act. Neither the Borrower, the Guarantors nor any Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Public Utility Holding Company Act. Neither the Borrower, PPI nor any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. SECTION 4.11. Ownership of Property. Each of the Borrower, PPI and the Subsidiaries has title to its properties sufficient for the conduct of its business, except where any such failure does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.12. No Default. Neither the Borrower, PPI nor any of the Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which has or is reasonably expected to cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 4.13. Full Disclosure. All information heretofore furnished by the Borrower or the Guarantors to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Bank will be, true, accurate and complete in all material respects or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower and the Guarantors have disclosed to the Banks in writing any and all facts which have had or are reasonably expected to cause a Material Adverse Effect. SECTION 4.14. Environmental Matters. (a) Neither the Borrower, the Guarantors nor any other Subsidiary is, to the knowledge of the Executive Officers, subject to any Environmental Liability which has had or is reasonably expected to cause a Material Adverse Effect and neither the Borrower, the Guarantors nor any Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent (and the Administrative Agent shall promptly furnish a copy of any such disclosure to the Banks). None of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent. 40 46 (b) No Hazardous Materials have been permitted or are being permitted to be used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, or, to the best of the knowledge of the Executive Officers, at or from any adjacent site or facility, except for Hazardous Materials, such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in all material respects in compliance with all applicable Environmental Requirements and except as disclosed in writing to the Administrative Agent. (c) The Borrower, the Guarantors and each of the Subsidiaries, has procured all Environmental Authorizations necessary for the conduct of its business, and is in compliance with all Environmental Requirements (including, to the best knowledge of the Executive Officers, with respect to any Environmental Releases) in connection with the operation of the Properties and the Borrower's, the Guarantors' and each other Subsidiary's respective businesses, except where any such failure to comply does not have and is not reasonably expected to cause a Material Adverse Effect. SECTION 4.15. Partner Interests and Capital Stock. All Partner Interests and Capital Stock, debentures, bonds, notes and all other securities of the Borrower, the Guarantors and each of the Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including, but not limited to, the "Blue Sky" laws of all applicable states and the federal securities laws, except where any such failure to comply does not and is not reasonably expected to cause a Material Adverse Effect. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of non-voting Capital Stock of each of the Borrower's Subsidiaries is owned by the Borrower free and clear of any Lien or adverse claim. SECTION 4.16. Margin Stock. Neither the Borrower, the Guarantors nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock. SECTION 4.17. Insolvency. After giving effect to the execution and delivery of the Loan Documents and the making of the Loans under this Agreement: (i) neither the Borrower nor the Significant Subsidiary will (x) be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction, whether current or contemplated, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with respect to the Loans will not be rendered avoidable under any Other Applicable Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other 41 47 applicable state law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time. SECTION 4.18. Insurance. The Borrower, the Guarantors and each of the Subsidiaries has (either in the name of the Borrower, the Guarantors or in such other Subsidiary's own name), with financially sound and reputable insurance companies having an A.M. Best rating of B+ or better, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 4.19. Real Estate Investment Trust. PPI is qualified under the Code as a real estate investment trust. ARTICLE V COVENANTS The Borrower and (by incorporation by reference in the Guaranty) the Guarantors agree that, so long as any Bank has any Commitment hereunder or any amount payable hereunder or under any Note remains unpaid: SECTION 5.01. Information. PPI and the Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each Fiscal Year, (i) a consolidated balance sheet of PPI as of the end of its Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all certified by PriceWaterhouseCoopers LLP or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications as to the scope of the audit or as to the going concern nature of the business, and (ii) a consolidated balance sheet of Borrower and its Consolidated Subsidiaries as of the end of its Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by an Executive Officer; (b) as soon as available and in any event within 60 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, consolidated balance sheets of each of PPI and of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement of income and statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by an Executive Officer; (c) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate, substantially in the form of Exhibit F (a "Compliance Certificate"), of an Executive Officer (i) setting forth in reasonable detail the calculations 42 48 required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.10, inclusive, and Section 5.12 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within 5 Domestic Business Days after any Executive Officer becomes aware of the occurrence of any Default, a certificate of an Executive Officer setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of PPI generally, copies of all financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports (excluding Form 4, Statement of Changes in Beneficial Ownership, or its equivalent, unless they reflect a Change in Control) which PPI shall have filed with the Securities and Exchange Commission; (g) if and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (h) by April 1 of each year, a report as of the end of such Fiscal Year containing the following information: (i) a schedule of all outstanding Debt, showing for each component of Debt, the lender, the total commitment, the total Debt outstanding, the interest rate, if fixed, or a statement that the interest rate floats, the term, the required amortization (if any) and the security (if any); (ii) a schedule of all interest rate protection agreements, showing for each such agreement, the total dollar amount, the type of agreement (i.e. cap, collar, swap, etc.) and the term thereof; and (iii) a development schedule of the announced development pipeline, including for each announced development project, the project name and location, the number of units, the expected construction start date, the expected date of delivery of the first units, the expected stabilization date, and the total anticipated cost. (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Inspection of Property, Books and Records. The Borrower and the Guarantors will (i) keep, and cause each other Consolidated Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be 43 49 made of all dealings and transactions in relation to its business and activities; and (ii) permit, and cause each other Consolidated Subsidiary to permit, representatives of any Bank at such Bank's expense prior to the occurrence of a Default and at the Borrower's or the Guarantors' expense after the occurrence and during the continuance of a Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower and the Guarantors agree to cooperate and assist in such visits and inspections, in each case at such reasonable times, upon reasonable prior notice to the Borrower or the Guarantors and as often as may reasonably be desired. SECTION 5.03. Consolidated Total Secured Debt. The amount of Consolidated Total Secured Debt will not at any time exceed 40% of Consolidated Total Asset Value. SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets. The ratio of Consolidated Total Debt to Consolidated Total Asset Value will not at any time exceed 0.60 to 1.00. SECTION 5.05. Interest Coverage. The ratio of Adjusted Consolidated Income Available For Debt Service to Adjusted Consolidated Interest Expense shall at all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. SECTION 5.06. Restricted Payments. The Borrower's Restricted Payments (other than in connection with the Approved Unit Redemption Transactions) in any calendar year shall not exceed 95% of Consolidated Income Available for Distribution for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Consolidated Income Available for Distribution to permit PPI to preserve its status as a real estate investment trust under the applicable provision of the Code, or (ii) PPI declares one or more capital gains dividends within such calendar year (in which event the amount of additional Restricted Payments that may be made as a result of such declaration as provided in this clause (ii) shall not exceed $30,000,000). In the event that the Borrower or PPI receives a public debt rating of BBB- or better from Standard & Poors or Baa3 or better from Moody's Investor's Service and so long as that rating is affirmed during each year, the Borrower's Restricted Payments in any calendar year will be limited to 100% of Consolidated Income Available for Distribution for such calendar year with the same exceptions contained in clauses (i) and (ii) of this Section 5.06. SECTION 5.07. Consolidated Fixed Charges Coverage Ratio. At the end of each Fiscal Quarter, the Consolidated Fixed Charges Coverage Ratio shall not have been less than 1.75 to 1.0. SECTION 5.08. Unsecured Fixed Charges Coverage. At the end of each Fiscal Quarter, the ratio of Consolidated Income Available For Debt Service From Eligible Properties to Adjusted Fixed Charges shall not have been less than 1.75 to 1.0. SECTION 5.09. Unencumbered Assets. The ratio of Total Unencumbered Asset Value to Unsecured Funded Debt shall not at any time be less than 1.75 to 1.0. 44 50 SECTION 5.10. Investments Neither the Borrower nor any Guarantor shall make Investments (including loans and advances) in or to any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and (v) deposits required by government agencies or public utilities; (B) without duplication, (i) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000, and (ii) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (C) without duplication, Investments (exclusive of Investments permitted under clauses (A) and (B) above and clauses (D) and (E) below) in an aggregate amount outstanding at any time not in excess of 20% of Consolidated Total Assets; (D) Investments in Consolidated Subsidiaries; and (E) Investments in connection with Approved Unit Redemption Transactions. Neither GP Sub nor LP Sub shall make any Investments after the Closing Date in excess of an aggregate amount of $1,000,000, except in the Borrower; provided, that if either of them desires to make Investments permitted by clauses (A) through (D) above, rather than be restricted by this sentence, it can elect to become a Guarantor pursuant to and in accordance with the last sentence of Section 5.23(d). SECTION 5.11. Dissolution; Redemptions. Neither the Borrower, any Guarantor nor any of the Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock or that of any Subsidiary, subject to the rights of limited partners of the Borrower to convert or exchange their Partner Interests in the Borrower to stock in PPI, except for (i) redemptions and retirements otherwise permitted by Section 5.10 or 5.12 and (ii) the Approved Unit Redemption Transactions. SECTION 5.12. Consolidations, Mergers and Sales of Assets The Borrower and the Guarantors will not, nor will the Borrower permit any other Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part 45 51 of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) the Borrower, any Guarantor and any Subsidiary may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower or such Guarantor or other Subsidiary is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (b) any Guarantor may merge with or transfer assets to the Borrower (with the Borrower as the survivor of any such merger), and any Subsidiary may dissolve, liquidate, merge with or transfer assets to the Borrower, any Guarantor, or another Subsidiary (with the Borrower or such Guarantor, as the case may be, as the survivor in any such merger in which the Borrower or any Guarantor is involved), and (c) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit: (i) Approved Unit Redemption Transactions; and (ii) during any Fiscal Quarter, a transfer of assets or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding three (3) Fiscal Quarters, either (x) constituted more than fifteen percent (15%) of Consolidated Total Assets at the end of the Fiscal Quarter immediately preceding such Fiscal Quarter, or (y) contributed more than fifteen percent (15%) of Consolidated Income Available For Debt Service during the four (4) Fiscal Quarters immediately preceding such Fiscal Quarter. In the case of any Subsidiary which transfers all or a substantial part of its assets pursuant to clause (c) of the preceding sentence, and in the case of any Subsidiary the stock or other ownership interests in which are being sold and with respect to which clause (c) would have been satisfied if the transaction had been a sale of assets of such Subsidiary, such Subsidiary shall be released from its obligations under the Guaranty (if it has become a party thereto) and, in the case of a transaction involving a sale of assets, such Subsidiary may dissolve, subject (as to GP Sub, if it is such Subsidiary to be released) to the last sentence of Section 5.22. SECTION 5.13. Use of Proceeds. The proceeds of the Loans may be used for general corporate and partnership purposes of the Borrower and the Guarantors, and the Subsidiaries. No portion of the proceeds of the Loans will be used by the Borrower or the Guarantors (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, unless such tender offer or other acquisition is to be made on a negotiated basis with the approval of the Board of Directors of the Person to be acquired or (ii) for any purpose in violation of any applicable law or regulation. 46 52 SECTION 5.14. Compliance with Laws; Payment of Taxes (a) The Borrower and the Guarantors will, and will cause each of the Subsidiaries and each member of the Controlled Group to, comply with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where (i) the necessity of such compliance is being contested in good faith through appropriate proceedings, or (ii) any failure to comply which does not have and is not reasonably expected to cause a Material Adverse Effect. The Borrower and the Guarantors will, and will cause each of the Subsidiaries to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a Lien against the Property of the Borrower, the Guarantors or any other Subsidiary, except (A) liabilities being contested in good faith and against which, if requested by the Administrative Agent, the Borrower, the Guarantors or Subsidiary will set up reserves in accordance with GAAP, and (B) liabilities in an aggregate amount not in excess of $2,500,000. (b) If the Borrower or any other member of the Controlled Group shall enter into a Multiemployer Plan, the Borrower and the Guarantors shall not permit the aggregate complete or partial withdrawal liability under Title IV of ERISA with respect to Multiemployer Plans incurred by the Borrower, the Guarantors and members of the Controlled Group to exceed $5,000,000 at any time. For purposes of this Section 5.14(b), the amount of withdrawal liability of the Borrower and members of the Controlled Group at any date shall be the aggregate present value of the amount claimed to have been incurred less any portion thereof which the Borrower, the Guarantors and members of the Controlled Group have paid or as to which the Borrower and the Guarantors reasonably believe, after appropriate consideration of possible adjustments arising under Sections 4219 and 4221 of ERISA, it and members of the Controlled Group will have no liability, provided that the Borrower and the Guarantors shall obtain prompt written advice from independent actuarial consultants supporting such determination. The Borrower and the Guarantors agree (i) once in each year, beginning with the first year in which the Borrower or any other member of the Controlled Group enters into a Multiemployer Plan, to request and use its best efforts to obtain a current statement (addressed to the Borrower and the Administrative Agent) of the withdrawal liability of the Borrower and the Guarantors and members of the Controlled Group from each Multiemployer Plan, if any, and (ii) to transmit a copy of such statement to the Administrative Agent and the Banks within 15 days after the Borrower receives the same. SECTION 5.15. Insurance. The Borrower and the Guarantors will maintain, and will cause each of the Subsidiaries to maintain (either in the name of the Borrower or the Guarantors' or such other Subsidiary's own name), with financially sound and reputable insurance companies having an A.M. Best rating of B+ or better, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 5.16. Change in Fiscal Year. The Borrower and the Guarantors will not, and will cause the Subsidiaries to not, change its Fiscal Year without the consent of the Required Banks. 47 53 SECTION 5.17. Maintenance of Property; Principal Business. The Borrower and the Guarantors shall, and shall cause each other Subsidiary to, maintain all of its properties and assets in good condition, repair and working order, ordinary wear and tear excepted, and maintain all Property consisting of apartment communities (other than Property consisting of land acquired with existing improvements which are to be substantially demolished) in a first class manner. The principal business operations of the Borrower and the Subsidiaries, taken as a whole, will be directly or indirectly related to multi-family residential Properties. SECTION 5.18. Environmental Notices. Promptly upon any Executive Officer's becoming aware thereof, the Borrower and the Guarantors shall furnish to the Banks and the Administrative Agent prompt written notice of all Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent property, which has had or is reasonably expected to cause a Material Adverse Effect. SECTION 5.19. Environmental Matters. The Borrower and the Guarantors will not, and will cause the Subsidiaries to not, and will not permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed, managed, or otherwise handled in compliance in all material respects with all applicable Environmental Requirements. SECTION 5.20. Environmental Release. The Borrower and the Guarantors agree that upon any Executive Officer's becoming aware of the occurrence of an Environmental Release at or on any of the Properties the Borrower will act immediately to investigate the extent of, and to take appropriate action to remediate such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority. SECTION 5.21. Transactions with Affiliates. Neither the Borrower, any Guarantor nor any of the Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower, any Guarantor or such other Subsidiary (which Affiliate is not PPI, the Borrower, the Guarantors or a Wholly Owned Subsidiary), except Approved Unit Redemption Transactions or as permitted by law and in the ordinary course of business and pursuant to reasonable terms which are no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate. SECTION 5.22. Qualification as a Real Estate Investment Trust; General Partner. PPI shall at all times remain qualified under the Code as a real estate investment trust. The Borrower will not agree to amend or waive the requirements of Section 7.5A of the limited partnership agreement of the Borrower, as in effect on the date of this Agreement, as such requirements are applicable to the General Partner, without the prior written consent of the Required Banks (which consent the Banks hereby agree not to unreasonably withhold or delay). The General Partner shall at all times be one of PPI, GP Sub or another Wholly Owned Subsidiary of PPI. 48 54 SECTION 5.23. Certain Covenants Concerning Subsidiaries. The Borrower and the Guarantors shall: (a) not permit any of the Subsidiaries (other than GP Sub, solely by virtue of its being and in its capacity as a general partner of the Borrower) to incur Unsecured Funded Debt after the Closing Date in an aggregate amount in excess of $2,000,000 outstanding at any one time; (b) not permit any of the Subsidiaries (other than GP Sub, solely by virtue of its being and in its capacity as a general partner of the Borrower) to Guarantee the Debt of another Person; provided, that any Subsidiary can Guarantee the Debt of another Subsidiary, so long as the aggregate amount of Debt of Subsidiaries which is Guaranteed by Subsidiaries does not exceed $500,000; (c) not permit any Significant Subsidiary to (x) be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction in which it is engaged or about to be engaged, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA. For purposes of this Section 5.23(c), "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable state law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time; and (d) cause each Subsidiary which is or which becomes a Significant Subsidiary to deliver to the Administrative Agent within 20 Business Days after such event occurs (x) an executed counterpart of the Guarantee of the Loans (substantially in the form set forth in Exhibit H), or joinder agreement with respect to the Guaranty, in favor of the Agent and the Banks; (y) an executed counterpart of the Contribution Agreement (substantially in the form set forth in Exhibit L), or joinder agreement with respect to the Contribution Agreement; and (z) documents pertaining to the Subsidiary reasonably requested by the Administrative Agent of the types described in paragraph (f) of Section 3.01. In addition, (i) any Subsidiary which is not a Significant Subsidiary but which has Subsidiary Excluded Property may elect to become a Guarantor by complying with the foregoing requirements, so that Property which it owns and which otherwise would not be Eligible Property can become Eligible Property and (ii) if either GP Sub or LP Sub wishes to make Investments permitted by the provisions of clauses (A) through (D) of Section 5.10 (rather than be restricted by the last sentence of Section 5.10), it may elect to become a Guarantor by complying with the foregoing requirements. 49 55 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within 5 Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within 5 Domestic Business Days after such fee or other amount becomes due; or (b) the Borrower or any Guarantor shall fail to observe or perform any covenant contained in Sections 5.01(d), 5.02(ii), 5.03 to 5.09, inclusive, 5.11, 5.16 and 5.22; or (c) the Borrower or any Guarantor shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by paragraph (a) or (b) above) and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower or the Guarantors by the Administrative Agent at the request of any Bank or (ii) an Executive Officer otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made by the Borrower or a Guarantor in Article IV of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (e) the Borrower or any Guarantor shall fail to make any payment in respect of Debt in an aggregate amount in excess of $10,000,000 outstanding (other than the Notes) when due or within any applicable grace period; or (f) any event or condition shall occur which results in the acceleration of the maturity of Debt outstanding of the Borrower or a Guarantor in an aggregate amount in excess of $10,000,000 (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or a Guarantor) or enables (with any condition for the giving of notice or the lapse of time, or both, having been satisfied) the holders of such Debt or any Person acting on such holders' behalf to accelerate the maturity thereof (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or a Guarantor); or (g) the Borrower or any Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or 50 56 (h) an involuntary case or other proceeding shall be commenced against the Borrower or a Guarantor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or a Guarantor under the federal bankruptcy laws as now or hereafter in effect; or (i) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; in each of the foregoing cases, where the aggregate amount not so paid or the resulting withdrawal liability of the Borrower, PPI or any Subsidiary is in excess of $10,000,000; or (j) one or more judgments or orders for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower or a Guarantor and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) a federal tax lien shall be filed against any Property of the Borrower or any Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be filed against any Property of the Borrower or a Guarantor under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing, except where in either such case (i) the aggregate amount involved is not in excess of $10,000,000, or (ii) such lien did not arise in connection with a capital gains transaction and is being contested in good faith and against which the Borrower or Subsidiary has set up reserves in accordance with GAAP. then, and in every such event, the Administrative Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and the obligation to make Swing Loans and they shall thereupon terminate, (ii) any Bank may terminate its obligation to fund a Money Market Loan in connection with any relevant Money Market Quote, and (iii) if requested by the Required Banks (but not otherwise), by notice to the Borrower declare the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) to be, and the Syndicated Loan Notes, together with the Swing Loan Note and the Money Market Loan Notes, shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default; provided that if any Event of Default specified in paragraph (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments and the 51 57 obligation to make Swing Loans shall thereupon terminate and the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest thereon at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Banks. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment; Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Bank; (b) shall not be responsible to the Banks for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Bank under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Banks, and then only on terms and conditions satisfactory to the Administrative Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or wilful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Administrative Agent and the Banks, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Administrative Agent shall be ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary 52 58 relationship in respect of any Bank, except that it will hold in trust for the account of each Bank any monies received by it which are payable to such Bank hereunder. SECTION 7.02. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks in any action taken or failure to act pursuant thereto shall be binding on all of the Banks. SECTION 7.03. Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the nonpayment of principal of or interest on the Loans) unless the Administrative Agent has received notice from a Bank or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default or an Event of Default, or actually becomes aware of the existence of an Event of Default, the Administrative Agent shall give prompt notice thereof to the Banks. The Administrative Agent shall give each Bank prompt notice of each nonpayment of principal of or interest on the Syndicated Loans or the Swing Loan, whether or not it has received any notice of the occurrence of such nonpayment. The Administrative Agent shall (subject to Section 9.06) take such action hereunder with respect to such Default or Event of Default as shall be directed by the Required Banks, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. SECTION 7.04. Rights of Administrative Agent as a Bank. With respect to the Loans made by it, Wachovia in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as the Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include Wachovia in its individual capacity. The Administrative Agent may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with PPI or Borrower (and any of its Subsidiaries and Affiliates) as if it were not acting as the Administrative Agent, and the Administrative Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and the Administrative Agent) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Banks. SECTION 7.05. Indemnification. Each Bank severally agrees to indemnify the Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without 53 59 limitation, counsel fees and disbursements, but not including fees payable pursuant to the Arranger's Letter Agreement), or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided that (i) no Bank shall be liable for any of the foregoing to the extent they arise from the negligence or wilful misconduct of the Administrative Agent and (ii) no Designated Bank shall be liable for any payment under this Section 7.05 so long as, and to the extent that, its Designating Bank makes such payments. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 7.06. Consequential Damages. THE ADMINISTRATIVE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 7.07. Payee of Note Treated as Owner. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent and the provisions of Section 9.08(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. SECTION 7.08. Nonreliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other 54 60 Person (or any of their Affiliates) which may come into the possession of the Administrative Agent. SECTION 7.09. Failure to Act. Except for action expressly required of the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Banks of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Administrative Agent by reason of taking, continuing to take, or failing to take any such action. SECTION 7.10. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower and the Administrative Agent may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Administrative Agent, subject to the right of the Borrower, so long as no Event of Default is in existence, to approve any such successor Administrative Agent which is not then a Bank or an Affiliate thereof, which approval shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's notice of resignation or the Required Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a bank which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: (a) the Administrative Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (b) the Required Banks advise the Administrative Agent that the London Interbank Offered Rate, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding the relevant type of Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the 55 61 Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make the type of Euro-Dollar Loans specified in such notice shall be suspended. Unless the Borrower notifies the Administrative Agent at least 2 Domestic Business Days before the date of any Borrowing of such type of Euro-Dollar Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Bank, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, a Change of Law or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement which is compensated by the payment of additional interest pursuant to the last paragraph of this Section 8.03(a)) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Lending Office); or (ii) shall impose on any Bank (or its Lending Office) or the London interbank market any other condition affecting its Fixed Rate Loans, its Syndicated Loan Notes or its Money Market Loan Notes or its obligation to make Fixed Rate Loans; 56 62 and the result of any of the foregoing is to increase the cost to such Bank (or its Lending Office) of making or maintaining any Syndicated Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Lending Office) under this Agreement or under its Syndicated Loan Notes or Money Market Loan Notes with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction, but in no event shall the Borrower be liable for amounts incurred more than 90 days prior to receipt of such demand. In addition, if at any time a Euro-Dollar Reserve Percentage greater than 0% is imposed on any Bank, the Borrower shall pay to such Bank additional interest on the unpaid principal amount of the Euro-Dollar Loans of such Bank until such principal amount is paid in full at an interest rate per annum equal at all times to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Euro-Dollar Loan for such Interest Period by (ii) 1.00 minus the Euro-Dollar Reserve Percentage, payable on each date on which interest is payable on such Euro-Dollar Loan. Such additional interest, if any, shall be determined by such Bank and notified to the Borrower through the Administrative Agent. (b) If any Bank shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction, but in no event shall the Borrower be liable for amounts incurred more than 90 days prior to receipt of such demand. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) Notwithstanding the foregoing, in the event the Borrower is required to pay any Bank amounts pursuant to Section 2.12(c) or this Section 8.03 and the designation of a different Lending Office pursuant to Section 2.12(c) or Section 8.03(c) will not avoid the need for compensation to such Bank (an "Affected Bank"), the Borrower may give notice to such Affected Bank (with copies to the Administrative Agent) that it wishes to seek one or more 57 63 assignees (which may be one or more of the Banks) to assume the Commitment of such Affected Bank and to purchase its outstanding Loans and Notes; provided, that if there is more than one Affected Bank which has requested substantially and proportionally equal compensation hereunder, the Borrower shall elect to seek an assignee to assume the Commitments of all such Affected Banks. Each Affected Bank agrees to sell its Commitment, Loans, Notes and interest in this Agreement in accordance with Section 9.08(c) to any such assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans and Notes, plus all other fees and amounts (including, without limitation, any compensation due to such Affected Banks under Section 2.12(c) or this Section 8.03) due to such Affected Bank hereunder calculated, in each case, to the date such Loans, Notes and interest are purchased. Upon such sale or prepayment, each such Affected Bank shall have no further commitment or other obligation to the Borrower hereunder or under any Note. (e) The provisions of this Section 8.03 shall be applicable with respect to any Transferee, subject to Section 9.08(e) as to any Participant, and any calculations required by such provisions shall be made based upon the circumstances of such Transferee. SECTION 8.04. Base Rate Loans or Other Euro-Dollar Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make or maintain any type of Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Syndicated Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans and interest and principal on such Syndicated Loans shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks, and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.05. Compensation. Upon the request of any Bank, delivered to the Borrower and the Administrative Agent, the Borrower shall pay to such Bank such amount or amounts as shall compensate such Bank for any loss, cost or expense (not including lost profits) reasonably and actually incurred by such Bank (except solely such as result from such Bank's breach of its obligations under the Loan Documents or gross negligence or wilful misconduct) as a result of: (a) any payment or prepayment (pursuant to Section 2.08, 2.09, 2.10, 2.11, 6.01, 8.02 or otherwise) of a Euro-Dollar Loan on a date other than the last day of an Interest Period for such Loan; or 58 64 (b) any failure by the Borrower to prepay a Euro-Dollar Loan on the date for such prepayment specified in the relevant notice of prepayment hereunder; or (c) any failure by the Borrower to borrow a Euro-Dollar Loan or Money Market Loan on the date for the Euro-Dollar Borrowing or Money Market Borrowing of which such Euro-Dollar Loan or Money Market Borrowing is a part specified in the applicable Notice of Borrowing delivered pursuant to Section 2.02 or notification of acceptance of Money Market Quotes pursuant to Section 2.03(e). ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature pages hereof or such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and the appropriate confirmation is received, (ii) if given by mail, 3 Domestic Business Days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i) all reasonable out-of-pocket expenses actually incurred by the Administrative Agent, including reasonable fees and disbursements of special counsel for the Banks and the Administrative Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default hereunder or thereunder and (ii) if a Default occurs, all reasonable out-of-pocket expenses actually incurred by the Administrative Agent and the Banks, including reasonable fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including reasonable out-of-pocket expenses actually incurred in enforcing this Agreement and the other Loan Documents. The Borrower shall indemnify the Administrative Agent and each Bank against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. 59 65 SECTION 9.04. Indemnification. The Borrower shall indemnify the Administrative Agent, the Banks and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Bank hereunder or breach by the Borrower of this Agreement or any other Loan Document or from any investigation, litigation (including, without limitation, any actions taken by the Administrative Agent or any of the Banks to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Administrative Agent and each Bank, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any out-of-pocket expenses (including, without limitation, reasonable legal fees) actually incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred solely by reason of the breach of obligations under the Loan Documents or gross negligence or wilful misconduct of the Person to be indemnified. SECTION 9.05. Setoff; Sharing of Setoffs. (a) The Borrower agrees that the Administrative Agent and each Bank (and Wachovia, as to the Swing Loans) shall have a right of setoff for all indebtedness and obligations owing to them from the Borrower upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned to the Administrative Agent or any such Bank or otherwise in the possession or control of the Administrative Agent or any such Bank for any purpose for the account or benefit of the Borrower and including any balance of any deposit account or of any credit of the Borrower with the Administrative Agent or any such Bank, whether now existing or hereafter established, and the Borrower hereby authorizes the Administrative Agent and each Bank at any time or times with or without prior notice to apply such balances or any part thereof to any indebtedness and obligations owing by the Borrower to the Banks and/or the Administrative Agent during the existence of an Event of Default and in such amounts as they may elect, and whether or not the collateral, if any, or the responsibility of other Persons primarily, secondarily or otherwise liable may be deemed adequate; provided, however, nothing herein contained shall authorize or entitle the Administrative Agent or any Bank to exercise any right of setoff against any accounts, monies, government securities, or other Investments held by such Person under any escrow, trust, special purpose account, or other similar arrangement established with such Person by the Borrower or the Guarantors or Subsidiary for the purpose of (i) implementing a defeasance or "in substance" defeasance of Debt of the Borrower or the Guarantors or Subsidiary, or (ii) maintaining security deposits of tenants of any of the Properties. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Administrative Agent or any such Bank as soon as the same may be put in transit to it by mail or carrier or by other bailee. (b) Each Bank agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise (including, without limitation, from any collateral hereafter obtained), receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Syndicated Loan Note held by it which is greater than the proportion received by any other Bank 60 66 in respect of the aggregate amount of all principal and interest owing with respect to the Syndicated Loan Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Syndicated Loan Notes held by the other Banks owing to such other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Syndicated Loan Notes held by the Banks owing to such other Banks shall be shared by the Banks pro rata; provided that (i) nothing in this Section shall impair the right of any Bank to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Syndicated Loan Notes, and (ii) if all or any portion of such payment received by the purchasing Bank is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay to the purchasing Bank the purchase price of such participation to the extent of such recovery together with an amount equal to such other Bank's ratable share (according to the proportion of (x) the amount of such other Bank's required repayment to (y) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Syndicated Loan Note or Money Market Loan Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.06. Amendments and Waivers. (a) Any provision of this Agreement, the Notes or any other Loan Documents, may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that, no such amendment or waiver shall, unless signed by all Banks, (i) change the Commitment of any Bank or subject any Bank to any additional obligation, (ii) change the principal of or rate of interest on any Loan or any fees (other than fees payable to the Administrative Agent) hereunder, (iii) change the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) change the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) release or substitute all or any substantial part of the collateral (if any) held as security for the Loans, or (viii) release any Guarantee given to support payment of the Loans, except as expressly provided in the last sentence of Section 5.12. (b) The Borrower will not obtain from any Bank its written agreement to waive or amend any of the provisions of this Agreement except through the Administrative Agent, and the Administrative Agent shall be supplied by the Borrower with sufficient information to enable the Banks to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to the Administrative Agent for redelivery to each Bank forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Banks. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, 61 67 whether by way of supplemental or additional interest, fee or otherwise, to any Bank (in its capacity as such) as consideration for or as an inducement to the entering into by such Bank of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Banks. (c) Each Designated Bank hereby appoints its Designating Bank as such Designated Bank's agent and attorney in fact and grants to its Designating Bank an irrevocable power of attorney, coupled with an interest, to receive payments made for the benefit of such Designated Bank under this Agreement, to deliver and receive all communications and notices under this Agreement and other Loan Documents and to exercise on such Designated Bank's behalf all rights to vote and to grant and make approvals, waivers, consents, releases and amendments to or under this Agreement or the other Loan Documents. Any document executed by such agent on such Designated Bank's behalf in connection with this Agreement or the other Loan Documents shall be binding on such Designated Bank. The Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions. SECTION 9.07. No Margin Stock Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (b) Any Bank may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment hereunder or any other interest of such Bank hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. In no event shall a Bank that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Bank may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related Loan or Loans, (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Loan or Loans, (iii) the change of the principal of the related Loan or Loans, (iv) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) fee is payable hereunder from the rate at which the Participant is entitled to receive interest or fee (as the case may be) in respect of such participation, (v) the release or substitution of all or any substantial part of the collateral (if any) held as security for the Loans, or (vi) the release of any Guarantee given to support payment of the Loans, except as 62 68 expressly provided in the last sentence of Section 5.12. Each Bank selling a participating interest in any Loan, Note, Commitment or other interest under this Agreement, other than a Money Market Loan or Money Market Loan Note or participating interest therein, shall, within 10 Domestic Business Days of such sale, provide the Borrower and the Administrative Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 8.03 and 8.05, subject to the provisions of Section 9.08(e), with respect to its participation in Loans outstanding from time to time. (c) Any Bank may at any time assign to one or more banks or financial institutions (each an "Assignee") all, or in the case of its Loans and Commitments, a proportionate part of all its Loans and Commitments, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance, executed by such Assignee, such transferor Bank and the Administrative Agent (and, in the case of an Assignee that is not then a Bank (or an Affiliate of a Bank), subject to clause (iii) below, by the Borrower); provided that (i) no interest may be sold by a Bank pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Bank's Commitment, (ii) if a Bank is assigning only a portion of its Commitment, then, the amount of the Commitment being assigned (determined as of the effective date of the assignment) shall be in an amount not less than $10,000,000, (iii) except during the continuance of an Event of Default, no interest may be sold by a Bank pursuant to this paragraph (c) to any Assignee that is not then a Bank (or an Affiliate of a Bank) without the consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld, and (iv) except during the existence of an Event of Default, each Bank may make only two assignments to a Person which, prior to the assignment, was not a Bank (or an Affiliate of such Bank), unless the Borrower has consented thereto in its sole discretion. Upon (A) execution of the Assignment and Acceptance by such transferor Bank, such Assignee, the Administrative Agent and (if applicable) the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Administrative Agent, (C) payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, and (D) payment by such Assignee of a processing and recordation fee of $2,500 to the Administrative Agent, such Assignee shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Banks or the Administrative Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to such Assignee. (d) Subject to the provisions of Section 9.09, the Borrower authorizes each Bank to disclose to any Participant or Assignee (each a "Transferee") and any prospective Transferee any and all financial information in such Bank's possession concerning the Borrower which has been delivered to such Bank by the Borrower pursuant to this Agreement or which has been delivered to such Bank by the Borrower in connection with such Bank's credit evaluation prior to entering into this Agreement. 63 69 (e) No Transferee shall be entitled to receive any greater payment under Section 8.03 than the transferor Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Anything in this Section 9.08 to the contrary notwithstanding, any Bank may assign and pledge all or any portion of the Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or obligations made by the Borrower to the assigning and/or pledging Bank in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Bank from its obligations hereunder. (g) Any Bank may at any time designate not more than one Designated Bank to fund Money Market Loans on behalf of such Designating Bank subject to the terms of this Section 9.08(g), and the provisions of Section 9.08(c) shall not apply to such designation. No Bank may have more than one Designated Bank at any time. Such designation may occur either by the execution of the signature pages of this Agreement by such Bank and Designated Bank next to the appropriate "Designating Bank" and "Designated Bank" captions, or by execution by such parties of a Designation Agreement subsequent to the date of this Agreement; provided, that any Bank and its Designated Bank executing the signatures pages of this Agreement as "Designating Bank" and "Designated Bank", respectively, on the date hereof shall be deemed to have executed a Designation Agreement, and shall be bound by the respective representations, warranties and covenants contained therein, and such designation shall be conclusively deemed to be acknowledged by the Borrower and the Administrative Agent. The parties to each such designation occurring subsequent to the execution date hereof shall execute and deliver to the Administrative Agent and the Borrower for their acknowledgment a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Bank and a designee representing that it is a Designated Bank and acknowledged by the Borrower, the Administrative Agent will acknowledge such Designation Agreement and will give prompt notice thereof to the Borrower and the other Banks, whereupon, (i) the Borrower shall execute and deliver to the Designating Bank a Designated Bank Note payable to the order of the Designated Bank, (ii) from and after the effective date specified in the Designation Agreement, the Designated Bank shall become a party to this Agreement with a right to make Money Market Loans on behalf of its Designating Bank pursuant to Section 2.03(g), and (iii) the Designated Bank shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Bank which is not otherwise required to repay obligations of such Designated Bank which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Bank, the Designating Bank shall be and remain obligated to the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks for each and every obligation of the Designating Bank and its related Designated Bank with respect to this Agreement, including, without limitation, any indemnification obligations under Section 64 70 7.05 and any sums otherwise payable to the Borrower by the Designated Bank. Each Designating Bank shall serve as the administrative agent of its Designated Bank and shall on behalf of its Designated Bank: (i) receive any and all payments made for the benefit of such Designated Bank and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, releases, consents and amendments under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by a Designating Bank as administrative agent for its Designated Bank and need not be signed by such Designated Bank on its own behalf. The Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks may rely thereon without any requirement that the Designated Bank sign or acknowledge the same. No Designated Bank may assign or transfer all or any portion of its interest hereunder or under any other Loan Document, other than via an assignment to its Designating Bank or Liquidity Bank (but any assignment to a Liquidity Bank shall not curtail or affect the appointment or rights of the Designating Bank pursuant to Section 9.06(c) or Section 4 of the Designation Agreement, which appointment and rights are irrevocable), if any, or otherwise in accordance with the provisions of Section 2.03(g). SECTION 9.09. Confidentiality. Each Bank agrees to exercise commercially reasonable efforts to keep any information delivered or made available by the Borrower to it confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Bank from disclosing such information (i) to any other Bank, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Bank, (iv) which has been publicly disclosed without breach of these or any other applicable confidentiality provisions, (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Bank or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel and independent auditors (whom the Bank agrees to advise as to the confidential nature of such information), (viii) to any actual or proposed Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 9.09; provided that should disclosure of any such confidential information be required by virtue of clause (ii) or clause (v) of the immediately preceding sentence, any relevant Bank shall promptly notify the Borrower of same so as to allow the Borrower to seek a protective order or to take any other appropriate action; provided, further, that, no Bank shall be required to delay compliance with any directive to disclose any such information so as to allow the Borrower to effect any such action, and (ix) by any Designated Bank to any rating agency, commercial paper dealer, or provider of a surety, guaranty or credit or liquidity enhancement to such Designated Bank which has agreed in writing to be bound by the provisions of this Section 9.09 and to use such information solely for purposes of evaluating the creditworthiness of the Borrower and the Guarantors and their abilities to perform their obligations under this Agreement and the other Loan Documents. SECTION 9.10. Representation by Banks. Each Bank hereby represents that it is a commercial lender or financial institution which makes Syndicated Loans and Money Market Loans in the ordinary course of its business and that it will make its Syndicated Loans and Money Market Loans hereunder for its own account in the ordinary course of such business; 65 71 provided that, subject to Section 9.08, the disposition of the Note or Notes held by that Bank shall at all times be within its exclusive control. SECTION 9.11. Obligations Several. The obligations of each Bank hereunder are several, and no Bank shall be responsible for the obligations or commitment of any other Bank hereunder. Nothing contained in this Agreement and no action taken by the Banks pursuant hereto shall be deemed to constitute the Banks to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Bank shall be a separate and independent debt, and each Bank shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Bank to be joined as an additional party in any proceeding for such purpose. SECTION 9.12. Georgia Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Georgia. SECTION 9.13. Severability. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.14. Interest. In no event shall the amount of interest, and all charges, amounts or fees contracted for, charged or collected pursuant to this Agreement, the Notes or the other Loan Documents and deemed to be interest under applicable law (collectively, "Interest") exceed the highest rate of interest allowed by applicable law (the "Maximum Rate"), and in the event any such payment is inadvertently received by any Bank, then the excess sum (the "Excess") shall be credited as a payment of principal, unless the Borrower shall notify such Bank in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that the Borrower not pay and the Banks not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. The right to accelerate maturity of any of the Loans does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Administrative Agent and the Banks do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Administrative Agent or the Banks hereunder or under any of the Notes or the other Loan Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, the Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any other remedy, legal or equitable , against the Administrative Agent or any Bank, based in whole or in part upon contracting for charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Administrative Agent or any Bank, all interest at any time contracted for, charged or received from the Borrower in connection with this Agreement, the Notes or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. The Borrower, the Administrative Agent and each Bank shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, 66 72 fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each Note and each of the other Loan Documents (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by the Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of obligations hereunder and under the Notes and the other Loan Documents be automatically recomputed by the Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 9.15. Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction. The Borrower (a) and each of the Banks and the Administrative Agent irrevocably waives, to the fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, (b) submits to the nonexclusive personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (c) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (d) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Administrative Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. SECTION 9.17. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.18. Source of Funds -- ERISA. Each of the Banks hereby severally (and not jointly) represents to the Borrower that no part of the funds to be used by such Bank to fund the Syndicated Loans and Money Market Loans hereunder from time to time constitutes (i) assets allocated to any separate account maintained by such Bank in which any employee benefit plan (or its related trust) has any interest nor (ii) any other assets of any employee benefit plan. As used in this Section, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 9.19. No Bankruptcy Proceedings. Each of the Borrower, the Banks, the Administrative Agent, the Syndication Agent and the Administrative Agent agrees that it will not institute against any Designated Bank or join any other Person in instituting against any Designated Bank any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after 67 73 the payment in full of the latest maturing commercial paper note issued by such Designated Bank. [Signatures are contained on the following pages.] 68 74 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: /s/ --------------------------- R. Gregory Fox Executive Vice President Post Apartment Homes, L.P. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327-3057 Attention: R. Gregory Fox Executive Vice President Telecopier number: 404-846-5028 Confirmation number: 404-846-9367 69 75 COMMITMENTS WACHOVIA BANK, N.A., as Administrative Agent $70,000,000 and as a Bank (SEAL) By: /s/ ----------------------------------------- Title: Senior Vice President Lending Office Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Telecopier number: 404-332-1394 Confirmation number: 404-332-6971 70 76 $60,000,000 FIRST UNION NATIONAL BANK, as Syndication Agent and as a Bank (SEAL) By: /s/ ----------------------------------------- Title: Vice President Lending Office First Union National Bank One First Union Center DC6 Charlotte, North Carolina 28288-0166 Attention: Mr. Daniel J. Sullivan Telecopier number: 704-383-6205 Confirmation number: 704-383-6441 71 77 $70,000,000 SUNTRUST BANK, as Documentation Agent and as a Bank (SEAL) By: /s/ ----------------------------------------- Title: Vice President Lending Office SunTrust Bank 50 Hurt Plaza-Suite 700 Atlanta, Georgia 30303 Attention: Mr. W. John Neill Telecopier number: 404-827-6774 Confirmation number: 404-588-8248 72 78 $25,000,000 BANK OF AMERICA, N.A. (SEAL) By: /s/ ----------------------------------------- Title: Vice President LENDING OFFICE Bank of America, N.A. 100 North Tryon Street Charlotte, North Carolina 28255-0001 Attention: Mr. Dean R. Whitehill Telecopier No.: 704-388-8841 Confirmation No.: 704-388-8494 73 79 $25,000,000 SOUTHTRUST BANK (SEAL) By: /s/ ----------------------------------------- Title: Group Vice President Lending Office SouthTrust Bank 420 North 20th Street Birmingham, Alabama 35290 Attention: Ms. Lynn Feuerlein Telecopier number: 205-254-8270 Confirmation number: 205-254-5870 74 80 $20,000,000 BANK ONE, NA (SEAL) By: /s/ ----------------------------------------- Title: Senior Vice President Lending Office Bank One, NA 1 Bank One Plaza Mail Suite IL1-0315 Chicago, Illinois 60670 Attention: Mr. Kenneth Nelson Telecopier number: 312-732-1117 Confirmation number: 312-732-6403 75 81 $10,000,000 THE CHASE MANHATTAN BANK (SEAL) By: /s/ ----------------------------------------- Title: Vice President Lending Office The Chase Manhattan Bank 707 Travis, 6th Floor-North-47 Houston, Texas 77252-8047 Attention: Ms. Susan M. Tate Telecopier number: 713-216-7713 Confirmation number: 713-216-1511 76 82 $20,000,000 PNC BANK, NATIONAL ASSOCIATION (SEAL) By: /s/ ----------------------------------------- Title: Assistant Vice President Lending Office PNC Bank, National Association One PNC Plaza 249 5th Avenue Mail Stop P1-POPP-19-2 Pittsburgh, Pennsylvania 15222 Attention: Mr. Wayne Robertson Telecopier number: 412-762-6500 Confirmation number: 412-762-8452 77 83 $20,000,000 BANKERS TRUST COMPANY (SEAL) By: /s/ ----------------------------------------- Title: Director Lending Office Bankers Trust Company 130 Liberty Street 14th Floor New York, New York 10006 Attention: Ms. Mary Rodwell Telecopier number: 212-669-0935 Confirmation number: 212-250-2955 78 84 EXHIBIT A-1 SYNDICATED LOAN NOTE Atlanta, Georgia January 12, 2001 For value received, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), promises to pay to the order of __________________________________________________, a ____________________ (the "Bank"), for the account of its Lending Office, the principal sum of ___________________________________ AND NO/100 DOLLARS ($__________), or such lesser amount as shall equal the unpaid principal amount of each Syndicated Loan made by the Bank to the Borrower pursuant to the Amended and Restated Credit Agreement referred to below, on the dates and in the amounts provided in the Amended and Restated Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Syndicated Loan Note on the dates and at the rate or rates provided for in the Amended and Restated Credit Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Amended and Restated Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be specified from time to time pursuant to the Amended and Restated Credit Agreement. All Syndicated Loans made by the Bank, the respective maturities thereof, the interest rates from time to time applicable thereto, and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Amended and Restated Credit Agreement. This Syndicated Loan Note is one of the Syndicated Loan Notes referred to in the Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 among the Borrower, the Banks listed on the signature pages thereof, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent (as the same may be amended and modified from time to time, the "Amended and Restated Credit Agreement"). Terms defined in the Amended and Restated Credit Agreement are used herein with the same meanings. Reference is made to the Amended and Restated Credit Agreement for provisions for the optional and mandatory prepayment and the repayment hereof and the acceleration of the maturity hereof. 79 85 IN WITNESS WHEREOF, the Borrower has caused this Syndicated Loan Note to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: ------------------------------------- R. Gregory Fox Executive Vice President 80 86 Syndicated Loan Note (cont'd)
Syndicated Loans AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Base Rate or Amount of Euro-Dollar Amount of Principal Notation Date Loan Loan Repaid Maturity Date Made by - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
81 87 EXHIBIT A-2 SWING LOAN NOTE Atlanta, Georgia January 12, 2001 For value received, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), promises to pay to the order of Wachovia Bank, N.A., a national banking association (the "Bank"), for the account of its Lending Office, the principal sum of Five Million and No/100 Dollars ($5,000,000), or such lesser amount as shall equal the unpaid principal amount of each Swing Loan made by the Bank to the Borrower pursuant to the Amended and Restated Credit Agreement referred to below, on the dates and in the amounts provided in the Amended and Restated Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Swing Loan Note at the rate provided for Base Rate Loans or Transaction Rate Loans, as the case may be, on the dates provided for in the Amended and Restated Credit Agreement. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Amended and Restated Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be specified from time to time pursuant to the Amended and Restated Credit Agreement. All Swing Loans made by the Bank, the respective maturities thereof, and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Amended and Restated Credit Agreement. This Swing Loan Note is the Swing Loan Note referred to in the Fifth Amended and Restated Credit Agreement dated as of January 12, 2001, among the Borrower, the Banks listed on the signature pages thereof, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent (as the same may be amended and modified from time to time, the "Amended and Restated Credit Agreement"). Terms defined in the Amended and Restated Credit Agreement are used herein with the same meanings. Reference is made to the Amended and Restated Credit Agreement for provisions for the optional and mandatory prepayment and the repayment hereof and the acceleration of the maturity hereof. 82 88 IN WITNESS WHEREOF, the Borrower has caused this Swing Loan Note to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: ------------------------------------- R. Gregory Fox Executive Vice President 83 89 Swing Loan Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Base Rate or Amount of Amount of Transaction Principal Notation Date Loan Rate Repaid Maturity Date Made by - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
84 90 EXHIBIT A-3 MONEY MARKET LOAN NOTE As of January 12, 2001 For value received, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), promises to pay to the order of _____________________________________, a _______________ (the "Bank"), for the account of its Lending Office, the principal sum of ONE HUNDRED SEVENTY-FIVE MILLION AND NO/100 DOLLARS ($175,000,000), or such lesser amount as shall equal the unpaid principal amount of each Money Market Loan made by the Bank to the Borrower pursuant to the Amended and Restated Credit Agreement referred to below, on the dates and in the amounts provided in the Amended and Restated Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Money Market Loan Note on the dates and at the rate or rates provided for in the Amended and Restated Credit Agreement referred to below. Interest on any overdue principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Amended and Restated Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be specified from time to time pursuant to the Amended and Restated Credit Agreement. All Money Market Loans made by the Bank, the respective maturities thereof, the interest rates from time to time applicable thereto, and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Amended and Restated Credit Agreement. This Money Market Loan Note is one of the Money Market Loan Notes referred to in the Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 among the Borrower, the Banks listed on the signature pages thereof, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent, and Wachovia Bank, N.A., as Administrative Agent (as amended on even date herewith and as the same may hereafter be amended and modified from time to time, the "Amended and Restated Credit Agreement"). Terms defined in the Amended and Restated Credit Agreement are used herein with the same meanings. Reference is made to the Amended and Restated Credit Agreement for provisions for the optional and mandatory prepayment and the repayment hereof and the acceleration of the maturity hereof. 85 91 IN WITNESS WHEREOF, the Borrower has caused this Money Market Loan Note to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: ------------------------------------- R. Gregory Fox Executive Vice President 86 92 Money Market Loan Note (cont'd)
MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount of Interest Amount of Principal Stated Notation Date Rate Loan Repaid Maturity Date Made by - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
87 93 EXHIBIT B OPINION OF KING & SPALDING, COUNSEL FOR THE BORROWER [Dated as provided in Section 3.01 of the Amended and Restated Credit Agreement] To the Banks and the Administrative Agent Referred to Below c/o Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attn: Syndications Group Re: Fifth Amended and Restated Credit Agreement dated as of January 12, 2001, among Post Apartment Homes, L.P., the Banks listed on the signature pages thereof, Wachovia Bank, N.A., as Administrative Agent, First Union National Bank, as Syndication Agent, and SunTrust Bank, as Documentation Agent (the "Fifth Amended and Restated Credit Agreement") We have acted as counsel for Post Apartment Homes, L.P. (the "Borrower") in connection with the above-referenced Fifth Amended and Restated Credit Agreement. Capitalized terms used in this opinion letter and not otherwise defined herein shall have the respective meanings assigned to such terms in the Fifth Amended and Restated Credit Agreement. We have also acted as counsel for Post Properties, Inc. (the "Guarantor") in connection with the Guaranty. In connection with the opinions expressed in this letter, we have examined each of the following documents dated as of January 12, 2001, as executed by the Borrower or the Guarantors, as the case may be (collectively, the "Transaction Documents"): (1) the Fifth Amended and Restated Credit Agreement; (2) the Syndicated Loan Notes, Money Market Loan Notes, and Swing Line Note executed and delivered by the Borrower pursuant to Section 3.01(b) of the Fifth Amended and Restated Credit Agreement; and (3) the Guaranty. The Transaction Documents described in items (1), (2) and (3) above are herein sometimes collectively referred to as the "Borrower Transaction Documents". 88 94 We have also reviewed such other documents and given consideration to such matters of law and fact as we have deemed appropriate, in our professional judgment, to render the opinions expressed in this letter. The documents so reviewed have included the originals or copies, certified or otherwise identified to our satisfaction, of certain corporate records and documents of the Borrower and the Guarantor, the certificates delivered on behalf of the Borrower and the Guarantor to you on this date pursuant to the requirements of the Transaction Documents, and the certificate delivered on behalf of the Borrower and the Guarantor to us on this date (the "Officer's Certificate"), and we have relied on the accuracy and completeness of all factual matters set forth in such corporate records, documents, and certificates, as well as the representations and warranties as to factual matters set forth in the Transaction Documents. In rendering the opinions set forth in paragraphs 1 and 2 below with respect to the current status of the Borrower and the Guarantor in the specified jurisdictions, we have relied solely on the certificates issued with respect to the Borrower or the Guarantor, as the case may be, by the Secretary of State of the respective jurisdictions, copies of which have been delivered to you, and we have assumed that such certificates were properly given and remain accurate as of the date of this letter. For purposes of the opinions expressed herein, we have assumed (i) the genuineness of all signatures (other than signatures on behalf of the Borrower and the Guarantor) on all documents submitted to us as originals, (ii) the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, and (iii) the absence of duress, fraud, or mutual mistake of material facts on the part of the parties to the Transaction Documents. We have further assumed that (i) the Administrative Agent, the Syndication Agent, the Documentation Agent, and the Banks have all requisite power and authority to enter into and perform their respective obligations under the Transaction Documents, (ii) the Fifth Amended and Restated Credit Agreement has been duly authorized, executed and delivered by the Banks and the Administrative Agent, the Syndication Agent, and the Documentation Agent respectively, and constitute their legal, valid and binding obligations, and (iii) to the extent applicable law requires that the Banks or the Administrative Agent, the Syndication Agent, or the Documentation Agent act in accordance with applicable duties of good faith or fair dealing, in a commercially reasonable manner, or otherwise in compliance with applicable legal requirements in exercising their respective rights and remedies under the Transaction Documents, the Banks and the Administrative Agent, the Syndication Agent, and the Documentation Agent will fully comply with such legal requirements, notwithstanding any provisions of the Transaction Documents that purport to grant the Banks or the Administrative Agent, the Syndication Agent, or the Documentation Agent the right to act or fail to act in a manner contrary to such legal requirements, or based on its sole judgment or in its sole discretion or provisions of similar import. We have also assumed that under no circumstances, whether by reason of prepayment, acceleration or otherwise, will the rate of interest payable by the Borrower or the Guarantor, including without limitation, expenses of the Banks or the Administrative Agent, the Syndication Agent, or the Documentation Agent chargeable to the Borrower or the Guarantor, and other fees and charges for the use of money, whether or not denominated as interest, exceed five percent (5%) per month. 89 95 Whenever any opinion or confirmation of fact set forth in this letter is qualified by the words "to our knowledge", "known to us" or other words of similar meaning, such words mean the current actual knowledge of lawyers in the Primary Lawyer Group (defined below) of factual matters such lawyers recognize as being relevant to the opinion or confirmation so qualified. "Primary Lawyer Group" means the lawyer who signs this opinion letter on behalf of this firm and, solely as to information relevant to an opinion or confirmation issue addressed herein, each lawyer in this firm who is primarily responsible for providing the response concerning the particular issue. Except as may be expressly described herein, we have not undertaken any investigation to determine the existence or absence of facts and no inference as to our knowledge of the existence or absence of facts should be drawn from our serving as counsel for the Borrower or the Guarantor on other matters. The opinions expressed herein are limited to the laws of the State of Georgia and applicable United States federal law, and we express no opinion as to the laws of any other jurisdiction or the effect any such laws may have on the matters set forth herein. Based on the foregoing, it is our opinion that: 1. The Borrower (i) is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Georgia, and (ii) has all partnership power required to carry on its business as now conducted. 2. The Guarantor (i) is a corporation duly incorporated, validly existing and in corporate good standing under the laws of Georgia, and (ii) has all corporate power required to carry on its business as now conducted. 3. The execution, delivery and performance by the Borrower of the Borrower Transaction Documents (i) are within the Borrower's partnership powers, (ii) have been duly authorized by all necessary partnership action (and, with respect to the General Partner, all necessary corporate action), (iii) do not contravene any provision of the partnership agreement of the Borrower, (iv) require no approval, authorization, consent, adjudication or order of any governmental authority of the State of Georgia or of the United States of America which has not been obtained, (v) do not violate any law or regulation of the State of Georgia or the United States of America binding on the Borrower that would (A) either prohibit performance by the Borrower under the Borrower Transaction Documents or subject the Borrower to a fine, penalty, or other similar sanction, and (B) which a lawyer, using customary professional diligence, would reasonably recognize as applicable to the Borrower and the transactions contemplated by the Borrower Transaction Documents, (vi) insofar as is known to us, do not violate any order, writ, judgment, injunction, decree or award binding on the Borrower or its properties, (vii) do not breach or cause a default under any of the "material agreements" identified as such in the Officer's Certificate, and (viii) will not result in the creation or imposition of any Lien on any assets of the Borrower or any of its Subsidiaries under any such "material agreements" or, insofar as is known to us, will not otherwise result in the creation or imposition of any such Lien. 4. The execution, delivery and performance by the Guarantor of the Guaranty (i) is within such Guarantor's corporate powers, (ii) has been duly authorized by all necessary corporate action, (iii) requires no approval, authorization, consent, adjudication or order of any 90 96 governmental authority of the State of Georgia or of the United States of America, which has not been obtained, (iv) does not contravene any provision of the articles of incorporation or by-laws of the Guarantor, (v) does not violate any law or regulation of the State of Georgia or of the United States of America binding on the Guarantor which (A) either prohibits performance by the Guarantor under the Guaranty or subjects the Guarantor to a fine, penalty or other similar sanction, and (B) which a lawyer, using customary professional diligence, would reasonably recognize as applicable to the Guarantor in the transactions contemplated by the Guaranty, (vi) insofar as is known to us, does not violate any order, writ, judgment, injunction, decree or award binding on the Guarantor or its properties, (vii) does not breach or constitute a default under any of the "material agreements" identified as such in the Officer's Certificate, and (viii) will not result in the creation or imposition of any Lien on any assets of the Guarantor under any such "material agreements" or, insofar as is known to us, will not otherwise result in the creation or imposition of any such Lien. 5. Each of the Transaction Documents has been duly executed and delivered on behalf of the Borrower or the Guarantor, as the case may be. 6. Each of the Transaction Documents constitutes the valid and binding obligation of the Borrower or the Guarantor, as the case may be, enforceable against it or them in accordance with its terms, except: (a) As enforceability thereof may be limited by the effect of (i) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors (including, without limitation, matters of contract rejection, fraudulent conveyances and obligations, turn-over, preference, equitable subordination, automatic stay, and substantive consolidation under federal bankruptcy laws, as well as state laws regarding fraudulent transfers, obligations, and conveyances, and state receivership laws), and (ii) general principles of equity, whether applied by a court of law or equity (including, without limitation, principles governing the availability of specific performance, injunctive relief or other traditional equitable remedies, principles affording traditional equitable defenses such as waiver, laches and estoppel, and legal standards requiring reasonableness or materiality of breach for exercise of remedies or providing for defenses based on impracticability or impossibility of performance or on obstruction or failure to perform or otherwise act in accordance with an agreement by a party thereto other than the Borrower or the Guarantor); (b) That no opinion is expressed with respect to the validity, binding effect, or enforceability of: (i) those provisions of the Transaction Documents requiring indemnification for, or providing exculpation, release, or exemption from liability for, any action or inaction by any other person or entity, to the extent such action or inaction involves negligence or willful misconduct on the part of any such person or entity or to the extent otherwise contrary to public policy; (ii) those provisions of the Transaction Documents providing for payment of interest on unpaid interest, or imposing increased interest rates or late 91 97 payment charges upon delinquency in payment or other default or providing for liquidated damages or for premiums on prepayment, acceleration, or termination, to the extent any such provisions may be deemed to be penalties or forfeitures; (iii) those provisions of the Transaction Documents, if any, that have the effect of waiving the right of jury trial, statutes of limitation, marshalling of assets or similar requirements, or consenting or waiving objections to the jurisdiction of certain courts or the venue or forum for judicial actions; (iv) those provisions of the Transaction Documents providing that waivers or consents by a party may not be given effect unless in writing or in compliance with particular requirements, or that a party's course of dealing, course of performance, or the like or failure or delay in taking action may not constitute a waiver of related rights or provisions, or that one or more waivers may not under certain circumstances constitute a waiver of other matters of the same kind; (v) those provisions of the Transaction Documents providing that a party has the right to pursue multiple remedies without regard to other remedies elected or that all remedies are cumulative; (vi) those provisions of the Transaction Documents purporting to require payment by the Borrower or the Guarantor of attorneys' fees of any Bank or the Administrative Agent, the Syndication Agent or the Documentation Agent, unless such Bank or such Agent has complied with the applicable requirements of O.C.G.A. ss. 13-1-11; (vii) those provisions of the Transaction Documents providing that modifications to such documents may only be made in writing or that the provisions of such documents are severable; (viii) those provisions of the Transaction Documents purporting to permit the exercise, under certain circumstances, of rights or remedies without notice or without providing opportunity to cure failures to perform; (ix) those provisions of the Transaction Documents, if any, purporting to grant rights of setoff otherwise than in accordance with applicable law; (x) those provisions of the Transaction Documents purporting to require a waiver of defenses, setoffs, or counterclaims against the Banks or the Administrative Agent, the Syndication Agent or the Documentation Agent; and (xi) those provisions of the Transaction Documents purporting to require the Borrower or the Guarantor to waive various rights, claims, and defenses, or to provide certain remedies in favor of the Administrative Agent, the Syndication Agent, the Documentation Agent or the Banks, to the extent any such waivers or remedial provisions may not be valid, binding or enforceable under applicable law; provided, however, in our opinion, the inclusion of such waivers 92 98 and remedial provisions does not render any Transaction Document invalid as a whole, and each Transaction Document otherwise contains remedies adequate for the practical realization of the benefits intended to be provided thereby assuming compliance by the Administrative Agent and the Banks with applicable legal requirements and procedures of the State of Georgia. 7. Neither the Borrower nor the Guarantor is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 8. Neither the Borrower nor the Guarantor is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. 9. Insofar as is known to us, there is no action, suit or proceeding pending or overtly threatened against or affecting the Borrower or the Guarantor before any court or arbitrator or any governmental body, agency or official in which (i) seeks monetary damages (excluding punitive or exemplary damages) in a specified amount greater than $1,000,000 in excess of any insurance coverage therefor, or (ii) in any manner questions the validity or enforceability of the Transaction Documents. This opinion letter is provided to you for your exclusive use solely in connection with the transactions contemplated by the Fifth Amended and Restated Credit Agreement and may not be relied upon by any other person or for any other purpose without our prior written consent, except that Jones, Day, Reavis & Pogue, special counsel for the Administrative Agent, may rely hereon for purposes of rendering their respective opinions to the Banks and the Administrative Agent, the Syndication Agent, and the Documentation Agent. The opinions and confirmation of facts expressed in this letter are strictly limited to the matters stated in this letter as of the date hereof, and no other opinions or confirmations of fact are to be implied or inferred. We undertake no obligation to advise you or any other person or entity of changes of law or fact that occur after the date of this letter, whether or not such change may affect any of the opinions expressed herein. Yours very truly, KING & SPALDING 93 99 EXHIBIT C OPINION OF JONES, DAY, REAVIS & POGUE, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT [Dated as provided in Section 3.01 of the Amended and Restated Credit Agreement] To the Banks and the Administrative Agent Referred to Below c/o Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attn: Syndications Group Dear Sirs: We have participated in the preparation of the Fifth Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") dated as of January 12, 2001 among Post Apartment Homes, L.P., a Georgia limited partnership (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Amended and Restated Credit Agreement. Terms defined in the Amended and Restated Credit Agreement are used herein as therein defined. This opinion letter is limited by, and is in accordance with, the January 1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion Committee of the Corporate and Banking Law Section of the State Bar of Georgia which Interpretive Standards are incorporated herein by this reference. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, and assuming the due authorization, execution and delivery of the Amended and Restated Credit Agreement and each of the Notes by or on behalf of the Borrower, we are of the opinion that the Amended and Restated Credit Agreement 94 100 constitutes a valid and binding agreement of the Borrower and each Note constitutes valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as: (i) the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent conveyance, voidable preference, moratorium or similar laws applicable to creditors' rights or the collection of debtors' obligations generally; (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; and (iii) the enforceability of certain of the remedial, waiver and other provisions of the Amended and Restated Credit Agreement and the Notes may be further limited by the laws of the State of Georgia; provided that such additional laws do not, in our opinion, substantially interfere with the practical realization of the benefits expressed in the Amended and Restated Credit Agreement and the Notes, except for the economic consequences of any procedural delay which may result from such laws. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction except the State of Georgia. We express no opinion as to the effect of the compliance or noncompliance of the Administrative Agent or any of the Banks with any state or federal laws or regulations applicable to the Administrative Agent or any of the Banks by reason of the legal or regulatory status or the nature of the business of the Administrative Agent or any of the Banks. This opinion is delivered to you in connection with the transaction referenced above and may only be relied upon by you and any Transferee under the Amended and Restated Credit Agreement without our prior written consent. Very truly yours, 95 101 EXHIBIT D ASSIGNMENT AND ACCEPTANCE Dated _____________ __, _____ Reference is made to the Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 (together with all amendments and modifications thereto, the "Amended and Restated Credit Agreement") among Post Apartment Homes, L.P., a Georgia limited partnership (the "Borrower"), the Banks (as defined in the Amended and Restated Credit Agreement), SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent"). Terms defined in the Amended and Restated Credit Agreement are used herein with the same meaning. ______________________________________________ (the "Assignor") and ___________________________________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, without recourse to the Assignor, and the Assignee hereby purchases and assumes from the Assignor, a _____% interest in and to all of the Assignor's rights and obligations under the Amended and Restated Credit Agreement as of the Effective Date (as defined below) (including, without limitation, a _____% interest (which on the Effective Date hereof is $______________) in the Assignor's Commitment and a ______ interest (which on the Effective Date hereof is $______________) in the Syndicated Loans [and Swing Loans] [and Money Market Loans] owing to the Assignor and a ___% interest in the Syndicated Loan Note [and Swing Loan Note] [and Money Market Loan Note] held by the Assignor (which on the Effective Date hereof is $_______) [and $_______, respectively]. 2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Amended and Restated Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Amended and Restated Credit Agreement or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder, that such interest is free and clear of any adverse claim and that as of the date hereof its Commitment (without giving effect to assignments thereof which have not yet become effective) is $______________ and the aggregate outstanding principal amount of Syndicated Loans [and Swing Loans] [and Money Market Loans] owing to it (without giving effect to assignments thereof which have not yet become effective) is $______________ [and $______________, respectively]; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Amended and Restated Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) attaches the Note[s] referred to in Paragraph 1 above and requests that the Agent exchange such Note[s] [for a new Syndicated Loan Note dated _________, ____ in the principal amount of $____________ payable to the order of the Assignee, a new Swing Loan Note dated ___________, ____ in the principal amount of 96 102 $____________ payable to the order of the Assignee, and a new Money Market Loan Note dated ___________, ____ in the principal amount of $____________ payable to the order of the Assignee] [and for new Notes as follows: a (i) Syndicated Loan Note dated ___________, ____ in the principal amount of $___________ payable to the order of the Assignor (ii) Swing Loan Note dated ____________, ____ in the principal amount of $__________ payable to the order of the Assignor, and (iii) Money Market Loan Note dated _________, ____ in the principal amount of $_____________ payable to the order of the Assignor]. 3. The Assignee (i) confirms that it has received a copy of the Amended and Restated Credit Agreement, together with copies of the financial statements referred to in Section 4.04(a) thereof (or any more recent financial statements of the Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Amended and Restated Credit Agreement; (iii) confirms that it is a bank or financial institution; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Amended and Restated Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Amended and Restated Credit Agreement are required to be performed by it as a Bank; (vi) specifies as its Lending Office (and address for notices) the office set forth beneath its name on the signature pages hereof, (vii) represents and warrants that the execution, delivery and performance of this Assignment and Acceptance are within its corporate powers and have been duly authorized by all necessary corporate action, (viii) makes the representation and warranty contained in Section 9.18 of the Amended and Restated Credit Agreement, and (ix) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Amended and Restated Credit Agreement and the Notes. 4. The Effective Date for this Assignment and Acceptance shall be ________, ____ (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for execution and acceptance by the Administrative Agent and to the Borrower for execution by the Borrower. 5. Upon such execution and acceptance by the Administrative Agent, and execution by the Borrower, if required by the Amended and Restated Credit Agreement, from and after the Effective Date, (i) the Assignee shall be a party to the Amended and Restated Credit Agreement and, to the extent rights and obligations have been transferred to it by this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its rights and obligations have been transferred to the Assignee by this Assignment and Acceptance, relinquish its rights (other than under Sections 8.03, 9.03 and 9.04 of the Amended and Restated Credit Agreement) and be released from its obligations under the Amended and Restated Credit Agreement, except as expressly provided therein. 97 103 6. Upon such execution and acceptance by the Administrative Agent, and execution by the Borrower, if required by the Amended and Restated Credit Agreement, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the interest assigned hereby to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to such acceptance by the Administrative Agent directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Georgia. [NAME OF ASSIGNOR] By: --------------------------------------- Title: [NAME OF ASSIGNEE] By: --------------------------------------- Title: Lending Office: [Address] 98 104 Wachovia Bank, N.A., As Administrative Agent By: ------------------------------------------ Title: POST APARTMENT HOMES, L.P. IF REQUIRED BY THE AMENDED AND RESTATED CREDIT AGREEMENT. By: Post GP Holdings, Inc., its sole ____ general partner By: -------------------------------------- [Name and title of Executive Officer] 99 105 EXHIBIT E NOTICE OF BORROWING _____________________, _____ Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Fifth Amended and Restated Credit Agreement (as amended and modified from time to time, the "Amended and Restated Credit Agreement") dated as of January 12, 2001 among Post Apartment Homes, L.P., the Banks from time to time parties thereto, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent. Gentlemen: Unless otherwise defined herein, capitalized terms used herein shall have the meanings attributable thereto in the Amended and Restated Credit Agreement. This Notice of Borrowing is delivered to you pursuant to Section 2.02 of the Amended and Restated Credit Agreement. The Borrower hereby requests a [Euro-Dollar Borrowing] [Syndicated Loan Borrowing at a Base Rate] [Swing Loan Borrowing] in the aggregate principal amount of $___________(1) to be made on ___________, ____, and for interest to accrue thereon at the rate established by the Amended and Restated Credit Agreement for [Euro-Dollar Loans] [Base Rate Loans]. The duration of the Interest Period with respect thereto shall be [1 month] [2 months] [3 months] [6 months] [30 days]. The amount available to be borrowed under Section 2.01 of the Amended and Restated Credit Agreement, net of amounts to be paid with the proceeds of this Borrowing, is as follows: (a) Aggregate amount of Commitments $___________ (b) Principal amount outstanding under $___________ Syndicated Loans
- -------------- (1) Not to exceed the amount available to be borrowed as set forth in the next paragraph. 100 106 (c) Principal amount outstanding under Swing $___________ Loans (d) Principal amount outstanding under $___________ Money Market Loans (e) Amount available to be borrowed ((a), less $___________ sum of (b), (c) and (d)
The Borrower has caused this Notice of Borrowing to be executed and delivered by its duly authorized officer this _____ day of __________, _____. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: ----------------------------------------- [President or other authorized designee] 101 107 EXHIBIT F COMPLIANCE CERTIFICATE Reference is made to the Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 (as modified and supplemented and in effect from time to time, the "Amended and Restated Credit Agreement") among Post Apartment Homes, L.P., the Banks from time to time parties thereto, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent and Wachovia Bank, N.A., as Administrative Agent. Capitalized terms used herein shall have the meanings ascribed thereto in the Amended and Restated Credit Agreement. Pursuant to Section 5.01(c) of the Amended and Restated Credit Agreement, _________________, the duly authorized [title of Executive Officer, other than Secretary] of the General Partner, hereby (i) certifies to the Administrative Agent and the Banks that the information contained in the Compliance Check List attached hereto is true, accurate and complete as of _____________, ____, and that no Default is in existence on and as of the date hereof and (ii) restates and reaffirms that the representations and warranties contained in Article IV of the Amended and Restated Credit Agreement are true on and as of the date hereof as though restated on and as of this date. POST APARTMENT HOMES, L.P.(SEAL) By: Post GP Holdings, Inc., its sole general partner By: -------------------------------------- [Name and title of Executive Officer, other than Secretary] 102 108 1. Consolidated Total Secured Debt (Section 5.03) The amount of Consolidated Total Secured Debt will not at any time exceed 40% of Consolidated Total Asset Value (a) Consolidated Total Secured Debt Schedule 1 $__________ (b) Consolidated Total Asset Value Schedule 2 $__________ (c) 40% of (b) $__________ Limitation: (a) cannot exceed (c)
2. Ratio of Consolidated Total Debt to Consolidated Total Asset Value (Section 5.04) The ratio of Consolidated Total Debt to Consolidated Total Asset Value will not at any time exceed 0.60 to 1.00. (a) total liabilities of the Borrower, the Guarantors and $__________ the other Subsidiaries at end of most recent Fiscal Quarter (excluding dividends declared but not paid) (b) Aggregate amount of Debt Guaranteed by Borrower, the $__________ Guarantors and the other Subsidiaries (other than of Debt of any of them) at end of most recent Fiscal Quarter (c) Joint Venture Share of aggregate amount of Debt $__________ of Joint Ventures at end of most recent Fiscal Quarter (d) Aggregate amount of segregated tenant deposits $__________ classified as restricted cash and Joint Venture Share of segregated tenant deposits classified as restricted cash (e) escrow deposits classified as restricted cash for $__________ real property taxes and Joint Venture Share of escrow deposits classified as restricted cash for real property taxes (f) Consolidated Total Debt (sum of (a) plus (b) plus $__________ (c) less (d) less (e)) (g) Consolidated Total Asset Schedule - 2 $___________ Value
103 109 Actual Ratio of (f) to (g) ____ to 1.00 Maximum Ratio 0.60 to 1.00 3. Interest Coverage (Section 5.05) The ratio of Adjusted Consolidated Income Available For Debt Service to Adjusted Consolidated Interest Expense shall at all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. (a) Borrower's Consolidated Schedule - 3 $___________ Income Available For Debt Service (b) Borrower's Joint Venture Share Schedule - 3 $___________ of Consolidated Income Available For Debt Service from Joint Ventures (c) sum of (a) and (b) $___________ (d) Borrower's Consolidated Schedule - 3 $___________ Interest Expense (e) Borrower's Joint Venture Share Schedule - 3 $___________ of interest expense of Joint Ventures (f) sum of (d) and (e) $___________ Actual Ratio of (c) to (f) ____ to 1.00 Minimum Ratio >2.00 to 1.00
4. Restricted Payments (Section 5.06) The Borrower's Restricted Payments (other than in connection with the Approved Unit Redemption Transactions) in any calendar year shall not exceed 95% of Consolidated Income Available for Distribution for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Consolidated Income Available for Distribution to permit PPI to preserve its status as a real estate investment trust under the applicable provision of the Code, or (ii) PPI declares one or more capital gains dividends in an amount not to exceed $30,000,000 within such calendar year. In the event that the Borrower or PPI receives a public debt rating of BBB- or better from Standard & Poors or Baa3 or better 104 110 from Moody's Investor Service and so long as that rating is affirmed during each year, the Borrower's Restricted Payments in any calendar year will be limited to 100% of Consolidated Income Available for Distribution for such calendar year with the same exceptions contained in clauses (i) and (ii) of this Section 5.06. (a) Consolidated Income Available Schedule - 4 $___________ For Debt Service (b) Consolidated Interest Expense Schedule - 4 $___________ (c) taxes included in Consolidated $___________ Income Available For Debt Service (d) sum of (a) less (b) less (c) $___________ Maximum Restricted Payments generally $___________ [95%][100%] of (d) Additional Restricted Payments $___________ permitted by clause (i) Additional Restricted Payments $___________ permitted by clause (ii), not to exceed $30,000,000 Calendar year distributions to date $___________
5. Consolidated Fixed Charges Coverage Ratio (Section 5.07) The ratio of Adjusted Consolidated Income Available For Debt Service to Consolidated Fixed Charges will not at any time be less than 1.75 to 1.00. (a) Adjusted Consolidated Income Available For Debt Service -- amount from line (c) of paragraph 3 above (b) Consolidated Fixed Charges Schedule - 5 $___________ Actual Ratio of (a) to (b) ____ to 1.00 Minimum Ratio 1.75 to 1.00
105 111 6. Unsecured Fixed Charges Coverage (Section 5.08) At the end of each Fiscal Quarter, the ratio of Consolidated Income Available For Debt Service From Eligible Properties to Adjusted Fixed Charges shall not have been less than 1.75 to 1.0. (a) Consolidated Income Available For Debt $___________ Service -- Schedule 3 (b) Adjusted Fixed Charges -- Schedule - 6 $___________ Actual Ratio of (a) to (b) ____ to 1.00 Minimum Ratio 1.75 to 1.00
7. Unencumbered Assets (Section 5.09) The ratio of Total Unencumbered Asset Value to Unsecured Funded Debt shall not at any time be less than 1.75 to 1.0. (a) Total Unencumbered Asset Value Schedule 2 $__________' (b) Unsecured Funded Debt $__________ Actual Ratio of (a) to (b) ____ to 1.00 Minimum Ratio 1.75 to 1.00
8. Investments (Section 5.10) Neither the Borrower nor any Guarantor shall make Investments (including loans and advances) in or to any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and (v) deposits required by government agencies or public utilities; 106 112 (B) without duplication, (i) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000, and (ii) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (C) without duplication, Investments (exclusive of Investments permitted under clauses (A) and (B) above and clauses (D) and (E) below) in an aggregate amount outstanding at any time not in excess of 20% of Consolidated Total Assets; (D) Investments in Consolidated Subsidiaries; and (E) Investments in connection with Approved Unit Redemption Transactions. (a) To directors, officers and employees $___________ Limitation $2,500,000 (b) debt or equity securities rated at least BBB+ $___________ or Baa1 Limitation $5,000,000 (c) Other Investments (excluding Investments in $___________ Consolidated Subsidiaries) (d) Consolidated Total Assets Schedule 2 $___________ (e) 20% of (d) $___________ Limitation (c) may not exceed (e)
9. Consolidations, Mergers and Sales of Assets (Section 5.12) The Borrower and the Guarantors will not, nor will the Borrower permit any other Subsidiary to . . . sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) . . . (b) . . ., and (c) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit: (i) Approved Unit Redemption Transactions; and (ii) during any Fiscal Quarter, a transfer of assets or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so 107 113 transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding three (3) Fiscal Quarters, either (x) constituted more than fifteen percent (15%) of Consolidated Total Assets at the end of the Fiscal Quarter immediately preceding such Fiscal Quarter, or (y) contributed more than fifteen percent (15%) of Consolidated Income Available For Debt Service during the four (4) Fiscal Quarters immediately preceding such Fiscal Quarter. . . . (a) aggregate assets to be transferred or $___________ aggregate assets used in business line or segment to be discontinued (b) assets transferred and all other assets utilized $___________ all other business lines or segments discontinued during current Fiscal Quarter and the immediately preceding 3 Fiscal Quarters (c) sum of (a) and (b) $___________ (d) Consolidated Total Assets for immediately $___________ preceding Fiscal Quarter (e) 15% of (d) $___________ Limitation: (c) may not exceed (e) (f) Consolidated Income Available For Debt $___________ Service during the four (4) Fiscal Quarters immediately preceding current Fiscal Quarter (g) Portion of (f) contributed by assets described $___________ in (a) and (b) (h) 15% of (f) $___________ Limitation: (g) may not exceed (h)
108 114 Schedule - 1 Consolidated Total Secured Debt
INTEREST FINAL TOTAL RATE(2) MATURITY ---------- -------- -------- Money Borrowed __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ Total Money $_________ Borrowed Deferred Purchase Price __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ Total Deferred $_________ Purchase Price Capitalized Leases _________________________________________________________ $_________ _________________________________________________________ $_________ Total Capitalized Leases $_________ Letter of Credit Reimbursement Obligations __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ __________________ _________ _________ $_________ Total Letter of Credit Reimbursement $_________ Obligations Total Consolidated Secured Debt $_________
- -------------- (2) If rate is fixed, insert contract rate. If rate is floating, state that. 109 115 Schedule - 2 CONSOLIDATED TOTAL ASSET VALUE AND ADJUSTED TOTAL ASSET VALUE (ALL PROPERTIES) (a) 12 month Net Operating Income(3) $__________ (b) (a) divided by 0.0875(4) $__________ (c) 3 month Net Operating Income(5) $__________ (d) (c) times 4 $__________ (e) (d) divided by 0.0875 $__________ (f) cash expenditures(6) $__________ (g) unrestricted cash and cash equivalents and specified Investments $__________ (h) Joint Venture Share of 12 month Net Operating Income from Joint Venture Property(7) $__________ (i) (h) divided by 0.0875(8) $__________ (j) Joint Venture Share of 3 month Net Operating Income from Joint Venture Property(9) $__________
- --------------- 3 Include only Properties which either were on average at least 90% Economically Occupied, or as to which the Construction Period Termination Date occurred, prior to the 12 months just ended. 4 If a Property satisfies the criteria set forth in both (a) and (c), included only in (c). 5 Include only Properties as to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period just ended. 6 Include only on Properties as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended. 7 Include only Joint Venture Properties which either were on average at least 90% Economically Occupied, or as to which the Construction Period Termination Date occurred, prior to the 12 months just ended. 8 If a Property satisfies the criteria set forth in both (h) and (j), included only in (j). 110 116 (k) (j) times 4 $__________ (l) (k) divided by 0.0875 $__________ (m) Joint Venture Share of cash expenditures(10) $__________ CONSOLIDATED TOTAL ASSET VALUE (all Properties) sum of (b) plus (e) plus (f) plus (g) plus (i) plus (l) plus (m) $__________ ADJUSTED TOTAL ASSET VALUE (all Properties) sum of (b) plus (e) plus (f) plus (g) $__________
- ------------ (continued...) 9 Include only Joint Venture Properties as to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period just ended. 10 Include only on Joint Venture Properties as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended. 111 117 TOTAL UNENCUMBERED ASSET VALUE(11) (a) 12 month Net Operating Income(12) $__________ (b) (a) divided by 0.0875(13) $__________ (c) 3 month Net Operating Income(14) $__________ (d) (c) times 4 $__________ (e) (d) divided by 0.0875 $__________ (f) cash expenditures(15) $__________ (g) (f) times 50% $__________ (h) unrestricted cash and cash equivalents and specified Investments $__________ TOTAL UNENCUMBERED ASSET VALUE sum of (b) plus (e) plus (g) plus (h) $__________
- --------------- (11) Include only Eligible Properties (other than from Subsidiary Excluded Properties) (12) Include only Properties which either were on average at least 90% Economically Occupied, or as to which the Construction Period Termination Date occurred, prior to the 12 months just ended. (13) If a Property satisfies the criteria set forth in both (a) and (c), included only in (c). (14) Include only Properties as to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period just ended. (15) Include only on Properties as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended. 112 118 Schedule - 3 BORROWER'S CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE (for Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters) ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________
113 119 less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ BORROWER'S INCOME AVAILABLE FOR DEBT SERVICE $ (LAST 4 FISCAL QUARTERS) ===========
114 120 BORROWER'S JOINT VENTURE SHARE OF CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE FROM JOINT VENTURES (for Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters) ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________
115 121 plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or joint ventures $___________ less gains from sales or joint ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ BORROWER'S JOINT VENTURE SHARE OF $ CONSOLIDATED INCOME AVAILABLE FOR DEBT =========== SERVICE FROM JOINT VENTURES (LAST 4 FISCAL QUARTERS)
116 122 BORROWER'S CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE FROM ELIGIBLE PROPERTIES (other than from Subsidiary Excluded Properties) (for Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters) ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ ____ quarter ____ net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________
117 123 less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ BORROWER'S INCOME AVAILABLE FOR DEBT SERVICE $ FROM ELIGIBLE PROPERTIES (LAST 4 FISCAL QUARTERS) ===========
118 124 Schedule - 4 Income Available For Debt Service (for the current calendar year) first quarter net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or Joint Ventures $___________ less gains from sales or Joint Ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ second quarter net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or Joint Ventures $___________ less gains from sales or Joint Ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ third quarter net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or Joint Ventures $___________ less gains from sales or Joint Ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________
119 125 fourth quarter net income $___________ plus Minority Interests $___________ less extraordinary gains $(__________) plus extraordinary losses $___________ plus depreciation and amortization $___________ plus losses from sales or Joint Ventures $___________ less gains from sales or Joint Ventures $(__________) less decreases in deferred taxes and non-cash items $(__________) plus increases in deferred taxes and non-cash items $___________ plus interest expense $___________ plus taxes $___________ Income Available for Debt Service (current calendar year) $ ===========
120 126 Schedule - 5 Consolidated Fixed Charges ____ quarter ____ Consolidated Interest Expense $___________ scheduled principal payments(16) $___________ aggregate of all preferred dividends paid $___________ Joint Venture Share of interest expense of Joint Ventures $___________ Joint Venture Share of scheduled principal payments of Joint Ventures(16) $___________ ____ quarter ____ Consolidated Interest Expense $___________ scheduled principal payments(16) $___________ aggregate of all preferred dividends paid $___________ Joint Venture Share of interest expense of Joint Ventures $___________ Joint Venture Share of scheduled principal payments of Joint Ventures(16) $___________ ____ quarter ____ Consolidated Interest Expense $___________ scheduled principal payments(16) $___________ aggregate of all preferred dividends paid $___________ Joint Venture Share of interest expense of Joint Ventures $___________ Joint Venture Share of scheduled principal payments of Joint Ventures(16) $___________ ____ quarter ____ Consolidated Interest Expense $___________ scheduled principal payments(16) $___________ aggregate of all preferred dividends paid $___________ Joint Venture Share of interest expense of Joint Ventures $___________ Joint Venture Share of scheduled principal payments of Joint Ventures(16) $___________ Consolidated Fixed Charges $ ===========
- --------------- (16) Balloon payments payable at maturity should be excluded. 121 127 Schedule 6 Adjusted Fixed Charges ____ quarter ____ interest expense on Unsecured Funded Debt $___________ scheduled principal payments on Unsecured Funded Debt(17) $___________ ____ quarter ____ interest expense on Unsecured Funded Debt $___________ scheduled principal payments on Unsecured Funded Debt(17) $___________ ____ quarter ____ interest expense on Unsecured Funded Debt $___________ scheduled principal payments on Unsecured Funded Debt(17) $___________ ____ quarter ____ interest expense on Unsecured Funded Debt $___________ scheduled principal payments on Unsecured Funded Debt(17) $___________ Adjusted Fixed Charges $ ===========
- --------------- (17) Balloon payments payable at maturity should be excluded. 122 128 EXHIBIT G POST APARTMENT HOMES, L.P. CLOSING CERTIFICATE Reference is made to the Fifth Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") dated as of January 12, 2001 among Post Apartment Homes, L.P., the Banks listed therein, SunTrust Bank, as Documentation Agent, First Union National Bank, as Syndication Agent, and Wachovia Bank, N.A., as Administrative Agent. Capitalized terms used herein have the meanings ascribed thereto in the Amended and Restated Credit Agreement. Pursuant to Section 3.01(e) of the Amended and Restated Credit Agreement, __________________________________, the duly authorized ____________________ of ____________________ hereby certifies to the Administrative Agent and the Banks that (i) no Default has occurred and is continuing as of the date hereof, and (ii) the representations and warranties contained in Article IV of the Amended and Restated Credit Agreement are true on and as of the date hereof. Certified as of January 12, 2001. By: ------------------------------------- [Name and title of Executive Officer] 123 129 EXHIBIT H GUARANTY THIS GUARANTY (this "Guaranty") is made January 12, 2001, by POST PROPERTIES, INC., a Georgia corporation (the "Guarantor", and the terms "Guarantor" and "Guarantors" shall include any Subsidiary which becomes a Guarantor pursuant to Section 15 hereof and Section 5.23(d) of the Amended and Restated Credit Agreement referred to below) in favor of the Administrative Agent, for the ratable benefit of the Banks, under the Amended and Restated Credit Agreement referred to below; W I T N E S S E T H WHEREAS, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), SUNTRUST BANK, as Documentation Agent, FIRST UNION NATIONAL BANK (formerly First Union National Bank of Georgia), as Syndication Agent (the "Syndication Agent"), and WACHOVIA BANK, N.A., as Administrative Agent (the "Administrative Agent"), and certain other Banks from time to time party thereto have entered into a certain Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 (as amended as of even date herewith and as it may be amended or modified further from time to time, the "Amended and Restated Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Banks to the Borrower which will the benefit the Guarantors; WHEREAS, it is required by Section 3.01(b) of the Fifth Amended and Restated Credit Agreement, that the Guarantors execute and deliver this Guaranty whereby the Guarantors shall, unconditionally and jointly and severally, guarantee the payment when due of all principal, interest and other amounts that shall be at any time payable by the Borrower under the Amended and Restated Credit Agreement, the Notes and the other Loan Documents; and WHEREAS, in consideration of the direct and indirect ownership interests of the Guarantors in the Borrower and the financial and other support that the Borrower has provided, and such financial and other support as the Borrower may in the future provide, to the Guarantors, whether directly or indirectly, and in order to induce the Banks, the Syndication Agent, the Documentation Agent and the Administrative Agent to enter into the Amended and Restated Credit Agreement, the Guarantors are willing to guarantee the obligations of the Borrower under the Amended and Restated Credit Agreement, the Notes, and the other Loan Documents; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 124 130 SECTION 1. Definitions. Terms defined in the Amended and Restated Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. SECTION 2. Representations and Warranties. The Guarantors incorporate herein by reference as fully as if set forth herein all of the representations and warranties pertaining to the Guarantors contained in Article IV of the Amended and Restated Credit Agreement (which representations and warranties shall be deemed to have been renewed by the Guarantors upon each Borrowing under the Amended and Restated Credit Agreement), except to the extent otherwise disclosed to the Banks pursuant to Section 5.01(c) or (d) of the Amended and Restated Credit Agreement). SECTION 3. Covenants. The Guarantors covenant that, so long as any Bank has any Commitment outstanding under the Amended and Restated Credit Agreement or any amount payable under the Amended and Restated Credit Agreement or any Note shall remain unpaid, the Guarantors will fully comply with those covenants set forth in Article V of the Amended and Restated Credit Agreement pertaining to the Guarantors, and the Guarantors incorporate herein by reference as fully as if set forth herein all of such covenants. SECTION 4. The Guaranty. The Guarantors hereby unconditionally and jointly and severally guarantee the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to the Amended and Restated Credit Agreement, and the full and punctual payment of all other amounts payable by the Borrower under the Amended and Restated Credit Agreement (including, without limitation, all Syndicated Loans, Swing Loans and Money Market Loans and interest thereon, and all compensation and indemnification amounts and fees payable pursuant to the Amended and Restated Credit Agreement and the Arranger's Letter Agreement (all of the foregoing obligations being referred to collectively as the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually any such amount, each Guarantor agrees that it shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Amended and Restated Credit Agreement, the relevant Note or the relevant Loan Document, as the case may be. SECTION 5. Guaranty Unconditional. The obligations of the Guarantors hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under the Amended and Restated Credit Agreement, any Note, or any other Loan Document, by operation of law or otherwise or any obligation of any other guarantor of any of the Guaranteed Obligations; (ii) any modification or amendment of or supplement to the Amended and Restated Credit Agreement, any Note, or any other Loan Document; (iii) any release, nonperfection or invalidity of any direct or indirect security for any obligation of the Borrower under the Amended and Restated Credit Agreement, 125 131 any Note, any Loan Document, or any obligations of any other Guarantor or guarantor of any of the Guaranteed Obligations; (iv) any change in the partnership structure or ownership of the Borrower or corporate structure or ownership of any of the Guarantors, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or any of the Guarantors, or any of their assets or any resulting release or discharge of any obligation of the Borrower or any of the Guarantors; (v) the existence of any claim, setoff or other rights which any of the Guarantors may have at any time against the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason related to the Amended and Restated Credit Agreement, any other Loan Document, or any other guaranty, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of or interest on any Note or any other amount payable by the Borrower under the Amended and Restated Credit Agreement, the Notes, or any other Loan Document; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent and any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantors' obligations hereunder. SECTION 6. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantors' obligations hereunder shall remain in full force and effect until all Guaranteed Obligations shall have been paid in full and the Commitments under the Amended and Restated Credit Agreement shall have terminated or expired. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under the Amended and Restated Credit Agreement or any other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantors' obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time. SECTION 7. Waiver of Notice by the Guarantors. Each of the Guarantors irrevocably waives, acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. SECTION 8. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower under the Amended and Restated Credit Agreement, any Note or any other Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of the Amended 126 132 and Restated Credit Agreement, any Note or any other Loan Document shall nonetheless be payable by the Guarantors hereunder forthwith on demand by the Administrative Agent made at the request of the Required Banks. SECTION 9. Notices. All notices, requests and other communications to any party hereunder shall be given or made by telecopier or other writing and telecopied or mailed or delivered to the intended recipient at its address or telecopier number set forth on the signature pages hereof or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the Administrative Agent in accordance with the provisions of Section 9.01 of the Amended and Restated Credit Agreement. Except as otherwise provided in this Guaranty, all such communications shall be deemed to have been duly given when transmitted by telecopier, or personally delivered or, in the case of a mailed notice, 3 Domestic Business Days after such communication is deposited in the mails with first class postage prepaid, in each case given or addressed as aforesaid. SECTION 10. No Waivers. No failure or delay by the Administrative Agent, the Documentation Agent, the Syndication Agent or any Banks in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Guaranty, the Amended and Restated Credit Agreement, the Notes, and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11. Successors and Assigns. This Guaranty is for the benefit of the Administrative Agent, the Documentation Agent, the Syndication Agent and the Banks and their respective successors and assigns and in the event of an assignment of any amounts payable under the Amended and Restated Credit Agreement, the Notes, or the other Loan Documents, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty may not be assigned by the Guarantors without the prior written consent of the Administrative Agent and the Required Banks, and shall be binding upon the Guarantors and its respective successors and permitted assigns. SECTION 12. Changes in Writing. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Guarantors and the Administrative Agent, with the consent of the Required Banks. SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE GUARANTORS AND THE ADMINISTRATIVE AGENT HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE 127 133 VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE GUARANTORS AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14. Taxes, etc. All payments required to be made by the Guarantors hereunder shall be made without setoff or counterclaim and free and clear of and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties or other charges of whatsoever nature imposed by any government or any political or taxing authority pursuant and subject to the provisions of Section 2.12(c) of the Amended and Restated Credit Agreement, the terms of which are incorporated herein by reference as to the Guarantors as fully as if set forth herein, and for such purposes, the rights and obligations of the Borrower under such Section shall devolve to the Guarantors as to payments required to be made by the Guarantors hereunder. SECTION 15. Additional Guarantors; Release of Guarantors. Section 5.23(d) of the Amended and Restated Credit Agreement provides that Significant Subsidiaries must become Guarantors, and certain other Subsidiaries may elect to become Guarantors, by, among other things, executing and delivering to the Administrative Agent a counterpart of this Guaranty. Any Subsidiary which executes and delivers to the Administrative Agent a counterpart of or joinder agreement with respect to this Guaranty shall be a Guarantor for all purposes hereunder. Under certain circumstances described in the last sentence of Section 5.12 of the Amended and Restated Credit Agreement, Guarantors may obtain from the Administrative Agent a written release from this Guaranty pursuant to the provisions of such sentence, and upon obtaining such written release, any such Subsidiary shall no longer be a Guarantor hereunder. Each other Guarantor consents and agrees to any such release and agrees that no such release shall affect its obligations hereunder. 128 134 IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be duly executed, under seal, by its authorized officer as of the date first above written. POST PROPERTIES, INC. (SEAL) By: ---------------------------------- R. Gregory Fox Executive Vice President Post Corporate Services Address: Post Properties, Inc. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327-3057 Attention: R. Gregory Fox Executive Vice President Telecopier number: 404-846-5028 Confirmation number: 404-504-9388 129 135 EXHIBIT I MONEY MARKET QUOTE REQUEST Wachovia Bank, N.A., as Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Money Market Quote Request This Money Market Quote Request is given in accordance with Section 2.03 of the Fifth Amended and Restated Credit Agreement (as amended or modified from time to time, the "Amended and Restated Credit Agreement") dated as of January 12, 2001 among POST APARTMENT HOMES, L.P., the Banks from time to time parties thereto, and SUNTRUST BANK, as Documentation Agent, FIRST UNION NATIONAL BANK, as Syndication Agent, and WACHOVIA BANK, N.A., as Administrative Agent. Terms defined in the Amended and Restated Credit Agreement are used herein as defined therein. The Borrower hereby requests that the Administrative Agent obtain quotes for a Money Market Borrowing or Borrowings based upon the following: 1. The proposed date of the Money Market Borrowing(s) shall be ______________, 200__ (the "Money Market Borrowing Date").(1)*) 2. The aggregate amount of the Money Market Borrowing(s) shall be $________.(2) 3. The Stated Maturity Date(s) applicable to the Money Market Borrowing shall be _______ days [______ days and _______ days, respectively].(3) - -------------- * All numbered footnotes appear on the last page of this Exhibit I. 130 136 Very truly yours, POST APARTMENT HOMES, L.P. By: Post GP Holdings, Inc. its sole general partner By: ------------------------------------------- [President or other authorized designee] - -------------------- 1 The date must be a Euro-Dollar Business Day. 2 The amount of the Money Market Borrowing is subject to Section 2.03(a) and (b). 3 The Stated Maturity Dates are subject to Section 2.03(b)(iii). The Borrower may request that up to 3 different Stated Maturity Dates be applicable to any Money Market Borrowing, provided that (i) each such Stated Maturity Date shall be deemed to be a separate Money Market Quote Request and (ii) the Borrower shall specify the amounts of such Money Market Borrowing to be subject to each such different Stated Maturity Date. 131 137 EXHIBIT J MONEY MARKET QUOTE Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Money Market Quote to This Money Market Quote is given in accordance with Section 2.03(c)(ii) of the Fifth Amended and Restated Credit Agreement (as amended or modified from time to time, the "Amended and Restated Credit Agreement") dated as of January 12, 2001 among POST APARTMENT HOMES, L.P. (the "Borrower"), the Banks from time to time parties thereto, SUNTRUST BANK, as Documentation Agent, FIRST UNION NATIONAL BANK, as Syndication Agent, and WACHOVIA BANK, N.A., as Administrative Agent. Terms defined in the Amended and Restated Credit Agreement are used herein as defined therein. In response to the Borrower's Money Market Quote Request dated ___________ , 200_ , we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: 2. Person to contact at Quoting Bank: 3. Date of Money Market Borrowing: (1*) 4. We hereby offer to make Money Market Loan(s) in the following maximum principal amounts for the following Interest Periods and at the following rates: Maximum Principal Amount(2) Stated Maturity Date(3) Rate Per Annum(4) ------------------------ -------------------- --------------
- --------------- * All numbered footnotes appear on the last page of this Exhibit J. 132 138 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Amended and Restated Credit Agreement, irrevocably obligate(s) us to make the Money Market Loan(s) for which any offer(s) [is] [are] accepted, in whole or in part (subject to the last sentence of Section 2.03(c)(i) of the Amended and Restated Credit Agreement). Very truly yours, [Name of Bank] Dated: By: ---------------------------------- Authorized Officer - --------------- (1) As specified in the related Money Market Quote Request. (2) The principal amount bid for each Stated Maturity Date may not exceed the principal amount requested. Money Market Quotes must be made for at least $5,000,000 or a larger multiple of $250,000. (3) The Stated Maturity Dates are subject to Section 2.03(b)(iii). (4) Subject to Section 2.03(c)(ii)(C). 133 139 EXHIBIT K Form of Designation Agreement Dated __________________, Reference is made to that certain Fifth Amended and Restated Credit Agreement dated as of January 12, 2001 (as amended prior to the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Post Apartment Homes, L.P., as the Borrower, the Banks parties thereto, Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent"), First Union National Bank, as Syndication Agent, and SunTrust Bank, as Documentation Agent. Terms defined in the Credit Agreement are used herein with the same meaning. [NAME OF DESIGNATING BANK] (the "Designating Bank") and [NAME OF DESIGNEE] (the "Designee") agree as follows: 1. Pursuant to Section 9.08(g) of the Credit Agreement, the Designating Bank hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Money Market Loans pursuant to Section 2.03(g) of the Credit Agreement. Any assignment by Designating Bank to Designee of its rights to make a Money Market Loan pursuant to such Section 2.03(g) shall be effective at the time of the funding of such Money Market Loan and not before such time. 2. Except as set forth in Section 7, below, the Designating Bank makes no representation or warranty and assumes no responsibility pursuant to this Designation Agreement with respect to (a) any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument and document furnished pursuant thereto and (b) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto. 3. The Designee (a) confirms that it has received a copy of each Loan Document, together with copies of the financial statements referred to in Sections 4.04 and 5.01(a) and (b) (for periods for which such financial statements are available) of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (b) agrees that it will independently and without reliance upon the Administrative Agent, the Documentation Agent, the Syndication Agent, the Designating Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under any Loan Document; (c) confirms that it is a Designated Bank; (d) appoints and authorizes the Administrative Agent to take such action as the Administrative Agent on its behalf and to exercise such powers and discretion under any Loan Document as are delegated to the Administrative Agent by the terms thereof, together with such powers and discretion as are 134 140 reasonably incidental thereto; and (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of any Loan Document are required to be performed by it as a Bank. 4. The Designee hereby appoints the Designating Bank as Designee's agent and attorney in fact and grants to the Designating Bank an irrevocable power of attorney, coupled with an interest, to receive payments made for the benefit of Designee under the Credit Agreement, to deliver and receive all communications and notices under the Credit Agreement and other Loan Documents and to exercise on Designee's behalf all rights to vote and to grant and make approvals, waivers, consents, releases and amendments to or under the Credit Agreement or other Loan Documents. Any document executed by such agent on the Designee's behalf in connection with the Credit Agreement or other Loan Documents shall be binding on the Designee. The Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions. 5. Following the execution of this Designation Agreement by the Designating Bank and its Designee, it will be delivered to the Borrower for acknowledgment and to the Administrative Agent for acknowledgment and recording by the Administrative Agent. The effective date for this Designation Agreement (the "Effective Date") shall be the date of acknowledgment hereof by the Administrative Agent, unless otherwise specified on the signature page thereto. 6. The Designating Bank and, by execution of their respective acknowledgments below, the Borrower and the Administrative Agent, each hereby (i) acknowledges that the Designee is relying on the non-petition provisions of Section 9.19 of the Credit Agreement as agreed to by all signatories thereto and (ii) reaffirms that it will not institute against the Designee or join any other Person in instituting against the Designee any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any federal or state bankruptcy or similar law for one year and done day after the payment in full of the latest maturing commercial paper note issued by the Designee. 7. The Designating Bank unconditionally agrees to pay or reimburse the Designee and save the Designee harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or mature whatsoever which may be imposed or asserted by any of the parties to the Loan Documents against the Designee, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Designee hereunder or thereunder, provided that the Designating Bank shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designee's gross negligence or willful misconduct. 8. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make Money Market Loans as a Designated Bank pursuant to Section 2.03(g) of the Credit Agreement and the rights and obligations of a Designated Bank related thereto; provided, however, that the Designee shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of the Designee which is not otherwise required to repay obligations 135 141 of the Designee Bank which are then due and payable. Notwithstanding the foregoing, the Designating Bank shall be and remain obligated to the Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent and the Banks for each and every of the obligations of the Designee and the Designating Bank with respect to the Credit Agreement, including, without limitation, any indemnification obligations under Section 7.05 of the Credit Agreement and any sums otherwise payable to the Borrower by the Designee. 9. This Designation Agreement shall be governed by and construed in accordance with the laws of the State of [GEORGIA][NEW YORK][OTHER JURISDICTION CHOSEN BY DESIGNATING BANK AND DESIGNATED BANK]. 10. This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Designation Agreement. 136 142 IN WITNESS WHEREOF, the Designating Bank and the Designee intending to be legally bound, have caused this Designation Agreement to be executed by their officers thereunto duly authorized as of the date first above written. [NAME OF DESIGNATING BANK] as Designating Bank By: --------------------------------- Title: [NAME OF DESIGNEE], as Designee By: --------------------------------- Title: Lending Office (and address for notices): Acknowledged this _____ day of Acknowledged this _____ day of __________________, _________ (the __________________, _________ "Effective Date") WACHOVIA BANK, N.A. POST APARTMENT HOMES, L.P. as the as the Administrative Agent Borrower By: By: Post GP Holdings, Inc., -------------------------------- its sole general partner Title --------------------------------- R. Gregory Fox Executive Vice President 137 143 EXHIBIT L CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of _______________ by and between POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Principal"), POST PROPERTIES, INC., a Georgia corporation and _______________________ (each individually a "Guarantor" and collectively, the "Guarantors", and the terms "Guarantor" and "Guarantors" shall include any Subsidiary which becomes a Guarantor pursuant to the last paragraph hereof, Section 15 of the Guaranty referred to below and Section 5.23 of the Credit Agreement referred to below). The Principal and each of the Guarantors are sometimes hereinafter referred to individually as a "Contributing Party" and collectively as the "Contributing Parties." W I T N E S S E T H: WHEREAS, pursuant to that certain Fifth Amended and Restated Credit Agreement, dated as of January 12, 2001, among the Principal, the Banks party thereto and Wachovia Bank, N.A., as Administrative Agent, SunTrust Bank, as Documentation Agent and First Union National Bank, as Syndication Agent, and certain other Banks from time to time party thereto (such agreement, as the same may from time to time be amended, modified, restated or extended, being hereinafter referred to as the "Credit Agreement"; capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement), the Banks have agreed to extend financial accommodations to the Principal; WHEREAS, as a condition, among others, to the willingness of the Administrative Agent and the Banks to enter into the Credit Agreement, they have required that PPI, the Guarantors and each Significant Subsidiary execute and deliver that certain Guaranty, dated as of even date herewith (such agreement, as the same may from time to time be amended, modified, restated or extended, being hereinafter referred to as the "Guaranty"), pursuant to which, among other things, the Guarantors have jointly and severally agreed to guarantee the "Guaranteed Obligations" (as defined in the Guaranty); and WHEREAS, each of the Guarantors will derive direct or indirect economic benefit from the effectiveness and existence of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce each Guarantor to enter into the Guaranty, it is agreed as follows: To the extent that any Guarantor shall, under the Guaranty, make a payment (a "Guarantor Payment") of a portion of the Guaranteed Obligations, then, without limiting its rights of subrogation against the Principal, such Guarantor shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Contributing Parties in an amount, for each such Contributing Party, equal to a fraction of such Guarantor Payment, the numerator 138 144 of which fraction is such Contributing Party's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Contributing Parties. As of any date of determination, the "Allocable Amount" of each Contributing Party shall be equal to the maximum amount of liability which could be asserted against such Contributing Party hereunder with respect to the applicable Guarantor Payment without (i) rendering such Contributing Party "insolvent" within the meaning of Section 101(31) of the Federal Bankruptcy Code (the "Bankruptcy Code") or Section 2 of either the Uniform Fraudulent Transfer Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the "UFCA"), (ii) leaving such Contributing Party with unreasonably small capital, within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or Section 5 of the UFCA, or (iii) leaving such Contributing Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or Section 6 of the UFCA. This Agreement is intended only to define the relative rights of the Contributing Parties, and nothing set forth in this Agreement is intended to or shall impair the obligations of the Guarantors, jointly and severally, to pay any amounts, as and when the same shall become due and payable in accordance with the terms of the Guaranty. The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets in favor of each Guarantor to which such contribution and indemnification is owing. This Agreement shall become effective upon its execution by each of the Contributing Parties and shall continue in full force and effect and may not be terminated or otherwise revoked by any Contributing Party until all of the Guaranteed Obligations shall have been indefeasibly paid in full (in lawful money of the United States of America) and discharged and the Credit Agreement and financing arrangements evidenced and governed by the Credit Agreement shall have been terminated. Each Contributing Party agrees that if, notwithstanding the foregoing, such Contributing Party shall have any right under applicable law to terminate or revoke this Agreement, and such Contributing Party shall attempt to exercise such right, then such termination or revocation shall not be effective until a written notice of such revocation or termination, specifically referring hereto and signed by such Contributing Party, is actually received by each of the other Contributing Parties and by the Administrative Agent at its notice address set forth in the Credit Agreement. Such notice shall not affect the right or power of any Contributing Party to enforce rights arising prior to receipt of such written notice by each of the other Contributing Parties and the Administrative Agent. If any Bank grants additional loans to the Principal or takes other action giving rise to additional Guaranteed Obligations after any Contributing Party has exercised any right to terminate or revoke this Agreement but before the Administrative Agent receives such written notice, the rights of each other Contributing Party to contribution and indemnification hereunder in connection with any Guarantor Payments made with respect to such loans or Guaranteed Obligations shall be the same as if such termination or revocation had not occurred. Section 5.23 (d) of the Credit Agreement provides that Significant Subsidiaries must become Guarantors, and Subsidiaries which are not Significant Subsidiaries may elect to become Guarantors, by, among other things, executing and delivering to the Administrative Agent a 139 145 counterpart of or joinder agreement with respect to the Guaranty and of this Contribution Agreement. Any Subsidiary which executes and delivers to the Administrative Agent a counterpart of the Guaranty and of this Contribution Agreement shall be a Guarantor for all purposes hereunder. Under certain circumstances described in the last sentence of Section 5.12 of the Credit Agreement, Subsidiaries may obtain from the Administrative Agent a written release from the Guaranty pursuant to the provisions of such sentence, and upon obtaining such written release, any such Subsidiary shall no longer be a Guarantor or Contributing Party hereunder, and such release shall automatically and without further action constitute a release by each other Contributing Party of all obligations of such Subsidiary hereunder. Each other Guarantor consents and agrees to any such release and agrees that no such release shall affect its obligations hereunder, except as to the Subsidiary so released. 140 146 IN WITNESS WHEREOF, each Contributing Party has executed and delivered this Agreement, under seal, as of the date first above written. POST APARTMENT HOMES, L.P.(SEAL) By: Post GP Holdings, Inc., its sole general partner By: ----------------------------------------- R. Gregory Fox Executive Vice President POST PROPERTIES, INC. (SEAL) By: -------------------------------------------------- R. Gregory Fox Executive Vice President Address: Post Properties, Inc. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327-3057 Attention: R. Gregory Fox Executive Vice President Telecopier number: 404-846-5028 Confirmation number: 404-504-9388 [OTHER GUARANTOR(S)] 141 147 Schedule 4.08 POST APARTMENT HOMES SUBSIDIARY SCHEDULE JURISDICTION OF INCORPORATION/ NAME FORMATION --------------- Addison Circle Access, Inc. DE Addison Circle One, Ltd. TX Addison Circle Three, Ltd. TX Addison Circle Two, Ltd. TX Addison Townhomes One, Ltd. TX Akard-McKinney Investment Company, LLC TX Armada Condominiums, L.P. GA Armada Denver Condominiums, LLC TX Armada Homes, Inc. DE Armada Phoenix Townhomes, LLC TX Armada Residences, L.P. GA Briarcliff Commercial Property, LLC GA Cumberland Lake, Inc. GA Gateway WW, LLC GA Greenwood Residential, LLC TX P/C First Avenue LLC DE Post 1499 Massachusetts, LLC GA Post Asset Management, Inc. GA
142 148 Post Aviation, LLC GA Post Carlyle I, LLC GA Post Construction Services, Inc. GA Post Development Services Limited Partnership GA Post Landscape Group, Inc. GA Post Paseo Colorado, LLC GA Post Rice Lofts, LLC TX Post Services, Inc. GA Post Travel, Inc. GA Post Uptown, LLC TX Post West Avenue Lofts, L.P. GA Post West Avenue, LLC GA Post-AmerUs American Beauty Mill, L.P. GA Post-AmerUs Bennie Dillon, L.P. GA Post-AmerUs Rice Lofts, L.P. GA Post-AmerUs Wilson Building II, L.P. GA Post-AmerUs Wilson Building, L.P. GA RAM Partners, Inc. GA Residential Ventures, Inc. GA Rice Lofts, LP TX Riverside Villas, LLC GA Rocky Point Management, Inc. GA Rose Hill Associates, LLC* DE STS Loan, L.P. GA
143 149 Uptown Denver, LLC CO Villas at Parkway Village, LP GA Villas GP, LLC GA
*Post Apartment Homes, L.P.'s indirect interest in this entity is anticipated to exceed 50% upon full funding during construction. 144 EX-21.1 4 g67475ex21-1.txt LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 SUBSIDIARIES OF POST PROPERTIES, INC.
NAME STATE OF FORMATION ---- ------------------ 1. Addison Circle Access, Inc. Delaware 2. Addison Circle One, Ltd. Texas 3. Addison Circle Three, Ltd. Texas 4. Addison Circle Two, Ltd. Texas 5. Addison Townhomes One, Ltd. Texas 6. Akard-McKinney Investment Company, LLC Texas 7. Armada Condominiums, L.P. Georgia 8. Armada Denver Condominiums, LLC Texas 9. Armada Homes, Inc. Delaware 10. Armada Phoenix Townhomes, LLC Texas 11. Armada Residences, L.P. Georgia 12. Briarcliff Commercial Property, LLC Georgia 13. Cumberland Lake, Inc. Georgia 14. Gateway WW, LLC Georgia 15. Greenwood Residential, LLC Texas 16. P/C 89th Street LLC Delaware 17. P/C First Avenue LLC Delaware 18. P/C Times Square LLC Delaware 19. Post 89th Street, LLC Georgia 20. Post 1499 Massachusetts, LLC Georgia 21. Post Apartment Homes, L.P. Georgia
2 22. Post Asset Management, Inc. Georgia 23. Post Austin Triangle, L.P. Georgia 24. Post Aviation, LLC Georgia 25. Post Carlyle I, LLC Georgia 26. Post Construction Services, Inc. Georgia 27. Post Development Services Limited Partnership Georgia 28. Post GP Holdings, Inc. Georgia 29. Post Landscape Group, Inc. Georgia 30. Post LP Holdings, Inc. Georgia 31. Post Paseo Colorado, LLC Georgia 32. Post Rice Lofts, LLC Texas 33. Post Services, Inc. Georgia 34. Post Times Square, LLC Georgia 35. Post Travel, Inc. Georgia 36. Post Triangle, LLC Georgia 37. Post Uptown, LLC Texas 38. Post West Avenue, LLC Georgia 39. Post West Avenue Lofts, L.P. Georgia 40. Post-AmerUs American Beauty Mill, L.P. Georgia 41. Post-AmerUs Bennie Dillon, L.P. Georgia 42. Post-AmerUs Rice Lofts, L.P. Georgia 43. Post-AmerUs Wilson Building II, L.P. Georgia 44. Post-AmerUs Wilson Building, L.P. Georgia 45. RAM Partners, Inc. Georgia
3 46. Residential Ventures, Inc. Georgia 47. Rice Lofts, LP Texas 48. Riverside Villas, LLC Georgia 49. Rocky Point Management, Inc. Georgia 50. Rose Hill Associates, LLC* Delaware 51. STS Loan, L.P. Georgia 52. The Clarett Group, LLC New York 53. Uptown Denver, LLC Colorado 54. Villas at Parkway Village, LP Georgia 55. Villas GP, LLC Georgia
EX-23.1 5 g67475ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-62243) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.2 6 g67475ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-70689) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.3 7 g67475ex23-3.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-81772) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.4 8 g67475ex23-4.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-36595) of our reports dated February 16, 2001 appearing on pages 41 and 62 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2000, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.5 9 g67475ex23-5.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-47399) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.6 10 g67475ex23-6.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-00020) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.7 11 g67475ex23-7.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.7 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-94121) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.8 12 g67475ex23-8.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.8 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-80427) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.9 13 g67475ex23-9.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.9 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-44722) of our report dated February 16, 2001 appearing on page 41 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.10 14 g67475ex23-10.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.10 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-42884) of our reports dated February 16, 2001 appearing on pages 41 and 62 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2000, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 EX-23.11 15 g67475ex23-11.txt CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.11 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-55994) of our reports dated February 16, 2001 appearing on pages 41 and 62 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2000, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 21, 2001 -----END PRIVACY-ENHANCED MESSAGE-----