-----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, Q1ThDUUpmCPonFENPRyQ6Fuhu/RHsYdOPuf1cM50wn0S2BW64FCD49r5wKNn7E78 ZZizNIIn9uuf6n/viSLvLw== 0000950144-98-003915.txt : 19980401 0000950144-98-003915.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950144-98-003915 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 28 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE SROS: PHLX 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: 98582930 BUSINESS ADDRESS: STREET 1: 3350 CUMBERLAND CIRCLE NW STREET 2: STE 2200 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 4048504400 MAIL ADDRESS: STREET 1: 3530 CUMBERLAND CIRCLE STREET 2: SUITE 2200 CITY: ATLANTA STATE: GA ZIP: 30339 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: 98582931 BUSINESS ADDRESS: STREET 1: 3350 CUMBERLAND CIRCLE NW STREET 2: STE 2200 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7708504400 MAIL ADDRESS: STREET 1: 3350 CUMBERLAND CIRCLE STREET 2: STE 2200 CITY: ATLANTA STATE: GA ZIP: 30339 10-K 1 POST PROPERTIES FORM 10-K 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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ---------- ---------- COMMISSION FILE NUMBER 1-12080 ---------------------------------- 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.) 3350 CUMBERLAND CIRCLE, SUITE 2200, ATLANTA, GEORGIA 30339 (Address of principal executive offices -- zip code) (770) 850-4400 (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: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON 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 17, 1998 was approximately $1,352,048,423. As of March 17, 1998, there were 34,229,074 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 8, 1998 are incorporated by reference in Part III. 2 POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. TABLE OF CONTENTS
Item FINANCIAL INFORMATION Page No. No. --- --- PART I 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4. Submission of Matters to a Vote of Securityholders . . . . . . . . . . . . . . . . . . 10 X. Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART II 5. Market Price of the Registrant's Common Stock and Related Stockholder Matters . . . . . 13 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 29 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 PART III 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 30 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 30 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 30 PART IV 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K . . . . . . . . . . . 31
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 78 stabilized communities (the "Communities") containing 25,938 apartment units located primarily in metropolitan Atlanta, Georgia, Dallas, Texas and Tampa, Florida. In addition, the Company currently has under construction or in initial lease-up 13 new communities and additions to three existing communities in the Atlanta, Georgia, Dallas and Houston, Texas, Tampa, Florida, Denver, Colorado, and Nashville, Tennessee metropolitan areas that will contain an aggregate of 4,945 apartment units upon completion. For the year ended December 31, 1997, 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 45 Communities stabilized for the entire year was 94.9%. The average monthly rental rate per apartment unit at these Communities for December 1997 was $811. The Company also manages through affiliates approximately 10,700 additional apartment units owned by third parties. The Company is a fully-integrated organization with multifamily development, acquisition, operation and asset management expertise and has approximately 1,600 employees, none of whom is a party to a collective bargaining agreement. Since founded in 1971, the Company has pursued three distinctive core business strategies that, for over 25 years, 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 niche and 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, 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. The Company is a self-administered and self-managed equity real estate investment trust (a "REIT"). On July 22, 1993, the Company completed an initial public offering of 10,580,000 shares of Common Stock (the "Initial Offering") and a business combination involving entities under varying common ownership (the "Formation Transactions"). On February 7, 1994, the Company completed a second public offering of 3,000,000 shares of Common Stock (the "Second 1 4 Offering"). On October 20, 1995, the Company completed a third public offering of 3,710,500 additional shares of Common Stock (the "Third Offering"). Proceeds from the Initial Offering were used by the Company (i) 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 and (ii) to pay down existing indebtedness on certain communities. Proceeds of the Second and Third Offerings were used by the Company to pay down existing indebtedness. On October 1, 1996, the Company sold one million non-convertible 8 1/2% Series A Cumulative Redeemable Preferred Shares (the "Series A Perpetual Preferred Shares") with a liquidation preference equivalent to $50 per share. On October 28, 1997, the Company sold two million non-convertible 7 5/8% Series B Cumulative Redeemable Preferred Shares (the "Series B Perpetual Preferred Shares" together with the Series A Perpetual Preferred Shares, the "Perpetual Preferred Shares") with a liquidation preference equivalent to $25 per share. Proceeds from the sale of the Perpetual Preferred Shares were contributed to the Operating Partnership in exchange for one million Series A Preferred Units and two million Series B Preferred Units, respectively, and used by the Operating Partnership to repay outstanding indebtedness. On October 24, 1997, Columbus Realty Trust ("Columbus") a Texas real estate investment trust, was merged into a wholly owned subsidiary of the Company (the "Merger"). At the time of the Merger, Columbus operated 26 completed communities containing 6,296 apartment units and had an additional five communities under development that will contain 1,243 apartment units upon completion located primarily in Dallas, Texas. Pursuant to the merger agreement, each outstanding share of Columbus common stock was converted into .615 shares of common stock of the Company, which resulted in the issuance of approximately 8.4 million shares of common stock of the Company. The 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 Partnership's executive offices are located at 3350 Cumberland Circle, Atlanta, Georgia 30339 and their telephone number is (770) 850-4400. 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, 1997, the Company, through wholly owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 85.5% of the common units in the Operating Partnership ("Units") and 100% of the Perpetual Preferred Units. The other limited partners of the Operating Partnership 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 Company 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 Company. The Company presently anticipates that it will elect to issue shares of Common Stock in connection with each such redemption rather than paying cash (and has done so 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. 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 Company by directing the affairs of the Operating Partnership. 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 2 5 indirect limited and general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to the Company's percentage interest therein and indirectly entitle the Company to vote on all matters requiring a vote of the limited partners. As part of the formation of the Operating Partnership, a new holding company, Post Services, Inc. ("Post Services") was organized as a separate corporate subsidiary of the Operating Partnership. Post Services, in turn, owns all the outstanding stock of two operating subsidiaries, RAM Partners, Inc. ("RAM") and Post Landscape Services, Inc. ("Post Landscape"). Certain officers and directors of the Company received 99%, collectively, of the voting common stock of Post Services, and the Operating Partnership received 1% of the voting common stock and 100% of the nonvoting common stock of Post Services. The voting and nonvoting common stock of Post Services held by the Operating Partnership represents 99% of the equity interests therein. The voting common stock held by officers and directors in Post Services is subject to an agreement that is designed to ensure that the stock will be held by one or more officers of Post Services. The by-laws of Post Services provide that a majority of the board of directors of Post Services must be persons who are not employees, members of management or affiliates of the Company or its subsidiaries. This by-law provision cannot be amended without the vote of 100% of the outstanding voting common stock of Post Services. Post Services currently has the same board of directors as the Company. OPERATING DIVISIONS The major operating divisions of the Operating Partnership include: Post Management Services Post Management Services is responsible for the day-to-day operations of all the Post(R) communities located in the eastern United States and is itself comprised of two divisions: one responsible for community leasing, property management and personnel recruiting, training and development, and the other for maintenance and security. Post Management Services also conducts short-term 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 in metropolitan Atlanta. Development activities include site selection, zoning and regulatory approvals, project design, and the full range of construction management services. Post East Development Post East Development conducts the development and construction activities of the Company in metropolitan Tampa, Charlotte and Nashville. In addition, it studies other markets in the Eastern United States for development and acquisition opportunities. Post West Post West conducts the development and construction activities and day to day operations of the Company in metropolitan Dallas, Denver and Houston. In addition, it studies other markets in the Western United States for development and acquisition opportunities. Post Landscape Operations This division works closely with Post Apartment Development and Post East Development in the initial design of each Post(R) community and then has primary responsibility for maintaining each community's landscape. The division maintains each community's grounds on a cost effective basis for seasonal impact and has earned national recognition for the Company. Post Landscape Operations employs professionals specializing in landscape architecture, horticulture, floriculture, and general landscape maintenance. 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 and insurance services required by the Company and all of its affiliates are centralized in Post Corporate Services. 3 6 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, 1997, RAM managed 57 properties (located in Georgia, Florida, Kansas, Missouri, North Carolina, Texas and Virginia) with approximately 10,700 units under management. Post Landscape Services 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 landscape services for clients other than Post(R) communities. Projects with third parties include the maintenance and design of the landscape for office parks, commercial buildings and other commercial enterprises, and private residences. Post Landscape Services provides such third party landscape services. HISTORY OF POST PROPERTIES, INC. During the five-year period from January 1, 1993 through December 31, 1997, the Company and its predecessors and affiliates have developed and completed 5,828 apartment units in 14 apartment communities, acquired 7,186 units in 28 apartment communities (26 were as a result of the Merger) and sold five apartment communities containing an aggregate of 1,164 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. During 1997, the Company acquired 26 communities containing 6,296 apartment units in conjunction with the Columbus merger. 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:
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Units completed . . . . . . . . . . . . . . . . 2,128 2,258 685 575 182 Units acquired(1) . . . . . . . . . . . . . . . 6,296 890 -- -- -- Units sold . . . . . . . . . . . . . . . . . . (416) (180) (568) -- -- Total units owned by Company affiliates at end of year . . . . . . . . . . . . . . . 25,938 17,930 14,962 14,845 14,270 Total apartment rental income (in thousands) . . . . . . . . . . . . . . . . . $186,126 158,618 $133,817 $115,309 $104,482
(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 13 new communities and additions to three existing communities that will contain an aggregate of 4,945 units upon completion. The Company's communities under development or in initial lease-up are summarized in the following table:
ACTUAL OR ACTUAL OR ESTIMATED ESTIMATED UNITS LEASED QUARTER OF QUARTER QUARTER OF AS OF FEBRUARY # OF CONSTRUCTION FIRST UNITS STABILIZED 28, METROPOLITAN AREA UNITS COMMENCEMENT AVAILABLE OCCUPANCY 1998 ----------------- ----- ------------ --------- --------- ----------- ATLANTA, GA Post Lindbergh(TM) . . . . . . . . 395 3Q'96 4Q'97 1Q'99 131 Post Gardens(R) . . . . . . . . . . 397 3Q'96 4Q'97 1Q'99 128 Riverside by Post(TM) . . . . . . . 537 3Q'96 2Q'98 1Q'00 N/A Post Ridge(TM) . . . . . . . . . . 232 1Q'97 4Q'97 4Q'98 55 Post River(R) - Phase II . . . . . 88 1Q'97 1Q'98 2Q'98 18 Post Briarcliff(TM) - Phase I . . . 388 2Q'97 2Q'98 3Q'99 N/A -------- -------- 2,037 332 -------- -------- DALLAS, TX Heights of State-Thomas . . . . . . 198 4Q'96 4Q'97 2Q'98 141 American Beauty Mill . . . . . . . 81 2Q'97 2Q'98 3Q'98 30 Addison Circle by Post(TM) - Phase II . . . . . . . . . . . 471 4Q'97 4Q'98 1Q'00 N/A Block 580 . . . . . . . . . . . . . 203 4Q'97 4Q'98 2Q'99 N/A -------- -------- 953 171 -------- -------- HOUSTON, TX The Rice . . . . . . . . . . . . . 312 1Q'97 2Q'98 4Q'98 178 Midtown - Phase I . . . . . . . . . 479 4Q'97 1Q'99 3Q'99 N/A -------- -------- 791 178 -------- -------- TAMPA, FL Post Rocky Point(R) - Phase III . . 290 2Q'97 2Q'98 1Q'99 9 Post Harbour Island(TM) . . . . . . 206 3Q'97 3Q'98 2Q'99 N/A -------- -------- 496 9 -------- -------- DENVER, CO Post Apartment Homes of Uptown . . . . . . . . . . . . 467 4Q'97 1Q'99 1Q'00 N/A -------- -------- NASHVILLE, TN Post Hillsboro Village(TM) . . . . 201 1Q'97 3Q'97 2Q'98 161 -------- -------- 4,945 851 ======== ========
The Company is also currently conducting feasibility and other pre-development studies for possible new Post(R) communities in its primary 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. YEAR 2000 ISSUE In 1997, the Company implemented an integrated accounting software package that is Year 2000 compatible. The Company intends to upgrade its property management software to a Year 2000 compliant version of its existing software in 1998. The Company has not yet determined whether other Year 2000 issues will affect its operations. However, management does not believe the cost related to undetermined issues will have a material effect on its financial results. ITEM 2. PROPERTIES The Communities consist of 78 stabilized Post(R) multifamily apartment communities located in the following metropolitan areas:
METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL ----------------- ----------- ---------- ---------- Atlanta, GA . . . . . . . . . . . . . . . . . . . 36 13,768 53.1% Dallas, TX . . . . . . . . . . . . . . . . . . . 24 6,021 23.2% Tampa, FL . . . . . . . . . . . . . . . . . . . . 8 2,570 9.9% Jackson, MS . . . . . . . . . . . . . . . . . . . 3 983 3.8% Orlando, FL . . . . . . . . . . . . . . . . . . . 2 1,248 4.8% Fairfax, VA . . . . . . . . . . . . . . . . . . . 2 700 2.7% Nashville, TN . . . . . . . . . . . . . . . . . . 2 246 1.0% Charlotte, NC . . . . . . . . . . . . . . . . . . 1 402 1.5% -------- --------- ------ 78 25,938 100.0% ======== ========= ======
The Company or its predecessors developed all but 14 of the Post(R) Communities and currently manages all of the Communities. Forty-four of the Communities have in excess of 300 apartment units, with the largest Community having a total of 907 apartment units. The oldest of the Communities was first occupied in 1977 and 69 of the 78 Communities, comprising approximately 92% of such Communities' apartment units, were completed after January 1, 1986. The average age of the Company's Communities is approximately seven years. The average economic occupancy rate was 94.8% and 95.4%, respectively, and the average monthly rental rate per apartment unit was 733 and 72%, respectively, for communities stabilized for each of the entire years ended December 31, 1997 and 1996 (does not include 11,066 units stabilized after January 1, 1996 or acquired in the Merger). See "Selected Financial Information". 7 10 COMMUNITY INFORMATION
DECEMBER 1997 1997 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 $760 96.0% Post Bridge(R) . . . . . . . . Atlanta 1986 847 354 655 94.5% Post Brookhaven(R) . . . . . . Atlanta 1990-92 (3) 991 735 929 92.0% Post Canyon(R) . . . . . . . . Atlanta 1986 899 494 684 96.9% Post Chase(R) . . . . . . . . . Atlanta 1987 938 410 684 94.7% Post Chastain(R) . . . . . . . Atlanta 1990 965 558 980 94.5% Post Collier Hills(R) . . . . . Atlanta 1997 967 396 987 N/A (4) Post Corners(R) . . . . . . . . Atlanta 1986 860 460 691 95.4% Post Court(R) . . . . . . . . . Atlanta 1988 838 446 676 95.0% Post Creek(TM) . . . . . . . . Atlanta 1983 (5) 1,180 810 884 94.3% Post Crest(R) . . . . . . . . . Atlanta 1996 1,073 410 950 96.8% Post Crossing(R) . . . . . . . Atlanta 1995 1,067 354 1,054 95.9% Post Dunwoody(R) . . . . . . . Atlanta 1989-96 (3) 941 530 927 93.4% Post Glen(R) . . . . . . . . . Atlanta 1997 1,113 314 1,137 N/A (4) Post Lane(R) . . . . . . . . . Atlanta 1988 840 166 721 97.2% Post Lenox Park(TM) . . . . . . Atlanta 1995 1,030 206 1,075 97.4% Post Mill(R) . . . . . . . . . Atlanta 1985 952 398 713 93.2% Post Oak(TM) . . . . . . . . . Atlanta 1993 1,003 182 995 97.4% Post Oglethorpe(R) . . . . . . Atlanta 1994 1,205 250 1,210 93.2% Post Park(R) . . . . . . . . . Atlanta 1988-90 (3) 904 770 780 95.0% Post Parkwood(R) . . . . . . . Atlanta 1995 1,071 125 931 95.4% Post Peachtree Hills(R) . . . . Atlanta 1992-94 (3) 982 300 1,007 96.3% Post Pointe(R) . . . . . . . . Atlanta 1988 835 360 671 95.4% Post Renaissance(R) (6) . . . . Atlanta 1992-94 (3) 890 342 926 94.5% Post River(R) . . . . . . . . . Atlanta 1991 983 125 1,118 93.1% Post Summit(R) . . . . . . . . Atlanta 1990 957 148 859 96.6% Post Terrace(R) . . . . . . . . Atlanta 1996 1,144 296 1,066 94.1% Post Valley(R) . . . . . . . . Atlanta 1988 854 496 659 93.6% Post Village(R) . . . . . . . . Atlanta 915 724 92.7% The Arbors . . . . . . . . . 1983 1,063 301 The Fountains . . . . . . . . 1987 850 352 The Gardens . . . . . . . . . 1986 891 494 The Hills . . . . . . . . . . 1984 953 241 The Meadows . . . . . . . . . 1988 817 350 Post Vinings(R) . . . . . . . . Atlanta 1989-91 (3) 964 403 780 95.0% Post Walk(R) . . . . . . . . . Atlanta 1984-87 (3)(7) 932 476 814 95.2% Post Woods(R) . . . . . . . . . Atlanta 1977-83 (3) 1,057 494 857 93.9% ------- ------ -------- ------- Subtotal/Average -- Atlanta . 965 13,768 872 95.0% ------- ------ -------- ------- TEXAS Addison Circle Apartment Homes by Post(TM) - Phase I . . . Dallas 1997 896 460 866 N/A (4) Cole's Corner . . . . . . . . . Dallas 1997 796 186 943 N/A (4) Columbus Square by Post(TM) . . Dallas 1996 861 218 1,066 98.3% Parkway Village . . . . . . . . Dallas 1986 1,308 136 1,108 88.2% Post Parkwood(R) (8) . . . . . Dallas 1962-70 (3) 1,042 96 1,048 98.5% Post Ascension(TM) . . . . . . Dallas 1985-95 (3) 929 165 787 93.0% Post Hackberry Creek(TM) . . . Dallas 1988-96 (3) 865 432 763 96.6% Post Lakeside(TM) . . . . . . . Dallas 1986 791 327 781 98.4% Post Reflections(TM) . . . . . Dallas 1986 797 198 642 99.0% Post Town Lake(TM)/Parks . . . Dallas 1986-87 (3) 869 398 698 98.5% Post White Rock(TM) . . . . . . Dallas 1988 659 207 676 93.5% Post Winsted(TM) . . . . . . . Dallas 1996 728 314 690 98.5% The Shores by Post(TM) . . . . Dallas 1988-97 (3) 874 907 868 97.0% Springstead Condos (9) . . . . Dallas 1983 1,157 38 1,207 94.4% The Abbey of State-Thomas . . . Dallas 1996 1,276 34 1,800 97.0% The Commons at Turtle Creek (10)Dallas 1985 645 158 703 98.0% The Meridian at State-Thomas . Dallas 1991 798 132 1,007 97.0% The Residences on McKinney . . Dallas 1986 749 196 987 95.7% The Vineyard of Uptown . . . . Dallas 1996 728 116 845 97.3% The Vintage of Uptown . . . . . Dallas 1993 781 161 850 96.6% The Worthington of State-Thomas Dallas 1993 818 332 1,082 95.6% Uptown Village . . . . . . . . Dallas 1995 767 300 821 98.1% Villas at Valley Ranch (9) . . Dallas 1985 1,300 36 1,335 93.6% Post Windhaven(TM) (11) . . . . Dallas 1991 825 474 528 100.0% ------- ------ -------- ------- Subtotal/Average -- Texas . . 886 6,021 921 96.6% ------- ------ -------- -------
8 11 FLORIDA Post Bay(R) . . . . . . . . . . Tampa 1988 782 312 674 98.2% Post Court(R) . . . . . . . . . Tampa 1991 1,018 228 788 95.1% Post Fountains at Lee Vista(R) Orlando 1988 835 508 617 96.0% Post Hyde Park(R) . . . . . . . Tampa 1996 1,009 270 957 99.6% Post Lake(R) . . . . . . . . . Orlando 1988 850 740 633 95.7% Post Rocky Point(R) . . . . . . Tampa 1996-97 (3) 1,018 626 946 N/A (4) Post Village(R) . . . . . . . . Tampa 941 742 94.8% The Arbors . . . . . . . . . 1991 967 304 The Lakes . . . . . . . . . . 1989 895 360 The Oaks . . . . . . . . . . 1991 968 336 Post Walk(R) at Old Hyde Park Village . . . . Tampa 1997 984 134 1,165 N/A (4) ------- ------- -------- ------ Subtotal/Average -- Florida . 933 3,818 815 96.6% ------- ----- -------- ------ MISSISSIPPI Post Mark . . . . . . . . . . . Jackson 1984 988 256 596 97.9% Post Pointe(R) . . . . . . . . Jackson 1997 812 241 597 N/A (4) Post Trace(R) (8) . . . . . . . Jackson 1989-95 (3) 734 486 566 94.7% ------- ----- -------- ------ Subtotal/Average -- Mississippi 845 983 586 96.3% ------- ----- -------- ------ VIRGINIA Post Corners(R) at Trinity Centre Fairfax . . . . . . . . 1996 1,030 336 963 98.2% Post Forest(R) . . . . . . . . Fairfax 1990 889 364 908 96.8% ------- ----- -------- ------ Subtotal/Average -- Virginia 960 700 936 97.5% ------- ----- -------- ------ NORTH CAROLINA Post Park at Phillips Place(R) Charlotte 1997 912 402 1,056 N/A (4) ------- ----- -------- ------- TENNESSEE Post Green Hills(R) . . . . . . Nashville 1996 1,056 166 1,099 95.6% The Lee Apartments . . . . . . Nashville 1924 808 80 628 98.8% ------- ----- -------- ------ Subtotal/Average -- Tennessee 932 246 864 97.2% ------- ----- -------- ------ TOTAL . . . . . . . . . . . 930 25,938 $ 874 95.4% (12) ======= ====== ======== ======
- -------------- (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. For the Texas and Mississippi communities which were acquired in connection with the Merger in October, 1997, average economic occupancy is for the period from October 24, 1997 through December 31, 1997. (3) These dates represent the respective completion dates for multiple phases of a Community. (4) During 1997, this community or a phase in this community was in lease-up and, therefore, is not included. (5) This community was completed by the Company in 1983, sold during 1986, managed by the Company through 1993 and reacquired by the Company in 1996. (6) The Company has a leasehold interest in the land underlying Post Renaissance pursuant to a ground lease that expires on January 1, 2040. (7) Post Brook(R) and Post Walk(R) were combined as one property effective January 1, 1997. (8) Existing property acquired in August 1997. Occupancy reflected is partial year from acquisition through December 31, 1997. (9) The Company does not own all of the units in these properties. Information is provided only with respect to the units owned by the Company as of December 31, 1997. (10) Existing property acquired in February 1997. (11) Post Windhaven(TM) Village is subject to a master lease with Electonic Data Systems. (12) The overall 1997 Average Economic Occupancy excludes the Texas and Mississippi communities. 9 12 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held a special meeting of shareholders on October 24, 1997. The matters voted upon and the results of voting were as follows: (i) To consider and vote upon a proposal to (a) approve and adopt the Agreement and Plan of Merger dated as of August 1, 1997 among the Company, Columbus Realty Trust ("Columbus") and Post LP Holdings, Inc. (subsequently renamed Post Interim Holdings, Inc.), a wholly owned subsidiary of the Company, and (b) approve the issuance of shares of Common Stock of the Company pursuant to the merger of Columbus with and into the Company. There were 15,542,329 votes for, 32,978 votes against and 46,207 votes abstained from this proposal. (ii) To consider and vote upon a proposal to amend the Company's Employee Stock Plan to increase the number of shares of Common Stock reserved for issuance thereunder from 1,200,000 to 3,500,000 shares. There were 12,889,067 votes for, 2,650,216 votes against and 82,231 votes abstained from this proposal. 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 . . . . . . . . . . . . President, Chief Operating Officer, Treasurer and Director Robert L. Shaw . . . . . . . . . . . . President -- Post West W. Daniel Faulk, Jr . . . . . . . . . . President -- Post Apartment Development Jeffrey A. Harris . . . . . . . . . . . President -- Post Management Services Sherry W. Cohen . . . . . . . . . . . . Executive Vice President -- Post Corporate Services and Secretary James F. Duffy . . . . . . . . . . . . Executive Vice President -- Post West Martha J. Logan . . . . . . . . . . . . Executive Vice President -- Post Management Services Arthur E. Lomenick . . . . . . . . . . Executive Vice President -- Post West John B. Mears . . . . . . . . . . . . . Executive Vice President -- Post East Development Timothy A. Peterson . . . . . . . . . . Executive Vice President -- Post Corporate Services Thomas L. Wilkes . . . . . . . . . . . Executive Vice President -- Post West Terry L. Chapman . . . . . . . . . . . Senior Vice President -- Post Management Services Judy M. Denman . . . . . . . . . . . . Senior Vice President -- Post Corporate Services R. Gregory Fox . . . . . . . . . . . . Senior Vice President -- Post Corporate Services John D. Hooks . . . . . . . . . . . . . Senior Vice President -- Post Management Services Katharine W. Kelley . . . . . . . . . . Senior Vice President -- Post Apartment Development William F. Leseman . . . . . . . . . . Senior Vice President -- RAM Partners, Inc. William C. Lincicome . . . . . . . . . Senior Vice President -- Post Landscape Services Janie S. Maddox . . . . . . . . . . . . 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. 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 NationsBank Corp., Crawford & Co. and the Atlanta Regional Commission. Mr. Williams is 55 years old. 10 13 John T. Glover. Mr. Glover is the President, Chief Operating Officer and Treasurer of the Company and a director. Mr. Glover joined the Company in 1984 and since that time has acted as its President. Mr. Glover is a Director of SunTrust Banks of Georgia Inc., SunTrust Bank, Atlanta, N.A. and Haverty's Furniture Companies, Inc. In addition, he is a member of the board of directors of the National Realty Committee and the National Multi-Housing Council. Mr. Glover is 51 years old. Robert L. Shaw. Mr. Shaw joined the Company in October 1997 and currently serves as President of Post West. Mr. Shaw was Chief Executive Officer of Columbus from January 1994 through October 1997. Mr. Shaw was a co-founder of Columbus Realty Holdings, Inc. ("CRH"), a predecessor of Columbus, and of its affiliate, Memphis Real Estate, Inc. ("Memphis Real Estate"), and served as President of CRH and Memphis Real Estate from August 1989 to December 1993. He serves on the Board of Directors of the Greater Dallas Chamber of Commerce and the Board of Governors of the National Association of Real Estate Investments Trusts. He is also a member of the Young Presidents Organization ("YPO"), the Urban Land Institute, and the Board of Governors of the National Multifamily Housing Counsel. In addition, he serves on the University of Texas at Dallas Advisory Board. Mr. Shaw is 41 years old. W. Daniel Faulk, Jr. Mr. Faulk has been with the Company for ten years. Since October 1997, he has been President of Post Apartment Development, which is responsible for the development and construction of all Post apartment communities located in Atlanta. Mr. Faulk was the President of Post Apartment Development from April 1993 to October 1997. 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 55 years old. Jeffrey A. Harris. Mr. Harris has been with the Company for thirteen years. Since October 1995, he has been President of Post Management Services and President of Post Landscape. Prior thereto, Mr. Harris was President of Post Management Division from March 1995, Executive Vice President of Post Management Division from April 1993 and Senior Vice President from 1989. Mr. Harris is on the Board of Directors and was President of the Atlanta Apartment Association. Mr. Harris is 40 years old. Sherry W. Cohen. Ms. Cohen has been with the Company for thirteen years. Since October 1997, she has been an Executive Vice President of Post Corporate Services responsible for supervising and coordinating legal affairs and insurance. 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, as well as Corporate Secretary. Ms. Cohen is 43 years old. James F. Duffy. Mr. Duffy joined the Company in October 1997 as an Executive Vice President of Post West and is responsible for the construction of all Post apartment communities located in the Western United States. He was a Senior Vice President of Columbus from May 1996 through October 1997. Prior to his affiliation with Columbus, Mr. Duffy was President of the JFD Group, a business consulting firm specializing in the commercial construction industry from 1993 to 1996. Prior thereto, he was President of the W. B. Moore Company from 1991 to 1993. Mr. Duffy is 54 years old. Martha J. Logan. Ms. Logan has been with the Company for six years. Since October 1995, she has been President of Post Management Services. Prior thereto, Ms. Logan was President of RAM since July 1994, Executive Vice President of RAM from January 1994 and Vice President of RAM since 1991. Ms. Logan is 43 years old. Arthur E. Lomenick. Mr. Lomenick joined the Company in October 1997 as an Executive Vice President of Post West and is responsible for acquiring new development sites in the Company's primary markets in the Western United States. Mr. Lomenick was a Senior Vice President of Columbus from October 1994 through October 1997 and was Vice President from October 1993 to October 1994. Previously, Mr. Lomenick served as Vice President, Investments, for Memphis Real Estate since January 1993. Mr. Lomenick is 42 years old. John B. Mears. Mr. Mears has been with the Company since November 1993. Since October, 1997, he has been an Executive Vice President of Post East Development responsible for acquiring new development sites in the Company's primary markets outside of Atlanta, Georgia in the Eastern United States. Prior thereto, he was a Senior Vice President of Post Apartment Development since July 1994. Prior to joining the Company, Mr. Mears was an associate in the Real Estate Investment Banking Group at Merrill Lynch and Company since July 1992. Mr. Mears is 34 years old. 11 14 Timothy A. Peterson. Mr. Peterson has been with the Company for eight years and currently serves as Executive Vice President of Post Corporate Services responsible for capital markets. Prior thereto, he was Senior Vice President of Post Corporate Services since April 1993 and responsible for capital markets since November 1995. Mr. Peterson was Vice President of Post Corporate Services since January 1993, and he was responsible for planning and reporting services since 1989. Mr. Peterson is Co-Chairman of the Accounting Committee for the National Association of Real Estate Investment Trust. Mr. Peterson is a Certified Public Accountant. Mr. Peterson is 32 years old. Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 as 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 38 years old. Terry L. Chapman. Mr. Chapman has been with the Company for twenty-four years. Since October 1997, he has been a Senior Vice President of Post Management Services. Prior thereto, he was an Executive Vice President of Post Management Services for more than five years responsible for maintenance, quality assurance, security, and preventive maintenance for all Post(R) communities. Mr. Chapman is 51 years old. Judy M. Denman. Ms. Denman has been with the Company for twenty-two years. Since July 1993, she has been a Senior Vice President of Post Corporate Services responsible for employee benefits and payroll. Prior thereto, she was a Vice President of Post Properties, Inc. since June 1984. Ms. Denman is 51 years old. R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and he serves as Senior Vice President of Post Corporate Services and the Company's Chief Accounting Officer responsible for financial reporting, accounting and management information systems. Prior to joining the Company, he was a senior manager in the audit division of Price Waterhouse LLP where he was employed for ten years. Mr. Fox is a Certified Public Accountant. Mr. Fox is 38 years old. John D. Hooks. Mr. Hooks has been with the Company for nineteen years. Since October 1997, he has been a Senior Vice President of Post Management Services responsible for landscape design, installation and maintenance on all Post(R) communities. Prior thereto, he was an Executive Vice President of Post Landscape since July 1993. He was the Senior Vice President of Landscape from January 1987 to July 1993. Mr. Hooks is 43 years old. Katharine W. Kelley. Ms. Kelley has been with the Company four years. Since October 1997, she has been a Senior Vice President of Post Apartment Development responsible for acquiring new development sites in metropolitan Atlanta, Georgia. Prior thereto, she served as a Senior Vice President of Post Apartment Development since 1994. For five years prior to joining the Company, she was a Vice President at The Landmarks Group, a commercial real estate development firm. Ms. Kelley is 34 years old. William F. Leseman. Mr. Leseman has been with the Company for eight years. Since October 1997, he has been Senior Vice President of RAM responsible for day-to-day operations of such division. Prior thereto, he was an Executive Vice President of RAM. Since October 1995, Mr. Leseman was Senior Vice President of Post Management Services from 1994 to 1995 and an Area Vice President of Post Management Services from 1989 to 1994. Mr. Leseman is 38 years old. William C. Lincicome. Mr. Lincicome has been with the Company for seven years. Since October 1997, he has been Senior Vice President of Post Landscape Services responsible for the day to day operations of Post Landscape Services. Prior thereto, he was Executive Vice President of Post Landscape Services since September 1996. He was an independent architectural consultant from April 1996 to September 1996 and was Vice President and Director of Land Planning of Post Landscape Services from 1989 to 1996. Mr. Lincicome is 45 years old. Janie S. Maddox. Ms. Maddox has been with the Company for twenty-two years. Since November 1995, she has been a Vice President of Post Corporate Services in charge of community relations. Prior thereto, she was a Senior Vice President of Post Management Services primarily responsible for human resources since 1990. Ms. Maddox is 50 years old. 12 15 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 ------------- ---- --- --------- 1996 First Quarter . . . . . . . . . . . . . $33.125 $ 30.875 $ 0.54 Second Quarter . . . . . . . . . . . . 35.375 32.000 0.54 Third Quarter . . . . . . . . . . . . . 37.000 33.875 0.54 Fourth Quarter . . . . . . . . . . . . 40.250 36.500 0.54 1997 First Quarter . . . . . . . . . . . . . $43.375 $ 37.625 $ 0.595 Second Quarter . . . . . . . . . . . . 42.000 37.250 0.595 Third Quarter . . . . . . . . . . . . . 41.500 37.000 0.595 Fourth Quarter . . . . . . . . . . . . 40.625 36.125 0.595
On March 17, 1998, the Company had 1,814 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 (the "Code") and such other factors as the board of directors deems relevant. During 1997, the Company did not sell any unregistered securities. 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. There is no established public trading market for the Units. As of March 17, 1998, the Operating Partnership had 121 holders of record of Units of the Operating Partnership. 13 16 ITEM 6. SELECTED FINANCIAL DATA POST PROPERTIES, INC. AND PREDECESSOR (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- OPERATING DATA: Revenue: Rental . . . . . . . . . . . . . . . . . . $186,126 $158,618 $133,817 $115,309 $104,482 Property management (1) . . . . . . . . . . 2,421 2,828 2,764 2,508 3,057 Landscape services (1) . . . . . . . . . . 5,120 4,834 4,647 3,799 3,829 Other . . . . . . . . . . . . . . . . . . . 6,449 5,295 3,477 3,123 2,879 -------- -------- -------- -------- -------- Total revenue . . . . . . . . . . . . 200,116 171,575 144,705 124,739 114,247 -------- -------- -------- -------- -------- Property operating and maintenance expense (exclusive of depreciation and amortization) . . . . . . . . . . . . . 67,519 58,202 49,912 43,376 41,209 Depreciation (real estate assets) . . . . . 27,991 22,676 20,127 19,967 19,427 Depreciation (non-real estate assets) . . . . 1,057 927 692 241 303 Property management expenses (1) . . . . . . 1,956 2,055 2,166 2,229 2,453 Landscape services expenses (1) . . . . . . . 4,284 3,917 3,950 3,098 3,151 Interest expense . . . . . . . . . . . . . . 24,658 22,131 22,698 19,231 34,309 Amortization of deferred loan costs . . . . . 980 1,352 1,967 1,999 969 General and administrative . . . . . . . . . 7,363 7,716 6,071 6,269 4,384 REIT formation expense . . . . . . . . . . . -- -- -- -- 2,783 Minority interest in consolidated property partnership . . . . . . . . . . . -- -- 451 680 692 -- -- --- --- --- Total expense . . . . . . . . . . . . 135,808 118,976 108,034 97,090 109,680 Income before minority interest of unitholders, net gain on sale of assets, loss on relocation of corporate office and extraordinary item . . . . . . . . . . . . 64,308 52,599 36,671 27,649 4,567 Net gain on sale of assets . . . . . . . . . 3,270 854 1,746 1,494 -- Loss on relocation of corporate office . . . (1,500) -- -- -- -- Minority interest of unitholders in Operating Partnership . . . . . . . . . . . (11,131) (9,984) (8,429) (6,951) (1,935) -------- -------- -------- -------- -------- Income before extraordinary item . . . . . . 54,947 43,469 29,988 22,192 2,632 Extraordinary item, net of minority interest (2). . . . . . . . . . . . . . . . . (75) -- (870) (3,293) (7,855) -------- -------- -------- -------- -------- Net income (loss) . . . . . . . . . . . . . . 54,872 43,469 29,118 18,899 (5,223) Dividends to preferred shareholders . . . . . (4,907) (1,063) -- -- -- -------- -------- -------- -------- -------- Net income (loss) available to common shareholders . . . . . . . . . . . . $ 49,965 $ 42,406 $ 29,118 $ 18,899 $ (5,223) ======== ======== ======== ======== ======== PER COMMON SHARE DATA: Income before extraordinary item (net of preferred dividend) - basic . . . . $ 2.11 $ 1.95 $ 1.63 $ 1.32 $ 0.34 Net income (loss) available to common shareholders - basic . . . . . . . . . . . 2.11 1.95 1.58 1.12 (0.67) Income before extraordinary item (net of preferred dividend) - diluted . . . 2.09 1.94 1.63 1.32 0.34 Net income (loss) available to common shareholders - diluted . . . . . . . . . . 2.09 1.94 1.58 1.12 (0.67) Dividends declared (3) . . . . . . . . . . . 2.38 2.16 1.96 1.8 0.77
14 17
DECEMBER 31, ---------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- --------- -------- ------- BALANCE SHEET DATA: Real estate, before accumulated depreciation . . . . . . . . . . . . $1,936,011 $1,109,342 $937,924 $828,585 $722,266 Real estate, net of accumulated depreciation. . . . . . . . . . . . . 1,734,916 931,670 781,100 686,009 599,898 Total assets . . . . . . . . . . . . . 1,780,563 958,675 812,984 710,973 627,322 Total debt . . . . . . . . . . . . . . 821,209 434,319 349,719 362,045 357,809 Shareholders' equity . . . . . . . . . 756,920 398,993 343,624 240,196 177,864
DECEMBER 31, ---------------------------------------------------------------- 1997 1996 1995 1994 1993 --------- ----------- ---------- ---------- ---------- OTHER DATA: Cash flow provided from (used in): Operating activities . . . . . . . $ 109,544 $ 78,966 $ 57,362 $ 43,807 $ 2,412 Investing activities . . . . . . . $ (208,377) $(166,762) $(114,531) $ (99,364) $ (51,152) Financing activities . . . . . . . $ 109,469 $ 79,021 $ 60,885 $ 46,508 $ 49,647 Funds from operations (4) . . . . . . . $ 87,392 $ 74,212 $ 56,798 $ 47,616 $ 26,777 Weighted average common shares outstanding - basic . . . . . . . . 23,664,044 21,787,648 18,382,299 16,847,999 7,824,311 Weighted average common shares and units outstanding - basic . . . . . . . 28,880,928 26,917,723 23,541,639 22,125,890 13,574,767 Weighted average common shares outstanding - diluted . . . . . . . . . 23,887,906 21,879,248 18,387,894 16,848,165 7,824,311 Weighted average common shares and units outstanding - diluted . . . . . . 29,104,790 27,009,323 23,547,234 22,126,056 13,574,767 Total stabilized communities (at end of period) . . . . . . . . . 78 49 42 42 41 Total stabilized apartment units (at end of period) . . . . . . . . . 25,938 17,930 14,962 14,845 14,270 Average economic occupancy (stabilized communities) (5) . . . . . . 94.8% 95.3% 96.0% 96.4% 94.7%
- --------------- (1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties (including services provided to third-party owners of properties previously developed and sold by the Company that operate under the Post(R) name). (2) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. The extraordinary item has been reduced by the portion related to the minority interest of the unitholders calculated on the basis of weighted average Units outstanding for the year. (3) The dividend paid by the Company for the portion of the quarter ended September 30, 1993 after the Initial Offering was $.320 per share of Common Stock, which is an amount equivalent to a quarterly distribution of $.415 per share (which, if annualized, would equal $1.66 per share). (4) The Company uses the National Association of Real Estate Investment Trust ("NAREIT") definition of FFO, which was adopted for periods beginning after January 1, 1996. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles ("GAAP"). FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. (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 93.9% and 94.7% for the year ended December 31, 1997 and 1996, respectively). Concessions were $903 and $428 and employee discounts were $267 and $261 for the years ended December 31, 1997 and 1996, 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. These calculations do not include communities which were acquired as part of the Merger. 15 18 POST APARTMENT HOMES, L.P. AND PREDECESSOR (DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- -------- -------- -------- OPERATING DATA: Revenue: Rental . . . . . . . . . . . . . . . . . . $186,126 $158,618 $133,817 $115,309 $104,482 Property management (1) . . . . . . . . . . 2,421 2,828 2,764 2,508 3,057 Landscape services ( 1) . . . . . . . . . 5,120 4,834 4,647 3,799 3,829 Other . . . . . . . . . . . . . . . . . . . 6,449 5,295 3,477 3,123 2,879 -------- -------- -------- -------- -------- Total revenue . . . . . . . . . . . . 200,116 171,575 144,705 124,739 114,247 -------- -------- -------- -------- -------- Property operating and maintenance expense (exclusive of depreciation and amortization) . . . . . . . . . . . . . 67,519 58,202 49,912 43,376 41,209 Depreciation (real estate assets) . . . . . 27,991 22,676 20,127 19,967 19,427 Depreciation (non-real estate assets) . . . . 1,057 927 692 241 303 Property management expenses (1) . . . . . . 1,956 2,055 2,166 2,229 2,453 Landscape services expenses (1) . . . . . . . 4,284 3,917 3,950 3,098 3,151 Interest expense . . . . . . . . . . . . . . 24,658 22,131 22,698 19,231 34,309 Amortization of deferred loan costs . . . . . 980 1,352 1,967 1,999 969 General and administrative . . . . . . . . . 7,363 7,716 6,071 6,269 4,384 REIT formation expense . . . . . . . . . . . -- -- -- -- 2,783 Minority interest in consolidated property partnership . . . . . . . . . . . -- -- 451 680 692 -- -- --- --- --- Total expenses . . . . . . . . . . . 135,808 118,976 108,034 97,090 109,680 -------- -------- -------- -------- -------- Income before net gain on sale of assets loss on relocation of corporate office, and extraordinary item . . . . . . . . . . . . 64,308 52,599 36,671 27,649 4,567 Net gain on sale of assets . . . . . . . . . 3,270 854 1,746 1,494 -- Loss on relocation of corporate office . . . (1,500) -- -- -- -- -------- -------- -------- -------- -------- Income before extraordinary item . . . . . . 66,078 53,453 38,417 29,143 4,567 Extraordinary item (2) . . . . . . . . . . . (93) -- (1,120) (4,413) (13,628) -------- -------- -------- -------- -------- Net Income (loss) 65,985 53,453 37,297 24,730 (9,061) Distribution to preferred unitholders . . . . (4,907) (1,063) -- -- -- -------- -------- -------- -------- -------- Net income (loss) available to common unitholders. . . . . . . . . . . . . $ 61,078 $ 52,390 $ 37,297 $ 24,730 $ (9,061) ======== ======== ======== ======== ======== PER COMMON UNIT DATA: Income before extraordinary item (net of preferred distribution) - basic $ 2.11 $ 1.95 $ 1.63 $ 1.32 $ 0.34 Net income (loss) available to common unitholders - basic . . . . . . . . . . . . 2.11 1.95 1.58 1.12 (0.67) Income before extraordinary item (net of preferred distribution) - diluted . . . . . . . . . . . . . . . . . . 2.09 1.94 1.63 1.32 0.34 Net income (loss) available to common unitholders - diluted . . . . . . . . . . . 2.09 1.94 1.58 1.12 (0.67) Distributions declared (3) . . . . . . . . . 2.38 2.16 1.96 1.80 0.77
16 19
DECEMBER 31, --------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- -------- -------- -------- BALANCE SHEET DATA: Real estate, before accumulated depreciation . . . . . $1,936,011 $1,109,342 $937,924 $828,585 $722,266 Real estate, net of accumulated depreciation . . . . . 1,734,916 931,670 781,100 686,009 599,898 Total assets . . . . . . . . . . . . . . . . . . . . . 1,780,563 958,675 812,984 710,973 627,322 Total debt . . . . . . . . . . . . . . . . . . . . . . 821,809 434,319 349,719 362,045 357,809 Partners' equity . . . . . . . . . . . . . . . . . . . 869,304 482,434 425,489 313,367 246,342
DECEMBER 31, ---------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- OTHER DATA: Cash flow provided from (used in): Operating activities . . . . . . . $ 109,554 $ 78,966 $ 57,362 $ 43,807 $ 2,412 Investing activities . . . . . . . $ (208,377) $ (166,762) $ (114,531) $ (99,364) $ (51,152) Financing activities . . . . . . . $ 109,469 $ 79,021 $ 60,885 $ 46,508 $ 49,647 Funds from operations (4) . . . . . . . $ 87,392 $ 74,212 $ 56,798 $ 47,616 $ 26,777 Weighted average common Units outstanding - basic . . . . . . . . 28,880,928 26,917,723 23,541,639 22,125,890 13,574,767 Weighted average common Units outstanding - diluted . . . . . . . 29,104,790 27,009,323 23,547,234 22,126,056 13,574,767 Total stabilized communities (at end of period) . . . . . . . . 78 49 42 42 41 Total stabilized apartment units (at end of period) . . . . . . . . 25,938 17,930 14,962 14,845 14,270 Average economic occupancy (stabilized communities) (5) . . . 94.8% 95.3% 96.0% 96.4% 94.7%
- -------------- (1) Consists of revenues and expenses from property management and landscape services provided to properties owned by third parties (including services provided to third-party owners of properties previously developed and sold by the Company that operate under the Post(R) name). (2) The extraordinary item resulted from costs associated with the early extinguishment of indebtedness. (3) The distribution paid by the Company for the portion of the quarter ended September 30, 1993 after the Initial Offering was $.320 per Unit, which is an amount equivalent to a quarterly distribution of $.415 per Unit (which, if annualized, would equal $1.66 per Unit). (4) The Company uses the National Association of Real Estate Investment Trust ("NAREIT") definition of FFO, which was adopted for periods beginning after January 1, 1996. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles ("GAAP"). FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs or ability to service indebtedness or make distributions. (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 93.9% and 94.7% for the year ended December 31, 1997 and 1996, respectively). Concessions were $903 and $428 and employee discounts were $267 and $261 for the years ended December 31, 1997 and 1996, 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. These calculations do not include communities acquired as part of the Merger. 17 20 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. and Post Apartment Homes, L.P. 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, 1997, there were 35,843,066 Units outstanding, of which 30,626,592 or 85.5%, were owned by the Company and 5,216,474, or 14.5% were owned by other limited partners ( including certain officers and directors of the Company). As of December 31, 1997, there were 3,000,000 Perpetual Preferred Units outstanding, all of which were owned by the Company. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 The Company recorded net income available to common shareholders of $49,965, $42,406 and $29,118 for the year ended December 31, 1997, 1996 and 1995, respectively. The increase in net income available to common shareholders of $7,559, from 1996 to 1997 was primarily related to the Merger, increased rental rates for fully stabilized communities and an increase in units placed in service. The $13,288 increase in net income available to common shareholders from 1995 and 1996 was primarily due 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, 1997, the Company's portfolio of apartment communities consisted of the following: (i) 37 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) four communities which reached stabilization during 1997, (iv) 27 communities that were acquired by way of the Merger during 1997 and (v) 13 communities and an additional phase of three existing communities in the development or lease-up stage. For communities with respect to which construction is completed and the community has become fully operational, all property operating and maintenance expenses are expensed as incurred and those recurring and non-recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset are capitalized. (See "Capitalization of Fixed Assets and Community Improvements"). The Company has adopted an accounting policy related to communities in the development and lease-up stage whereby substantially all operating expenses (including pre-opening marketing expenses) are expensed as incurred. The Company treats each unit in an apartment community separately for cost accumulation, capitalization and expense recognition purposes. Prior to the commencement of leasing activities, interest and other construction costs are capitalized and reflected on the balance sheet as construction in progress. Once a unit is placed in service, all operating expenses allocated to that unit, including interest, are expensed as incurred. During the lease-up phase, the sum of interest expense on completed units and other operating expenses (including pre-opening marketing expenses) will initially exceed rental revenues, resulting in a "lease-up deficit," which continues until such time as rental revenues exceed such expenses. Therefore, 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 18 21 communities combined and for communities which have reached stabilization prior to January 1, 1996. The Company has also presented financial information reflecting the dilutive impact of lease-up deficits incurred for communities in the development and lease-up stage and not yet operating at break-even. ALL OPERATING COMMUNITIES The operating performance for all of the Company's apartment communities combined for the years ended December 31, 1997, 1996 and 1995 is summarized as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, -------------------------------- --------------------------- % % 1997 1996 CHANGE 1996 1995 CHANGE ------- ------- ------ ------- ------- ------- Rental and other revenue: Fully stabilized communities (1) . . . . 127,495 125,921 1.3% 125,921 118,388 6.4% Communities stabilized during 1996 . . . 31,337 22,747 37.8% 22,747 4,346 423.4% Acquired communities (2) . . . . . . . . 12,525 -- -- -- -- -- Development and lease-up communities (3) 15,793 6,039 161.5% 6,039 3,209 88.2% Sold communities (4) . . . . . . . . . . 1,494 4,763 (68.6)% 4,763 8,300 42.6% Other revenue (5) . . . . . . . . . . . . 3,842 4,117 6.7% 4,117 2,458 67.5% ------- ------- ------- ------- 192,486 163,587 17.7% 163,587 136,701 19.7% ------- ------- ------- ------- Property operating and maintenance expense (exclusive of depreciation and amortization): Fully stabilized communities . . . . . . 41,223 41,092 0.3% 41,092 39,107 5.1% Communities stabilized during 1996 . . . 9,124 7,324 24.6% 7,324 2,241 226.8% Acquired communities . . . . . . . . . . 4,089 -- -- -- -- -- Development and lease-up communities . . 5,896 2,461 139.6% 2,461 1,309 88.0% Sold communities . . . . . . . . . . . . 657 2,033 (67.7)% 2,033 3,413 40.4% Other expenses (6) . . . . . . . . . . . 6,530 5,292 23.4% 5,292 3,842 37.7% ------- ------- ------- ------- 67,519 58,202 16.0% 58,202 49,912 16.6% ------- ------- ------- ------- Revenue in excess of specified expense . . 124,967 105,385 18.6% 105,385 86,789 21.4% ======= ======= ======= ======= Recurring capital expenditures: (7) Carpet . . . . . . . . . . . . . . . . . 1,617 1,087 48.8% 1,087 897 21.2% Other . . . . . . . . . . . . . . . . . . 2,058 1,874 9.8% 1,874 803 133.4% ------- ------- ------- ------- Total . . . . . . . . . . . . . . . . 3,675 2,961 24.1% 2,961 1,700 74.2% ======= ======= ======= ======= Average apartment units in service . . . . 19,413 17,089 8.3% 17,089 15,519 10.1% ======= ======= ======= =======
- -------------------- (1) Communities which reached stabilization prior to January 1, 1996. (2) As part of the Merger on October 24, 1997, the Company acquired 26 completed communities containing 6,296 units and five communities under development containing 1,243 apartment units when completed. Results of these communities are included from October 24, 1997 through year-end. (3) Communities in the "construction", "development" or "lease-up" stage during 1997 and, therefore, not considered fully stabilized for all of the periods presented. (4) Includes three communities, containing 568 units, which were sold on September 13, 1995 and one community, containing 180 units, which was sold on July 19, 1996 and one community, containing 416 units, which was sold on May 22, 1997. The revenues and expenses for these communities had previously been included in the fully stabilized group. (5) Other revenue includes revenue on furnished apartment rentals above the unfurnished rental rates and any revenue not directly related to property operations. Other revenue also includes, for the year ended December 31, 1996, approximately $527 which resulted from the Company's Olympic-related housing initiatives. (6) Other expenses includes certain indirect central office operating expenses related to management, grounds maintenance, and costs associated with furnished apartment rentals. 19 22 (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, 1997, rental and other revenue increased $28,899 or 17.7% compared to the same period in the prior year, primarily as a result of communities acquired in the Merger and an increase in units placed in service, partially offset by a decrease in rental and other revenue due to the sale of one community during the third quarter of 1996 and the sale of one community during the second quarter of 1997. For the year ended December 31, 1996, rental and other revenue increased $26,886, or 19.7% compared to the same period in the prior year, primarily as a result of increased rental rates for fully stabilized communities, an increase in units placed in service, and the acquisition of communities and the Company's Olympic-related housing initiatives, partially offset by a decrease in rental and other revenue due to the sale of three communities during the third quarter of 1995 and the sale of one community during the third quarter of 1996. Property operating and maintenance expenses (exclusive of depreciation and amortization) increased from 1996 to 1997 and 1995 to 1996 primarily due to the increase in the units placed in service through the development and acquisition of communities. For the year ended December 31, 1997 and 1996, recurring capital expenditures increased $714 or 24.1% and $1,261 or 74.2%, respectively, compared to the same period in the prior year, primarily due to additional units placed in service and the timing 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 37 communities containing an aggregate of 14,039 units which were stabilized as of January 1, 1996, are summarized as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, --------------------------------- --------------------------------- % % 1997 1996 CHANGE 1996 1995 Change ---------- --------- ------ --------- -------- ------ Rental and other revenue . . . . . . . . . $127,495 $125,921 1.3% $125,921 $118,388 6.4% Property operating and maintenance expense (exclusive of depreciation and amortization) (1) . . . . . . . . . . . . 41,223 41,092 0.3% 41,092 39,107 5.1% -------- -------- -------- -------- Revenue in excess of specified expense . . $ 86,272 $ 84,829 1.7% $ 84,829 $ 79,281 7.0% ======== ======== ======== ======== Average economic occupancy (2) . . . . . . 94.8% 95.4% 95.4% 94.7% ======== ======== ======== ======== Average monthly rental rate per apartment unit (3) . . . . . . . . . . . . . . . . $733 $ 729 0.5% $729 $ 691 5.5% ======== ======== ======== ======== Apartment units in service . . . . . . . . 14,039 14,039 14,039 14,039 ======== ======== ======== ========
- --------------- (1) 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, 1997 and 1996, recurring expenditures were $3,146 and $2,571 or $224 and $183 on a per unit basis, respectively. (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. 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 93.9% and 94.9% for the years ended December 31, 1997 and 1996, respectively.) Concessions were $903 and $375 and employee discounts were $267 and $256 for the years ended December 31, 1997 and 1996, respectively. (3) 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. 20 23 Rental and other revenue increased from 1996 to 1997 due to higher rental rates with occupancy slightly declining. The modest increase in property and maintenance expense (exclusive of depreciation and amortization) from 1996 to 1997 was primarily due to an increase in personnel costs which was substantially offset by a decrease in ad valorem real estate taxes. Rental and other revenue increased from 1995 to 1996 due to higher rental rates and occupancy. Property operating and maintenance expenses (exclusive of depreciation and amortization) increased primarily as a result of increases in ad valorem real estate taxes ($1,287 or 65% of the increase). The remaining increase was due to increases in salaries and utilities. LEASE-UP DEFICITS As noted in the overview of Community Operations, 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 as well as other construction costs are capitalized and reflected on the balance sheet as construction in progress. Once a unit is placed in service, all 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 typically exceed rental revenues, resulting in a "lease-up deficit," which continues until rental revenues exceed such expenses. In this presentation, only those communities which were dilutive during each period are included in that period and, accordingly, different communities may be included in different periods. The Company calculates "lease-up deficit" on a quarterly basis, and accumulates the quarterly deficits to the annual deficit. Only those communities which were dilutive during each quarter are included and, accordingly, different communities may be included in each quarter within each year. For each of the years ended December 31, 1997 through 1995, the "lease-up deficit" charged to and included in results of operations are summarized as follows:
YEAR ENDED DECEMBER 31, ------------------------------------- 1997 1996 1995 ---------- ---------- --------- Rental and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,467 $ 974 $ 3,327 Property operating and maintenance expense (exclusive of depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . 1,442 1,056 2,422 ---------- --------- -------- Revenue in excess of specified expense . . . . . . . . . . . . . . . . . . . 25 (82) 905 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,364 673 2,072 ---------- --------- -------- Lease-up deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,339) $ (755) $ (1,167) ========== ========= ========
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, 1997, 1996 and 1995 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------- -------------------------------- % % 1997 1996 CHANGE 1996 1995 CHANGE ------ ------- -------- ------- ------ ------- Property management and other revenue . $2,444 $ 2,562 (4.6)% $2,562 $2,331 9.9% Property management expense . . . . . . 1,313 1,244 5.5% 1,244 1,213 2.6% General and administrative expense . . 574 502 14.3% 502 467 7.5% Depreciation expense . . . . . . . . . 44 66 (33.3)% 66 89 (25.8)% ------ ------- ------ ------ Revenue in excess of specified expense $ 513 $ 750 (31.6)% $ 750 $ 562 33.5% ------ ======= ====== ====== Average apartment units in service . . 9,061 8,852 2.4% 8,852 8,798 0.6% ====== ======= ====== ======
21 24 The change in property management revenues and expenses from 1996 to 1997 and from 1995 to 1996 is primarily attributable to the change in the average number and the average gross revenues of units managed. THIRD PARTY LANDSCAPE SERVICES The Company provides landscape maintenance, design and installation services to non-related parties through a subsidiary, Post Landscape Services. The operating performance of Post Landscape Services for the years ended December 31, 1997, 1996 and 1995 are summarized as follows:
Year ended Year ended December 31, December 31, ----------------------------------------- ------------------------------------- % % 1997 1996 CHANGE 1996 1995 CHANGE ------------- -------------- ---------- ----------- -------------- -------- Landscape services and other revenue $5,149 $4,882 5.5% $4,882 $4,662 4.7% Landscape services expense . . . . . 3,777 3,459 9.2% 3,459 3,255 6.3% General and administrative expense . 507 458 10.7% 458 695 (34.1)% Depreciation expense . . . . . . . . 107 76 40.8% 76 111 (31.5)% ------ ------ ------ ------ Revenue in excess of specified expense . . . . . . . . . . . . . . . $ 758 $ 889 (14.7)% $ 889 $ 601 47.9% ====== ====== ====== ======
The change in landscape services revenue, landscape services expense and general and administrative expense from 1996 to 1997 and 1995 to 1996 is primarily due to an increase in landscape contracts. OTHER INCOME AND EXPENSES Depreciation expense increased from 1996 to 1997 primarily due to the communities acquired in the Merger and the completion of new communities, and 1995 to 1996 primarily due to the completion of new communities and the acquisition of communities. Interest expense increased from 1996 to 1997 primarily due to additional debt incurred in connection with the Merger. Interest expense decreased from 1995 to 1996 primarily due to the repayment of debt with proceeds from the Third Offering and the Series A Perpetual Preferred Shares. Amortization of deferred loan costs decreased from 1996 to 1997 primarily due to interest rate protection agreements becoming fully amortized and from 1995 to 1996 as a result of repayment of indebtedness with proceeds of the Third Offering. General and administrative expenses decreased from 1996 to 1997 as a result of a reduction in executive incentive compensation. General and administrative expense increased from 1995 to 1996 primarily as a result of increased travel- related expenses and personnel costs. The gain on sale of assets resulted from the sale of a community in 1997, gain on sale of a community and other assets in 1996 and the sale of three communities in 1995. The loss on relocation of corporate office in 1997 resulted from a decision to relocate the corporate office prior to the end of the lease term on the current corporate office space. The extraordinary item of $75 and $870, net of minority interest portion, for the years ended December 31, 1997 and 1995, respectively, 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 $57,362 in 1995 to $78,966 in 1996 and to $109,554 in 1997, principally due to increased property operating income. Net cash used in investing activities increased 22 25 from $114,531 in 1995 to $166,762 in 1996 and to $208,377 in 1997, primarily due to increases in spending on construction and acquisition of real estate assets. Net cash provided by financing activities increased from $60,885 in 1995 to $79,021 in 1996 and to $109,469 in 1997. The increase from 1995 to 1996 is a result of a decrease in net borrowings and an increase in offering proceeds from the Notes and the Perpetual Preferred Shares. The increase from 1996 to 1997 is primarily a result of an increase in net borrowings. The Company has elected to be taxed as a Real Estate Investment Trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993. REITs are subject to a number of organizational and operational requirements, including a requirement that they currently distribute 95% of their ordinary taxable income. As a REIT, the Company generally will not be subject to Federal income tax on net income. At December 31, 1997, the Company had total indebtedness of $821,209 and cash and cash equivalents of $10,879. The Company's indebtedness includes approximately $38,681 in conventional mortgages payable and $154,528 in tax-exempt bond indebtedness secured by communities, senior unsecured notes of $306,000, and borrowings under unsecured lines of credit totaling approximately $322,000. 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, possibly in connection with acquisitions of land or improved properties, Units of the Operating Partnership. The Company believes that its net cash provided by operations will be adequate and anticipates that it 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 In December 1997, the Company added two banks to its syndicated line of credit (the "Revolver"), increasing its capacity from $180,000 to $200,000. The Revolver matures on May 1, 2000 and borrowings currently bear interest at LIBOR plus .675% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short term funds up to $100,000 (increased in December 1997 from $90,000) at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. On November 21, 1997, the Company closed on an aggregate of $132,000 in bridge loans (the "Bridge loans") with three commercial banks. These notes bear interest at LIBOR plus 1.04% for the first 30 days. From December 21, 1997 through maturity on May 20, 1998, these notes bear interest of LIBOR plus .92%. Proceeds from these notes were used to pay down debt assumed in the Merger. On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was fully funded and used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and has a maturity date of June 26, 1998. 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. 23 26 Tax Exempt Bonds On June 29, 1995, the Company replaced the bank letters of credit providing credit enhancement for twelve of its outstanding tax-exempt bonds and three of its economically defeased 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 seven bond issues, aggregating $141,230, which were concurrently reissued, and has agreed, subject to certain conditions, to provide credit enhancement through June 1, 2025 for up to an additional $94,650 ($81,352 of which is currently defeased) with respect to four other bond issues which mature and may be refunded during 1998. Under this agreement, on January 1, 1998, the Post Fountains, Post Fountains and Meadows and Post Lake bonds (all of which had previously been defeased) were refunded in the amount of $21,500, $26,000 and $28,500, respectively, with an issue enhanced by FNMA and maturing on June 1, 2025. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. Refundable Tax Exempt Bonds The Company has previously issued tax-exempt bonds, secured by certain communities, totaling $235,880, of which $81,352 has been economically defeased at December 31, 1997, leaving $154,528 of principal amount of tax-exempt bonds outstanding at December 31, 1997 of which $141,230 of the bonds outstanding have been reissued with a maturity of June 1, 2025. On January 1, 1998, the Post Vista, Post F&M Villages and Post Lake (Orlando) bonds were refunded in the amount of $21,500, $26,000 and $28,500, respectively, with an issue enhanced by FNMA and maturing on June 1, 2025. Proceeds from these re-issuances, which totaled $76,000, were used to reduce outstanding balances on the Bridge loans ($61,050) and the Revolver ($14,950). The Company has chosen economic defeasance of the bond obligations rather than a legal defeasance in order to preserve the legal right to refund such obligations on a tax-exempt basis at the stated maturity if the Company then determines that such refunding is beneficial to the Company. The following table shows the amount of bonds (both defeased and outstanding) at December 31, 1997, which the Company may reissue during the years 1998 and 2025:
DEFEASED OUTSTANDING TOTAL REISSUE PORTION PORTION CAPACITY -------------- --------------- --------------- 1998 (1) $ 81,352 $ 13,298 $ 94,650 2025 -- 141,230 141,230 -------------- --------------- --------------- $ 81,352 $ 154,528 $ 235,880 ============== =============== ===============
- -------------- (1) 1998 amounts include Post Vista, Post F&M Villages and Post Lake (Orlando) bonds aggregating $76,000 which matured and were refunded on January 1, 1998. Senior Unsecured Debt Offering 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%, or 71 basis points over the rate on U.S. Treasury securities with a comparable maturity. The second tranche, $25,000 or 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544%, or 83 basis points over the rate on U.S. Treasury securities with a comparable maturity. Proceeds from the Notes were used to pay down the Revolver. Medium Term Notes On January 29, 1997, the Operating Partnership established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Company increased the amount available under this program to $344 million. 24 27 The following table sets forth MTNs issued and outstanding as of December 31, 1997:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ----------------- ----------------- ------------------ ------------------- March 3, 1997 $ 30,000 LIBOR plus .25% 03/03/2000 March 31, 1997 37,000 7.02% 04/02/2001 March 31, 1997 13,000 7.30% 04/01/2004 September 22, 1997 10,000 6.69% 09/22/2004 September 22, 1997 25,000 6.78% 09/22/2005 September 26, 1997 16,000 6.22% 12/31/99 ---------- $ 131,000 ==========
Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) pay down existing indebtedness outstanding under the Company's Revolver. Perpetual Preferred Stock Offerings On October 1, 1996, the Company sold one million non-convertible 8.5% Series A Cumulative Redeemable Shares (the "Series A Perpetual Preferred Shares"), raising $50 million. Net proceeds of $48,700 from the sale of the Series A Perpetual Preferred Shares were contributed to the Operating Partnership in exchange for one million Series A Preferred Units and used by the Operating Partnership to repay outstanding indebtedness. On October 28, 1997, the Company sold two million non-convertible 7 5/8% Series B Cumulative Redeemable Shares (the "Series B Perpetual Preferred Shares") with a liquidation preference equivalent to $25 per share. Net proceeds of $48,300 from the sale of Series B Perpetual Preferred Shares were contributed to the Operating Partnership in exchange for two million Series B Preferred Units and used by the Operating Partnership to repay outstanding indebtedness. 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") at a price of $25 per share. Net proceeds of $ 48,425 from the sale of Series C Perpetual Shares were contributed to the Operating Partnership in exchange for two million Series C Preferred Units and used by the Operating Partnership to repay outstanding indebtedness. Common Stock Offering On February 26, 1998, the Company sold 3.5 million shares of common stock. The net proceeds from this offering of $129.5 million were contributed to the Operating Partnership in exchange for 3.5 million common units and used by the Operating Partnership to repay outstanding indebtedness. MandatOry Par Put Remarketed Securities On March 12, 1998, the Operating Partnership issued $100 million of 6.85% MandatOry Par Put Remarketed Securities(SM) ("MOPPRS(SM)"). The net proceeds from the MOPPRS(SM) were used to repay outstanding indebtedness. As part of the MOPPRS(SM) structure, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005. The Operating Partnership will have an effective borrowing rate through the remarketing date of approximately 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 will be approximately 6.85%, the coupon rate on the MOPPRS(SM). Shelf Registration On September 25, 1997, the Company filed a shelf registration to register an additional $200,000 of undesignated equity securities and an additional $300,000 of undesignated debt securities. Dividend Reinvestment Plan The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 25 28 Schedule of Indebtedness The following table reflects the Company's indebtedness at December 31, 1997:
MATURITY PRINCIPAL COMMUNITY LOCATION INTEREST RATE DATE (1) BALANCE - --------- ------------- ------------------- -------------- ----------- TAX EXEMPT FIXED RATE (SECURED) Post Court(R) . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 06/01/98(4) $ 13,298 -------- 13,298 -------- CONVENTIONAL FIXED RATE (SECURED) Post Summit(R) . . . . . . . . . . . Atlanta, GA 7.72% 02/01/98 5,250 Post River(R) . . . . . . . . . . . . Atlanta, GA 7.72% 03/01/98 5,803 Clyde Lane . . . . . . . . . . . . . Dallas, TX 10.00% 05/12/98 1,995 Post Hillsboro Village(TM) . . . . . Nashville, TN 9.20% 10/01/2001 3,009 Parkwood Townhomes(TM) . . . . . . . Dallas, TX 7.375% 04/01/2014 899 -------- 16,956 -------- CONVENTIONAL FLOATING RATE (SECURED) Addison Circle Apartment Homes by Post(TM) - Phase I . . . . . . Dallas, TX LIBOR +1.65% (6) 6/01/99 21,724 The Rice . . . . . . . . . . . . . . Houston, TX LIBOR + 1.90% 8/01/99 1 -------- 21,725 -------- TAX EXEMPT FLOATING RATE (SECURED) Post Ashford(R) Series 1995 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 9,895 Post Valley(R) Series 1995 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 18,600 Post Brook(R) Series 1995 . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 4,300 Post Village(R) (Atlanta) Hills Series 1995 . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 7,000 Post Mill(R) . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 12,880 Post Canyon(R) . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 16,845 Post Corners(R) . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 14,760 Post Bridge(R) . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 12,450 Post Village(R) (Atlanta) Gardens . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 14,500 Post Chase(R) . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 15,000 Post Walk(R) . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 15,000 -------- 141,230 -------- SENIOR NOTES (UNSECURED) Medium Term Notes . . . . . . . . . . N/A 6.22% 12/31/99 16,000 Medium Term Notes . . . . . . . . . . N/A LIBOR + .25% 03/03/2000 30,000 Northwestern Mutual Life . . . . . . N/A 8.21% 06/07/2000 30,000 Medium Term Notes . . . . . . . . . . N/A 7.02% 04/02/2001 37,000 Northwestern Mutual Life . . . . . . N/A 8.37% 06/07/2002 20,000 Senior Notes . . . . . . . . . . . . N/A 7.25% 10/01/2003 100,000 Medium Term Notes . . . . . . . . . . N/A 7.30% 04/01/2004 13,000 Medium Term Notes . . . . . . . . . . N/A 6.69% 09/22/2004 10,000 Medium Term Notes . . . . . . . . . . N/A 6.78% 09/22/2005 25,000 Senior Notes . . . . . . . . . . . . N/A 7.50% 10/01/2006 25,000 -------- 306,000 -------- LINES OF CREDIT (UNSECURED) Revolver . . . . . . . . . . . . . . N/A LIBOR + .675% or prime minus.25%(5) 05/01/2000 170,000 Bridge Loan . . . . . . . . . . . . . N/A LIBOR + .92% 5/20/98 132,000 Cash Management Line . . . . . . . . N/A LIBOR + .675 % or prime minus.25% 6/26/98 20,000 -------- 322,000 -------- TOTAL . . . . . . . . . . . . . . . . $821,209 ========
- -------------- (1) All of the debt can be prepaid at any time, subject to certain prepayment penalties. All dates listed are final maturity dates assuming the exercise of any available extension option by the Company. (2) Bond financed (interest rate on bonds plus credit enhancement fees). 26 29 (3) These bonds are cross collateralized and are also secured by Post Vista, Post Lake (Orlando) and Post F&M Villages for which the Company has economically defeased their respective bond indebtedness. (4) Subject to certain conditions at re-issuance, the credit enhancement runs to June 1, 2025. (5) Represents stated rate. The Company may also make "money market' loans of up to $100,000 at rates below the stated rate. (6) Rate reduced to LIBOR + .75% effective January 14, 1998. Other Activities On May 7, 1996, the Company reacquired three contiguous Atlanta apartment communities, containing 810 units, which the Company developed in the early 1980's and managed under the Post(R) brand name through mid-1993. The Company is operating this as one community under the name Post Creek(R). On July 19, 1996, the Company sold a community located in Florida, containing 180 units. On May 22, 1997, the Company sold another community located in Florida, containing 416 units. The sale of these communities is consistent with the Company's strategy of selling communities when the market demographics for a community are no longer consistent with the Company's existing ownership strategy. 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 year ended December 31, 1997 and 1996 are summarized as follows:
YEAR ENDED DECEMBER 31, ----------------------------------------------- 1997 1996 --------------- --------------- New community development and acquisition activity .................. $ 218,111 $ 173,328 Revenue generating additions and improvements Property renovations ........................................ 5,532 509 Submetering of water service................................. 2,636 -- Nonrecurring capital expenditures Vehicle access control gates................................. 115 66 Other community additions and improvements................... 490 1,363 Recurring capital expenditures Carpet replacements.......................................... 1,617 1,087 Other community additions and improvements .................. 2,058 1,874 Corporate additions and improvements......................... 3,220 820 --------------- --------------- $ 233,779 $ 179,047 =============== ===============
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. 27 30 YEAR 2000 ISSUE In 1997, the Company implemented an integrated accounting software package that is Year 2000 compatible. The Company intends to upgrade its property management software to a Year 2000 compliant version of its existing software in 1998. The Company has not yet determined whether other Year 2000 issues will affect its operations. However, management does not believe the cost related to undetermined issues will have a material effect on its financial results. NEW ACCOUNTING PRONOUNCEMENTS See Note 1 to Consolidated Financial Statements. FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION Historical Funds from Operations The Company considers funds from operations ("FFO") an appropriate measure of performance of an equity REIT. FFO is defined to mean net income (loss) determined in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company's financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. Cash available for distribution ("CAD") is defined as FFO less capital expenditures funded by operations and loan amortization payments. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO and CAD should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO and CAD for the years ended December 31, 1997, 1996 and 1995 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, -------------------------------------------- 1997 1996 1995 ----------- ----------- ---------- Net income available to common shareholders . . . . . . . . . . . . . $ 49,965 $ 42,406 $ 29,118 Extraordinary item, net of minority interest. . . . . . . . . . . . . 75 -- 870 Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . 11,131 9,984 8,429 Net gain on sale of assets . . . . . . . . . . . . . . . . . . . . (3,270) (854) (1,746) Loss on relocation of corporate office . . . . . . . . . . . . . . 1,500 -- -- ----------- ----------- ---------- Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . 59,401 51,536 36,671 Depreciation of real estate assets . . . . . . . . . . . . . . . . 27,991 22,676 20,127 ----------- ----------- ----------- Funds from Operations (1) . . . . . . . . . . . . . . . . . . . . . . 87,392 74,212 56,798 Recurring capital expenditures (2) . . . . . . . . . . . . . . . . (3,675) (2,961) (1,700) Non-recurring capital expenditures (3) . . . . . . . . . . . . . . . (605) (1,429) (428) Loan amortization payments . . . . . . . . . . . . . . . . . . . . (179) (228) (199) ----------- ----------- ----------- Cash Available for Distribution . . . . . . . . . . . . . . . . . . . $ 82,933 $ 69,594 $ 54,471 =========== =========== =========== Revenue generating capital expenditures (4) . . . . . . . . . . . . . $ 8,168 $ 509 $ (859) =========== =========== =========== Cash Flow Provided From (Used In): Operating activities . . . . . . . . . . . . . . . . . . . . . . . $ 109,554 $ 78,966 $ 57,362 Investing activities . . . . . . . . . . . . . . . . . . . . . . . $ (208,377) $ (166,762) $ (114,531) Financing activities . . . . . . . . . . . . . . . . . . . . . . . $ 109,469 $ 79,021 $ 60,885 Weighted average common shares outstanding - basic . . . . . . . . . 23,664,044 21,787,648 18,382,299 =========== =========== =========== Weighted average common shares outstanding - diluted . . . . . . . . 23,887,906 21,879,248 18,387,894 =========== =========== =========== Weighted average common shares and Units outstanding - basic . . . . 28,880,928 26,917,723 23,541,639 =========== =========== =========== Weighted average common shares and Units outstanding - diluted . . . 29,104,790 27,009,323 23,547,234 =========== =========== ===========
28 31 (1) The Company uses the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO which was adopted for periods beginning after January 1, 1996. FFO for any period means the Consolidated Net Income of the Company and its subsidiaries for such period excluding gains or losses from debt restructuring and sales of property plus depreciation of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current NAREIT definition. (2) Recurring capital expenditures consisted primarily of $1,617, $1,087 and $897 of carpet replacement and $2,058, $1,874 and $803 of other community additions and improvements to existing communities for the years ended December 31, 1997, 1996 and 1995, respectively. Since the Company does not add back the depreciation of non-real estate assets in its calculation of FFO, capital expenditures of $3,220, $820 and $1,267 are excluded from the calculation of CAD for the years ended December 31, 1997, 1996 and 1995, respectively. (3) Non-recurring capital expenditures consisted of the additions of vehicle access control gates to communities of $115, $66 and $428 and other community additions and improvements of $490, $1,363 and $0 for the years ended December 31, 1997, 1996 and 1995, respectively. (4) Revenue generating capital expenditures included a major renovation of communities in the amount of $5,532, $509 and $0 for the years ended December 31, 1997, 1996 and 1995, respectively, and submetering of water service to communities in the amount of $2,636 for the year ended December 31, 1997, and construction of garages on certain communities in the amount of $859 for the year ended December 31, 1995. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS The Company considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of The Securities Exchange Act of 1934, as amended. Forward - looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to the following: (i) local market conditions, (ii) governmental laws and regulations related to the Company's REIT status, housing and the environment, among others, and (iii) general economic conditions. 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. 29 32 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections under the headings "Election of Directors" entitled "Nominee for Election -- New Director," "Nominees for Election -- Term Expiring 1998," "Incumbent Directors -- Term Expiring 1999," and "Incumbent Directors -- Term Expiring 2000" of the Proxy Statement for Annual Meeting of Shareholders to be held May 8, 1998 (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", "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. 30 33 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Consolidated Balance Sheets as of December 31, 1997 and 1996 . . . . . . . . . . . . . . . . 33 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Consolidated Statements of Shareholders' Equity and Accumulated Earnings (Deficit) for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . 35 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 37 POST APARTMENT HOMES, L.P. Consolidated Financial Statements: Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Consolidated Balance Sheets as of December 31, 1997 and 1996 . . . . . . . . . . . . . . . . 51 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Consolidated Statements of Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 55 Schedule III: Consolidated Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . 68 All other schedules are omitted because they are not applicable or not required. POST PROPERTIES, INC. -- 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN Financial Statements: PAGE Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Statement of Net Assets Available for Plan Benefits as of December 31, 1997 and 1996 . . . . 72 Statement of Changes in Net Assets Available for Plan Benefits for the years ended December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
31 34 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Post Properties, Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a) 1. and 2. on page 31 present fairly, in all material respects, the financial position of Post Properties, Inc. at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the management of Post Properties, Inc.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Atlanta, Georgia March 20, 1998 32 35 POST PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ---------------------------- 1997 1996 ------------- ------------- ASSETS Real estate assets Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,011 $ 150,072 Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,255,118 730,518 Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 89,251 74,120 Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,071 140,437 Land held for future development . . . . . . . . . . . . . . . . . . . . . . . . . 15,560 14,195 ---------- ---------- 1,936,011 1,109,342 Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (201,095) (177,672) ---------- ---------- Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,734,916 931,670 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,879 233 Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,542 1,148 Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,629 9,459 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,597 16,165 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,780,563 $ 958,675 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 821,209 $ 434,319 Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,505 4,264 Dividend and distribution payable . . . . . . . . . . . . . . . . . . . . . . . . . . 21,327 14,659 Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 53,101 17,915 Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . . . . . 8,117 5,084 ---------- ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911,259 476,241 ---------- ---------- Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . 112,384 83,441 ---------- ---------- Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders' equity Preferred stock, $.01 par value, 20,000,000 authorized, 3,000,000 shares issued and outstanding . . . . . . . . . . . . . . . 30 10 Common stock, $.01 par value, 100,000,000 authorized, 30,626,592 and 21,922,393 shares issued and outstanding at December 31, 1997 and December 31, 1996, respectively . . . . . . . . . . . . . . . . . . . . . . . 306 219 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756,584 398,764 Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- ---------- ---------- Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . 756,920 398,993 ---------- ---------- Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . $1,780,563 $ 958,675 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 33 36 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, ------------------------------------------- 1997 1996 1995 ---------- ---------- ---------- REVENUES Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 186,126 $ 158,618 $ 133,817 Property management - third party. . . . . . . . . . . . . . . . . . . 2,421 2,828 2,764 Landscape services - third party . . . . . . . . . . . . . . . . . . . 5,120 4,834 4,647 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 326 593 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,360 4,969 2,884 ---------- ---------- ---------- Total revenue . . . . . . . . . . . . . . . . . . . . . . . . 200,116 171,575 144,705 ---------- ---------- ---------- EXPENSES Property operating and maintenance (exclusive of items shown separately below) . . . . . . . . . . . . . . . . . . . . . 67,519 58,202 49,912 Depreciation (real estate assets) . . . . . . . . . . . . . . . . . 27,991 22,676 20,127 Depreciation (non-real estate assets) . . . . . . . . . . . . . . . 1,057 927 692 Property management . . . . . . . . . . . . . . . . . . . . . . . . 1,956 2,055 2,166 Landscape services . . . . . . . . . . . . . . . . . . . . . . . . 4,284 3,917 3,950 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,658 22,131 22,698 Amortization of deferred loan costs . . . . . . . . . . . . . . . . 980 1,352 1,967 General and administrative . . . . . . . . . . . . . . . . . . . . 7,363 7,716 6,071 Minority interest in consolidated property partnership . . . . . . -- -- 451 ---------- ---------- ---------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . 135,808 118,976 108,034 ---------- ---------- ---------- Income before net gain on sale of assets, loss on relocation of corporate office, minority interest of unitholders in Operating Partnership and extraordinary item . . . . . . . . . . . 64,308 52,599 36,671 Net gain on sale of assets . . . . . . . . . . . . . . . . . . . 3,270 854 1,746 Loss on relocation of corporate office . . . . . . . . . . . . . . (1,500) -- -- Minority interest of unitholders in Operating Partnership . . . . (11,131) (9,984) (8,429) ---------- ---------- ---------- Income before extraordinary item . . . . . . . . . . . . . . . . . 54,947 43,469 29,988 Extraordinary item, net of minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . . . . . . . . (75) -- (870) ---------- ---------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,872 43,469 29,118 Dividends to preferred shareholders . . . . . . . . . . . . . . . (4,907) (1,063) -- ---------- ---------- ---------- Net income available to common shareholders . . . . . . . . . . . $ 49,965 $ 42,406 $ 29,118 ========== ========== ========== EARNINGS PER COMMON SHARE - BASIC Income before extraordinary item (net of preferred dividends) . . $ 2.11 $ 1.95 $ 1.63 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . -- -- (0.05) ---------- ---------- ---------- Net income available to common shareholders . . . . . . . . . . . $ 2.11 $ 1.95 $ 1.58 ========== ========== ========== Weighted average common shares outstanding . . . . . . . . . . . . 23,664,044 21,787,648 18,382,299 ========== ========== ========== Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . $ 2.38 $ 2.16 $ 1.96 ========== ========== ========== EARNINGS PER COMMON SHARE - DILUTED Income before extraordinary item (net of preferred dividends) . . $ 2.09 $ 1.94 $ 1.63 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . -- -- (0.05) ---------- ---------- ---------- Net income available to common shareholders . . . . . . . . . . . $ 2.09 $ 1.94 $ 1.58 ========== ========== ========== Weighted average common shares outstanding . . . . . . . . . . . . 23,887,906 21,879,248 18,387,894 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 34 37 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS)
ACCUMULATED PREFERRED COMMON PAID-IN EARNINGS/ SHARES SHARES CAPITAL (DEFICIT) TOTAL --------- --------- -------- --------- -------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS (DEFICIT), DECEMBER 31, 1994 . . . . . . . . . . . . . . . . $ -- $172 $ 256,377 $ (16,353) $240,196 Proceeds of Third Offering, net of underwriting discount and offering costs of $6,501 . . . . . -- 37 105,241 -- 105,278 Adjustment for minority interest of unitholders in Operating Partnership at date of Third Offering . . . . . . . . . . . . . . . -- -- (10,598) -- (10,598) Proceeds from Dividend Reinvestment Plan . . . . . -- 6 16,165 -- 16,171 Conversion of Units to shares . . . . . . . . . . -- 1 -- (1) -- Net income . . . . . . . . . . . . . . . . . . . . -- -- -- 29,118 29,118 Dividends declared and paid . . . . . . . . . . . -- -- (22,071) (3,897) (25,968) Dividends declared . . . . . . . . . . . . . . . . -- -- (1,706) (8,867) (10,573) ---- ---- --------- --------- -------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS, DECEMBER 31, 1995 . . . . . . . . . . . . . . . . . -- 216 343,408 -- 343,624 Proceeds from Preferred Shares, net of underwriting discount and offering costs of $1,387 . . . . . . . . . . . . . . . . 10 -- 48,603 -- 48,613 Acquisition of real estate through issuance of Units . . . . . . . . . . . . . . . . . . . . . -- -- 5,091 -- 5,091 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans . . . . . . . . . -- 2 9,032 -- 9,034 Conversion of Units to shares . . . . . . . . . . -- 1 (1) -- -- Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions . . . . . . . . -- -- (2,680) -- (2,680) Net income . . . . . . . . . . . . . . . . . . . . -- -- -- 43,469 43,469 Dividends to preferred shareholders . . . . . . . -- -- -- (1,063) (1,063) Dividends declared and paid to common shareholders . . . . . . . . . . . . . . . . . . -- -- (3,549) (31,708) (35,257) Dividends declared to common shareholders . . . . -- -- (1,140) (10,698) (11,838) ---- ---- --------- --------- -------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS DECEMBER 31, 1996 . . . . . . . . . . . . . . . . 10 219 398,764 -- 398,993 ---- ---- --------- --------- -------- Proceeds from Preferred Shares, net of underwriting discount and offering costs of $1,709 . . . . . . . . . . . . 20 -- 48,271 -- 48,291 Common shares issued in connection with Merger . . . . . . . . . . . . . . . . . . -- 84 338,269 -- 338,353 Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans . . . . . . . . . -- 2 9,128 -- 9,130 Conversion of Units to shares . . . . . . . . . . -- 1 (1) -- -- Adjustment for minority interest of unitholders in Operating Partnership at dates of capital transactions . . . . . . . . -- -- (30,245) -- (30,245) Net income . . . . . . . . . . . . . . . . . . . . -- -- -- 54,872 54,872 Dividends to preferred shareholders . . . . . . . -- -- -- (4,907) (4,907) Dividends declared and paid to common shareholders . . . . . . . . . . . . . . . . . . -- -- (3,273) (36,073) (39,346) Dividends declared to common shareholders . . . . -- -- (4,329) (13,892) (18,221) ---- ---- --------- --------- -------- SHAREHOLDERS' EQUITY AND ACCUMULATED EARNINGS DECEMBER 31, 1997 . . . . . . . . . . . . . . . . $ 30 $306 $ 756,584 $ -- $756,920 ==== ==== ========= ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 35 38 POST PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------- 1997 1996 1995 --------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,872 $ 43,469 $ 29,118 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest of unitholders in Operating Partnership . . . . . . . . . 11,131 9,984 8,175 Net gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . (3,270) (854) (1,746) Loss on relocation of corporate office . . . . . . . . . . . . . . . . . . 1,500 -- -- Extraordinary item, net of minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 75 -- -- Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,048 23,603 20,819 Write-off of deferred financing costs . . . . . . . . . . . . . . . . . . . (93) -- 1,120 Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . . . 980 1,352 1,967 Changes in assets, (increase) decrease in: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (394) (2) 7,211 Organization costs and other deferred charges . . . . . . . . . . . . . . -- 1,589 (90) Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,797 (3,281) (9,122) Changes in liabilities, increase (decrease) in: Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . 2,172 299 (1,171) Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . 1,341 2,089 868 Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . 395 718 213 --------- -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . 109,554 78,966 57,362 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (190,810) (168,885) (117,120) Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . 25,402 12,285 22,645 Acquisition of Columbus Realty Trust, net of cash acquired . . . . . . . . (17,734) -- -- Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,567) (4,443) (5,653) Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . (3,675) (2,961) (1,700) Corporate capital expenditures . . . . . . . . . . . . . . . . . . . . . . (3,220) (820) (1,267) Non-recurring capital expenditures . . . . . . . . . . . . . . . . . . . . (605) (1,429) (428) Revenue generating capital expenditures . . . . . . . . . . . . . . . . . . (8,168) (509) (859) Purchase of minority interests in property partnerships . . . . . . . . . . -- -- (10,149) --------- -------- -------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (208,377) (166,762) (114,531) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . (4,208) (3,986) (4,614) Debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,564 236,833 362,196 Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (564,085) (277,233) (374,522) Offering proceeds, net of underwriters discount and offering costs . . . . -- 123,438 105,278 Proceeds from Preferred Shares . . . . . . . . . . . . . . . . . . . . . . 48,291 48,613 -- Proceeds from Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . 9,130 9,034 16,171 Capital distributions to unitholders . . . . . . . . . . . . . . . . . . . (12,132) (10,785) (9,919) Dividends paid to preferred shareholders . . . . . . . . . . . . . . . . . (4,907) (1,063) -- Dividends paid to common shareholders . . . . . . . . . . . . . . . . . . . (51,184) (45,830) (33,705) --------- -------- -------- Net cash provided by financing activities . . . . . . . . . . . . . . . . . 109,469 79,021 60,885 --------- -------- -------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 10,646 (8,775) 3,716 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . 233 9,008 5,292 --------- -------- -------- Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . $ 10,879 $ 233 $ 9,008 ========= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 36 39 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") through its majority owned subsidiary, Post Apartment Homes, L.P. (the "Operating Partnership") currently owns and manages or is in the process of developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando, Northern Virginia, Nashville, Houston, Denver and Charlotte metropolitan areas. At December 31, 1997, approximately 53.1% and 23.2% (on a unit basis) of the Company's communities are located in the Atlanta and Dallas metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Company and the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. See Note 2 related to the acquisition of Columbus Realty Trust. Since units can be redeemed for shares of the Company on a one-for- one basis at the Company'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 Consolidated Financial Statements were reclassified for comparative purposes. ACCOUNTING CHANGES In the fourth quarter of 1997, the company adopted Statement of Financial Accounting Standards ("SFAS") 128, "Earnings per Share," which requires the dual presentation of basic and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures. It also requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. All prior period EPS data presented in the consolidated financial statements was restated in accordance with the provisions of this statement. NEW ACCOUNTING PRONOUNCEMENTS In the first quarter of 1998, the Company is required to adopt SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and disclosing comprehensive income and its components. Besides net income, SFAS No. 130 requires the reporting of other comprehensive income, defined as revenues, expenses, gains and losses that under generally accepted accounting principles are not included in net income. As of December 31, 1997, the Company had no items of other comprehensive income and, as a result; management does not believe this statement will result in significant changes to its current disclosures. In the first quarter of 1998, the Company is required to adopt SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." This statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in its interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief decision maker in deciding how to allocate resources and in assessing performance. FAS No. 131 also allows the aggregation of segments which meet certain criteria. Management believes its current disclosure contained within the "Management's Discussion on Analysis of Financial Condition and Results of Operations" section of its interim reports on SEC Form 10Q and annual report on SEC Form 10K as well as its Annual Report comply with most of the requirements of SFAS 131. As a result, management does not believe the adoption of SFAS 131 will significantly affect its financial statement disclosures. REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5 - 10 years). 37 40 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 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 $9,567, $4,443 and $5,653 during 1997, 1996 and 1995, respectively, and interest rate protection receipts of $296, $830 and $1,539 during 1997, 1996 and 1995, respectively) aggregated $39,815, $31,563 and $28,343 for the years ended December 31, 1997, 1996 and 1995, respectively. DERIVATIVES The Company may enter into various treasury lock arrangements from time to time in anticipation of a specific debt transaction. These arrangements are used to manage the Company's exposure to fluctuations in interest rates. The Company does not utilize these arrangements for trading or speculative purposes. These arrangements, considered qualifying hedges, are not recorded in the financial statements until the debt transaction is consummated and the arrangement is settled. The proceeds or payments resulting from the settlement of the arrangement are deferred and amortized over the life of the debt as an adjustment to interest expense. As of December 31, 1997, the Company had entered into nine treasury locks arrangements with various financial institutions with an aggregate notional amount of $200,000. The notional amounts are used to measure the proceeds to be received or payments to be made upon settlement of the arrangement and do not represent the amount of exposure to credit loss. The counterparties to these arrangements are various financial institutions of high credit quality; therefore, the risk of nonperformance by the counterparties is considered to be negligible. The arrangements are tied to treasury bills ranging from 5-10 year terms and yields of 6.051% to 6.327%. At December 31, 1997, the expected cost to settle these arrangements was approximately $5,300. Premiums paid to purchase interest rate protection agreements are capitalized and amortized over the terms of those agreements using the interest method. Unamortized premiums are included in other assets in the consolidated balance sheet. Amounts receivable under the interest rate protection agreements are accrued as a reduction of interest expense. PER SHARE DATA Basic earnings per common share with respect to the Company for the years ended December 31, 1997, 1996 and 1995 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. 38 41 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ACQUISITION OF COLUMBUS REALTY TRUST On October 24, 1997, Columbus Realty Trust ("Columbus") a Texas real estate investment trust, was merged into a wholly owned subsidiary of the Company (the "Merger"). At the time of the Merger, Columbus was operating 26 completed communities containing 6,296 apartment units and had an additional 5 communities under development that will contain 1,243 apartment units upon completion located in Dallas and Houston, Texas. Pursuant to the merger agreement, each outstanding share of Columbus common stock was converted into .615 shares of common stock of the Company, which resulted in the issuance of approximately 8.4 million shares of common stock of the Company. The total purchase price including liabilities assumed was $643,268. The Merger was accounted for as a purchase. Under the purchase method of accounting, the assets acquired and liabilities assumed of Columbus were recorded at their estimated fair market values and its results of operations have been included in the accompanying consolidated statements of operations from the date of the acquisition, October 24, 1997, through year-end. Unaudited, supplemental pro-forma information, assuming the acquisition had occurred on January 1, 1996, is as follows:
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 ----------- ---------- Total revenue . . . . . . . . . . . . . . . . . $ 247,295 $ 219,238 Net income available to common shareholders before extraordinary items . . 60,242 54,071 Net income available to common shareholders . . . . . . . . . . . . . . . . 60,167 54,071 Earnings per share available to common shareholders - basic . . . . . . . . . . . . . $ 1.99 $ 1.79 Earnings per share available to common shareholders - diluted . . . . . . . . . . . $ 1.96 $ 1.77
3. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, --------------------------- 1997 1996 ----------- ----------- Deferred financing costs . . . . . . . . . . . $ 20,131 $ 18,915 Other . . . . . . . . . . . . . . . . . . . . . 2,822 1,156 ---------- ---------- 22,953 20,071 Less: accumulated amortization . . . . . . . . (10,324) (10,612) ---------- ---------- $ 12,629 $ 9,459 ========== ==========
39 42 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 4. NOTES PAYABLE The Company's indebtedness consists of the following:
DECEMBER 31, ------------------------------------- 1997 1996 -------------- -------------- Tax-exempt fixed rate bond indebtedness (secured) . . . . . . . . . . . . . . . . . . . $ 13,298 $ 64,758 Conventional fixed rate (secured) . . . . . . . 16,956 21,881 Conventional floating rate (secured) . . . . . 21,725 14,400 Tax-exempt floating rate bond indebtedness (secured) . . . . . . . . . . . . . . . . . . . 141,230 84,280 Senior notes (unsecured) . . . . . . . . . . . 306,000 225,000 Lines of credit (unsecured) . . . . . . . . . . 322,000 24,000 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . $ 821,209 $ 434,319 ========= =========
CONVENTIONAL MORTGAGES PAYABLE Conventional mortgages payable were comprised of seven and three loans at December 31, 1997 and 1996, respectively, each of which is collateralized by an apartment community included in real estate assets. The mortgages payable are generally due in monthly installments of interest only and mature at various dates through 2014. The interest rates on the fixed rate mortgages payable ranged from 7.375% to 10.00% at December 31, 1997. At December 31, 1997, the interest rates on the variable rate mortgages payable were at a range from 1.65% to 1.90% above the London Interbank Offered Rate ("LIBOR"). At December 31, 1997, LIBOR ranged from 5.72% to 5.97% for one, three, six, and twelve month indices. TAX-EXEMPT BOND INDEBTEDNESS Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. Such bonds are generally payable in monthly or semi-annual installments of interest only and mature at various dates through 2025. The interest rate on the fixed rate bond payable was 7.50% at December 31, 1997. Floating rate indebtedness reissued in 1995 through 1997, bears interest at the "AAA" non-AMT tax exempt rate, set weekly, which was 3.80% at December 31, 1997 (average of 3.67% for 1997). With respect to such bonds, the Company pays certain credit enhancement fees of .575% of the amount of such bonds or the amount of such letters of credit, as the case may be. On June 29, 1995, the Company replaced the bank letters of credit providing credit enhancement for twelve of its outstanding tax-exempt bonds and three of its economically defeased 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 for such bonds. Under the terms of such agreement, FNMA has provided replacement credit enhancement through 2025 for eleven bond issues, aggregating $141,230, which were concurrently reissued, and has agreed, subject to certain conditions, to provide credit enhancement through June 1, 2025 for up to an additional $94,650 ($81,352 of which is currently defeased) with respect to four other bond issues which mature and may be refunded during 1998. Under this agreement, on January 1, 1997, the Post F&M Villages, Post Vista and Post Lake (Orlando) bonds were refunded in the amount of $76,000 (all of which had previously been defeased), with issues enhanced by FNMA and maturing on June 1, 2025. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. 40 43 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) DEBT DEFEASED The Company applied a portion of the net proceeds of its equity offerings in 1993 and 1994 to pay in full thirteen fixed rate obligations totaling $132,470 and economically defease in full six tax exempt bond financings totaling $52,700. In addition, the Company paid $43,108 to partially prepay eleven variable rate obligations and $51,956 to economically defease portions of eight tax exempt bond financings. The above amounts do not include aggregate prepayment penalties and defeasance escrow requirements in excess of principal defeased of $18,077. The balance of debt fully or partially economically defeased aggregated $81,352 at December 31, 1997. LINES OF CREDIT In December 1997, the Company added two banks to its syndicated line of credit (the "Revolver"), increasing its capacity from $180,000 to $200,000. The Revolver matures on May 1, 2000 and borrowings currently bear interest at LIBOR plus .675% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Company's senior unsecured debt. The Revolver also includes a money market competitive bid option for short term funds up to $100,000 (increased in December 1997 from $90,000) at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Company does not anticipate that this covenant will adversely affect the ability of the Operating Partnership to make distributions, or the Company to declare dividends, under the Company's current dividend policy. On July 26, 1996, the Company closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was fully funded and used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and has a maturity date of June 26, 1998. The Revolver requires three days advance notice to repay borrowings whereas this facility provides the Company with an automatic daily sweep which applies all available cash to reduce the outstanding balance. On November 21, 1997, the Company closed on an aggregrate of $132,000 in bridge loans (the "Bridge Loan") with three commercial banks. These notes bear interest at LIBOR plus 1.04% for the first 30 days. From December 21, 1997 through maturity on May 20, 1998, these notes bear interest of LIBOR plus .92%. Proceeds from these notes were used to pay down debt assumed in the Merger. On February 20, 1998, the Company sold 3.5 million shares of common stock. Net proceeds from this offering of $129.5 million were used to pay in full the Bridge Loan and to repay other outstanding indebtedness. At December 31, 1997, the outstanding balances on the Revolver, Bridge Loan and Cash Management Line were $170,000, $132,000 and $20,000, respectively. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. SENIOR UNSECURED 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, 2000; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to reduce other secured indebtedness and to pay down the Revolver. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. 41 44 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) On September 30, 1996, the Company completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to pay down existing indebtedness outstanding on the Revolver. MEDIUM TERM NOTES On January 29, 1997, the Company established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Company increased the amount available under this program to $344 million. The following table sets forth MTNs issued and outstanding as of December 31, 1997:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ---------------- ---------- --------------- ---------- March 3, 1997 $ 30,000 LIBOR plus .25% 03/03/2000 March 31, 1997 37,000 7.02% 04/02/2001 March 31, 1997 13,000 7.30% 04/01/2004 September 22, 1997 10,000 6.69% 09/22/2004 September 22, 1997 25,000 6.78% 09/22/2005 September 26, 1997 16,000 6.22% 12/31/99 ---------- $ 131,000 ==========
Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) paydown existing indebtedness outstanding under the Company's revolving line of credit (the "Revolver"). The aggregate maturities of the above conventional mortgages payable, tax-exempt bond indebtedness, lines of credit and senior unsecured notes (after giving effect to the refunding of the Post F&M Villages, Post Vista and Post Lake (Orlando) bonds and the issuance of the MOPPRS(SM)) are as follows: 1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,048 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 37,725 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 130,000 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 40,010 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Thereafter . . . . . . . . . . . . . . . . . . . . . . 428,426 ---------- $ 821,209 ==========
42 45 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) MandatOry Par Put Remarketed Securities On March 12, 1998, the Operating Partnership issued $100 million of 6.85% MandatOry Par Put Remarketed Securities(SM) ("MOPPRS(SM)"). The net proceeds from the MOPPRS(SM) were used to repay outstanding indebtedness. As part of the MOPPRS(SM) structure, Merrill Lynch & Co. purchased an option to remarket the securities as of March 16, 2005. The Operating Partnership will have an effective borrowing rate through the remarketing date of approximately 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 will be approximately 6.85%, the coupon rate on the MOPPRS(SM). PLEDGED ASSETS The aggregate net book value at December 31, 1997 of property pledged as collateral for indebtedness amounted to approximately $297,763. EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1997 and 1995 resulted from the write-off of deferred financing costs on the mortgage debt satisfied. The extraordinary item is net of minority interest ($18 and $250) of the unitholders calculated on the basis of weighted average units and common shares outstanding for the year ended December 31, 1997 and 1995, respectively. 5. INCOME TAXES The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% of its REIT taxable income, as defined in the Code, to its shareholders and satisfy certain other requirements. As a result, the Company generally will not be subject to Federal income taxation at the corporate level on the income it distributes to the shareholders. Although Post Properties, Inc. has elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed as a subsidiary of the Operating Partnership to provide through its subsidiaries asset management, leasing and landscaping services to third parties. The consolidated taxable income of Post Services, if any, will be subject to tax at regular corporate rates. As of December 31, 1997, 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 $54,896. 6. RELATED PARTY TRANSACTIONS The Company provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 1997, 1996 and 1995, the Company received landscaping fees of $670, $1,391 and $1,758 for such services. These amounts include reimbursements of direct expenses in the amount of $138, $729 and $1,111 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 $532, $662 and $647 in the accompanying financial statements for the years ended December 31, 1997, 1996 and 1995, respectively. The Company provides accounting and administrative services to entities controlled by certain executive officers of the Company. Fees under this arrangement aggregated $25, $25 and $32 for the years ended December 31, 1997, 1996 and 1995, respectively. 43 46 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 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 $326, $363 and $317 for the years ended December 31, 1997, 1996 and 1995, respectively. On May 22, 1995, the Company purchased for a nominal amount the outstanding capital stock of A.T. Aviation, Inc. ("A.T. Aviation"), an entity formed and owned by John A. Williams, Chairman of the Board of Directors of the Company, and John T. Glover, President and a Director of the Company. In connection with the acquisition, the Company assumed certain obligations of A.T. Aviation. At the time of the acquisition, A.T. Aviation had entered into a purchase agreement for a used aircraft, leased certain property improvements related thereto, and obtained a line of credit in the amount of $7,500 to fund such acquisitions. In connection with the acquisition, the Company assumed and repaid such line of credit, which had been guaranteed by such officers, and such line and guarantees were terminated. On October 15, 1996, the Company exercised its option to purchase land from unitholders of the Operating Partnership. In exchange for the land, the Company issued 138,150 units of the Operating Partnership to the unitholders. 7. EMPLOYEE BENEFIT PLANS The employees of the Company are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Company contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Company contribution, the maximum employee contribution included in the calculation is 3% of salary. Company contributions of $158 and $251 were made in 1997 and 1996, 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 or part-time by the Company or the Operating Partnership for at least one month. The purchase price of shares of Common Stock under the ESPP is equal to 85% of the lesser of the closing price per share of Common Stock on the first or last day of the trading period, as defined. 8. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 1997, 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 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, $209 and $129 for 1997 and 1996, 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 Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below: 44 47 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 1996 1995 ----------- ---------- -------- Net income available to common shareholders As reported . . . $ 49,965 $ 42,406 $ 29,118 Pro forma . . . . $ 49,579 $ 40,488 $ 28,771 Net income per common share - basic As reported . . . $ 2.11 $ 1.95 $ 1.58 Pro forma . . . . $ 2.10 $ 1.86 $ 1.57 Net income per common share - diluted As reported . . . $ 2.09 $ 1.94 $ 1.58 Pro forma . . . . $ 2.08 $ 1.85 $ 1.56
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 1997, 1996 and 1995, are as follows: dividend yield of 6.5 percent for 1997, 5.4 percent 1996 and 6.2 percent for 1995; expected volatility of 14.5 percent for all years; risk- free interest rates ranging from 5.5 to 5.6 percent for 1997, 5.4 to 5.7 percent for 1996 and 5.5 to 7.3 percent for 1995; and expected lives ranging from 5 to 7 years for all years. FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant options to its employees and directors for up to 3,500,000 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 50,000 shares a year. The exercise price of each option equals 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, 1997 and 1996, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
1997 1996 1995 ------------------------------------------------------------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- ---------- ---------- --------- ---------- ---------- FIXED OPTIONS Outstanding at beginning of year . . 864,105 $ 31 601,366 $ 31 353,344 $ 31 Granted . . . . . . . . . . . . . . . 243,946 39 310,067 32 251,383 30 Converted in connection with the Merger . . . . . . . . . . . . . . . 1,192,230 30 -- -- -- -- Exercised . . . . . . . . . . . . . . (49,406) 31 (18,993) 31 (361) 28 Forfeited . . . . . . . . . . . . . . (13,324) 38 (28,335) 31 (3,000) 30 --------- -------- -------- Outstanding at end of year . . . . . 2,237,551 31 864,105 31 601,366 31 ========= ======== ======== Options exercisable at year-end . . . 2,000,279 797,830 238,188 ========= ======== ======== Weighted-average fair value of options granted during the year . . . . . . $ 2.85 $ 3.47 $ 3.59 ========= ======== ========
At December 31, 1997, the range of exercise prices for options outstanding was $28 - $41 and the weighted average remaining contractual life was 7 years. 45 48 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Company is party to two ground leases relating to an operating community with terms expiring in years 2040 and 2043, one ground lease for a community under development with terms expiring in year 2038 and to office, equipment and other operating leases with terms expiring in years 1997 through 2004. Future minimum lease payments for noncancellable land, office, equipment and other leases at December 31, 1997 are as follows: 1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,296 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 2,186 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 1,090 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 804 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 202 2003 and thereafter . . . . . . . . . . . . . . . . . . 6,562
The Company incurred $3,366, $2,172 and $2,034 of rent expense for the years ended December 31, 1997, 1996 and 1995, 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, interest rate protection agreement, accounts payable, accrued expenses, notes payable and other liabilities are carried at amounts which reasonably approximate their fair values. The fair values of treasury lock arrangements (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 1997, there were no carrying amounts related to these arrangements in the consolidated balance sheet. As of December 31, 1997, the expected cost to settle these contracts was approximately $5,300. Disclosure about fair value of financial instruments are based on pertinent information available to management as of December 31, 1997. 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. 46 49 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, 1997, 1996 and 1995, 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:
FOR THE YEAR ENDED 1997 ---------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 54,947 Less: Preferred stock dividends . . . . . . . . . . . . . . . . . . (4,907) ---------- BASIC EPS Income available to common shareholders before extraordinary item . 50,040 23,664,044 $ 2.11 ========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 223,862 ---------- ----------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 50,040 23,887,906 $ 2.09 ========== =========== ==========
FOR THE YEAR ENDED 1996 --------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 43,469 Less: Preferred stock dividends . . . . . . . . . . . . . . . . . . (1,063) ---------- BASIC EPS Income available to common shareholders before extraordinary item . 42,406 21,787,648 $ 1.95 ========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 91,600 ---------- ----------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 42,406 21,879,248 $ 1.94 ========== =========== ==========
FOR THE YEAR ENDED 1995 ---------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ------------ ------------- ------------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 29,988 Less: Preferred stock dividends . . . . . . . . . . . . . . . . . . -- ----------- BASIC EPS Income available to common shareholders before extraordinary item . 29,988 18,382,299 $ 1.63 =========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,595 ----------- ----------- DILUTED EPS Income available to common shareholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 29,988 18,387,894 $ 1.63 =========== =========== ===========
47 50 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 1997, 1996 and 1995 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 outstanding in the Operating Partnership. During 1997, 1996 and 1995, holders of 6,519, 54,400 and 97,201 Units in the Operating Partnership, respectively, exercised their option to convert their units to shares of the Company on a one-for-one basis. During 1996 the Company exercised its option to purchase land in exchange for 138,150 Units of the Operating Partnership. The net effect of the capital allocated to the unitholders of the Operating Partnership on the dates of the offerings, the subsequent conversion of Units of the Operating Partnership to shares of the Company, the adjustments to minority interest for the dilutive impact of the Dividend Reinvestment and Employee Stock Purchase Plans and the issuance of Units of the Operating Partnership in exchange for land was a reclassification increasing minority interest and decreasing shareholders' equity in the amount of $30,245, $2,680 and $10,598 for the years ended December 31, 1997, 1996 and 1995, respectively. (b) The Operating Partnership committed to distribute $21,327, $14,659 and $13,091 for the quarters ended December 31, 1997, 1996 and 1995, respectively. As a result, the Company declared dividends of $18,221, $11,838 and $10,573 for the quarters ended December 31, 1997, 1996 and 1995, respectively. The remaining distributions from the Operating Partnership in the amount of $3,104, $2,821 and $2,518 for the quarters ended December 31, 1997, 1996 and 1995, respectively, are distributed to minority interest unitholders in the Operating Partnership. (c) The Merger was a stock for stock transaction. In connection with the Merger, the cash and non-cash components were are follows: Fair value of assets acquired . . . . . . . . . . . . . $ 643,268 Less: Value of stock issued in exchange for stock of Columbus . . . . . . . . . . . . . . . . . 338,353 Liabilities assumed . . . . . . . . . . . . . . . . 285,852 Cash acquired . . . . . . . . . . . . . . . . . . . 1,329 ----------- Cash component of purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . $ 17,734 ===========
48 51 POST PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 1997 and 1996 are as follows:
YEAR ENDED DECEMBER 31, 1997* ------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues . . . . . . . . . . . . . . . . . . . $ 44,566 $46,114 $47,514 $61,922 Net income before net gain(loss) on sale of assets, loss on relocation of corporate office, and minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . . . 14,156 14,448 15,783 19,923 Net gain(loss) on sale of assets -- 3,512 -- (242) Loss on relocation of corporate office . . . . -- -- -- (1,500) Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . . . (2,515) (3,236) (2,811) (2,569) Net income . . . . . . . . . . . . . . . . . . 11,566 14,724 12,972 15,612 Dividends to preferred shareholders . . . . . . (1,063) (1,062) (1,062) (1,720) Net income available to common shareholders . . 10,503 13,662 11,910 13,892 Earnings per common share: Net income available to common shareholders - basic . . . . . . . . . . . . 0.48 0.62 0.54 0.49 Net income available to common shareholders - diluted . . . . . . . . . . . 0.47 0.62 0.53 0.48
YEAR ENDED DECEMBER 31, 1996* -------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues . . . . . . . . . . . . . . . . . . . $ 39,205 $42,578 $ 44,699 $ 44,335 Net income before net gain on sale of assets and minority interest of unitholders in Operating Partnership . . . . . . . . . . . 12,432 12,443 13,423 14,301 Net gain on sale of assets -- -- 854 -- Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . . . (2,386) (2,360) (2,696) (2,542) Net income . . . . . . . . . . . . . . . . . . 10,046 10,083 11,581 11,759 Dividends to preferred shareholders . . . . . . -- -- -- (1,063) Net income available to common shareholders . . 10,046 10,083 11,581 10,696 Earnings per common share: Net income available to common shareholders - basic . . . . . . . . . . . . 0.46 0.46 0.53 Net income available to common shareholders - diluted . . . . . . . . . . . 0.46 0.46 0.53 0.48
- -------------- * 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. 49 52 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Post Apartment Homes, L.P. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a) 1. and 2. on page 31 present fairly, in all material respects, the financial position of Post Apartment Homes, L.P. at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the management of Post Apartment Homes, L.P.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Atlanta, Georgia March 20, 1998 50 53 POST APARTMENT HOMES, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ---------------------------- 1997 1996 ------------- ------------- ASSETS Real estate assets Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,011 $ 150,072 Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,255,118 730,518 Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 89,251 74,120 Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,071 140,437 Land held for future development . . . . . . . . . . . . . . . . . . . . . . . . . 15,560 14,195 ----------- ---------- 1,936,011 1,109,342 Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (201,095) (177,672) ----------- ---------- Operating real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,734,916 931,670 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,879 233 Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,542 1,148 Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,629 9,459 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,597 16,165 ----------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,780,563 $ 958,675 =========== ========== LIABILITIES AND PARTNERS' EQUITY Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 821,209 $ 434,319 Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,505 4,264 Distribution payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,327 14,659 Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 53,101 17,915 Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . . . . . 8,117 5,084 ----------- ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911,259 476,241 ----------- ---------- Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . Partners' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869,304 482,434 ----------- ---------- Total liabilities and partners' equity . . . . . . . . . . . . . . . . . . . . $ 1,780,563 $ 958,675 =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 51 54 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- -------------- -------------- REVENUES Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 186,126 $ 158,618 $ 133,817 Property management - third party . . . . . . . . . . . . . . . . . . . 2,421 2,828 2,764 Landscape services - third party . . . . . . . . . . . . . . . . . . . 5,120 4,834 4,647 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 326 593 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,360 4,969 2,884 ---------- ----------- ---------- Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,116 171,575 144,705 ---------- ----------- ---------- Expenses Property operating and maintenance (exclusive of items shown separately below) . . . . . . . . . . . . . . . . . . . . . . . 67,519 58,202 49,912 Depreciation (real estate assets) . . . . . . . . . . . . . . . . . . . 27,991 22,676 20,127 Depreciation (non-real estate assets) . . . . . . . . . . . . . . . . . 1,057 927 692 Property management . . . . . . . . . . . . . . . . . . . . . . . . . . 1,956 2,055 2,166 Landscape services . . . . . . . . . . . . . . . . . . . . . . . . . . 4,284 3,917 3,950 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,658 22,131 22,698 Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . 980 1,352 1,967 General and administrative . . . . . . . . . . . . . . . . . . . . . . 7,363 7,716 6,071 Minority interest in consolidated property partnership . . . . . . . . -- -- 451 ---------- ----------- ---------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,808 118,976 108,034 ---------- ----------- ---------- Income before net gain on sale of assets, loss on relocation of corporate office, and extraordinary item . . . . . . . . . . . . . 64,308 52,599 36,671 Net gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . 3,270 854 1,746 Loss on relocation of corporate office . . . . . . . . . . . . . . . . (1,500) -- -- ---------- ----------- ---------- Income before extraordinary item . . . . . . . . . . . . . . . . . . . 66,078 53,453 38,417 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . (93) -- (1,120) ---------- ----------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,985 53,453 37,297 Distribution to preferred Unitholders . . . . . . . . . . . . . . . . . (4,907) (1,063) -- ---------- ----------- ---------- Net income available to common Unitholders . . . . . . . . . . . . . . $ 61,078 $ 52,390 $ 37,297 ========== =========== ========== EARNINGS PER COMMON UNIT - BASIC Income before extraordinary item (net of preferred distributions) . . $ 2.11 $ 1.95 $ 1.63 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (0.05) ---------- ----------- ---------- Net income available to common Unitholders . . . . . . . . . . . . . . $ 2.11 $ 1.95 $ 1.58 ---------- =========== ========== Weighted average common Units outstanding . . . . . . . . . . . . . . 28,880,928 26,917,723 23,541,639 ========== =========== ========== Distributions declared . . . . . . . . . . . . . . . . . . . . . . . . $ 2.38 $ 2.16 $ 1.96 ========== =========== ========== EARNINGS PER COMMON UNIT - DILUTED Income before extraordinary item (net of preferred distributions) . . $ 2.09 $ 1.94 $ 1.63 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (0.05) ---------- ----------- ---------- Net income available to common Unitholders . . . . . . . . . . . . . . $ 2.09 $ 1.94 $ 1.58 ========== =========== ========== Weighted average common Units outstanding . . . . . . . . . . . . . . 29,104,790 27,009,323 23,547,234 ========== =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 52 55 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DOLLARS IN THOUSANDS)
GENERAL LIMITED PARTNER PARTNERS TOTAL -------- --------- ----- PARTNERS' EQUITY, DECEMBER 31, 1994 . . . . . . . . . . . . $ 3,527 $ 309,840 $313,367 Contribution from PPI related to Third Offering . . . . . . 1,053 104,225 105,278 Contribution from PPI related to Dividend Reinvestment Plan 161 16,010 16,171 Distributions paid . . . . . . . . . . . . . . . . . . . . (335) (33,198) (33,533) Distributions declared to common Unitholders . . . . . . . (131) (12,960) (13,091) Net income . . . . . . . . . . . . . . . . . . . . . . . . 373 36,924 37,297 ------- --------- -------- PARTNERS' EQUITY, DECEMBER 31, 1995 . . . . . . . . . . . . 4,648 420,841 425,489 Contributions from PPI related to Preferred Shares . . . . 486 48,127 48,613 Acquisition of real estate through issuance of Units . . . 51 5,040 5,091 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans . . . . . . . . . . . . 90 8,944 9,034 Distributions to preferred Unitholders . . . . . . . . . . (11) (1,052) (1,063) Distributions to common Unitholders . . . . . . . . . . . . (435) (43,089) (43,524) Distributions declared to common Unitholders . . . . . . . (147) (14,512) (14,659) Net income . . . . . . . . . . . . . . . . . . . . . . . . 534 52,919 53,453 ------- --------- -------- PARTNERS' EQUITY, DECEMBER 31, 1996 . . . . . . . . . . . . 5,216 477,218 482,434 Contributions from PPI related to Preferred Shares . . . . 483 47,808 48,291 Common units issued in connection with Merger . . . . . . . 3,384 334,969 338,353 Contributions from PPI related to Dividend Reinvestment and Employee Stock Purchase Plans . . . . . . . . . . . . 91 9,039 9,130 Distributions to preferred Unitholders . . . . . . . . . . (49) (4,858) (4,907) Distributions to common Unitholders . . . . . . . . . . . . (487) (48,172) (48,659) Distributions declared to common Unitholders . . . . . . . (213) (21,110) (21,323) Net income . . . . . . . . . . . . . . . . . . . . . . . . 660 65,325 65,985 ------- --------- -------- PARTNERS' EQUITY, DECEMBER 31, 1997 . . . . . . . . . . . . $ 9,085 $ 860,219 $869,304 ======= ========= ========
The accompanying notes are an integral part of these consolidated financial statements. 53 56 POST APARTMENT HOMES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,985 $ 53,453 $ 37,297 Adjustments to reconcile net income to net cash provided by operating activities: Net gain on sale of assets . . . . . . . . . . . . . . . . . . . . . (3,270) (854) (1,746) Loss on relocation of corporate office . . . . . . . . . . . . . . . 1,500 -- -- Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . 93 -- -- Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,048 23,603 20,819 Write-off of deferred financing costs . . . . . . . . . . . . . . . . (93) -- 1,120 Amortization of deferred loan costs . . . . . . . . . . . . . . . . . 980 1,352 1,967 Changes in assets, (increase) decrease in: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . (394) (2) 7,211 Organization costs and other deferred charges . . . . . . . . . . . -- 1,589 (90) Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,797 (3,281) (9,122) Changes in liabilities, increase (decrease) in: Accrued interest payable . . . . . . . . . . . . . . . . . . . . . 2,172 299 (1,171) Accounts payable and accrued expenses . . . . . . . . . . . . . . . 1,341 2,089 868 Security deposits and prepaid rents . . . . . . . . . . . . . . . . 395 718 213 ----------- ----------- ---------- Net cash provided by operating activities . . . . . . . . . . . . . . 109,554 78,966 57,366 ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Construction and acquisition of real estate assets, net of payables . . . . . . . . . . . . . . . . . . . . . . . . . . (190,810) (168,885) (117,120) Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . 25,402 12,285 22,645 Acquisition of Columbus Realty Trust, net of cash acquired . . . . . (17,734) -- -- Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . (9,567) (4,443) (5,653) Recurring capital expenditures . . . . . . . . . . . . . . . . . . . (3,675) (2,961) (1,700) Corporate capital expenditures . . . . . . . . . . . . . . . . . . . (3,220) (820) (1,267) Non-recurring capital expenditures . . . . . . . . . . . . . . . . . (605) (1,429) (428) Revenue generating capital expenditures . . . . . . . . . . . . . . . (8,168) (509) (859) Purchase of minority interests in property partnerships . . . . . . . -- -- (10,149) ----------- ----------- ---------- Net cash used in investing activities . . . . . . . . . . . . . . . . (208,377) (166,762) (114,531) ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of financing costs . . . . . . . . . . . . . . . . . . . . . (4,208) (3,986) (4,614) Debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,564 236,833 362,196 Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (564,085) (277,233) (374,523) Offering proceeds, net of underwriters discount and offering costs . -- 123,438 105,278 Proceeds from contributions from PPI related to Preferred Shares . . 48,291 48,613 -- Proceeds from contributions from PPI related to Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . . . 9,130 9,034 16,171 Capital distributions to preferred Unitholders . . . . . . . . . . . (4,907) (1,063) -- Capital distributions to common Unitholders . . . . . . . . . . . . . (63,316) (56,615) (43,627) ----------- ----------- ---------- Net cash provided by financing activities . . . . . . . . . . . . . . 109,469 79,021 60,881 ----------- ----------- ---------- Net increase (decrease) in cash and cash equivalents . . . . . . . . 10,646 (8,775) 3,716 Cash and cash equivalents, beginning of period . . . . . . . . . . . 233 9,008 5,292 ----------- ----------- ---------- Cash and cash equivalents, end of period . . . . . . . . . . . . . . $ 10,879 $ 233 $ 9,008 =========== =========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 54 57 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"). The Operating Partnership, through its operating divisions and subsidiaries, is the entity through which all of the Company's operations are conducted. 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, Denver and Charlotte metropolitan areas. At December 31, 1997, approximately 53.1% and 23.2% (on a unit basis) of the Operating Partnership communities are located in the Atlanta and Dallas metropolitan areas, respectively. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated accounts of the Operating Partnership and the Company. All significant intercompany accounts and transactions have been eliminated in consolidation. See Note 2 related to the acquisition of Columbus Realty Trust. Certain items in the Consolidated Financial Statements were reclassified for comparative purposes. ACCOUNTING CHANGES In the fourth quarter of 1997, the Operating Partnership adopted Statement of Financial Accounting Standards ("SFAS") 128, "Earnings per Share," which requires the dual presentation of basic and diluted earnings per share ("EPS") on the face of the income statement for all entities with complex capital structures. It also requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Since 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 the such redemption, at the option of the Company, the Operating Partnership applies the requirements of SFAS 128 to its calculations of its per Unit information. All prior period per Unit data presented in the consolidated financial statements was restated in accordance with the provisions of this statement. NEW ACCOUNTING PRONOUNCEMENTS In the first quarter of 1998, the Operating Partnership is required to adopt SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and disclosing comprehensive income and its components. Besides net income, SFAS No. 130 requires the reporting of other comprehensive income, defined as revenues, expenses, gains and losses that under generally accepted accounting principles are not included in net income. As of December 31, 1997, the Operating Partnership had no items of other comprehensive income and, as a result; management does not believe this statement will result in significant changes to its current disclosures. In the first quarter of 1998, the Operating Partnership is required to adopt SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." This statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in its interim financial reports issued to Unitholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated by the chief decision maker in deciding how to allocate resources and in assessing performance. FAS No. 131 also allows the aggregation of segments which meet certain criteria. Management believes its current disclosure contained within the "Management's Discussion on Analysis of Financial Condition and Results of Operations" section of its interim reports on SEC Form 10Q and annual report on SEC Form 10K comply with most of the requirements of SFAS 131. As a result, management does not believe the adoption of SFAS 131 will significantly affect its financial statement disclosures. 55 58 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) REAL ESTATE ASSETS AND DEPRECIATION Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements -- 20-40 years; furniture, fixtures and equipment -- 5 - 10 years). 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 $9,567, $4,443 and $5,653 during 1997, 1996 and 1995, respectively, and interest rate protection receipts of $296, $830 and $1,539 during 1997, 1996 and 1995, respectively) aggregated $39,815, $31,563 and $28,343 for the years ended December 31, 1997, 1996 and 1995, respectively. DERIVATIVES The Operating Partnership may enter into various treasury lock arrangements from time to time in anticipation of a specific debt transaction. These arrangements are used to manage the Operating Partnership's exposure to fluctuations in interest rates. The Operating Partnership does not utilize these arrangements for trading or speculative purposes. These arrangements, considered qualifying hedges, are not recorded in the financial statements until the debt transaction is consummated and the arrangement is settled. The proceeds or payments resulting from the settlement of the arrangement are deferred and amortized over the life of the debt as an adjustment to interest expense. As of December 31, 1997, the Operating Partnership had entered into 9 treasury locks arrangements with various financial institutions with an aggregate notional amount of $200,000. The notional amounts are used to measure the proceeds to be received or payments to be made upon settlement of the arrangement and do not represent the amount of exposure to credit loss. The counterparties to these arrangements are various financial institutions of high credit quality; therefore, the risk of nonperformance by the counterparties is considered to be negligible. The arrangements are tied to treasury bills ranging from 5-10 year terms and yields of 6.051% to 6.327%. At December 31, 1997, the expected cost to settle these arrangements was approximately $5,300. Premiums paid to purchase interest rate protection agreements are capitalized and amortized over the terms of those agreements using the interest method. Unamortized premiums are included in other assets in the consolidated balance sheet. Amounts receivable under the interest rate protection agreements are accrued as a reduction of interest expense. 56 59 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) PER UNIT DATA Basic earnings per common Unit with respect to the Operating Partnership for the years ended December 31, 1997, 1996 and 1995 is computed based upon the weighted average number of units outstanding during the period. Diluted earnings per common Unit is based upon the weighted average number of Units outstanding during the period and includes the effect of the potential issuance of additional Units if stock options were exercised or converted into common stock of the Company. USE OF ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ACQUISITION OF COLUMBUS REALTY TRUST On October 24, 1997, Columbus Realty Trust ("Columbus") a Texas real estate investment trust, was merged in to a wholly owned subsidiary of the Company (the "Merger"). At the time of the Merger, Columbus was operating 26 completed communities containing 6,296 apartment units and had an additional 5 communities under development that will contain 1,243 apartment units upon completion located in Dallas and Houston, Texas. Pursuant to the merger agreement, each outstanding share of Columbus common stock was converted into .615 shares of common stock of the Company, which resulted in the issuance of approximately 8.4 million shares of common stock of the Company. The total purchase price including liabilities assumed was $643,268. The Merger was accounted for as a purchase. Under the purchase method of accounting, the assets acquired and liabilities assumed of Columbus were recorded at their estimated fair market values and its results of operations have been included in the accompanying consolidated statements of operations from the date of the acquisition, October 24, 1997, through year-end. Unaudited, supplemental pro-forma information, assuming the acquisition had occurred on January 1, 1996, is as follows:
YEAR ENDED DECEMBER 31, -------------------------- 1997 1996 ---------- ---------- Total revenue . . . . . . . . . . . . . . . . . $247,295 $219,238 Net income available to common unitholders before extraordinary items . . 69,978 63,241 Net income available to common unitholders . . . . . . . . . . . . . . . . 69,885 63,241 Earnings per unit available to common unitholders - basic . . . . . . . . . . . . . . $ 1.99 $ 1.79 Earnings per unit available to common unitholders - diluted . . . . . . . . . . . $ 1.96 $ 1.77
3. DEFERRED CHARGES Deferred charges consist of the following:
DECEMBER 31, --------------------------- 1997 1996 ----------- ----------- Deferred financing costs . . . . . . . . . . . $ 20,131 $ 18,915 Other . . . . . . . . . . . . . . . . . . . . . 2,822 1,156 ---------- ---------- 22,953 20,071 Less: accumulated amortization . . . . . . . . (10,324) (10,612) ---------- ---------- $ 12,629 $ 9,459 ========== ==========
57 60 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 4. NOTES PAYABLE The Operating Partnership's indebtedness consists of the following:
DECEMBER 31, ----------------------------------- 1997 1996 ------------- ------------ Tax-exempt fixed rate bond indebtedness (secured) . . . . . . . . . . . . . . . . . . . $ 13,298 $ 64,758 Conventional fixed rate (secured) . . . . . . . 16,956 21,881 Conventional floating rate (secured) . . . . . 21,725 14,400 Tax-exempt floating rate bond indebtedness 141,230 84,280 (secured) . . . . . . . . . . . . . . . . . . . Senior notes (unsecured) . . . . . . . . . . . 306,000 225,000 Lines of credit (unsecured) . . . . . . . . . . 322,000 24,000 --------- --------- Total . . . . . . . . . . . . . . . . . . . . . $ 821,209 $ 434,319 ========= =========
CONVENTIONAL MORTGAGES PAYABLE Conventional mortgages payable were comprised of seven and three loans at December 31, 1997 and 1996, respectively, each of which is collateralized by an apartment community included in real estate assets. The mortgages payable are generally due in monthly installments of interest only and mature at various dates through 2014. The interest rates on the fixed rate mortgages payable ranged from 7.375% to 10.00% at December 31, 1997. At December 31, 1997, the interest rates on the variable rate mortgage payable were at a range from 1.65% to 1.90% above the London Interbank Offered Rate ("LIBOR"). At December 31, 1997, LIBOR ranged from 5.72% to 5.97% for one, three, six, and twelve month indices. TAX-EXEMPT BOND INDEBTEDNESS Certain of the apartment communities are encumbered to secure tax-exempt housing bonds. Such bonds are generally payable in monthly or semi-annual installments of interest only and mature at various dates through 2025. The interest rate on the fixed rate bond payable was 7.50% at December 31, 1997. Floating rate indebtedness reissued in 1995 through 1997, bears interest at the "AAA" non-AMT tax exempt rate, set weekly, which was 3.80% at December 31, 1997 (average of 3.67% for 1997). With respect to such bonds, the Operating Partnership pays certain credit enhancement fees of .575% of the amount of such bonds or the amount of such letters of credit, as the case may be. On June 29, 1995, the Operating Partnership replaced the bank letters of credit providing credit enhancement for twelve of its outstanding tax-exempt bonds and three of its economically defeased 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 for such bonds. Under the terms of such agreement, FNMA has provided replacement credit enhancement through 2025 for eleven bond issues, aggregating $141,230, which were concurrently reissued, and has agreed, subject to certain conditions, to provide credit enhancement through June 1, 2025 for up to an additional $94,650 ($81,352 of which is currently defeased) with respect to four other bond issues which mature and may be refunded during 1998. Under this agreement, on January 1, 1997, the Post F&M Villages, Post Vista and Post Lake (Orlando) bonds were refunded in the amount of $76,000 (all of which had previously been defeased), with issues enhanced by FNMA and maturing on June 1, 2025. The agreement with FNMA contains representations, covenants, and events of default customary to such secured loans. 58 61 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) DEBT DEFEASED The Operating Partnership applied a portion of the net proceeds of equity offerings in 1993 and 1994, contributed from the Company, to pay in full thirteen fixed rate obligations totaling $132,470 and economically defease in full six tax exempt bond financings totaling $52,700. In addition, the Company paid $43,108 to partially prepay eleven variable rate obligations and $51,956 to economically defease portions of eight tax exempt bond financings. The above amounts do not include aggregate prepayment penalties and defeasance escrow requirements in excess of principal defeased of $18,077. The balance of debt fully or partially economically defeased aggregated $81,352 at December 31, 1997. LINES OF CREDIT In December 1997, the Operating Partnership added two banks to its syndicated line of credit (the "Revolver"), increasing its capacity from $180,000 to $200,000. The Revolver matures on May 1, 2000 and borrowings currently bear interest at LIBOR plus .675% or prime minus .25%. The Revolver provides for the rate to be adjusted up or down based on changes in the credit ratings on the Operating Partnership's senior unsecured debt. The Revolver also includes a money market competitive bid option for short term funds up to $100,000 (increased in December 1997 from $90,000) at rates below the stated line rate. The credit agreement for the Revolver contains customary representations, covenants and events of default, including covenants which restrict the ability of the Operating Partnership to make distributions, in excess of stated amounts, which in turn restricts the discretion of the Company to declare and pay dividends. In general, during any fiscal year the Operating Partnership may only distribute up to 100% of the Operating Partnership's consolidated income available for distribution (as defined in the credit agreement) exclusive of distributions of up to $30,000 of capital gains for such year. The credit agreement contains exceptions to these limitations to allow the Operating Partnership to make distributions necessary to allow the Company to maintain its status as a REIT. The Operating Partnership does not anticipate that this covenant will adversely affect its ability to make required distributions. On July 26, 1996, the Operating Partnership closed a $20,000 unsecured line of credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"), which was fully funded and used to pay down the outstanding balance on the Revolver. The Cash Management Line bears interest at LIBOR plus .75% or prime minus .25% and has a maturity date of November 14, 1997. The Revolver requires three days advance notice to repay borrowings whereas this facility provides the Operating Partnership with an automatic daily sweep which applies all available cash to reduce the outstanding balance. On November 21, 1997, the Operating Partnership closed on an aggregrate of $132,000 in bridge loans (the "Bridge Loan") with three commercial banks. These notes bear interest at LIBOR plus 1.04% for the first 30 days. From December 21, 1997 through maturity on May 20, 1998, these notes bear interest of LIBOR plus .92%. Proceeds from these notes were used to pay down debt assumed in the Merger. On February 20, 1998, the Company sold 3.5 million shares of common stock. Net proceeds from this offering of $129.5 million were contributed by the Company to the Operating Partnership and used to pay in full the Bridge Loan and to repay other outstanding indebtedness. At December 31, 1997, the outstanding balances on the Revolver, Bridge Loan and Cash Management Line were $170,000, $132,000 and $20,000, respectively. In addition, the Company has a $3,000 facility to provide letters of credit for general business purposes. SENIOR UNSECURED 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, 2000; and the second, totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the corresponding treasury rate on the date such rate was set) and matures on June 7, 2002. Proceeds from the notes were used to reduce other secured indebtedness and to pay down the Revolver. The note agreements pursuant to which the notes were purchased contain customary representations, covenants and events of default similar to those contained in the note agreement for the Revolver. 59 62 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) On September 30, 1996, the Operating Partnership completed a $125,000 senior unsecured debt offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316% per annum (.71% over the corresponding treasury rate on the date such rate was set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on the date such rate was set). Proceeds from the Notes were used to pay down existing indebtedness outstanding on the Revolver. MEDIUM TERM NOTES On January 29, 1997, the Operating Partnership established a program for the sale of up to $175,000 aggregate principal amount of Medium-Term Notes due nine months or more from the date of issue (the "MTNs"). On October 20, 1997, the Operating Partnership increased the amount available under this program to $344 million. The following table sets forth MTNs issued and outstanding as of December 31, 1997:
ISSUE INTEREST MATURITY DATE AMOUNT RATE DATE ----------------- ----------------- ------------------ ------------------- March 3, 1997 $ 30,000 LIBOR plus .25% 03/03/2000 March 31, 1997 37,000 7.02% 04/02/2001 March 31, 1997 13,000 7.30% 04/01/2004 September 22, 1997 10,000 6.69% 09/22/2004 September 22, 1997 25,000 6.78% 09/22/2005 September 26, 1997 16,000 6.22% 12/31/99 ---------- $ 131,000 ==========
Proceeds from the MTNs were used to (i) prepay certain outstanding notes and (ii) paydown existing indebtedness outstanding under the Operating Partnership's revolving line of credit (the "Revolver"). The aggregate maturities of the above conventional mortgages payable, tax-exempt bond indebtedness, lines of credit and senior unsecured notes (after giving effect to the refunding of the Post F&M Villages, Post Vista and Post Lake (Orlando) bonds) are as follows: 1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,048 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 37,725 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 230,000 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 40,010 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Thereafter . . . . . . . . . . . . . . . . . . . . . . 328,426 ---------- $ 821,209 ==========
PLEDGED ASSETS The aggregate net book value at December 31, 1997 of property pledged as collateral for indebtedness amounted to approximately $297,763. 60 63 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) EXTRAORDINARY ITEM The extraordinary item for the year ended December 31, 1997 and 1995 resulted from the write-off of deferred financing costs on the mortgage debt satisfied. 5. INCOME TAXES Income or losses of the Operating Partnership are allocated to the partners of the Operating Partnership for inclusion in their respective income tax returns. Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") commencing with the taxable year ended December 31, 1993. In order for the Company to qualify as a REIT, it must distribute annually at least 95% of its REIT taxable income, as 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 Comapny distributes to the shareholders. Although the Company, 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, 1997, 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 $54,896. 6. RELATED PARTY TRANSACTIONS The Operating Partnership provides landscaping services for executive officers, employees, directors and other related parties. For the years ended December 31, 1997, 1996 and 1995, the Operating Partnership received landscaping fees of $670, $1,391 and $1,758 for such services. These amounts include reimbursements of direct expenses in the amount of $138, $729 and $1,111 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 $532, $662 and $647 in the accompanying financial statements for the years ended December 31, 1997, 1996 and 1995, 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, $25 and $32 for the years ended December 31, 1997, 1996 and 1995, 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 $326, $363 and $317 for the years ended December 31, 1997, 1996 and 1995, respectively. On May 22, 1995, the Operating Partnership purchased for a nominal amount the outstanding capital stock of A.T. Aviation, Inc. ("A.T. Aviation"), an entity formed and owned by John A. Williams, Chairman of the Board of Directors of the Operating Partnership, and John T. Glover, President and a Director of the Company. In connection with the acquisition, the Operating Partnership assumed certain obligations of A.T. Aviation. At the time of the acquisition, A.T. Aviation had entered into a purchase agreement for a used aircraft, leased certain property improvements related thereto, and obtained a line of credit in the amount of $7,500 to fund such acquisitions. In connection with the acquisition, the Operating Partnership assumed and repaid such line of credit, which had been guaranteed by such officers, and such line and guarantees were terminated. On October 15, 1996, the Operating Partnership exercised its option to purchase land from certain Unitholders. In exchange for the land, the Operating Partnership issued 138,150 Units to the unitholders. 61 64 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 7. EMPLOYEE BENEFIT PLANS Through a plan adopted by the Company, the employees of the Operating Partnership are participants in a defined contribution plan pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Operating Partnership contributions, if any, to this plan are based on the performance of the Company and are allocated to each participant based on the relative contribution of the participant to the total contributions of all participants. For purposes of allocating the Operating Partnership contribution, the maximum employee contribution included in the calculation is 3% of salary. Operating Partnership contributions of $158 and $251 were made in 1997 and 1996, 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. 8. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the Company. Under the DRIP, shareholders may elect for their dividends to be used to acquire additional shares of the Company's Common Stock directly from the Company, for 95% of the market price on the date of purchase. 9. STOCK-BASED COMPENSATION PLANS STOCK COMPENSATION PLANS At December 31, 1997, 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, $209 and $129 for 1997 and 1996, 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:
1997 1996 1995 ----------- ---------- -------- Net income available to common Unitholders As reported . . . $ 61,078 $ 52,390 $ 37,297 Pro forma . . . . $ 60,692 $ 50,472 $ 36,950 Net income per common Unit - basic As reported . . . $ 2.11 $ 1.95 $ 1.58 Pro forma . . . . $ 2.10 $ 1.86 $ 1.57 Net income per common Unit - diluted As reported . . . $ 2.09 $ 1.94 $ 1.58 Pro forma . . . . $ 2.08 $ 1.85 $ 1.56
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 1997, 1996 and 1995, are as follows: dividend yield of 6.5 percent for 1997, 5.4 percent 62 65 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) for 1996 and 6.2 percent for 1995; expected volatility of 14.5 percent for all years; risk-free interest rates ranging from 5.5 to 5.6 percent for 1997, 5.4 to 5.7 percent for 1996 and 5.5 to 7.3 percent for 1995; and expected lives ranging from 5 to 7 years for all years. FIXED STOCK OPTION PLANS Under the Stock Plan, the Company may grant options to its employees and directors for up to 3,500,000 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 50,000 shares a year. The exercise price of each option equals 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, 1997 and 1996, changes during the years then ended, and the weighted-average fair value of options granted during the years is presented below:
1997 1996 1995 ---------------------- ---------------------- ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------- --------- ---------- ----------- -------- --------- FIXED OPTIONS Outstanding at beginning of year . . 864,105 $ 31 601,366 $ 31 353,344 $ 31 Granted . . . . . . . . . . . . . . . 243,946 39 310,067 32 251,383 30 Converted in connection with the Merger . . . . . . . . . . . . . . . 1,192,230 30 -- -- -- -- Exercised . . . . . . . . . . . . . . (49,406) 31 (18,993) 31 (361) 28 Forfeited . . . . . . . . . . . . . . (13,324) 38 (28,335) 31 (3,000) 30 ---------- -------- -------- Outstanding at end of year . . . . . 2,237,551 31 864,105 31 601,366 31 ========== ======== ======== Options exercisable at year-end . . . 2,000,279 797,830 238,188 ========== ======== ======== Weighted-average fair value of options granted during the year . . . . . . $ 2.85 $ 3.47 $ 3.59 ========== ======== ========
At December 31, 1997, the range of exercise prices for options outstanding was $28 - $41 and the weighted average remaining contractual life was 7 years. 63 66 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 10. COMMITMENTS AND CONTINGENCIES LAND, OFFICE AND EQUIPMENT LEASES The Operating Partnership is party to two ground leases relating to an operating community with terms expiring in years 2040 and 2043, one ground lease for a community under development with terms expiring in year 2038 and to office, equipment and other operating leases with terms expiring in years 1997 through 2004. Future minimum lease payments for noncancellable land, office, equipment and other leases at December 31, 1997 are as follows: 1998 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,296 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 2,186 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 1,090 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 804 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 202 2003 and thereafter . . . . . . . . . . . . . . . . . . 6,562
The Operating Partnership incurred $3,366, $2,172 and $2,034 of rent expense for the years ended December 31, 1997, 1996 and 1995, 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, interest rate protection agreement, accounts payable, accrued expenses, notes payable and other liabilities are carried at amounts which reasonably approximate their fair values. The fair values of treasury lock arrangements (used for hedging purposes) are estimated by obtaining quotes from an investment broker. At December 31, 1997, there were no carrying amounts related to these arrangements in the consolidated balance sheet. As of December 31, 1997, the expected cost to settle these contracts was approximately $5,300. Disclosure about fair value of financial instruments are based on pertinent information available to management as of December 31, 1997. 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. 64 67 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, 1997, 1996 and 1995, 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:
FOR THE YEAR ENDED 1997 --------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- ----------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 66,078 Less: Preferred stock distributions . . . . . . . . . . . . . . . . (4,907) ---------- BASIC EPS Income available to common Unitholders before extraordinary item . 61,171 28,880,928 $ 2.11 ========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 223,862 ---------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 61,171 29,104,790 $ 2.09 ========== =========== ==========
FOR THE YEAR ENDED 1996 --------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- ----------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 53,453 Less: Preferred stock distributions . . . . . . . . . . . . . . . . (1,063) ---------- BASIC EPS Income available to common Unitholders before extraordinary item . 52,390 26,917,723 $ 1.95 ========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 91,600 ---------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 52,390 27,009,323 $ 1.94 ========== =========== ==========
FOR THE YEAR ENDED 1995 --------------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- ------------- Income before extraordinary item . . . . . . . . . . . . . . . . . $ 38,417 Less: Preferred stock distributions . . . . . . . . . . . . . . . . -- ----------- BASIC EPS Income available to common Unitholders before extraordinary item . 38,417 23,541,639 $ 1.63 =========== EFFECT OF DILUTIVE SECURITIES Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,595 ----------- ----------- DILUTED EPS Income available to common Unitholders + assumed conversions before extraordinary item . . . . . . . . . . . . . $ 38,417 23,547,234 $ 1.63 =========== =========== ===========
65 68 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 13. SUPPLEMENTAL CASH FLOW INFORMATION Non-cash investing and financing activities for the years ended December 31, 1997, 1996 and 1995 are as follows: (a) During 1996 the Company exercised its option to purchase land in exchange for 138,150 Units of the Operating Partnership. (b) The Operating Partnership committed to distribute $21,327, $14,659 and $13,091 for the quarters ended December 31, 1997, 1996 and 1995, respectively. (c) The Merger was a stock for stock transaction. In connection with the Merger, the cash and non-cash components were are follows: Fair value of assets acquired . . . . . . . . . . . . . $ 643,268 Less: Value of stock issued in exchange for stock of Columbus . . . . . . . . . . . . . . . . . 338,353 Liabilities assumed . . . . . . . . . . . . . . . . 285,852 Cash acquired . . . . . . . . . . . . . . . . . . . 1,329 ----------- Cash component of purchase price, net of cash acquired . . . . . . . . . . . . . . . . . . . $ 17,734 ===========
66 69 POST APARTMENT HOMES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the years ended 1997 and 1996 are as follows:
YEAR ENDED DECEMBER 31, 1997* ------------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER UNIT DATA) Revenues . . . . . . . . . . . . . . . . . . . . $ 44,566 $ 46,114 $ 47,514 $ 61,922 Net income before net gain(loss) on sale of assets, loss on relocation of corporate office, and minority interest of Unitholders in Operating Partnership . . . . . . . . . . . . 14,156 14,448 15,783 19,923 Net gain(loss) on sale of assets -- 3,512 -- (242) Loss on relocation of corporate office . . . . . -- -- -- (1,500) Net income . . . . . . . . . . . . . . . . . . . 14,156 17,960 15,783 18,181 Distributions to preferred Unitholders . . . . . (1,063) (1,062) (1,062) (1,720) Net income available to common Unitholders . . . 13,093 16,898 14,721 16,461 Earnings per common Unit: Net income available to common Unitholders - basic . . . . . . . . . . . . . 0.48 0.62 0.54 0.49 Net income available to common Unitholders - diluted . . . . . . . . . . . . 0.47 0.62 0.53 0.48
YEAR ENDED DECEMBER 31, 1996* ----------------------------------------- FIRST SECOND THIRD FOURTH ---------- ---------- ---------- -------- (IN THOUSANDS, EXCEPT PER UNIT DATA) Revenues . . . . . . . . . . . . . . . . . . . $ 39,205 $ 42,578 $ 44,699 $ 44,335 Net income before net gain on sale of assets and minority interest of Unitholders in Operating Partnership . . . . . . . . . . . 12,432 12,443 13,423 14,301 Net gain on sale of assets -- -- 854 -- Net income . . . . . . . . . . . . . . . . . . 12,432 12,443 14,277 14,301 Distributions to preferred Unitholders . . . . -- -- -- (1,063) Net income available to common Unitholders . . 12,432 12,443 14,277 13,238 Earnings per common Unit: Net income available to common Unitholders - basic . . . . . . . . . . . . 0.46 0.46 0.53 0.49 Net income available to common Unitholders - diluted . . . . . . . . . . . 0.46 0.46 0.53 0.48
- -------------- * 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. 67 70 POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
INITIAL COSTS COSTS ======================= CAPITALIZED RELATED BUILDING AND SUBSEQUENT DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION ============= ============ ======== ============ =============== GEORGIA Post Ashford Apartments $9,895 (2) $1,906 $ - $7,508 Post Briarcliff Apartments - 18,785 - 549 Post Bridge Apartments 12,450 (2) 868 - 11,803 Post Brookhaven Apartments - 7,921 - 30,205 Post Canyon Apartments 16,845 (2) 931 - 15,713 Post Chase Apartments 15,000 (2) 1,438 - 14,094 Post Chastain Apartments - 6,352 - 38,042 Post Collier Hills Apartments - 6,487 - 24,925 Post Corners Apartments 14,760 (2) 1,473 - 13,655 Post Court Apartments 13,298 (2) 1,769 - 15,851 Post Creek Apartments - 10,406 36,756 2,690 Post Crest Apartments - 4,733 - 24,601 Post Crossing Apartments - 3,951 - 19,308 Post Dunwoody Apartments - 4,917 - 28,084 Post Gardens Apartments - 5,859 - 30,618 Post Glen Apartments - 5,591 - 38,196 Post Lane Apartments - 1,512 - 8,005 Post Lenox Park Apartments - 3,132 - 10,638 Post Lindbergh Apartments - 6,268 - 26,663 Post Mill Apartments 12,880 (2) 915 - 12,257 Post Oak Apartments - 2,028 - 8,105 Post Oglethorpe Apartments - 3,662 - 16,822 Post Park Apartments - 6,253 - 39,047 Post Parkwood Apartments - 1,331 - 7,290 Post Peachtree Hills Apartments - 4,215 - 13,525 Post Pointe Apartments - 2,417 - 15,347 Post Renaissance Apartments - - - 19,389 Post Ridge Apartments - 11,332 - 1,136 Post River Apartments 5,803 1,011 - 9,397 Post River - Phase II Apartments - 5,368 - 408 Post Summit Apartments 5,250 1,575 - 6,077 Post Terrace Apartments - 4,131 - 14,594 Post Valley Apartments 18,600 (2) 1,117 - 17,301 Post Vinings Apartments - 4,322 - 21,132 Post Village Apartments The Arbors Apartments - 384 - 15,677 The Fountains and The Meadows Apartments - (2) 611 - 33,132 The Gardens Apartments 14,500 (2) 187 - 24,584 The Hills Apartments 7,000 (2) 91 - 11,864 Post Walk Apartments 19,300 (2) 2,954 - 16,460 Post Woods Apartments - 1,378 - 26,146 Riverside by Post Mixed Use - 11,130 - 36,437 GROSS AMOUNTS AT WHICH CARRIED AT CLOSE OF PERIOD ===================================== BUILDING AND ACCUMULATED LAND IMPROVEMENTS TOTAL (1) DEPRECIATION ========= ============ ========= ============ GEORGIA Post Ashford $1,906 $7,508 $9,414 $2,698 Post Briarcliff 18,785 549 19,334 - Post Bridge 869 11,802 12,671 4,150 Post Brookhaven 7,921 30,205 38,126 8,376 Post Canyon 931 15,713 16,644 6,283 Post Chase 1,438 14,094 15,532 5,150 Post Chastain 6,779 37,615 44,394 10,139 Post Collier Hills 7,183 24,229 31,412 2 Post Corners 1,473 13,655 15,128 5,376 Post Court 1,769 15,851 17,620 5,393 Post Creek 10,442 39,410 49,852 2,305 Post Crest 4,763 24,571 29,334 876 Post Crossing 3,951 19,308 23,259 1,563 Post Dunwoody 4,961 28,040 33,001 3,812 Post Gardens 5,859 30,618 36,477 - Post Glen 6,029 37,758 43,787 1 Post Lane 2,067 7,450 9,517 2,404 Post Lenox Park 3,132 10,638 13,770 998 Post Lindbergh 6,670 26,261 32,931 - Post Mill 922 12,250 13,172 4,739 Post Oak 2,027 8,106 10,133 1,545 Post Oglethorpe 3,662 16,822 20,484 1,758 Post Park 8,830 36,470 45,300 10,539 Post Parkwood 1,331 7,290 8,621 614 Post Peachtree Hills 4,857 12,883 17,740 2,025 Post Pointe 3,027 14,737 17,764 4,963 Post Renaissance - 19,389 19,389 3,557 Post Ridge 11,332 1,136 12,468 - Post River 1,011 9,397 10,408 2,372 Post River - Phase II 5,368 408 5,776 - Post Summit 1,575 6,077 7,652 1,833 Post Terrace 4,148 18,726 18,725 706 Post Valley 1,117 17,301 18,418 5,815 Post Vinings 5,668 19,786 25,454 5,687 Post Village The Arbors 774 15,287 16,061 5,090 The Fountains and The Meadows 907 32,836 33,743 9,670 The Gardens 348 24,423 24,771 6,871 The Hills 165 11,790 11,955 3,817 Post Walk 2,954 16,460 19,414 6,178 Post Woods 3,070 24,454 27,524 7,888 Riverside by Post 45,854 1,713 47,567 - DEPRECIABLE DATE OF DATE LIVES CONSTRUCTION ACQUIRED YEARS ===================== =========== ============= GEORGIA Post Ashford 4/86 - 6/87 6/87 5 - 40 Years Post Briarcliff 12/96 (4) 9/96 5 - 40 Years Post Bridge 9/84 - 12/86 9/84 5 - 40 Years Post Brookhaven 7/89 - 12/92 3/89 5 - 40 Years Post Canyon 4/84 - 4/86 10/81 5 - 40 Years Post Chase 6/85 - 4/87 6/85 5 - 40 Years Post Chastain 6/88 - 10/90 6/88 5 - 40 Years Post Collier Hills 10/95 6/95 5 - 40 Years Post Corners 8/84 - 4/86 8/84 5 - 40 Years Post Court 6/86 - 4/88 12/85 5 - 40 Years Post Creek 9/81 - 8/83 5/96 5 - 40 Years Post Crest 9/95 10/94 5 - 40 Years Post Crossing 4/94 - 8/95 11/93 5 - 40 Years Post Dunwoody 11/88 12/84&8/94 (6) 5 - 40 Years Post Gardens 7/96 (4) 5/96 - Post Glen 7/96 (4) 5/96 - Post Lane 4/87 - 5/88 1/87 5 - 40 Years Post Lenox Park 3/94 - 5/95 3/94 5 - 40 Years Post Lindbergh 11/96 (4) 8/96 - Post Mill 5/83 - 5/85 5/81 5 - 40 Years Post Oak 9/92 - 12/93 9/92 5 - 40 Years Post Oglethorpe 3/93 - 10/94 3/93 5 - 40 Years Post Park 6/87 - 9/90 6/87 5 - 40 Years Post Parkwood 7/94 - 8/95 6/94 5 - 40 Years Post Peachtree Hills 2/92 - 9/94 2&11/92 (6) 5 - 40 Years Post Pointe 4/87 - 12/88 12/86 5 - 40 Years Post Renaissance 7/91 - 12/94 6/91&1/94 (6) 5 - 40 Years Post Ridge 10/96 (4) 7/96 - Post River 9/90 - 1/92 7/90 5 - 40 Years Post River - Phase II 12/96 (4) 7/90 - Post Summit 1/90 - 12/90 1/90 5 - 40 Years Post Terrace 10/94 3/94 5 - 40 Years Post Valley 3/86 - 4/88 12/85 5 - 40 Years Post Vinings 5/88 - 9/91 5/88 5 - 40 Years Post Village The Arbors 4/82 - 10/83 3/82 5 - 40 Years The Fountains and The Meadows 8/85 - 5/88 8/85 5 - 40 Years The Gardens 6/88 - 7/89 5/84 5 - 40 Years The Hills 5/84 - 4/86 4/83 5 - 40 Years Post Walk 3/86 - 8/87 6/85 5 - 40 Years Post Woods 3/76 - 9/83 6/76 5 - 40 Years Riverside by Post 7/96 (4) 1/96 -
68 71
GROSS AMOUNT AT WHICH INITIAL COSTS COSTS CARRIED AT CLOSE OF PERIOD ===================== CAPITALIZED ========================== RELATED BUILDING AND SUBSEQUENT BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS =========== ============= ======= ============ ============== ===== ============ TEXAS Addison Circle Apartment Homes by Post - Phase I Mixed Use 21,724 2,885 41,482 1,050 2,885 42,532 Addison Circle Apartment Homes by Post - Phase II Mixed Use - - 1,128 5,841 - 6,969 American Beauty Mill Apartments - 234 2,786 1,208 234 3,994 Block 580 Mixed Use - 3,334 2,536 246 3,334 2,782 Block 588 Apartments - - 48 1,278 1,278 48 Clyde Lane Apartments 1,995 2,765 895 56 2,765 951 Cole's Corner Mixed Use - 1,886 18,006 751 1,912 18,731 Columbus Square by Post Mixed Use - 4,565 24,595 47 4,565 24,642 Heights of State-Thomas Mixed Use - 2,615 15,559 4,482 2,615 20,041 Mattingly Site Apartments - 824 11 47 824 58 Midtown - Phase I Mixed Use - 2,456 1,134 402 2,456 1,536 Midtown - Phase II Mixed Use - 2,093 278 28 2,093 306 Parkway Village Apartments - 1,020 4,024 22 1,020 4,046 Post Parkwood Apartments 899 306 2,592 14 306 2,606 Post Ascension Apartments - 1,230 8,976 18 1,230 8,994 Post Hackberry Creek Apartments - 7,269 23,579 47 7,269 23,626 Post Lakeside Apartments - 3,924 20,334 38 3,924 20,372 Post Reflections Apartments - 1,188 10,005 22 1,188 10,027 Post Town Lake/Parks Apartments - 2,985 19,464 42 2,985 19,506 Post White Rock Apartments - 1,560 9,969 0 1,560 9,969 Post Winsted Apartments - 2,826 18,632 20 2,826 18,652 Post Windhaven Apartments - 4,029 23,385 34 4,029 23,419 The Shores by Post Mixed Use - 11,572 69,794 254 11,572 70,048 Springstead Condos Apartments - 225 948 (307) 181 685 The Abbey of State-Thomas Apartments - 575 6,276 1,470 575 7,746 The Commons at Turtle Creek Apartments - 1,406 7,938 48 1,406 7,986 The Meridian at State-Thomas Apartments - 1,535 11,605 25 1,535 11,630 The Residences on McKinney Apartments - 1,494 18,022 32 1,494 18,054 The Rice Apartments 1 - 13,393 3,483 - 16,876 The Vineyard of Uptown Apartments - 1,133 8,560 9 1,133 8,569 The Vintage of Uptown Apartments - 2,614 12,188 1,013 3,614 12,201 The Worthington of State-Thomas Mixed Use - 3,744 34,700 45 3,744 34,745 Thomas Tract Apartments - - 68 1,715 1,708 75 Uptown Village Apartments - 3,955 22,120 25 3,955 22,145 Villas at Valley Ranch Apartments - 212 899 (213) 212 686 Wilson Building Mixed Use - 2,766 689 111 2,766 800 Campus Circle Retail - 1,045 3,084 29 1,045 3,113 Towne Crossing Retail - 3,703 10,721 11 3,703 10,732 Post & Paddock Retail - 2,352 7,383 13 2,352 7,396 FLORIDA Post Bay Apartments - 2,203 - 13,578 2,573 13,208 Post Court Apartments - 2,083 - 9,664 2,083 9,664 Post Fountains Apartments - (2) 3,856 - 20,458 3,856 20,458 Post Harbour Island Apartments - 3,854 - 367 3,854 367 Post Hyde Park Apartments - 3,498 - 15,979 3,853 15,624 Post Lake Apartments - (2) 6,113 - 30,483 6,724 29,872 Post Rocky Point Apartments - 4,634 - 22,734 4,709 22,659 Post Rocky Point - Phase III Apartments - 7,425 - 1,290 7,425 1,290 Post Village Apartments - The Arbors Apartments - 2,063 - 14,544 2,446 14,161 The Lakes Apartments - 2,813 - 16,063 3,387 15,489 The Oaks Apartments - 3,229 - 15,230 3,855 14,604 Post Walk at Hyde Park Apartments - 1,943 - 10,770 1,974 10,739 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD DEPRECIABLE =========== ACCUMULATED DATE OF DATE LIVES TOTAL (1) DEPRECIATION CONSTRUCTION ACQUIRED YEARS =========== ============ ============ ======== =========== TEXAS Addison Circle Apartment Homes by Post - Phase I 45,417 - 10/97 (4) 10/97 - Addison Circle Apartment Homes by Post - Phase II 6,969 - 10/97 (4) 10/97 - American Beauty Mill 4,228 - 10/97 (4) 10/97 - Block 580 6,116 - 10/97 (4) 10/97 - Block 588 1,326 - 10/97 (4) 10/97 - Clyde Lane 3,716 - 10/97 (4) 10/97 - Cole's Corner 20,643 20 n/a 10/97 5 - 40 Years Columbus Square by Post 29,207 132 n/a 10/97 5 - 40 Years Heights of State-Thomas 22,656 - 10/97 (4) 10/97 - Mattingly Site 882 - 10/97 (4) 10/97 - Midtown - Phase I 3,992 - 10/97 (4) 10/97 - Midtown - Phase II 2,399 - 10/97 (4) 10/97 - Parkway Village 5,066 30 n/a 10/97 5 - 40 Years Post Parkwood 2,912 20 n/a 10/97 5 - 40 Years Post Ascension 10,224 57 n/a 10/97 5 - 40 Years Post Hackberry Creek 30,895 145 n/a 10/97 5 - 40 Years Post Lakeside 24,296 148 n/a 10/97 5 - 40 Years Post Reflections 11,215 73 n/a 10/97 5 - 40 Years Post Town Lake/Parks 22,491 140 n/a 10/97 5 - 40 Years Post White Rock 11,529 68 n/a 10/97 5 - 40 Years Post Winsted 21,478 100 n/a 10/97 5 - 40 Years Post Windhaven 27,448 144 n/a 10/97 5 - 40 Years The Shores by Post 81,620 415 n/a 10/97 5 - 40 Years Springstead Condos 866 (75) n/a 10/97 5 - 40 Years The Abbey of State-Thomas 8,321 34 n/a 10/97 5 - 40 Years The Commons at Turtle Creek 9,392 60 n/a 10/97 5 - 40 Years The Meridian at State-Thomas 13,165 72 n/a 10/97 5 - 40 Years The Residences on McKinney 19,548 138 n/a 10/97 5 - 40 Years The Rice 16,876 - 10/97 (4) 10/97 - The Vineyard of Uptown 9,702 46 n/a 10/97 5 - 40 Years The Vintage of Uptown 15,815 72 n/a 10/97 5 - 40 Years The Worthington of State-Thomas 38,489 205 n/a 10/97 5 - 40 Years Thomas Tract 1,783 - 10/97 (4) - Uptown Village 26,100 125 n/a 10/97 5 - 40 Years Villas at Valley Ranch 898 (63) n/a 10/97 5 - 40 Years Wilson Building 3,566 - 10/97 (4) - Campus Circle 4,158 16 n/a 10/97 5 - 40 Years Towne Crossing 14,435 56 n/a 10/97 5 - 40 Years Post & Paddock 9,748 39 n/a 10/97 5 - 40 Years FLORIDA Post Bay 15,781 4,296 5/87 - 12/88 5/87 5 - 40 Years Post Court 11,747 2,792 4/90 - 5/91 10/87 5 - 40 Years Post Fountains 24,314 6,671 12/85 - 3/88 12/85 5 - 40 Years Post Harbour Island 4,221 - 3/97 (4) 1/97 - Post Hyde Park 19,477 966 9/94 7/94 5 - 40 Years Post Lake 36,596 9,723 11/85 - 3/88 10/85 5 - 40 Years Post Rocky Point 27,368 1,367 4/94 2/94&9/96 (6) 5 - 40 Years Post Rocky Point - Phase III 8,715 - 11/96 (4) 9/96 - Post Village The Arbors 16,607 3,801 6/90 - 12/91 11/90 5 - 40 Years The Lakes 18,876 4,158 7/88 - 12/89 5/88 5 - 40 Years The Oaks 18,459 3,920 11/89 - 7/91 12/89 5 - 40 Years Post Walk at Hyde Park 12,713 189 10/95 - 9/97 9/95 5 - 40 Years
69 72 POST PROPERTIES, INC. POST APARTMENT HOMES, L.P. REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
INITIAL COSTS COSTS ====================== CAPITALIZED RELATED BUILDING AND SUBSEQUENT DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION ============ ============ ======== ============= =============== MISSISSIPPI Post Mark Apartments - 716 13,879 34 Post Pointe Apartments - 723 14,091 165 Post Trace Apartments - 1,944 24,616 49 VIRGINIA Post Corners at Trinity Centre Apartments - 4,404 - 23,176 Post Forest Apartments - 8,590 - 23,509 NORTH CAROLINA Post Park at Phillips Place Mixed Use - 4,685 - 21,753 TENNESSEE Post Green Hills Apartments - 2,464 - 13,629 Post Hillsboro Village Apartments 1,685 2,255 2,555 585 The Lee Apartments Apartments 1,324 720 2,125 36 MISCELLANEOUS INVESTMENTS - 15,560 703 23,842 ---------- ---------- -------- ---------- TOTAL $ 193,209 $ 334,811 $572,531 $1,028,669 ========== ========== ======== ========== GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD ======================================== BUILDING AND ACCUMULATED DATE OF DATE LAND IMPROVEMENTS TOTAL (1) DEPRECIATION CONSTRUCTION ACQUIRED ========== ============ ============ ============ ============ =========== MISSISSIPPI Post Mark 717 13,912 14,629 109 n/a 10/97 Post Pointe 723 14,256 14,979 74 n/a 10/97 Post Trace 1,944 24,665 26,609 150 n/a 10/97 VIRGINIA Post Corners at Trinity Centre 4,493 23,087 27,580 1,338 6/94 6/94 Post Forest 9,106 22,993 32,099 7,502 1/89 - 12/90 3/88 NORTH CAROLINA Post Park at Phillips Place 3,190 23,248 26,438 1 1/96 11/95 TENNESSEE Post Green Hills 2,505 13,588 16,093 854 9/94 7/94 Post Hillsboro Village 2,369 3,026 5,395 - 12/96 (4) 8/96 The Lee Apartments 720 2,161 2,881 67 n/a (5) 8/96 MISCELLANEOUS INVESTMENTS 15,560 13,200 40,105 5,707 -------- ---------- ----------- --------- TOTAL $386,234 $1,542,581 $ 1,936,011 $ 201,095 ======== ========== =========== ========= DEPRECIABLE LIVES YEARS ============ MISSISSIPPI Post Mark 5 - 40 Years Post Pointe 5 - 40 Years Post Trace 5 - 40 Years VIRGINIA Post Corners at Trinity Centre 5 - 40 Years Post Forest 5 - 40 Years NORTH CAROLINA Post Park at Phillips Place 5 - 40 Years TENNESSEE Post Green Hills 5 - 40 Years Post Hillsboro Village - The Lee Apartments 5 - 40 Years MISCELLANEOUS INVESTMENTS 5 - 40 Years TOTAL
(1) The aggregate cost for Federal Income Tax purposes to the Company was approximately $1,702,403 at December 31, 1997, 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, 1997. (5) The Company acquired this community during 1996. The Company is operating the community while evaluating whether whether to hold, renovate or sell the community. (6) Additional land was acquired for construction of a second phase. ============================= A summary of activity for real estate investments and accumulated depreciation is as follows:
YEAR ENDED DECEMBER, 31 ============================================= 1997 1996 1995 =========== =========== ========== Real estate investments: Balance at beginning of year $ 1,109,342 $ 937,924 $ 828,585 Purchase of minority interests in certain property partnerships - - 10,149 Purchase of assets in connection with the Merger 635,732 Improvements 216,020 183,910 127,150 Disposition of property (25,083) (12,492) (27,960) ----------- ----------- --------- Balance at end of year $ 1,936,011 $ 1,109,342 $ 937,924 =========== =========== ========= Accumulated depreciation: Balance at beginning of year $ 177,672 $ 156,824 $ 142,576 Depreciation 29,023 [A] 23,372 [A] 20,681 [A] Depreciation on disposed property (5,600) (2,524) (6,433) ----------- ----------- --------- Balance at end of year $ 201,095 $ 177,672 $ 156,824 =========== =========== =========
[a] Depreciation expense in the Consolidated Statements for the years ended December 31, 1997, 1996 and 1995, include $25, $231 and $138, respectively, of depreciation expense on other assets. 70 73 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, 1997 and 1996 and the changes in net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Atlanta, Georgia March 20, 1998 71 74 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 -------- -------- ASSETS Receivable from Post Apartment Homes, L.P. . . . . . . $440,170 $424,015 -------- ======== NET ASSETS AVAILABLE FOR PLAN BENEFITS Net Assets available for Plan Benefits . . . . . . . . $440,170 $424,015 ======== ========
72 75 POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 ---------- ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1 . . . . $ 424,015 $ 805,797 DEDUCTIONS: Purchase of participants' shares . . . . . . . . . . . (961,877) (1,162,977) Payment for payroll taxes on behalf of participants . . . . . . . . . . . . . . . . . . . (63,869) (70,204) ADDITIONS: Participant contributions . . . . . . . . . . . . . . . 1,041,901 851,399 ---------- ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31 . . . $ 440,170 $ 424,015 ========== ===========
73 76 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: Upon adoption by the Company's Board of Directors, 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% 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 subsidiary. 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 incomes 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 Participant contributions. The fair market value of the shares is determined as of the stock purchase date. 74 77 3. EXHIBITS Certain of the exhibits required by Item 601 of Regulation S-K have been filed with previous reports by the registrant and are herein incorporated by reference thereto. The Registrant agrees to furnish a copy of all agreements relating to long-term debt upon request of the Commission.
EXHIBIT NO. DESCRIPTION 2.1+++ -- Agreement and Plan of Merger dated as of August 1, 1997 among Post Properties, Inc. (the "Company"), Columbus Realty Trust ("Columbus") and Post LP Holdings, Inc. (subsequently renamed Post Interim Holdings, Inc.), a wholly owned subsidiary of the Company. 3.1* -- Articles of Incorporation of the Company 3.2* -- Bylaws of the Company 4.1*** -- Indenture between the Company and Sun Trust Bank, Atlanta, as Trustee 10.1 -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership 10.2 -- First Amendment to Second Amended and Restated Partnership Agreement 10.3 -- Second Amendment to Second Amended and Restated Partnership Agreement 10.4** -- Employee Stock Plan 10.5 -- Amendment to Employee Stock Plan 10.6 -- Amendment No. 2 to Employee Stock Plan 10.7 -- Amendment No. 3 to Employee Stock Plan 10.8 -- Amendment No. 4 to Employee Stock Plan 10.9** -- Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams 10.10** -- Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover 10.11** -- Employment Agreement between the Company and John A. Williams 10.12** -- Employment Agreement between the Company and John T. Glover 10.13** -- Employment Agreement between the Operating Partnership and John A. Williams 10.14** -- Employment Agreement between the Operating Partnership and John T. Glover 10.15** -- Employment Agreement between Post Services, Inc. and John A. Williams 10.16** -- Employment Agreement between Post Services, Inc. and John T. Glover 10.17** -- Option and Transfer Agreement among the Operating Partnership, Post Services, John A. Williams and John T. Glover 10.18** -- Promissory Note made by Post Services, Inc. in favor of RAM Partners, Inc. 10.19 -- Form of officers and directors Indemnification Agreement 10.20* -- Form of Option Agreement to be entered into between the Operating Partnership and the owners of four parcels of undeveloped land 10.21* -- Profit Sharing Plan of the Company 10.22 -- Amendment Number One to Profit Sharing Plan 10.23 -- Amendment Number Two to Profit Sharing Plan 10.24 -- Amendment Number Three to Profit Sharing Plan 10.25 -- Amendment Number Four to Profit Sharing Plan 10.26** -- Form of General Partner 1% Exchange Agreement 10.27+ -- Employee Stock Purchase Plan 10.28 -- Amendment to Employee Stock Purchase Plan 10.29++ -- Amended and Restated Dividend Reinvestment and Stock Purchase Plan 10.30 -- Amended and Restated Credit Agreement dated as of April 9, 1997 among Post Apartment Homes, L.P., Wachovia Bank of Georgia, N.A., as administrative agent, First Union National Bank of Georgia, as Co- Agent, and the banks listed on the signature pages thereto (the "Credit Agreement")
75 78
EXHIBIT NO. DESCRIPTION 10.31 -- First Amendment to Credit Agreement dated December 17, 1997 21.1 -- List of Subsidiaries 23.1 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-8 (No. 333-38725) 23.2 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-8 (No. 33-86674) 23.3 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-3 (No. 33-81772) 23.4 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-3 (No. 333-39461) 23.5 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-3 (No. 333-36595) 23.6 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-3 (No. 333-47399) 23.7 -- Consent of Price Waterhouse LLP for Registration Statement on Form S-8 (No. 33-00020) 27.1 -- Financial Data Schedule for the Company for the year ended December 31, 1997 (for SEC use only) 27.2 -- Financial Data Schedule for the Operating Partnership for the year ended December 31, 1997 (for SEC use only) 27.3 -- Financial Data Schedule for the Company for the year ended December 31, 1996 (for SEC use only) 27.4 -- Financial Data Schedule for the Operating Partnership for the year ended December 31, 1996 (for SEC use only)
- --------------- * Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-61936), as amended, of the Company. ** Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No. 33-71650), as amended, of the Company. *** Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No. 333-3555) of the Company. + Filed as an exhibit to the Registration Statement on Form S-8 (SEC File No. 33-86674) of the Company. ++ Filed as part of the Registration Statement on Form S-3 (SEC File No. 333-39461) of the Company. +++ Filed as an exhibit to the Current Report on Form 8-K, dated as of August 6, 1997, of the Company. The Company's proxy statement is expected to be filed with the Commission on or about April 7, 1998. (b) Reports on Form 8-K During the fourth quarter of fiscal 1997, the Company and the Operating Partnership filed current reports on Form 8-K on October 22, 1997 and October 28, 1997 and the Operating Partnership filed a current report on Form 8-K on November 7, 1997. 76 79 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POST PROPERTIES, INC. (Registrant) March 30,1998 John T. Glover -------------- ------------------------------------ John T. Glover, President Chief Operating Officer, Treasurer and a Director (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE John A. Williams Chairman of the Board, Chief - ----------------------------------- Executive Officer and Director March 30, 1998 John A. Williams John T. Glover President, Chief Operating Officer, - ----------------------------------- Treasurer, Principal Financial March 30, 1998 John T. Glover Officer, and Director Robert Shaw President, Post West - ----------------------------------- March 30, 1998 Robert Shaw R. Gregory Fox Senior Vice President, Chief - ----------------------------------- Accounting Officer March 30, 1998 R. Gregory Fox Arthur M. Blank Director - ----------------------------------- Arthur M. Blank March 30, 1998 Herschel M. Bloom Director - ----------------------------------- Herschel M. Bloom March 30, 1998 Russell R. French Director - ----------------------------------- Russell R. French March 30, 1998 William A. Parker, Jr. Director - ----------------------------------- William A. Parker, Jr. March 30, 1998 Charles Rice Director - ----------------------------------- Charles Rice March 30, 1998 J.C. Shaw Director - ----------------------------------- J.C. Shaw March 30, 1998
77 80 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 30, 1998 John T. Glover --------------- ------------------------------------------------ John T. Glover, President Chief Operating Officer, Treasurer and Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE John A. Williams Chief Executive Officer March 30, 1998 ----------------------------------- John A. Williams John T. Glover President, Chief Operating Officer, March 30, 1998 ----------------------------------- Treasurer and Principal Financial John T. Glover Officer R. Gregory Fox Senior Vice President, Chief March 30, 1998 ----------------------------------- Accounting Officer R. Gregory Fox
78 EX-10.1 2 2ND AMEND & RESTATED AGRMT OF LMTD PARTNERSHIP 1 EXHIBIT 10.1 _______________________________________________________________________________ _______________________________________________________________________________ SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF POST APARTMENT HOMES, L.P. Dated as of October 24, 1997 _______________________________________________________________________________ _______________________________________________________________________________ 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.3 Registered Office and Agent; Principal Office . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.4 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 3 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.1 Purpose and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 4 CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4.1 Capital Contributions of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4.2 Issuances of Additional Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.3 Contribution of Proceeds of Issuance of REIT Shares . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 5 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 5.1 Requirement and Characterization of Distributions . . . . . . . . . . . . . . . . . . . . . 19 Section 5.2 Amounts Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 5.3 Distributions Upon Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE 6 ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.1 Allocations For Capital Account Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.2 Certificate of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 7.3 Restrictions on General Partner's Authority . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 7.4 Reimbursement of the General Partner and PPI . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.5 Outside Activities of the General Partner, Post LP Holdings and PPI . . . . . . . . . . . . 28
i 3 Section 7.6 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.8 Liability of the General Partner and PPI . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.9 Other Matters Concerning the General Partner . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.10 Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.11 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 8.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 8.2 Management of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 8.3 Outside Activities of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 8.4 Return of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 8.5 Rights of Limited Partners Relating to the Partnership . . . . . . . . . . . . . . . . . . 34 Section 8.6 Redemption Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 9.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 10 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 10.1 Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 10.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 10.3 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 10.4 Organizational Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 10.5 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE 11 TRANSFERS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 11.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 11.2 Transfer of Post Partners' Partnership Interests or PPI's Ownership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 11.3 Limited Partners' Rights to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 11.4 Substituted Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 11.5 Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 11.6 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE 12 ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 12.1 Admission of Successor General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 45
-ii- 4 Section 12.2 Admission of Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 12.3 Amendment of Agreement and Certificate of Limited Partnership . . . . . . . . . . . . . . . 46 ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 13.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 13.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 13.3 Negative Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 13.4 Deemed Distribution and Recontribution . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 13.5 Rights of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 13.6 Notice of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 13.7 Termination of Partnership and Cancellation of Certificate of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 13.8 Reasonable Time for Winding-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 13.9 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 14.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 14.2 Meetings of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE 15 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 15.1 Addresses and Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 15.2 Titles and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 15.3 Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 15.4 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 15.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 15.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 15.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 15.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 15.9 Invalidity of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 15.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Exhibits: Exhibit A - Partner, Contributions and Partnership Interests Exhibit B - Capital Account Maintenance Exhibit C - Special Allocation Rules Exhibit D - Value of Contributed Property Exhibit E - Notice of Redemption Exhibit F - Designation of the Voting Powers, Designation, Preferences and Relative, Participating, Optional or Other Special Rights and Qualifications, Limitations or Restrictions of the Series A Preferred Partnership Units
-iii- 5 SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF POST APARTMENT HOMES, L.P. THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of October 24, 1997, is entered into by and among Post GP Holdings, Inc. ("Post GP Holdings"), a Georgia corporation, as the General Partner, and the Persons whose names are set forth on Exhibit A as attached hereto, as the Limited Partners, including Post LP Holdings, Inc. ("Post LP Holdings"), a Georgia corporation, together with any other Persons who become Partners in the Partnership as provided herein. Post Properties, Inc. ("PPI"), a Georgia corporation, owns all of the stock of Post GP Holdings and Post LP Holdings but is not a partner in the Partnership. ARTICLE 1 DEFINED TERMS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Act" means the Georgia Revised Uniform Limited Partnership Act (Official Code of Georgia Annotated, Sections 14-9-100 et seq.), as it may be amended from time to time, and any successor to such statute. References to specific Sections of the Act refer to the corresponding Sections of the Official Code of Georgia Annotated. "Additional Limited Partner" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on the books and records of the Partnership. "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each Partnership Year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account as of the end of the relevant Partnership Year. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to 6 Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Exhibit B hereof. "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests, or (iv) any officer, director, general partner or trustee of such Person or of any Person referred to in clauses (i), (ii), and (iii) above. "Agreed Value" means (i) in the case of any Contributed Property set forth in Exhibit D and as of the time of its contribution to the Partnership, the Agreed Value of such property as set forth in Exhibit D; (ii) in the case of any Contributed Property not set forth in Exhibit D and as of the time of its contribution to the Partnership, the 704(c) Value of such property or other consideration, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed, and (iii) in the case of any property distributed to a Partner by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the Regulations thereunder. "Agreement" means this Second Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time. "Articles of Incorporation" means the Articles of Restatement of the Articles of Incorporation of PPI filed in the State of Georgia on July 21, 1993, as amended or restated from time to time. "Assignee" means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5. "Available Cash" means, with respect to any period for which such calculation is being made, (i) the sum of: (a) the Partnership's Net Income or Net Loss (as the case may be) for such period (without regard to adjustments resulting from allocations described in Sections 1.A through 1.E of Exhibit C), (b) Depreciation and all other noncash charges deducted in determining Net Income or Net Loss for such period, -2- 7 (c) the amount of any reduction in the reserves of the Partnership referred to in clause (ii)(f) below (including, without limitation, reductions resulting because the General Partner determines such amounts are no longer necessary), (d) the excess of proceeds from the sale, exchange, disposition, or refinancing of Partnership property for such period over the gain (or loss, as the case may be) recognized from such sale, exchange, disposition, or refinancing during such period (excluding Terminating Capital Transactions), and (e) all other cash received by the Partnership for such period that was not included in determining Net Income or Net Loss for such period; (ii) less the sum of: (a) all principal debt payments made during such period by the Partnership, (b) capital expenditures made by the Partnership during such period, (c) investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clause (ii)(a) or (ii)(b), (d) all other expenditures and payments not deducted in determining Net Income or Net Loss for such period, (e) any amount included in determining Net Income or Net Loss for such period that was not received by the Partnership during such period, (f) the amount of any increase in reserves during such period which the General Partner determines to be necessary or appropriate in its sole and absolute discretion, and (g) the amount of any working capital accounts and other cash or similar balances which the General Partner determines to be necessary or appropriate in its sole and absolute discretion. Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership. "Book-Tax Disparities" means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such -3- 8 Partner's Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close. "Capital Account" means the Capital Account maintained for a Partner pursuant to Exhibit B hereof. "Capital Contribution" means, with respect to any Partner, any cash, cash equivalents or the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1, 4.2 or 4.3 hereof. "Carrying Value" means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Property charged to the Partners' Capital Accounts, and (ii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B hereof, and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "Cash Amount" means an amount of cash equal to the Value on the Valuation Date of the REIT Shares Amount. "Certificate" means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Georgia Secretary of State, as amended from time to time in accordance with the terms hereof and the Act. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Common Partnership Unit" means a Partnership Unit that is not a Preferred Partnership Unit. "Consent" means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2 hereof. "Contributed Property" means each property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership (or deemed -4- 9 contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B hereof, such property shall no longer constitute a Contributed Property for purposes of Exhibit B hereof, but shall be deemed an Adjusted Property for such purposes. "Conversion Factor" means 1.0, provided that in the event that PPI (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. "Debt" means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized. "Depreciation" means, for each fiscal year, an amount equal to the federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner. "Effective Date" means October 24, 1997. "General Partner" means Post GP Holdings or its successors as general partner of the Partnership. -5- 10 "General Partner Interest" means a Partnership Interest held by the General Partner that is a general partnership interest. A General Partner Interest may be expressed as a number of Partnership Units. "IRS" means the Internal Revenue Service, which administers the internal revenue laws of the United States. "Immediate Family" means, with respect to any natural Person, such natural Person's spouse and such natural Person's natural or adoptive parents, descendants, nephews, nieces, brothers, and sisters. "Incapacity" or "Incapacitated" means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him incompetent to manage his Person or his estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership which is a Partner, the dissolution and commencement of winding up of the partnership; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate's entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner's creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner's properties, (f) any proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Partner's consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment, or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay. "Indemnitee" means (i) any Person made a party to a proceeding by reason of (A) its status as the General Partner, (B) its status as the sole shareholder of the General Partner (i.e. PPI), (C) his status as a director or officer of the Partnership, the General Partner PPI or any Subsidiary of PPI or the Partnership, or (D) his or its liability, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including without limitation any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and (ii) such other Persons (including Affiliates and Subsidiaries of the General Partner, -6- 11 PPI or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion. "IPO" means the closing on July 22, 1993 of the initial public offering of shares of PPI pursuant to that certain Purchase Agreement among Post Apartment Homes, L.P., PPI and the representatives of the several underwriters. "Limited Partner" means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person's capacity as a Limited Partner in the Partnership. The General Partner shall maintain the information set forth in Exhibit A hereto, as such information shall change from time to time, in such form as the General Partner deems appropriate for the conduct of the Partnership's affairs, and Exhibit A shall be deemed amended from time to time to reflect the information so maintained by the General Partner, whether or not a formal amendment to this Agreement has been executed amending such Exhibit A. Such information shall reflect (and Exhibit A shall be deemed amended from time to time to reflect) the issuance of any additional Partnership Units to the General Partner or any other Person, the transfer of Partnership Units and the redemption of any Partnership Units, all as contemplated herein. "Limited Partner Interest" means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of Partnership Units of any one or more classes. "Liquidation Preference Amount" means, with respect to any Preferred Partnership Unit, the amount payable with respect to such Preferred Partnership Unit (as established by the instrument designating such Preferred Partnership Units) upon the voluntary or involuntary dissolution, liquidation or winding up of the Partnership, or upon the earlier redemption of such Preferred Partnership Units, as the case may be. "Liquidator" has the meaning set forth in Section 13.2. "Net Income" means, for any taxable period, the excess, if any, of the Partnership's items of income and gain for such taxable period over the Partnership's items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Exhibit B. Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Exhibit C, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item. -7- 12 "Net Loss" means, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction for such taxable period over the Partnership's items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Exhibit B. Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item. "Nonrecourse Built-in Gain" means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. "Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c). "Nonrecourse Liability" has the meaning set forth in Regulations Section 1.752-1(a)(2). "Notice of Redemption" means the Notice of Redemption substantially in the form of Exhibit E to this Agreement. "Original Limited Partner" means a Limited Partner who was a Partner on the date of closing of the IPO and who owns one or more Original Limited Partnership Units on the date action is called for under Section 13.1. "Original Limited Partnership Unit" means a Partnership Unit held by an Original Limited Partner on the date of closing of the IPO and held by such Original Limited Partner on the date action is called for under Section 13.1. "Ownership Interest" means the stock and securities (including evidence of indebtedness) of the General Partner and Post LP Holdings at any time owned or held directly or indirectly by PPI. "Partner" means a General Partner or a Limited Partner, and "Partners" means the General Partner and the Limited Partners. "Partner Minimum Gain" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3). "Partner Nonrecourse Debt" has the meaning set forth in Regulations Section 1.704-2(b)(4). -8- 13 "Partner Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2). "Partnership" means the limited partnership formed under the Act and pursuant to the Prior Agreement, as amended and restated pursuant to this Agreement, and any successor thereto. "Partnership Interest" means an ownership interest in the Partnership representing a Capital Contribution by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be expressed as a number of Partnership Units. "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d). "Partnership Record Date" means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution. "Partnership Unit" means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2. The ownership of Partnership Units may be evidenced by such form of certificate for units, if any, as the General Partner adopts from time to time on behalf of the Partnership. Without limitation on the authority of the General Partner as set forth in Section 4.2 hereof, the General Partner may designate any Partnership Units, when issued, as Common Partnership Units or as Preferred Partnership Units, may establish any other class of Partnership Units, and may designate one or more series of any class of Partnership Units. "Partnership Year" means the fiscal year of the Partnership, which shall be the calendar year. "Percentage Interest" means, as to a Partner, with respect to any class of Partnership Units held by such Partner, its interest in such class of Partnership Units as determined by dividing the number of Partnership Units in such class owned by such Partner by the total number of Partnership Units in such class then outstanding. "Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity. "Post GP Holdings" means Post GP Holdings, Inc., a Georgia corporation. -9- 14 "Post LP Holdings" means Post LP Holdings, Inc., a Georgia corporation. "PPI" means Post Properties, Inc., a Georgia corporation. "Post Merger Sub" means Post Interim Holdings, Inc., a Georgia corporation formerly known as Post LP Holdings, Inc., or more fully discussed in Section 12.4 hereof. "Post Partners" means Post GP Holdings and Post LP Holdings. "Preferred Partnership Unit" means any Partnership Unit issued from time to time pursuant to Section 4.2 hereof that is designated by the General Partner at the time of its issuance as a Preferred Partnership Unit. Each Preferred Partnership Unit shall have such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partner Interests and Common Partnership Units, all as shall be determined by the General Partner subject to the requirements of Section 4.2 hereof. "Principal" means each of John A. Williams and John T. Glover, in his individual capacity as a Limited Partner. "Principal-Controlled Partnership" means any of those certain general partnerships which, on the date of execution of this Agreement, has as its sole partners a Principal and a corporation which is wholly owned by such Principal and which becomes a Partner at the time of execution of this Agreement by reason of a Capital Contribution pursuant to Section 4.1 hereof. "Prior Agreement" means the Agreement of Limited Partnership of Post Apartment Homes, L.P., dated as of May 14, 1993, between PPI as the sole general partner and John A. Williams as the sole limited partner, as amended and restated in its entirety by the First Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated as of July 22, 1993, between PPI as the sole general partner and the Limited Partners of Post Apartment Homes, L.P., as further amended by the First Amendment to First Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated as of October 1, 1996, and as further amended by the Second Amendment to First Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated as of October 15, 1996, which Prior Agreement is, itself, amended and restated in its entirety by this Agreement as of the Effective Date. "Recapture Income" means any gain recognized by the Partnership upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Redeeming Partner" has the meaning set forth in Section 8.6 hereof. "Redemption Amount" means either the Cash Amount or the REIT Shares Amount, as determined by PPI in its sole and absolute discretion. A Redeeming Partner shall have no right, -10- 15 without the General Partner's and PPI's consent, to receive the Redemption Amount in the form of the REIT Shares Amount. "Redemption Right" shall have the meaning set forth in Section 8.6 hereof. "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "REIT" means a real estate investment trust under Section 856 of the Code. "REIT Share" shall mean a share of common stock of PPI. "REIT Shares Amount" shall mean a number of REIT Shares equal to the product of the number of Common Partnership Units offered for redemption by a Redeeming Partner, multiplied by the Conversion Factor; provided that in the event PPI issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the "rights") then the REIT Shares Amount shall also include such rights that a holder of that number of REIT Shares would be entitled to receive. "Residual Gain" or "Residual Loss" means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities. "704(c) Value" of any Contributed Property means the value of such property as set forth in Exhibit D, or if no value is set forth in Exhibit D, the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the 704(c) Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Values of Contributed Properties in a single or integrated transaction among the separate properties on a basis proportional to their respective fair market values. "Series A Preferred Partnership Unit" means a Partnership Unit issued by the Partnership to PPI in consideration of the contribution by PPI to the Partnership of the entire net proceeds received by PPI from the issuance of the Series A Preferred Shares on October 1, 1996. The Series A Preferred Partnership Units constitute Preferred Partnership Units. The Series A Preferred Partnership Units have the voting powers, designation, preferences and relative, participating, -11- 16 optional or other special rights and qualifications, limitations or restrictions as are set forth in Exhibit F, attached hereto. Each Series A Preferred Partnership Unit shall be substantially the economic equivalent of a Series A Preferred Share. The Series A Preferred Partnership Units have been assigned by PPI to the Post Partners as of the Effective Date. "Series A Preferred Shares" means the 8 1/2% Series A Cumulative Redeemable Preferred Shares, par value $0.01 per share, having a liquidation preference equivalent to $50.00 per share, issued by PPI on October 1, 1996. "Series 1996A Common Partnership Units" means a Partnership Unit issued by the Partnership to John A. Williams and L. Barry Teague, as Additional Limited Partners, on October 15, 1996 pursuant to Section 14.2. The Series 1996A Common Partnership Units constitute Common Partnership Units. The Series 1996A Common Partnership Units have the same designation, preferences and relative, participating, optional and other special rights, powers and duties as all other Common Partnership Units outstanding as of October 15, 1996, with the exception that no Series 1996A Common Partnership Units may be redeemed pursuant to Section 8.6 hereof at any time prior to October 15, 1998. "Specified Redemption Date" means the tenth (10th) Business Day after receipt by the General Partner of a Notice of Redemption; provided that with respect to any Series 1996A Common Partnership Unit, no Specified Redemption Date shall occur prior to October 15, 1998 (i.e., two years following the issuance of the Series 1996A Common Partnership Units); and provided further, that if PPI combines its outstanding REIT Shares, no specified Redemption Date shall occur after the record date and prior to the effective date of such combination. "Subsidiary" means, with respect to any Person, any corporation, partnership or other entity of which a majority of (i) the voting power of the voting equity securities, or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person. "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4. "Terminating Capital Transaction" means any sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Exhibit B hereof) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B hereof) as of such date. "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment -12- 17 to be made pursuant to Exhibit B hereof) as of such date, over (ii) the fair market value of such property (as determined under Exhibit B hereof) as of such date. "Valuation Date" means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter. "Value" means, with respect to a REIT Share, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the Valuation Date. The market price for each such trading day shall be: (i) if the REIT Shares are listed or admitted to trading on any securities exchange or the Nasdaq National Market, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day; (ii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by PPI; or (iii) if the REIT Shares are not listed or admitted to trading on any securities exchange or the Nasdaq National Market and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by PPI, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Value of the REIT Shares shall be determined by PPI acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount includes rights that a holder of REIT Shares would be entitled to receive, then the Value of such rights shall be determined by PPI acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. ARTICLE 2 ORGANIZATIONAL MATTERS Section 2.1 Organization The Partnership is a limited partnership organized pursuant to the provisions of the Act and upon the terms and conditions set forth in the Prior Agreement. The Partners hereby amend and restate the Prior Agreement in its entirety as of the Effective Date. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes. -13- 18 Section 2.2 Name The name of the Partnership is Post Apartment Homes, L.P. The Partnership's business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners. Section 2.3 Registered Office and Agent; Principal Office The address of the registered office of the Partnership in the State of Georgia is located at 1201 Peachtree Street, N.E., Suite 1240, Atlanta, Georgia 30361, and the registered agent for service of process on the Partnership in the State of Georgia at such registered office is CT Corporation System. The principal office of the Partnership is located at Suite 2200, 3350 Cumberland Circle, N.W., Atlanta, Georgia 30339, and may be changed to such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Georgia as the General Partner deems advisable. Section 2.4 Power of Attorney A. Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: (1) execute, swear to, seal, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Georgia and in all other jurisdictions in which the Partnership may or plans to conduct business or own property; (b) all instruments that the General Partner or the Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the -14- 19 dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article 11, 12 or 13 hereof or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and (2) execute, swear to, seal, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement. Nothing contained herein shall be construed as authorizing the General Partner or the Liquidator to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement. B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner or any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Units and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner's or Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership. Section 2.5 Term The term of the Partnership commenced on May 14, 1993, the date the Certificate was filed in the office of the Secretary of State of Georgia in accordance with the Act and shall continue until -15- 20 December 31, 2092, unless the Partnership is dissolved sooner pursuant to the provisions of Article 13 or as otherwise provided by law. ARTICLE 3 PURPOSE Section 3.1 Purpose and Business The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit PPI at all times to be classified as a REIT, unless PPI ceases to qualify as a REIT for reasons other than the conduct of the business of the Partnership, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or to own interests in any entity engaged in any of the foregoing, and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting PPI's right in its sole discretion to cease qualifying as a REIT, the Partners acknowledge that PPI's current status as a REIT inures to the benefit of all of the Partners and not solely the Post Partners, as wholly owned subsidiaries of PPI. Section 3.2 Powers The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, provided that the Partnership shall not take, or refrain from taking, any action which, in the judgment of the General Partner or PPI, in its sole and absolute discretion, (i) could adversely affect the ability of PPI to continue to qualify as a REIT, (ii) could subject PPI to any additional taxes under Section 857 or Section 4981 of the Code; or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over PPI or its securities, unless such action (or inaction) shall have been specifically consented to by the General Partner and PPI in writing. ARTICLE 4 CAPITAL CONTRIBUTIONS Section 4.1 Capital Contributions of the Partners Capital Contributions made by Partners at the time of and prior to the execution of this Agreement are set forth in Exhibit A to this Agreement. To the extent the Partnership acquires any property by the merger of any other Person into the Partnership, Persons who receive Partnership Interests in exchange for their interests in the Person merging into the Partnership shall become -16- 21 Partners and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement. Each Partner shall own Partnership Units in the amount set forth for such Partner in Exhibit A, as amended from time to time, and shall have a Percentage Interest in each class of Partnership Units determined as set forth herein, which Percentage Interest shall be adjusted from time to time by the General Partner to the extent necessary to reflect accurately redemptions, Capital Contributions, the issuance of additional Partnership Units (pursuant to any merger or otherwise), or similar events having an effect on a Partner's Percentage Interest. Except as provided in Sections 4.2, 10.5, and 13.3, the Partners shall have no obligation to make any additional Capital Contributions or loans to the Partnership. Section 4.2 Issuances of Additional Partnership Interests A. The General Partner is hereby authorized to cause the Partnership from time to time to issue to the Partners (including the Post Partners) or other Persons additional Partnership Units or other Partnership Interests in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any of the Limited Partners, subject to Georgia law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership, provided that no such additional Partnership Units or other Partnership Interests shall be issued to PPI or any Post Partner unless either (a) (1) the additional Partnership Interests are issued in connection with an issuance of shares of PPI, which shares have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the Post Partners in accordance with this Section 4.2.A, and (2) PPI shall transfer to one or both of the Post Partners, by loan or capital contribution, an amount equal to the proceeds raised in connection with the issuance of such shares of PPI and, in turn, the applicable Post Partners shall make Capital Contributions to the Partnership in an aggregate amount equal to the amount transferred to them by PPI; or (b) the additional Partnership Interests are issued to all Partners holding Common Partnership Units in proportion to their respective Percentage Interests in Common Partnership Units. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the interest of PPI and the Partnership (for example, and not by way of limitation, the issuance of Partnership Units pursuant to an employee purchase plan -17- 22 providing for employee purchases of Partnership Units at a discount from fair market value or employee options that have an exercise price that is less than the fair market value of the Partnership Units, either at the time of issuance or at the time of exercise). B. PPI shall not issue any additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6), or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares (collectively, "New Securities") other than to all holders of REIT Shares unless (i) the General Partner shall cause the Partnership to issue to the Post Partners Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the New Securities; and (ii) PPI transfers to one or both of the Post Partners, by loan or contribution, the proceeds from the issuance of such New Securities and from the exercise of rights contained in such New Securities and the applicable Post Partners, in turn, contribute the amount so transferred to them to the Partnership. Without limiting the foregoing, PPI is expressly authorized to issue New Securities for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the Post Partners corresponding Partnership Interests, so long as (x) the General Partner concludes in good faith that such issuance is in the interest of PPI and the Partnership (for example, and not by way of limitation, the issuance of REIT Shares and corresponding Partnership Units pursuant to an employee stock purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise), and (y) PPI transfers all proceeds from such issuance and exercise to the Post Partners, whether by loan or capital contribution, and the Post Partners, in turn, contribute the amount so transferred to them to the Partnership. Section 4.3 Contribution of Proceeds of Issuance of REIT Shares In connection with the issuance of REIT Shares pursuant to Section 4.2, PPI shall transfer to one or both of the Post Partners any proceeds raised in connection with such issuance, by loan or capital contribution, and the applicable Post Partners, in turn, shall contribute the amount so transferred to them to the Partnership, provided that if the proceeds actually received by PPI are less than the gross proceeds of such issuance as a result of any underwriter's discount or other expenses paid or incurred in connection with such issuance, then PPI shall be deemed to have transferred to the applicable Post Partners, by loan or capital contribution, and the applicable Post Partners shall be deemed in turn to have made Capital Contributions to the Partnership, in the amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have reimbursed the Post Partners pursuant to Section 7.4.C, and the Post Partners in turn shall be deemed to have reimbursed PPI, for the amount of such underwriter's discount or other expenses paid by PPI. -18- 23 ARTICLE 5 DISTRIBUTIONS Section 5.1 Requirement and Characterization of Distributions The General Partner shall cause the Partnership to distribute quarterly an amount equal to 100% of Available Cash generated by the Partnership during such quarter to the Partners who are Partners on the Partnership Record Date with respect to such quarter in the following order of priority: (i) First, to the holders of the Preferred Partnership Units in such amount as is required for the Partnership to pay all distributions with respect to such Preferred Partnership Units due or payable in accordance with the instruments designating such Preferred Partnership Units through the last day of such quarter; such distributions shall be made to such Partners in such order of priority and with such preferences as have been established with respect to such Preferred Partnership Units as of the last day of such calendar quarter; and then (ii) To the holders of Common Partnership Units in proportion to their respective Percentage Interests held with respect to Common Partnership Units on such Partnership Record Date; provided that in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit if such Partner is entitled to receive a distribution out of such Available Cash with respect to a REIT Share for which such Partnership Unit has been redeemed or exchanged. The General Partner shall take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with PPI's qualification as a REIT, to distribute Available Cash to the Limited Partners so as to preclude any such distribution or portion thereof from being treated as part of a sale of property to the Partnership by a Limited Partner under Section 707 of the Code or the Regulations thereunder; provided that PPI, the General Partner and the Partnership shall not have liability to a Limited Partner under any circumstances as a result of any distribution to a Limited Partner being so treated. Notwithstanding anything to the contrary contained herein, in no event shall any Partner receive a distribution of Available Cash with respect to any Common Partnership Unit with respect to any quarter until such time as the Partnership has distributed to the holders of the Preferred Partnership Units an amount sufficient to pay all distributions payable with respect to such Preferred Partnership Units through the last day of such quarter, in accordance with the instruments designating such Preferred Partnership Units. -19- 24 Section 5.2 Amounts Withheld All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 hereof with respect to any allocation, payment or distribution to the General Partner, the Limited Partners or Assignees shall be treated as amounts distributed to the General Partner, Limited Partners or Assignees pursuant to Section 5.1 for all purposes under this Agreement. Section 5.3 Distributions Upon Liquidation Proceeds from a Terminating Capital Transaction, and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership, shall be distributed to the Partners in accordance with Section 13.2. ARTICLE 6 ALLOCATIONS Section 6.1 Allocations For Capital Account Purposes For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below. A. Net Income. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Income shall be allocated in the following manner and order of priority: (1) To the General Partner until the cumulative allocations of Net Income under this Section 6.1.A.(1) equal the cumulative Net Losses allocated to the General Partner under Section 6.1.B.(5) hereof. (2) To those Partners who have received allocations of Net Loss under Section 6.1.B.(4) hereof until the cumulative allocations of Net Income under this Section 6.1.A.(2) equal such cumulative allocations of Net Loss (such allocation of Net Income to be in proportion to the cumulative allocations of Net Loss under such section to each such Partner). (3) To the Post Partners until the cumulative allocations of Net Income under this Section 6.1.A.(3) equal the cumulative allocations of Net Loss to the Post Partners under Section 6.1.B.(3) hereof (such allocation of Net Income to be in proportion to the cumulative allocations of Net Loss under such section to each such Partner). -20- 25 (4) To those Partners who have received allocations of Net Loss under Section 6.1.B.(2) hereof until the cumulative allocations of Net Income under this Section 6.1.A.(4) equal such cumulative allocations of Net Loss (such allocation of Net Income to be in proportion to the cumulative allocations of Net Loss under such section to each such Partner). (5) To the Partners until the cumulative allocations of Net Income under this Section 6.1.A.(5) equal the cumulative allocations of Net Loss to such Partners under Section 6.1.B.(1) hereof (such allocation of Net Income to be in proportion to the cumulative allocations of Net Loss under such section to each such Partner). (6) Any remaining Net Income shall be allocated to the Partners who hold Common Partnership Units in proportion to their respective Percentage Interests with respect to Common Partnership Units. B. Net Losses. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Losses shall be allocated to the Partners as follows: (1) To the Partners who hold Common Partnership Units in accordance with their respective Percentage Interests held with respect to Common Partnership Units, except as otherwise provided in this Section 6.1.B. (2) To the extent that an allocation of Net Loss under Section 6.1.B.(1) would cause a Partner to have an Adjusted Capital Account Deficit at the end of such taxable year (or increase any existing Adjusted Capital Account Deficit of such Partner), such Net Loss shall instead be allocated to those Partners, if any, for whom such allocation of Net Loss would not cause or increase an Adjusted Capital Account Deficit. Solely for purposes of this Section 6.1.B.(2), the Adjusted Capital Account Deficit, in the case of the Post Partners, shall be determined without regard to the amount credited to the Post Partners' respective Capital Accounts for the aggregate Liquidation Preference Amount attributable to Preferred Partnership Units and without regard to any deemed deficit restoration obligation of the General Partner recognized under Regulations Section 1.704-1(b)(2)(ii)(c)(2); and in the case of a Principal or a Principal-Controlled Partnership, shall be determined without regard to such Partner's deficit Capital Account restoration obligation under Section 13.3.B hereof. The Net Loss allocated under this Section 6.1.B.(2) shall be allocated among the Partners who may receive such allocation in proportion to and to the extent of the respective amounts of Net Loss that could be allocated to such Partners without causing such Partners to have an Adjusted Capital Account Deficit. (3) Any remaining Net Loss that cannot be allocated under Sections 6.1.B.(1) and (2) hereof shall be allocated to the Post Partners in proportion to their respective Percentage Interests with respect to Preferred Partnership Units, to the extent that such -21- 26 allocation of Net Loss would not cause or increase an Adjusted Capital Account Deficit of the Post Partners determined, in the case of the General Partner, without regard to any deemed deficit restoration obligation of the General Partner recognized under Regulations Section 1.704-1(b)(2)(ii)(c)(2). (4) Any remaining Net Loss shall be allocated to the Principals and the Principal-Controlled Partnerships in accordance with their respective Percentage Interests in Common Partnership Units; provided that if, after the death of a Principal, the estate of such Principal or any Principal-Controlled Partnership with respect to such Principal elects pursuant to Section 13.3.C hereof to eliminate or reduce its deficit Capital Account restoration obligation under Section 13.3.B hereof, Net Losses shall not be allocated to such Partner to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or would increase any existing Adjusted Capital Account Deficit of such Partner) as of the end of such taxable year, and instead shall be allocated to those Principals and Principal- Controlled Partnerships as to whom the foregoing limitation does not apply. (5) Any remaining Net Loss shall be allocated to the General Partner. C. For purposes of Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain, and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests in Common Partnership Units. D. Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall to the extent possible, after taking into account other required allocations of gain pursuant to Exhibit C, be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS Section 7.1 Management A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General -22- 27 Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3 hereof, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation: (1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit PPI (so long as PPI qualifies as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to the Post Partners such that PPI can distribute to its shareholders amounts sufficient to permit PPI to maintain REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance on the Partnership's assets) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership; (2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (3) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership (including the exercise or grant of any conversion, option, privilege, or subscription right or any other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the Partnership with or into another entity (all of the foregoing subject to any prior approval only to the extent required by Section 7.3 hereof); (4) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct of the operations of PPI, the General Partner, the Partnership or any of the Partnership's Subsidiaries, the lending of funds to other Persons (including without limitation Subsidiaries of the Partnership and/or PPI), the repayment of obligations of PPI, the Partnership, Subsidiaries of the Partnership and/or PPI and any other Person in which it has an equity investment, and the making of capital contributions to Subsidiaries of the Partnership and/or PPI; -23- 28 (5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership; (6) the negotiation, execution, and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership's operations or the implementation of the General Partner's powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership's assets; (7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement; (8) holding, managing, investing and reinvesting cash and other assets of the Partnership; (9) the collection and receipt of revenues and income of the Partnership; (10) the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership, any division of the Partnership, the General Partner or PPI (including, without limitation, employees having titles such as "president", "vice president", "secretary" and "treasurer" of the Partnership, any division of the Partnership, the General Partner or PPI), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, any division of the Partnership, the General Partner or PPI and the determination of their compensation and other terms of employment or hiring; (11) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (12) the formation of, or acquisition of, an interest in, and the contribution of property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity investment from time to time); (13) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause -24- 29 of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law; (14) the undertaking of any action in connection with the Partnership's direct or indirect investment in its Subsidiaries or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons); (15) the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt; (16) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership; (17) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person; (18) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person; and (19) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement. B. Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3), the Act or any applicable law, rule or regulation, to the fullest extent permitted under the Act or other applicable law. The execution, delivery or -25- 30 performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity. C. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership; and (ii) liability insurance for the Indemnitees hereunder. D. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain any and all reserves, working capital accounts and other cash or similar balances in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time. E. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner of any action taken by it. The General Partner and the Partnership shall not have liability to a Limited Partner under any circumstances as a result of an income tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement. Section 7.2 Certificate of Limited Partnership To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Georgia and each other state or the District of Columbia, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability to the extent provided by applicable law) in the State of Georgia and any other state, or the District of Columbia, in which the Partnership may elect to do business or own property. Section 7.3 Restrictions on General Partner's Authority A. The General Partner may not, without the written Consent of all of the Limited Partners, take any action in contravention of an express prohibition or limitation contained in this Agreement. B. Except as provided in Article 13 hereof, the General Partner may not sell, exchange, transfer or otherwise dispose of all or substantially all of the Partnership's assets in a single -26- 31 transaction or a series of related transactions (including by way of merger, consolidation or other combination with any other Person) without the Consent of the Limited Partners holding a majority of the outstanding Common Partnership Units held by Limited Partners. Section 7.4 Reimbursement of the General Partner and PPI A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership. B. The General Partner and PPI shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses the General Partner and/or PPI incur relating to the ownership and operation of, or for the benefit of, the Partnership, provided that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner or PPI with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership as permitted in Section 7.5.A. The Limited Partners acknowledge that the sole business of the General Partner and PPI is the ownership of direct or indirect interests in and the direct or indirect operation of the Partnership and that all of the expenses of the General Partner and PPI are incurred for the benefit of the Partnership. Such reimbursements shall be in addition to any reimbursement to the General Partner or PPI as a result of indemnification pursuant to Section 7.7 hereof. C. The General Partner and PPI shall also be reimbursed for all expenses they incur relating to the organization and/or reorganization of the Partnership and the General Partner, the public offering of REIT Shares by PPI, and any other issuance of additional Partnership Interests or REIT Shares pursuant to Section 4.2 hereof. D. In the event that the General Partner or PPI shall elect to purchase from the shareholders of PPI REIT Shares pursuant to any stock repurchase program or for the purpose of delivering such REIT Shares to satisfy an obligation under Section 8.6 of this Agreement, any dividend reinvestment program adopted by PPI, any employee stock purchase plan adopted by the General Partner or PPI or any other similar obligation or arrangement undertaken by the General Partner or PPI in the future, the purchase price paid by the General Partner or PPI for such REIT Shares and any other expenses incurred by the General Partner or PPI in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursed to the General Partner or PPI, as the case may be, subject to the conditions that, if such REIT Shares are sold by the General Partner or PPI, the General Partner shall contribute to the Partnership any proceeds received by the General Partner or PPI for such REIT Shares (provided that a transfer of REIT Shares for Partnership Units pursuant to Section 8.6 shall not be considered a sale for such purpose). -27- 32 Section 7.5 Outside Activities of the General Partner, Post LP Holdings and PPI A. The General Partner shall not directly or indirectly enter into or conduct any business other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner, the management of the business of the Partnership and such activities as are incidental thereto. Post LP Holdings shall not directly or indirectly enter into or conduct any business other than in connection with the ownership, organization and disposition of Partnership Interests as a Limited Partner, and such activities as are incidental thereto. PPI shall not directly or indirectly enter into or conduct any business other than in connection with the direct or indirect ownership of the stock and debt obligations of the General Partner and Post LP Holdings, making loans or contributions to the Post Partners or the Partnership, and such activities as are incidental thereto. PPI and the Post Partners shall not incur any debts other than (i) debts for which the Partnership may be liable or for which the General Partner may be liable in its capacity as General Partner of the Partnership, (ii) any guaranty of any debt of the Partnership, or (iii) a debt incurred by PPI pursuant to Article 5 of the Articles of Incorporation. The assets of the Post Partners shall be limited to Partnership Interests and the assets of PPI shall be limited to the direct and indirect ownership of the stock and debt obligations of the Post Partners. The Post Partners shall not own any assets other than Partnership Interests as a General Partner or Limited Partner, and other than such bank accounts or similar instruments or accounts as each deems necessary to carry out its responsibilities contemplated under this Agreement and the Articles of Incorporation. The Post Partners, any Affiliates of the Post Partners and PPI may acquire Limited Partner Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partner Interests. B. In the event PPI exercises its rights under Article 5 of the Articles of Incorporation to purchase REIT Shares, then the General Partner shall cause the Partnership to purchase from one or both of the Post Partners that number of Common Partnership Units equal to the product obtained by multiplying the number of REIT Shares to be purchased by PPI times the Conversion Factor on the same terms and for the same aggregate price that PPI purchased such REIT Shares. The applicable Post Partners shall then distribute such funds to PPI. C. The Post Partners shall not issue at any time any capital stock (whether voting or non-voting, common or preferred) or any evidence of indebtedness, except to PPI or any direct or indirect wholly owned subsidiary of PPI. Section 7.6 Contracts with Affiliates A. The Partnership may lend or contribute funds or other assets to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person. -28- 33 B. Except as provided in Section 7.5.A, the Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes are advisable. C. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith, in its sole and absolute discretion, to be fair and reasonable. D. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans, stock option plans and similar plans funded by the Partnership for the benefit of employees of the General Partner, PPI, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the General Partner, PPI or any of the Partnership's Subsidiaries. E. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership, PPI and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable. Section 7.7 Indemnification A. The Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including without limitation attorney's fees and other legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, provided that the Partnership shall not indemnify an Indemnitee (i) for intentional misconduct or a knowing violation of the law, or (ii) for any transaction for which such Indemnitee received a personal benefit in violation or breach of any provision of this Agreement. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. It is the intention of this Section 7.7.A that the Partnership indemnify each Indemnitee to the fullest extent permitted under the Act. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction of an -29- 34 Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an entry of an order of probation against an Indemnitee prior to judgment, creates a rebuttable presumption that such Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise provide funds, including pursuant to Section 13.3.B, to enable the Partnership to fund its obligations under this Section 7.7. B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding may be paid or reimbursed by the Partnership in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified. D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of any of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. E. Any liabilities which an Indemnitee incurs as a result of acting on behalf of the Partnership or the General Partner (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities or judgments or fines under this Section 7.7, unless such liabilities arise as a result of (i) such Indemnitee's intentional misconduct or knowing violation of the law, or (ii) any transaction in which such Indemnitee received a personal benefit in violation or breach of any provision of this Agreement or applicable law. F. In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. -30- 35 G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnership's liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. I. To the extent, but only to the extent, that this Section 7.7 is subject to the limitations on indemnification set forth in Official Code of Georgia Annotated Section 13-8-2(b), and indemnification of an Indemnitee pursuant to this Section 7.7 would under the circumstances violate the provisions of such statute (taking into account, among other things, the availability of insurance coverage and the intention of the Partnership to allocate to the Partnership rather than the Indemnitees the risks of insurable claims), this Section 7.7 shall not be construed as purporting to indemnify such Indemnitee against or to hold such Indemnitee harmless from liability for damages arising solely out of bodily injury to persons or damage to property resulting from the sole negligence of such Indemnitee. Section 7.8 Liability of the General Partner and PPI A. Notwithstanding anything to the contrary set forth in this Agreement, neither the General Partner nor PPI shall be liable for monetary damages to the Partnership, any Partners or any Assignees for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith. B. The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, PPI and PPI's shareholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that neither the General Partner nor PPI shall be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith. C. Subject to its obligations and duties as General Partner set forth in Section 7.1.A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. Neither the General Partner nor PPI shall be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith. -31- 36 D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner's liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. Section 7.9 Other Matters Concerning the General Partner A. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties. B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. D. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of PPI to continue to qualify as a REIT, or (ii) to avoid PPI incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. Section 7.10 Title to Partnership Assets Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General -32- 37 Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held. Section 7.11 Reliance by Third Parties Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without the consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS Section 8.1 Limitation of Liability The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 hereof, or under the Act. Section 8.2 Management of Business No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control -33- 38 of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. Section 8.3 Outside Activities of Limited Partners Subject to any agreements entered into pursuant to Section 7.6.E hereof and any other agreements entered into by a Limited Partner or its Affiliates with the Partnership or a Subsidiary, any Limited Partner (other than any Post Partner) and any officer, director, employee, agent, trustee, Affiliate or shareholder of any Limited Partner (other than any Post Partner) shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. None of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than PPI and the Post Partners to the extent expressly provided herein) and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person. Section 8.4 Return of Capital Except pursuant to the right of redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of his Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except to the extent provided by Exhibit C hereof or as permitted by Section 4.2.A, or otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Section 8.5 Rights of Limited Partners Relating to the Partnership A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner's own expense (including such copying and administrative charges as the General Partner may establish from time to time): -34- 39 (1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by PPI pursuant to the Securities Exchange Act of 1934; (2) to obtain a copy of the Partnership's federal, state and local income tax returns for each Partnership Year; (3) to obtain a current list of the name and last known business, residence or mailing address of each Partner; and (4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed. B. The Partnership shall notify any Limited Partner, on request, of the then current Conversion Factor or any change made to the Conversion Factor. C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business, or (ii) the Partnership is required by law or by agreements with an unaffiliated third party to keep confidential. Section 8.6 Redemption Right A. Subject to the provisions of this Section 8.6., each Limited Partner, other than any Post Partner, shall have the right (the "Redemption Right") to require the Partnership to redeem on a Specified Redemption Date all or a portion of the Partnership Units held by such Limited Partner at a redemption price equal to and in the form of the Redemption Amount to be paid by the Partnership. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Limited Partner who is exercising the redemption right (the "Redeeming Partner"). A Limited Partner may not exercise the Redemption Right for less than one thousand (1,000) Partnership Units or, if such Limited Partner holds less than one thousand (1,000) Partnership Units, all of the Partnership Units held by such Limited Partner. The Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid after the Specified Redemption Date. The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Limited Partner's Assignee. In connection with any exercise of such rights by such Assignee -35- 40 on behalf of such Limited Partner, the Redemption Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner. B. Notwithstanding the provisions of Section 8.6.A, either of the General Partner or PPI may, in its sole and absolute discretion, assume directly and satisfy a Redemption Right by paying to the Redeeming Partner the Redemption Amount on the Specified Redemption Date, whereupon the General Partner or PPI, as the case may be, shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. In the event the General Partner or PPI shall exercise this right to satisfy the Redemption Right in the manner described in the preceding sentence, the Partnership shall have no obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner's exercise of the Redemption Right, and each of the Redeeming Partner, the Partnership and, as the case may be, the General Partner or PPI shall treat the transaction between the General Partner or PPI, as the case may be, and the Redeeming Partner as a sale of the Redeeming Partner's Partnership Units to the General Partner or PPI, as the case may be, for federal income tax purposes. Each Redeeming Partner agrees to execute such documents as the General Partner or PPI, as the case may be, may reasonably require in connection with the issuance of REIT Shares upon exercise of the Redemption Right. C. Notwithstanding any other provision of this Section 8.6, a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified Redemption Date would be prohibited under the Articles of Incorporation. D. Notwithstanding any other provision of this Section 8.6, no Partner shall be entitled to exercise the Redemption Right pursuant to Section 8.6.A with respect to any Preferred Partnership Unit unless the General Partner has expressly granted to such Partner in the instrument designating such Preferred Partnership Units (or series or class thereof), the right to redeem such Preferred Partnership Units pursuant to Section 8.6.A. Preferred Partnership Units shall be redeemed, if at all, only in accordance with such redemption rights or options as are set forth with respect to such Preferred Partnership Units (or class or series thereof) in the instruments designating such Preferred Partnership Units (or class or series thereof). E. No Series 1996A Common Partnership Unit may be redeemed pursuant to this Section 8.6 at any time prior to October 15, 1998, unless sooner permitted by the General Partner in its sole discretion. -36- 41 ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS Section 9.1 Records and Accounting The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnership's business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3 hereof. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles, or on such other basis as the General Partner determines to be necessary or appropriate. Section 9.2 Fiscal Year The fiscal year of the Partnership shall be the calendar year. Section 9.3 Reports A. As soon as practicable, but in no event later than one hundred five (105) days after the close of each Partnership Year, the General Partner shall cause to be mailed to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership or, if such statements are prepared solely on a consolidated basis with the General Partner and/or PPI, financial statements of the General Partner and/or PPI for such Partnership Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner. B. As soon as practicable, but in no event later than one hundred five (105) days after the close of each calendar quarter (except the last calendar quarter of each year), the General Partner shall cause to be mailed to each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership or, if such statements are prepared solely on a consolidated basis with the General Partner and/or PPI, financial statements of the General Partner and/or PPI, as well as such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate. -37- 42 ARTICLE 10 TAX MATTERS Section 10.1 Preparation of Tax Returns The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes. Section 10.2 Tax Elections Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code; provided, however, that the General Partner shall make the election under Section 754 of the Code in accordance with applicable Regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner's determination in its sole and absolute discretion that such revocation is in the best interests of the Partners. Section 10.3 Tax Matters Partner A. The General Partner shall be the "tax matters partner" of the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address and profit interest of each of the Limited Partners and the Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners and the Assignees. B. The tax matters partner is authorized, but not required: (1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a "tax audit" and such judicial proceedings being referred to as "judicial review"), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner, or (ii) who is a "notice partner" (as defined in Section 6231(a)(8) of -38- 43 the Code) or a member of a "notice group" (as addressed in Section 6223(b)(2) of the Code); (2) in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a "final adjustment") is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Partnership's principal place of business is located; (3) to intervene in any action brought by any other Partner for judicial review of a final adjustment; (4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request; (5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and (6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by law. The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 of this Agreement shall be fully applicable to the tax matters partner in its capacity as such. C. The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable. -39- 44 Section 10.4 Organizational Expenses The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a sixty (60)-month period as provided in Section 709 of the Code. Section 10.5 Withholding Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner, or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner's Partnership Interest to secure such Limited Partner's obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5. In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner. Without limitation, in such event the General Partner shall have the right to receive distributions that would otherwise be distributable to such defaulting Limited Partner until such time as such loan, together with all interest thereon, has been paid in full; and any such distributions so received by the General Partner shall be treated as having been distributed to the defaulting Limited Partner and immediately paid by the defaulting Limited Partner to the General Partner in repayment of such loan. Any amounts payable by a Limited Partner hereunder shall bear interest at the lesser of (A) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four (4) percentage points or (b) the maximum lawful rate of interest on such obligation, such interest to accrue from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder. -40- 45 ARTICLE 11 TRANSFERS AND WITHDRAWALS Section 11.1 Transfer A. The term "transfer," when used in this Article 11 with respect to a Partnership Unit, shall be deemed to refer to a transaction by which the General Partner purports to assign all or any part of its General Partner Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term "transfer" when used in this Article 11 does not include any redemption of Partnership Units by a Limited Partner or acquisition of Partnership Units from a Limited Partner by the General Partner or PPI pursuant to Section 8.6. B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void. Section 11.2 Transfer of Post Partners' Partnership Interests or PPI's Ownership Interest A. No Post Partner may transfer any of its Partnership Interest or withdraw as General Partner or Limited Partner, as appropriate, except as provided in Section 11.2.B or in connection with a Transaction described in Section 11.2.C. PPI shall not transfer any of its Ownership Interest except in connection with a Transaction described in Section 11.2.C. B. Any Post Partner may transfer Partnership Interests held by it (i) to the Partnership in accordance with Section 7.5.B hereof; (ii) to a purported holder of REIT Shares in accordance with the provisions of Article 5 of the Articles of Incorporation; or (iii) to PPI, to the other Post Partner or to any other direct or indirect wholly owned subsidiary of PPI. C. Except as otherwise provided in Section 11.2.D, PPI shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets, or any reclassification, or recapitalization or change of outstanding REIT Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of "Conversion Factor") ("Transaction"), unless (i) the Transaction also includes a merger of the Partnership or sale of substantially all of the assets of the Partnership which has been approved by the requisite Consent of Partners pursuant to Section 7.3 and as a result of which all Limited Partners will receive for each Common Partnership Unit an amount of cash, securities or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid to a holder of one REIT Share in consideration of one REIT Share at any time during the period from and after the date on which the Transaction is consummated, provided that if, in connection with the Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent -41- 46 (50%) of the outstanding REIT Shares, each holder of Common Partnership Units shall receive the greatest amount of cash, securities or other property which such holder would have received had it exercised the Redemption Right and received REIT Shares in exchange for its Common Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer; and (ii) no more than seventy-five percent (75%) of the equity securities of the acquiring Person in such Transaction shall be owned, after consummation of such Transaction, by PPI, the General Partner or Persons who are Affiliates of PPI, the Partnership or the General Partner immediately prior to the date on which the Transaction is consummated. D. Notwithstanding Section 11.2.C, any Post Partner or PPI may merge or combine with another entity if immediately after such merger substantially all of the assets of the surviving entity, other than general or limited Partnership Units held by any Post Partner or PPI, are contributed to the Partnership as a Capital Contribution in exchange for Partnership Units (either directly by the Post Partners or indirectly by PPI to the Post Partners and then by the Post Partners to the Partnership). In addition, PPI may merge or combine with any Post Partner or any other direct or indirect wholly owned subsidiary of PPI, and any Post Partner may merge or combine with any other Post Partner or any direct or indirect wholly owned subsidiary of PPI and, if determined by the General Partner to be in the best interests of PPI and the Partnership, with the Partnership. Section 11.3 Limited Partners' Rights to Transfer A. Subject to the provisions of Section 11.3.F, no Limited Partner shall have the right to transfer all or any portion of his Partnership Interest, or any of such Limited Partner's rights as a Limited Partner, without the prior written consent of the General Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. Any purported transfer of a Partnership Interest by a Limited Partner in violation of this Section 11.3.A shall be void ab initio and shall not be given effect for any purpose by the Partnership. B. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner's estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership. C. The General Partner may prohibit any transfer otherwise permitted under Section 11.3.F by a Limited Partner of his Partnership Units (i) if, in the opinion of legal counsel to the Partnership, such transfer would require filing of a registration statement under the Securities Act of 1933 or would otherwise violate any federal, state or foreign securities laws or regulations applicable to the Partnership or the Partnership Units, or (ii) if the transferring Limited Partner fails or is unable to obtain and deliver to the Partnership a legal opinion, from counsel acceptable to the General Partner, addressed to the Partnership and the General Partner, that such registration is not required in -42- 47 connection with such transfer and that such transfer does not violate any federal, state or foreign securities laws or regulations applicable to the Partnership or the Partnership Units. D. No transfer by a Limited Partner of his Partnership Units may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it would result in the Partnership being treated as an association taxable as a corporation, or (ii) such transfer is effectuated through an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of Section 7704(b) of the Code. E. No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, without the consent of the General Partner, in its sole and absolute discretion. F. Notwithstanding the provisions of Section 11.3.A (but subject to the provisions of Sections 11.3.C, 11.3.D, and 11.3.E), a Limited Partner may transfer, with or without the consent of the General Partner, all or a portion of his Partnership Units to (i) a member of his Immediate Family, or a trust for the benefit of a member of his Immediate Family, in a donative transfer that does not involve the receipt of any consideration (but not by inheritance so long as the transferee at the death of such Limited Partner would have a basis for federal income tax purposes in such Partnership Units equal to their fair value at the time of such Limited Partner's death); or (ii) an organization that qualifies under Section 501(c)(3) of the Code and that is not a private foundation within the meaning of Section 509(a) of the Code; provided that in the case of either (i) or (ii) above, such transferee shall constitute an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended. G. The transfer of any Limited Partner Interest by Post LP Holdings or any other Post Partner shall be governed by Section 11.2 hereof rather than this Section 11.3. Section 11.4 Substituted Limited Partners A. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his place. The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. The General Partner's failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or any Partner. B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. -43- 48 C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of Partnership Units and Percentage Interest of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner. Section 11.5 Assignees If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be deemed to have had assigned to it, and shall be entitled to receive, distributions from the Partnership and the share of Net Income, Net Losses, Recapture Income and any other items of income, gain, loss, deduction and credit of the Partnership attributable to the Partnership Units assigned to such transferee, but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Units in any matter presented to the Limited Partners for a vote (such Partnership Units being deemed to have been voted on such matter in the same proportion as all other Partnership Units held by Limited Partners are voted). In the event any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units. Section 11.6 General Provisions A. No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner's Partnership Units in accordance with this Article 11 or pursuant to redemption of all of its Partnership Units under Section 8.6. B. Any Limited Partner who shall transfer all of his Partnership Units in a transfer permitted pursuant to this Article 11 shall cease to be a Limited Partner upon the admission of all Assignees of such Partnership Units as Substituted Limited Partners. Similarly, any Limited Partner who shall transfer all of his Partnership Units pursuant to a redemption of all of his Partnership Units under Section 8.6 shall cease to be a Limited Partner. C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees. D. If any Partnership Unit is transferred or assigned in compliance with the provisions of this Article 11, or redeemed or transferred pursuant to Section 8.6, on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items attributable to such Partnership Unit for such Partnership Year shall be allocated to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a transfer or assignment other than a redemption, to the transferee Partner, by taking into account their varying interests -44- 49 during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method. Solely for purposes of making such allocations, each of such items for the calendar month in which a transfer or assignment occurs shall be allocated to the transferee Partner, and none of such items for the calendar month in which a transfer or a redemption occurs shall be allocated to the transferor Partner or the Redeeming Partner, as the case may be. All distributions of Available Cash attributable to such Partnership Unit with respect to which the Partnership Record Date is before the date of such transfer, assignment or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a transfer or assignment other than a redemption, all distributions of Available Cash thereafter attributable to such Partnership Unit shall be made to the transferee Partner. ARTICLE 12 ADMISSION OF PARTNERS Section 12.1 Admission of Successor General Partner A successor to all of the General Partner Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Section 11.6.D hereof. Section 12.2 Admission of Additional Limited Partners A. After the admission to the Partnership of the initial Limited Partners on the date of the closing of the IPO, a Person who made or makes a Capital Contribution to the Partnership in accordance with this Agreement or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person's admission as an Additional Limited Partner. B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name -45- 50 of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. C. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code, using the interim closing of the books method. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner. D. Pursuant to the Second Amendment to the First Amended and Restated Partnership Agreement of Post Apartment Homes, L.P., dated October 15, 1996 (the "Second Amendment") the Series 1996A Common Partnership Units (consisting of 138,150 Common Partnership Units) were issued to John A. Williams and L. Barry Teague in connection with the Partnership's exercise of an option to acquire real property owned by a partnership of which Messrs. Williams and Teague were the sole partners. Such option was exercised, and such Partnership Units were issued, with the approval of a majority of the disinterested directors of PPI. Such Partnership Units were issued pursuant to Section 4.2.A hereof, and are reflected on Exhibit A hereto. Section 12.3 Amendment of Agreement and Certificate of Limited Partnership For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof. Section 12.4. Acknowledgment of and Consent to Certain Transactions. On or about the Effective Date, the following transactions have occurred: (1) PPI has organized Post GP Holdings as a wholly-owned subsidiary of PPI. (2) PPI has organized Post Merger Sub as a wholly-owned subsidiary of PPI. -46- 51 (3) PPI has transferred to Post GP Holdings the General Partner Interest, consisting of one percent (1%) of the aggregate Common Partnership Units outstanding immediately prior to the Effective Date. (4) PPI has transferred to Post Merger Sub all Partnership Units (common and preferred), other than the General Partner Interest, held by PPI immediately prior to the Effective Date, and Post Merger Sub has been admitted to the Partnership as a substituted Limited Partner in the Partnership in place of PPI. (5) Post GP Holdings has assumed and agreed to undertake, and does hereby assume and agree to undertake, PPI's rights, duties and responsibilities as General Partner hereunder, and PPI has withdrawn from the Partnership as both the General Partner and Limited Partner, such that PPI is no longer a Partner in the Partnership. Post GP Holdings has been and is hereby admitted to the Partnership as substitute General Partner of the Partnership. (6) Pursuant to an Agreement and Plan of Merger, dated as of August 1, 1997, among PPI, Columbus Realty Trust ("Columbus") and Post Merger Sub, Columbus has merged with and into Post Merger Sub, with Post Merger Sub being the surviving corporation of the merger (the "Columbus Merger"). (7) PPI has organized Post LP Holdings as a wholly-owned subsidiary of PPI. (8) PPI has contributed one hundred percent (100%) of the capital stock of Post Merger Sub to Post LP Holdings. As a result of such contribution, Post Merger Sub became a wholly-owned, indirect subsidiary of PPI. (9) PPI and Post LP Holdings have caused Post Merger Sub to be merged with and into the Partnership, with the Partnership being the surviving limited partnership (the "Second Merger"). As a result of the Second Merger, the Partnership has acquired all Partnership Units previously held by Post Merger Sub and all assets of Post Merger Sub acquired from Columbus in the Columbus Merger. (10) As consideration for the Second Merger, the Partnership has issued to Post LP Holdings, a number of Partnership Units equal to the sum of (a) all Partnership Units previously held by Post Merger Sub, as described above, consisting of the number of Common Partnership Units and Series A Partnership Units acquired by the Partnership from Post Merger Sub in the Second Merger, plus (b) an additional number of Common Partnership Units equal to the sum of (x) the aggregate number of REIT Shares issued to Shareholders of Columbus in the Columbus Merger, plus (y) the aggregate number of fractional REIT Shares (rounded to the nearest whole number) in respect to which PPI paid cash to Columbus shareholders in the Columbus Merger. Such Partnership -47- 52 Units so issued by the Partnership to Post LP Holdings as a result of the Second Merger are reflected on Exhibit A. (11) The General Partner, on behalf of the Partnership, has admitted and does hereby admit Post LP Holdings to the Partnership as a substituted Limited Partner, subject to the provisions of this Agreement applicable to Post LP Holdings. The Partners hereby consent to each of the foregoing transactions. ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION Section 13.1 Dissolution The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following ("Liquidating Events"): A. the expiration of its term as provided in Section 2.5 hereof; B. an event of withdrawal of the General Partner, as defined in the Act (other than an event described in Sections 14-9-602(a)(4) and 14-9-602(a)(5) of the Act), unless, within ninety (90) days after the withdrawal all the remaining Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a successor General Partner; C. from and after the date of this Agreement through December 31, 2013, an election to dissolve the Partnership made by the General Partner, unless any Original Limited Partner who holds one or more Original Limited Partnership Units objects in writing to such dissolution within thirty (30) days of receiving written notice of such election from the General Partner; D. from and after January 1, 2014 through December 31, 2043, an election to dissolve the Partnership made by the General Partner, unless Original Limited Partners holding at least five percent (5%) of the Original Limited Partnership Units object in writing to such dissolution within thirty (30) days of receiving written notice of such election from the General Partner; E. on or after January 1, 2044, an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion; F. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act; -48- 53 G. the sale of all or substantially all of the assets and properties of the Partnership; or H. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to the entry of such order or judgment all of the remaining Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner. Section 13.2 Winding Up A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership's business and affairs. The General Partner or, in the event there is no remaining General Partner, any Person elected by a majority in interest of the Limited Partners (the General Partner or such other Person being referred to herein as the "Liquidator") shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership's liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order: (1) First, to the payment and discharge of all of the Partnership's debts and liabilities to creditors other than the Partners; (2) Second, to the payment and discharge of all of the Partnership's debts and liabilities to the Post Partners; (3) Third, to the payment and discharge of all of the Partnership's debts and liabilities to the other Partners; (4) The balance, if any, to the General Partner and Limited Partners in accordance with their Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods. The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13. B. Notwithstanding the provisions of Section 13.2.A hereof which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the -49- 54 Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. C. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article 13 may be: (1) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or (2) withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2.A as soon as practicable. Section 13.3 Negative Capital Accounts A. Except as provided in this Section 13.3, no Partner, General or Limited, shall be liable to the Partnership or to any other Partner for any negative balance outstanding in each such Partner's Capital Account, whether such negative Capital Account results from the allocation of Net Losses or other items of deduction and loss to such Partner or from distributions to such Partner. B. Subject to Section 13.3.C, if a Principal or a Principal-Controlled Partnership, on the date of the "liquidation" of his respective interest in the Partnership (within the meaning of Regulations Section 1.704- 1(b)(2)(ii)(g)), has a negative balance in his Capital Account, then such -50- 55 Partner shall contribute in cash to the capital of the Partnership the amount required to increase his Capital Account as of such date to zero. Any such contribution required of a Partner hereunder shall be made on or before the later of (i) the end of the Partnership Year in which the interest of such Partner is liquidated; or (ii) the ninetieth (90th) day following the date of such liquidation. Notwithstanding any provision hereof to the contrary, all amounts so contributed by a Partner to the capital of the Partnership shall, upon the liquidation of the Partnership under this Article 13, be first paid to any then creditors of the Partnership, and any remaining amount shall be distributed to the other Partners, if any, then having positive balances in their respective Capital Accounts in proportion to such positive balances. C. After the death of a Principal, the executor of the estate of such Principal may elect to reduce (or eliminate) the deficit Capital Account restoration obligation of such Principal pursuant to Section 13.3.B. Such election may be made by such executor by delivering to the General Partner within two hundred seventy (270) days of the death of such Principal a written notice setting forth the maximum deficit balance in his Capital Account that such executor agrees to restore under Section 13.3.B, if any. If such executor does not make a timely election pursuant to this Section 13.3.C (whether or not the balance in his Capital Account is negative at such time), then such Principal's estate (and the beneficiaries thereof who receive distribution of Partnership Units therefrom) shall be deemed to have a deficit Capital Account restoration obligation as set forth pursuant to the terms of Section 13.3.B. Any Principal- Controlled Partnership may likewise elect, after the death of its respective Principal, to reduce (or eliminate) its deficit Capital Account restoration obligation pursuant to Section 13.3.B by delivering a similar written notice to the General Partner within the time period specified herein. Any Principal-Controlled Partnership that does not make any such timely election shall similarly be deemed to have a deficit Capital Account restoration obligation as set forth pursuant to the terms of Section 13.3.B. Section 13.4 Deemed Distribution and Recontribution Notwithstanding any other provision of this Article 13, in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's property shall not be liquidated, the Partnership's liabilities shall not be paid or discharged, and the Partnership's affairs shall not be wound up. Instead, for federal income tax purposes and for purposes of maintaining Capital Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have distributed the property in kind to the General Partner and Limited Partners, who shall be deemed to have assumed and taken such property subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the General Partner and Limited Partners shall be deemed to have recontributed the Partnership property in kind to the Partnership, which shall be deemed to have assumed and taken such property subject to all such liabilities. -51- 56 Section 13.5 Rights of Limited Partners Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of his Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of his Capital Contributions, distributions, or allocations. Section 13.6 Notice of Dissolution In the event a Liquidating Event occurs or an event occurs that would, but for an election or objection by one or more Partners pursuant to Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners. Section 13.7 Termination of Partnership and Cancellation of Certificate of Limited Partnership Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2 hereof, the Partnership shall be terminated, a certificate of cancellation shall be filed, and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Georgia shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken. Section 13.8 Reasonable Time for Winding-Up A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. Section 13.9 Waiver of Partition Each Partner hereby waives any right to partition of the Partnership property. ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS Section 14.1 Amendments A. Amendments to this Agreement may be proposed by the General Partner or by any Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests. Following -52- 57 such proposal, the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written vote of the Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written vote, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a vote which is consistent with the General Partner's recommendation with respect to the proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and it receives the Consent of the Partners holding a majority of the Percentage Interests of the Limited Partners with respect to Common Partnership Units (including Limited Partner Interests held by any Post Partner). [If the General Partner holds less than one percent (1%) of the Common Partnership Units outstanding as of the date any Consent is sought pursuant to the immediately preceding sentence, then solely for the purposes of such Consent the number of Common Partnership Units held by the Post Partners as Limited Partner Interests shall be reduced by the number of Common Partnership Units that, if added to the Common Partnership Units then held by the General Partner, would cause the General Partner to hold one percent (1%) of the outstanding Common Partnership Units; the purpose of this sentence being to avoid dilution of the Consent rights of Limited Partners other than the Post Partners as compared to the Consent rights of such Limited Partners under the Prior Agreement, which required the General Partner to maintain one percent (1%) of the Partnership Units as the General Partner Interest.] B. Notwithstanding Section 14.1.A, the General Partner shall have the power, without the consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes: (1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners; (2) to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement; (3) to set forth the designations, rights, powers, duties, and preferences of the holders of any additional Partnership Interests issued pursuant to Section 4.2.A hereof; (4) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement; and -53- 58 (5) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law. The General Partner shall provide notice to the Limited Partners when any action under this Section 14.1.B is taken. C. Notwithstanding Sections 14.1.A and 14.1.B hereof, this Agreement shall not be amended without the Consent of each Partner adversely affected if such amendment would (i) convert a Limited Partner's interest in the Partnership into a general partner interest, (ii) modify the limited liability of a Limited Partner in a manner adverse to such Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant to Article 5, or the allocations specified in Article 6, in a manner adverse to such Partner (except as permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof), (iv) alter or modify the Redemption Right and REIT Shares Amount as set forth in Sections 8.6 and 11.2.B, and related definitions hereof, in a manner adverse to such Partner, (v) cause the termination of the Partnership prior to the time set forth in Sections 2.5 or 13.1, or (vi) amend this Section 14.1.C. Further, no amendment may alter the restrictions on the General Partner's authority set forth in Section 7.3 without the Consent specified in that section. D. Notwithstanding Section 14.1.A hereof, the General Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the Consent of the Partners holding a majority of the Percentage Interests held by the Limited Partners with respect to Common Partnership Units (excluding Limited Partner Interests held by any Post Partner). Section 14.2 Meetings of the Partners A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held with respect to Common Partnership Units. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1 hereof. Except as otherwise expressly provided in this Agreement, the Consent of holders of a majority of the Percentage Interests held with respect to Common Partnership Units shall control. B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a majority of the Percentage Interests of the Partners held with respect to Common Partnership Units (or such other percentage as is expressly required by this Agreement). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a majority of the -54- 59 Percentage Interests of the Partners held with respect to Common Partnership Units (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. C. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or his attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership's receipt of written notice of such revocation from the Limited Partner executing such proxy. D. Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate in his sole discretion. Without limitation, meetings of Partners may be conducted in the same manner as meetings of the shareholders of PPI and may be held at the same time, and as part of, meetings of the shareholders of PPI. ARTICLE 15 GENERAL PROVISIONS Section 15.1 Addresses and Notice Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address set forth in Exhibit A or such other address of which the Partner shall notify the General Partner in writing. Section 15.2 Titles and Captions All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. Section 15.3 Pronouns and Plurals Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. -55- 60 Section 15.4 Further Action The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. Section 15.5 Binding Effect This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. Section 15.6 Waiver No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. Section 15.7 Counterparts This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto. Section 15.8 Applicable Law This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Georgia, without regard to the principles of conflicts of law. Section 15.9 Invalidity of Provisions If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. Section 15.10 Entire Agreement This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes the Prior Agreement and any other prior written or oral understandings or agreements among them with respect thereto. Section 15.11 Guaranty by PPI PPI unconditionally and irrevocably guarantees to the Limited Partners the performance by the Post Partners of the Post Partners' respective obligations under this Agreement. This guarantee is exclusively for the benefit of the Limited Partners and shall not extend to the benefit of any creditor of the Partnership. -56- 61 IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the date first written above. GENERAL PARTNER: POST GP HOLDINGS, INC. By: /s/ John T. Glover ---------------------------------- John T. Glover President [CORPORATE SEAL] LIMITED PARTNERS: POST LP HOLDINGS, INC.: By: /s/ John T. Glover ---------------------------------- John T. Glover President [CORPORATE SEAL] Each of the Limited Partners listed on Exhibit A (other than Post LP Holdings, Inc.) By: POST PROPERTIES, INC., as attorney-in-fact By: /s/ John A. Williams (SEAL) ---------------------------------- John A. Williams Chairman -57- 62 Post Properties, Inc. has executed and delivered this Agreement solely for the purposes of agreeing to the provisions of this Agreement applicable to it, including without limitation Section 15.11 hereof. Neither this execution by Post Properties, Inc. nor anything contained herein constitute or shall be deemed to constitute Post Properties, Inc. as a partner in the Partnership. POST PROPERTIES, INC. By /s/ John A. Williams --------------------- John A. Williams Chairman -58- 63 EXHIBIT A PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS [AWAITING CONFIRMATION FROM POST.]
Agreed Value of Name and Address Cash Contributed Total Partnership Date of of Partner Contribution Property Contribution Units Contribution(s) General Partner Post GP Holdings, Inc. Suite 2200 3350 Cumberland Circle Atlanta, Georgia 30309 Limited Partners Post LP Holdings, Inc. Additional Limited Partners
EXHIBIT A (Page 1 of ___) 64 EXHIBIT B CAPITAL ACCOUNT MAINTENANCE 1. Capital Accounts of the Partners A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Partner to the Partnership pursuant to this Agreement, and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or Agreed Value of all actual and deemed distributions of cash or property made to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof. B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: (1) Except as otherwise provided in Regulations Section 1.704(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership, provided that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners' Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4). (2) The computation of all items of income, gain, loss and deduction shall be made without regard to the fact that items described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable in gross EXHIBIT B (Page 1 of 4) 65 income or are neither currently deductible nor capitalized for federal income tax purposes. (3) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. (4) In lieu of the depreciation, amortization and other cash recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year. (5) In the event the Carrying Value of any Partnership Asset is adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset. (6) Any items specially allocated under Section 2 of Exhibit C hereof shall not be taken into account. C. Generally, a transferee (including any Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be deemed, solely for federal income tax purposes, to have been distributed in liquidation of the Partnership to the holders of Partnership Units (including such transferee) and recontributed by such Persons in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 1.D.(2) hereof. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Exhibit B. D. (1) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 1.D.(2), the Carrying Values of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 1.D.(2) hereof, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 6.1 of the Agreement. (2) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital EXHIBIT B (Page 2 of 4) 66 Contribution; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; and (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704- 1(b)(2)(ii)(g), provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership. (3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e) the Carrying Value of Partnership assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed. (4) In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article 13 of the Agreement, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties). E. The provisions of this Agreement (including this Exhibit B and the other Exhibits to this Agreement) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners), are computed in order to comply with such Regulations, the General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article 13 of the Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate EXHIBIT B (Page 3 of 4) 67 modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-(b). 2. No Interest No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts. 3. No Withdrawal No Partner shall be entitled to withdraw any part of his Capital Contribution or his Capital Account or to receive any distribution from the Partnership, except as provided in Articles 4, 5, 7 and 13 hereof. EXHIBIT B (Page 4 of 4) 68 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. EXHIBIT C (Page 1 of 4) 69 C. Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-1(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 Post Partners in an amount equal to the excess, if any, of the cumulative distributions received by each Post 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 Post Partner under this Section 1.F for all prior Partnership Years (such allocations being made in proportion to the respective excess amounts for each Post Partner). 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 their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations. EXHIBIT C (Page 2 of 4) 70 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 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 loss is allocated EXHIBIT C (Page 3 of 4) 71 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"). EXHIBIT C (Page 4 of 4) 72 EXHIBIT D VALUE OF CONTRIBUTED PROPERTY Underlying Property 704(c) Value Agreed Value - ------------------- ------------ ------------
EXHIBIT D (Page 1 of 1) 73 EXHIBIT E NOTICE OF REDEMPTION The undersigned Limited Partner hereby irrevocably (i) redeems __________ Partnership Units in Post Apartment Homes, L.P. in accordance with the terms of the Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., as amended, and the Redemption Right referred to therein, (ii) surrenders such Partnership Units and all right, title and interest therein, and (iii) directs that the Cash Amount or REIT Shares (as determined by the General Partner) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if REIT Shares are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, certifies and agrees (a) that the undersigned has good, marketable and unencumbered title to such Partnership Units, free and clear of the rights or interests of any other person or entity, (b) that the undersigned has the full right, power and authority to redeem and surrender such Partnership Units as provided herein, (c) that the undersigned has obtained the consent or approval of all persons or entities, if any, having the right to consent to or approve such redemption and surrender, (d) that, if REIT Shares are to be delivered, the undersigned is acquiring such REIT Shares for his own account, for investment and without a view to engaging in any resale or distribution thereof, except such as may occur pursuant to the registration statement required to be filed by the Company pursuant to a Registration Rights and Lock-Up Agreement to which the undersigned and the General Partner are parties, (e) that, if REIT Shares are to be delivered, such REIT Shares may not be transferred by the undersigned except in transactions pursuant to such registration statement or that are exempt from the registration requirements of the Securities Act of 1933 and all applicable state and foreign securities laws and (f) that, if REIT Shares are to be delivered, the Company may refuse to transfer such REIT Shares as to which evidence satisfactory to it of such registration or exemptions is not provided to it. Dated: ------------- Name of Limited Partner: ----------------------------- (Signature of Limited Partner) ----------------------------- (Street Address) ----------------------------- (City) (State) (Zip Code) Signature Guaranteed by: ----------------------------- IF REIT SHARES ARE TO BE ISSUED, ISSUE TO: Please insert social security or identifying number: EXHIBIT E (Page 1 of 1) 74 EXHIBIT F DESIGNATION OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE SERIES A PREFERRED PARTNERSHIP UNITS The following are the terms of the Series A Preferred Partnership Units established pursuant to this Amendment: 1. Number The maximum number of authorized Series A Preferred Partnership Units shall be 1,150,000. 2. Relative Seniority In respect of rights to receive quarterly distributions and to participate in distributions of payments in the event of any liquidation, dissolution or winding up of the Partnership, the Series A Preferred Partnership Units shall rank senior to the Common Partnership Units and any other class or series of Partnership Units of the Partnership ranking, as to quarterly distributions and upon liquidation, junior to the Series A Preferred Partnership Units (collectively, "Junior Partnership Units"). 3. Quarterly Distributions A. The Post Partners, in their capacity as the holders of the then outstanding Series A Preferred Partnership Units, shall be entitled to receive, when and as declared by the General Partner out of any funds legally available therefor, cumulative quarterly distributions at the rate of $4.25 per Series A Preferred Partnership Unit per year, payable in equal amounts of $1.0625 per unit quarterly in cash on the last day of each March, June, September, and December or, if not a Business Day (as hereinafter defined), the next succeeding Business Day beginning on December 31, 1996 (each such day being hereafter called a "Quarterly Distribution Date" and each period ending on a Quarterly Distribution Date being hereinafter called a "Distribution Period"). Quarterly distributions on each Series A Preferred Partnership Unit shall accrue and be cumulative from and including the date of original issue thereof, whether or not (i) quarterly distributions on such Series A Preferred Partnership Units are earned or declared; or (ii) on any Quarterly Distribution Date there shall be funds legally available for the payment of quarterly distributions. Quarterly distributions paid on the Series A Preferred Partnership Units in an amount less than the total amount of such quarterly distributions at the time accrued and payable on such Partnership Units shall be allocated pro rata on a per unit basis among all such Series A Preferred Partnership Units at the time outstanding. EXHIBIT E (Page 1 of 4) 75 "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close. B. The amount of any quarterly distributions accrued on any Series A Preferred Partnership Units at any Quarterly Distribution Date shall be the amount of any unpaid quarterly distributions accumulated thereon, to and including such Quarterly Distribution Date, whether or not earned or declared, and the amount of quarterly distributions accrued on any Series A Preferred Partnership Units at any date other than a Quarterly Distribution Date shall be equal to the sum of the amount of any unpaid quarterly distributions accumulated thereon, to and including the last preceding Quarterly Distribution Date, whether or not earned or declared, plus an amount calculated on the basis of the annual distribution rate of $4.25 per unit for the period after such last preceding Quarterly Distribution Date to and including the date as of which the calculation is made based on a 360-day year of twelve 30-day months. C. Except as provided herein, the Series A Preferred Partnership Units shall not be entitled to participate in the earnings or assets of the Partnership, and no interest, or sum of money in lieu of interest, shall be payable in respect of any distribution or distributions on the Series A Preferred Partnership Units which may be in arrears. D. Any distribution made on the Series A Preferred Partnership Units shall be first credited against the earliest accrued but unpaid quarterly distribution due with respect to such Partnership Units which remains payable. E. No quarterly distributions on the Series A Preferred Partnership Units shall be authorized by the General Partner or be paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of PPI, the General Partner or the Partnership, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. Notwithstanding the foregoing, quarterly distributions on the Series A Preferred Partnership Units will accrue whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such quarterly distributions and whether or not such quarterly distributions are authorized. 4. Liquidation Rights A. Upon the voluntary or involuntary dissolution, liquidation or winding up of the Partnership, the Post Partners, in their capacity as the holders of the Series A Preferred Partnership Units then outstanding, shall be entitled to receive and to be paid out of the assets of the Partnership available for distribution to its partners, before any payment or distribution shall be made on any Junior Partnership Units, the amount of $50.00 per Series A Preferred Partnership Unit, plus accrued and unpaid quarterly distributions thereon. EXHIBIT F (Page 2 of 4) 76 B. After the payment to the holders of the Series A Preferred Partnership Units of the full preferential amounts provided for herein, the Post Partners, in their capacity as the holders of the Series A Preferred Partnership Units as such, shall have no right or claim to any of the remaining assets of the Partnership. C. If, upon any voluntary or involuntary dissolution, liquidation, or winding upon of the Partnership, the amounts payable with respect to the preference value of the Series A Preferred Partnership Units and any other Preferred Partnership Units of the Partnership ranking as to any such distribution on a parity with the Series A Preferred Partnership Units are not paid in full, the holders of the Series A Preferred Partnership Units and of such other Preferred Partnership Units will share ratably in any such distribution of assets of the Partnership in proportion to the full respective preference amounts to which they are entitled. D. Neither the sale, lease or conveyance of all or substantially all of the property or business of the Partnership, nor the merger or consolidation of the Partnership into or with any other entity or the merger or consolidation of any other entity into or with the Partnership, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes hereof. 5. Redemption A. Optional Redemption. On and after October 1, 2026, the General Partner may, at its option, cause the Partnership to redeem at any time all or, from time to time, part of the Series A Preferred Partnership Units at a price per unit (the " Redemption Price"), payable in cash, of $50, together with all accrued and unpaid distributions to the and including the date fixed for redemption (the "Redemption Date"). The Series A Preferred Partnership Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption provisions. B. Procedures of Redemption. (1) At any time that PPI exercises its right to redeem all or any of the Series A Preferred Shares, the General Partner shall exercise its right to cause the Partnership to redeem an equal number of Series A Preferred Partnership Units in the manner set forth herein. (2) No Series A Preferred Partnership Units may be redeemed except from proceeds from the sale of capital stock of PPI, including but not limited to common stock, preferred stock, depositary shares, interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into the exchangeable for equity securities) or options to purchase any of the foregoing. The proceeds of such sale of capital stock of PPI shall be conveyed by PPI to the Post Partners, by contribution or loan, and thereupon contributed by the Post Partners to the Partnership pursuant to the requirements of Section 4.2 of the Partnership Agreement. EXHIBIT F (Page 3 of 4) 77 6. Voting Rights Except as required by law, the General Partner, in its capacity as the holder of the Series A Preferred Partnership Units, shall not be entitled to vote at any meeting of the Partners or for any other purpose or otherwise to participate in any action taken by the Partnership or the Partners, or to receive notice of any meeting of Partners. 7. Conversion The Series A Preferred Partnership Units are not convertible into or exchangeable for an other property or securities of the Partnership. 8. Restrictions on Ownership The Series A Preferred Partnership Units shall be owned and held solely by one or both of the Post Partners. As of the date hereof, all of the Series A Preferred Partnership Units are owned by Post LP Holdings. 9. General The rights of the Post Partners, in their capacity as holders of the Series A Preferred Partnership Units, are in addition to and not in limitation on any other rights or authority of the Post Partners, in any other capacity, under the Partnership Agreement. In addition, nothing contained herein shall be deemed to limit or otherwise restrict any rights or authority of the Post Partners under the Partnership Agreement, other than in their capacity as the holders of the Series A Preferred Partnership Units. EXHIBIT F (Page 4 of 4) EX-10.2 3 1ST AMEND TO 2ND PARTNERHSIP AGREEMENT 1 EXHIBIT 10.2 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF POST APARTMENT HOMES, L.P. This First Amendment to Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P. (this "Amendment") is entered into as of October 28, 1997, 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 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 (the "Partnership Agreement"). WHEREAS, Post Properties, Inc. ("PPI"), on even date herewith, has issued 2,000,000 shares of its 75/8% Series B Cumulative Redeemable Preferred Shares, par value $0.01 per share, having a liquidation preference equivalent to $25.00 per share (the "Series B Preferred Shares"), and has sold such Series B Preferred Shares in a public offering; WHEREAS, PPI has contributed to Post LP Holdings, Inc. ("Post LP Holdings") the net proceeds of the sale of the Series B Preferred Shares; WHEREAS, Post LP Holdings desires to contribute such net proceeds of the sale of the Series B Preferred Shares to the Partnership in exchange for partnership interests in the Partnership as set forth herein; WHEREAS, the General Partner is authorized to cause the Partnership to issue interests in the Partnership to Post LP Holdings in exchange for such contribution; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Contribution. PPI has contributed to Post LP Holdings, and Post LP Holdings in turn hereby contributes to the Partnership, the entire net proceeds received by PPI from the issuance of the Series B Preferred Shares. As provided in Section 4.3 of the Partnership Agreement, Post LP Holdings shall be deemed to have made a Capital Contribution to the Partnership in the amount of the gross proceeds of such issuance, which is $50,000,000.00, and the Partnership shall be deemed simultaneously to have reimbursed Post LP Holdings (and Post LP Holdings shall be deemed to have reimbursed PPI) 2 pursuant to Section 7.4.C of the Partnership Agreement for the amount of the underwriters discount and other costs incurred by PPI in connection with such issuance. Section 2. Issuance of Series B Preferred Partnership Units. In consideration of the contribution to the Partnership made by Post LP Holdings pursuant to Section 1 hereof, the Partnership hereby issues to Post LP Holdings 2,000,000 Series B Preferred Partnership Units (as defined herein). Section 3. Definitions. In addition to those terms defined in the Partnership Agreement, the following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in the Partnership Agreement and in this Amendment: "Series B Preferred Partnership Unit" means a Partnership Unit issued by the Partnership to Post LP Holdings in consideration of the contribution by Post LP Holdings to the Partnership of the entire net proceeds received by Post LP Holdings from PPI in connection with PPI's issuance of the Series B Preferred Shares. The Series B Preferred Partnership Units shall constitute Preferred Partnership Units. The Series B Preferred Partnership Units shall have the voting powers, designation, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions as are set forth in Exhibit G, attached hereto. It is the intention of the General Partner, in establishing the Series B Preferred Partnership Units, that each Series B Preferred Partnership Unit shall be substantially the economic equivalent of a Series B Preferred Share. "Series B Preferred Shares" means the 75/8 % Series B Cumulative Redeemable Preferred Shares, par value $0.01 per share, having a liquidation preference equivalent to $25.00 per share, issued by PPI. Section 4. Exhibits to Partnership Agreement. The General Partner shall maintain the information set forth in Exhibit A to the Partnership Agreement, as such information shall change from time to time, in such form as the General Partner deems appropriate for the conduct of the Partnership affairs, and Exhibit A shall be deemed amended from time to time to reflect the information so maintained by the General Partner, whether or not a formal amendment to the Partnership Agreement has been executed amending such Exhibit A. In addition to the issuance of Series B Preferred Partnership Units to Post LP Holdings pursuant to this Amendment, such information shall reflect (and Exhibit A shall be deemed amended from time to time to reflect) the issuance of any additional Partnership Units to one or both of the Post Partners or any other Person, the transfer of Partnership Units and the redemption of any Partnership Units, all as contemplated herein. In addition, the Partnership Agreement is hereby amended by attaching thereto as Exhibit G the Exhibit G attached hereto. -2- 3 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: /s/ John A. Williams ----------------------------------------- John A. Williams Chairman and Chief Executive Officer Attest: /s/ Sherry W. Cohen ------------------------------------- Sherry W. Cohen Vice President and Secretary [CORPORATE SEAL] LIMITED PARTNERS: POST GP HOLDINGS, INC., a Georgia corporation, as attorney-in-fact for the Limited Partners By: /s/ John A. Williams ----------------------------------------- John A. Williams Chairman and Chief Executive Officer Attest: /s/ Sherry W. Cohen ------------------------------------- Sherry W. Cohen Vice President and Secretary [CORPORATE SEAL] -3- 4 EXHIBIT G POST APARTMENT HOMES, L.P. DESIGNATION OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE SERIES B PREFERRED PARTNERSHIP UNITS The following are the terms of the Series B Preferred Partnership Units established pursuant to this Amendment: (a) NUMBER. The maximum number of authorized Series B Preferred Partnership Units shall be 2,300,000. (b) RELATIVE SENIORITY. In respect of rights to receive quarterly distributions and to participate in distributions of payments in the event of any liquidation, dissolution or winding up of the Partnership, the Series B Preferred Partnership Units shall rank senior to the Common Partnership Units and any other class or series of Partnership Units of the Partnership ranking, as to quarterly distributions and upon liquidation, junior to the Series B Preferred Partnership Units (collectively, "Junior Partnership Units"). (c) QUARTERLY DISTRIBUTIONS. (1) The Post Partners, in their capacity as the holders of the then outstanding Series B Preferred Partnership Units, shall be entitled to receive, when and as declared by the General Partner out of any funds legally available therefor, cumulative quarterly distributions at the rate of $1.90625 per Series B Preferred Partnership Unit per year, payable in equal amounts of $0.47656 per unit quarterly in cash on the last day of each March, June, September, and December or, if not a Business Day (as hereinafter defined), the next succeeding Business Day beginning on December 31, 1997 (each such day being hereafter called a "Quarterly Distribution Date" and each period ending on a Quarterly Distribution Date being hereinafter called a "Distribution Period"). Quarterly distributions on each Series B Preferred Partnership Unit shall accrue and be cumulative from and including the date of original issue thereof, whether or not (i) quarterly distributions on such Series B Preferred Partnership Units are earned or declared or (ii) on any Quarterly Distribution Date there shall be funds legally available for the payment of quarterly distributions. Quarterly distributions paid on the Series B Preferred Partnership Units in an amount less than the total amount of such quarterly G-1 5 distributions at the time accrued and payable on such Partnership Units shall be allocated pro rata on a per unit basis among all such Series B Preferred Partnership Units at the time outstanding. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close. (2) The amount of any quarterly distributions accrued on any Series B Preferred Partnership Units at any Quarterly Distribution Date shall be the amount of any unpaid quarterly distributions accumulated thereon, to and including such Quarterly Distribution Date, whether or not earned or declared, and the amount of quarterly distributions accrued on any Series B Preferred Partnership Units at any date other than a Quarterly Distribution Date shall be equal to the sum of the amount of any unpaid quarterly distributions accumulated thereon, to and including the last preceding Quarterly Distribution Date, whether or not earned or declared, plus an amount calculated on the basis of the annual distribution rate of $1.90625 per unit for the period after such last preceding Quarterly Distribution Date to and including the date as of which the calculation is made based on a 360-day year of twelve 30-day months. (3) Except as provided herein, the Series B Preferred Partnership Units shall not be entitled to participate in the earnings or assets of the Partnership, and no interest, or sum of money in lieu of interest, shall be payable in respect of any distribution or distributions on the Series B Preferred Partnership Units which may be in arrears. (4) Any distribution made on the Series B Preferred Partnership Units shall be first credited against the earliest accrued but unpaid quarterly distribution due with respect to such Partnership Units which remains payable. (5) No quarterly distributions on the Series B Preferred Partnership Units shall be authorized by the General Partner or be paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of PPI, General Partner or the Partnership, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law. Notwithstanding the foregoing, quarterly distributions on the Series B Preferred Partnership Units will accrue whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such quarterly distributions and whether or not such quarterly distributions are authorized. (d) LIQUIDATION RIGHTS. (1) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Partnership, the Post Partners, in their capacity as the holders of the Series B Preferred Partnership Units then outstanding, shall be entitled to receive and to be paid out of the assets of the Partnership G-2 6 available for distribution to its partners, before any payment or distribution shall be made on any Junior Partnership Units, the amount of $25.00 per Series B Preferred Partnership Unit, plus accrued and unpaid quarterly distributions thereon. (2) After the payment to the holders of the Series B Preferred Partnership Units of the full preferential amounts provided for herein, the Post Partners, in their capacity as the holders of the Series B Preferred Partnership Units as such, shall have no right or claim to any of the remaining assets of the Partnership. (3) If, upon any voluntary or involuntary dissolution, liquidation, or winding upon of the Partnership, the amounts payable with respect to the preference value of the Series B Preferred Partnership Units and any other Preferred Partnership Units of the Partnership ranking as to any such distribution on a parity with the Series B Preferred Partnership Units are not paid in full, the holders of the Series B Preferred Partnership Units and of such other Preferred Partnership Units will share ratably in any such distribution of assets of the Partnership in proportion to the full respective preference amounts to which they are entitled. (4) Neither the sale, lease or conveyance of all or substantially all of the property or business of the Partnership, nor the merger or consolidation of the Partnership into or with any other entity or the merger or consolidation of any other entity into or with the Partnership, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes hereof. (e) REDEMPTION. (1) OPTIONAL REDEMPTION. On and after October 28, 2007, the General Partner may, at its option, cause the Partnership to redeem at any time all or, from time to time, part of the Series B Preferred Partnership Units at a price per unit (the " Redemption Price"), payable in cash, of $25.00, together with all accrued and unpaid distributions to the and including the date fixed for redemption (the "Redemption Date"). The Series B Preferred Partnership Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption provisions. (2) PROCEDURES OF REDEMPTION. (i) At any time that PPI exercises its right to redeem all or any of the Series B Preferred Shares, the General Partner shall exercise its right to cause the Partnership to redeem an equal number of Series B Preferred Partnership Units in the manner set forth herein. (ii) No Series B Preferred Partnership Units may be redeemed except from proceeds from the sale of capital stock of PPI, including but not limited to common stock, preferred stock, depositary shares, interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into the exchangeable for equity securities) or options to purchase any of the foregoing. The G-3 7 proceeds of such sale of capital stock of PPI shall be conveyed by PPI to the Post Partners, by contribution or loan, and thereupon contributed by the Post Partners to the Partnership pursuant to the requirements of Section 4.2 of the Partnership Agreement. (f) VOTING RIGHTS. Except as required by law, the General Partner, in its capacity as the holder of the Series B Preferred Partnership Units, shall not be entitled to vote at any meeting of the Partners or for any other purpose or otherwise to participate in any action taken by the Partnership or the Partners, or to receive notice of any meeting of Partners. (g) CONVERSION. The Series B Preferred Partnership Units are not convertible into or exchangeable for an other property or securities of the Partnership. (h) RESTRICTIONS ON OWNERSHIP. The Series B Preferred Partnership Units shall be owned and held solely by one or both of the Post Partners. As of the date hereof, all of the Series B Preferred Partnership Units are owned by Post LP Holdings. (i) GENERAL. The rights of the Post Partners, in their capacity as holders of the Series B Preferred Partnership Units, are in addition to and not in limitation on any other rights or authority of the Post Partners, in any other capacity, under the Partnership Agreement. In addition, nothing contained herein shall be deemed to limit or otherwise restrict any rights or authority of the Post Partners, under the Partnership Agreement, other than in their capacity as the holders of the Series B Preferred Partnership Units. G-4 EX-10.3 4 2ND AMEND TO 2ND AMEND RESTATED PARTNERSHIP 1 EXHIBIT 10.3 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF POST APARTMENT HOMES, L.P. This Second Amendment to First Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P. (this "Amendment") is entered into as of December 23, 1997, 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 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 by the First Amendment to Second Amended and Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated as of October 28, 1997 (the "Partnership Agreement"). WHEREAS, certain Limited Partners of Post Apartment Homes, L.P. (the "Partnership") have requested an amendment to the Partnership Agreement as provided herein, and such amendment has been approved by the requisite number of Limited Partners as set forth in the Partnership Agreement; WHEREAS, the parties hereto accordingly desire to amend the Partnership Agreement in accordance with the approved amendment; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Partnership Agreement - Election to Restore Deficit Capital Account. The Partnership Agreement is hereby amended by adding the following new Sections 13.3.D, 13.3.E, 13.3.F and 13.3.G immediately following the existing Section 13.3.C: D. Any Partner (other than a Principal or a Principal-Controlled Partnership, whose rights and obligations shall be as set forth above) may elect at any time to undertake deficit Capital Account restoration liability under Section 13.3.E (or increase the amount of such deficit Capital Account restoration liability previously undertaken) by delivering written notice of such election to the General Partner. Any such notice of election shall include a statement of the maximum dollar amount of such Partner's deficit Capital Account restoration obligation (the "Stipulated Liability Cap") or a statement that such obligation shall be unlimited in amount. Such election, including the Stipulated Liability Cap, shall 2 be subject to the written approval of the General Partner. At such time as the General Partner gives such written approval, such electing Partner shall be deemed an "Electing Partner" for purposes of this Section 13.3. The General Partner may prescribe such form or forms (if any) for an election under this Section 13.3.D as the General Partner deems appropriate. E. Subject to Section 13.3.F, if an Electing Partner (as hereinafter defined), on the date of the "liquidation" of his interest in the Partnership (within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)), has a negative balance in his Capital Account, then such Electing Partner shall contribute in cash to the capital of the Partnership the lesser of (i) the amount required to increase his Capital Account as of such date to zero or (ii) such Electing Partner's Stipulated Liability Cap (as defined above). Any such contribution required of an Electing Partner hereunder shall be made on or before the later of (x) the end of the Partnership Year in which the interest of such Electing Partner is liquidated; or (y) the ninetieth (90th) day following the date of such liquidation. Notwithstanding any provision hereof to the contrary, all amounts so contributed by an Electing Partner to the capital of the Partnership shall, upon the liquidation of the Partnership under this Article 13, be first paid to any then creditors of the Partnership, and any remaining amount shall be distributed to the other Partners, if any, then having positive balances in their respective Capital Accounts in proportion to such positive balances. F. After the death of a Control Person (as hereinafter defined), the executor of the estate of such Control Person, on behalf of an Electing Partner, may elect to reduce (or eliminate) the deficit Capital Account restoration obligation of such Electing Partner pursuant to Section 13.3.E. Such election may be made by such executor by delivering to the General Partner within two hundred seventy (270) days of the death of such Control Person a written notice, on behalf of such Electing Partner, setting forth the maximum deficit balance in such Electing Partner's Capital Account that such Electing Partner agrees to restore under Section 13.3.E, if any. If such executor does not make a timely election pursuant to this Section 13.3.F (whether or not the balance in the Electing Partner's Capital Account is negative at such time), then such Electing Partner (and the beneficiaries of any Control Person who receive distribution of Partnership Units therefrom) shall be deemed to have a deficit Capital Account restoration obligation as set forth pursuant to the terms of Section 13.3.E. For purposes of this Section 13.3.F, "Control Person" means, with respect to any Electing Partner, (i) such Electing Partner, if such Electing Partner is an individual, and (ii) if such Electing Partner is not an individual, an individual who owns, directly or indirectly, a majority of (A) the power of the voting equity securities of such Electing Partner or (B) the outstanding equity interests of such Electing Partner. Section 2. Amendment to Partnership Agreement - Allocation of Net Losses Section 6.1.B of the Partnership Agreement is hereby deleted in its entirety and the following new Section 6.1.B is inserted in its place: -2- 3 B. Net Losses. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Losses shall be allocated to the Partners as follows: (1) To the Partners who hold Common Partnership Units in accordance with their respective Percentage Interests held with respect to Common Partnership Units, except as otherwise provided in this Section 6.1.B. (2) To the extent that an allocation of Net Loss under Section 6.1.B.(1) would cause a Partner to have an Adjusted Capital Account Deficit at the end of such taxable year (or increase any existing Adjusted Capital Account Deficit of such Partner), such Net Loss shall instead be allocated to those Partners, if any, for whom such allocation of Net Loss would not cause or increase an Adjusted Capital Account Deficit. Solely for purposes of this Section 6.1.B.(2), the Adjusted Capital Account Deficit shall be determined (i) in the case of the Post Partners, without regard to the amount credited to the Post Partners' respective Capital Accounts for the aggregate Liquidation Preference Amount attributable to Preferred Partnership Units and without regard to any deemed deficit restoration obligation of the General Partner recognized under Regulations Section 1.704-1(b)(2)(ii)(c)(2), and (ii) in the case of an Electing Partner, Principal or a Principal-Controlled Partnership, without regard to such Partner's deficit Capital Account restoration obligation under Section 13.3 hereof. The Net Loss allocated under this Section 6.1.B.(2) shall be allocated among the Limited Partners who may receive such allocation in proportion to their respective Percentage Interests in Common Partnership Units, but for any particular Limited Partner not in excess of the maximum amount of Net Loss that could be allocated to such Partner without causing such Partner to have an Adjusted Capital Account Deficit. (3) Any remaining Net Loss that cannot be allocated under Sections 6.1.B.(1) and (2) hereof shall be allocated to the Post Partners in proportion to their respective Percentage Interests with respect to Preferred Partnership Units, to the extent that such allocation of Net Loss would not cause or increase an Adjusted Capital Account Deficit of the Post Partners determined, in the case of the General Partner, without regard to any deemed deficit restoration obligation of the General Partner recognized under Regulations Section 1.704-1(b)(2)(ii)(c)(2). (4) Any remaining Net Loss shall be allocated to the Electing Partners, Principals and the Principal-Controlled Partnerships who may receive such allocation without causing an Adjusted Capital Account Deficit as to such Partner, in proportion to their respective Percentage Interests in Common Partnership Units; provided that if, after the death of a Control Person (as defined in Section 13.3.F hereof) or Principal, an election is made on behalf of the applicable Electing Partner, Principal or Principal-Controlled Partnership under Section 13.3 hereof to eliminate or reduce its deficit Capital Account restoration obligation under Section 13.3 hereof, Net Losses shall not be allocated to such Partner to the extent that such allocation would cause such -3- 4 Partner to have an Adjusted Capital Account Deficit (or would increase any existing Adjusted Capital Account Deficit of such Partner) as of the end of such taxable year, and instead shall be allocated to those Electing Partners, Principals and Principal-Controlled Partnerships as to whom the foregoing limitation does not apply, in proportion to their respective Percentage Interests in Common Partnership Units. (5) Any remaining Net Loss shall be allocated to the General Partner. C. For purposes of Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain, and (ii) the total amount of Nonrecourse Built-in Gains3 shall be allocated among the Partners in accordance with their respective Percentage Interests in Common Partnership Units. D. Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall to the extent possible, after taking into account other required allocations of gain pursuant to Exhibit C, be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. 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: /s/ John A. Williams ------------------------------------ Name: John A. Williams ------------------------------- Title: Chairman and Chief Executive Officer ------------------------------ Attest: /s/ Sherry W. Cohen -------------------------------- Name: Sherry W. Cohen -------------------------- Title: Vice President and Secretary ------------------------- [CORPORATE SEAL] -4- 5 LIMITED PARTNERS: POST GP HOLDINGS, INC., a Georgia corporation, as attorney-in-fact for the Limited Partners (other than Post LP Holdings, Inc.) By: /s/ John A. Williams ----------------------------------- Name: John A. Williams ------------------------------ Title: Chairman and Chief Executive Officer ----------------------------- Attest: /s/ Sherry W. Cohen ------------------------------- Name: Sherry W. Cohen ------------------------- Title: Vice President and Secretary ------------------------ POST LP HOLDINGS, INC., a Georgia corporation By: /s/ John A. Williams ----------------------------------- Name: John A. Williams ------------------------------ Title: Chairman and Chief Executive Officer ----------------------------- Attest: /s/ Sherry W. Cohen ------------------------------ Name: Sherry W. Cohen -------------------------- Title: Vice President and Secretary ------------------------- [CORPORATE SEAL] -5- EX-10.5 5 AMEND TO EMPLOYEE STOCK PLAN 1 EXHIBIT 10.5 AMENDMENT POST PROPERTIES, INC. EMPLOYEE STOCK PLAN Pursuant to the power reserved in sec. 17 of the Post Properties, Inc. Employee Plan, sec. 15, Adjustment, is hereby amended to delete the second sentence in sec. 15 as currently in effect and to substitute the following for such sentence: "Furthermore, the Board as part of any corporate transaction described in sec. 424(a) of the Code shall have the right to adjust (in any manner which the Board in its discretion deems consistent with sec. 424(a) of the Code) the number, kind or class (or any combination thereof)of shares of Stock reserved under sec. 3 of this Plan, and the Committee as part of any such transaction shall have the right to adjust (in any manner which the Committee in its discretion deems consistent with sec. 424(a) of the Code) the number, kind or class (or any combination thereof) of shares of Stock underlying any Restricted Stock grants previously made under this Plan and any related grant conditions and forfeiture conditions, and the number, kind or class (or any combination thereof) of shares subject to Option grants previously made under this Plan and the related Option Price and, further, shall have the right to make (in any manner which the Committee in its discretion deems consistent with sec. 424(a) of the Code) Restricted Stock and Option grants to effect the assumption of, or the substitution for, restricted stock or option grants previously made by any other corporation to the extent that such corporate transaction calls for such substitution or assumption of such restricted stock or option grants." This Amendment to the Post Properties, Inc. Employee Stock Plan shall be effective as of the date that the Board of Directors of Post Properties, Inc. adopted this Amendment to the Plan. POST PROPERTIES, INC. BY: /s/ Sherry W. Cohen -------------------------- TITLE: Sr. V.P. & Sec. ------------------------ DATE: October 14, 1997 ------------------------- EX-10.6 6 AMEND NO 2 TO EMP STOCK PLAN 1 EXHIBIT 10.6 AMENDMENT NO. TWO POST PROPERTIES, INC. EMPLOYEE STOCK PLAN Pursuant to the power reserved in section 17 of the Post Properties, Inc. Employee Stock Plan and in connection with the approval granted by the shareholders of Post Properties, Inc., section 3, Shares Reserved Under the Plan, is hereby amended to delete 1,200,000 from the first sentence thereof and to insert in its place "3,500,000." This Amendment to the Post Properties, Inc. Employee Stock Plan shall be effective as of the date that the shareholders of Post Properties, Inc. adopted the Amendment to the Plan. POST PROPERTIES, INC. By: /s/ Sherry W. Cohen -------------------------- Sherry W. Cohen Senior Vice President and Secretary Date: October 24, 1997 EX-10.7 7 AMEND NO 3 TO EMP STOCK PLAN 1 EXHIBIT 10.7 AMENDMENT NO. THREE POST PROPERTIES, INC. EMPLOYEE STOCK PLAN Pursuant to the power reserved in ss. 17 of the Post Properties, Inc. Employee Stock Plan, ss. 7.3, Grants to Directors, is hereby amended to delete ss. 7.3 in its entirety and to substitute the following for such section: "Each Director automatically shall be granted (without any further action on the part of the Committee) a NQO under this Plan as of the first day he serve as such to purchase the number of shares of Stock determined by dividing $10,000 by the Fair Market Value of a share of Stock on the date of grant and rounding down to the nearest whole number. Such grant shall be made at an Option Price equal to the Fair Market Value of a share of Stock on the date of such grant. Thereafter, each Director who is serving as such on December 31 of each calendar year and who has served as such for more than one full year automatically shall be granted (without any further action on the part of the Committee), as of such December 31, a NQO under this Plan to purchase 1,000 shares of Stock. Such grant shall be made at an Option Price equal to the Fair Market Value of a share of Stock on the date of such grant. Each NQO granted under this Plan to a Director shall be evidenced by an Option Certificate, shall be exercisable in full upon grant and shall expire 90 days after a Director ceases to serve as such or, if earlier, on the tenth anniversary of the date of the grant of the NQO. A NQO granted to a Director under this Plan shall conform in all other respects to the terms and conditions of a NQO under this Plan, and no Director shall be eligible to receive an Option under this Plan except as provided in this ss. 7.3. A grant of a NQO to a Director under this ss. 7.3 is intended to allow such Director to be a "disinterested person" within the meaning of Rule 16b-3, and all NQOs granted to Directors as well as this ss. 7.3 shall be construed to effect such intent." This Amendment to the Post Properties, Inc. Employee Stock Plan shall be effective as of the date that the Board of Directors of Post Properties, Inc. adopted the Amendment to the Plan. POST PROPERTIES, INC. By: /s/ Sherry Cohen --------------------------------------- Sherry W. Cohen Senior Vice President and Secretary Date: October 30, 1997 EX-10.8 8 AMEND NO 4 TO EMP STOCK PLAN 1 EXHIBIT 10.8 AMENDMENT NO. FOUR POST PROPERTIES, INC. EMPLOYEE STOCK PLAN Pursuant to the power reserved in section 17 of the Post Properties, Inc. Employee Stock Plan ("Plan"), the first sentence of Section 7.1, Committee Action, is hereby amended to read as follows: "The Committee acting in its absolute discretion shall have the right to grant Options to Key Employees under this Plan from time to time to purchase shares of Stock; provided, however, that the Committee shall not have the right to grant new Options in exchange for the cancellation of outstanding Options which have a higher Option Price than the new Options and, further, no grants of ISOs shall be made to Key Employees who are not employed by Post or a Subsidiary, and no Option or Options, individually or collectively, shall be granted to any Key Employee in any calendar year to purchase more than 50,000 shares of Stock." This Amendment to the Plan shall be effective as of the date that the Board of Directors of Post Properties, Inc. adopted this Amendment to the Plan. POST PROPERTIES, INC. BY: /s/ Sherry W. Cohen --------------------------------------- TITLE: Senior Vice President and Secretary ------------------------------------ DATE: October 30, 1997 EX-10.19 9 FORM OF OFFICERS & DIR INDEMNIFICATION AGREE 1 EXHIBIT 10.19 [AMENDED AND RESTATED] INDEMNIFICATION AGREEMENT THIS [AMENDED AND RESTATED] INDEMNIFICATION AGREEMENT (this "Agreement"), is made and entered into as of the ___ day of ___________, 1998, by and between POST PROPERTIES, INC., a Georgia corporation (the "Company"), and _______________, an officer or director of the Company ("Indemnitee"). For the purposes of this Agreement, all references to the "Company" shall include all subsidiaries, affiliates, corporations, partnerships, joint ventures, enterprises, employee benefit plans, trusts and other entities on behalf of which Indemnitee serves or will serve at the Company's request as an officer, director, partner, trustee, employee or agent or in a related capacity. WITNESSETH: WHEREAS, Indemnitee has agreed to serve, at the request of the Company, as an officer or director of the Company; [WHEREAS, the parties hereto have executed that certain Indemnification Agreement dated as of July 22, 1993, which agreement is hereby amended and restated in its entirety; and] WHEREAS, Indemnitee is willing to serve on behalf of the Company on the condition that he or she be indemnified, and that he or she have litigation expenses advanced, to the maximum extent permitted by law. NOW, THEREFORE, in consideration of Indemnitee's agreement to serve as an officer or director of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 2 1. Mandatory Indemnification. (a) General. The Company shall indemnify and hold harmless Indemnitee to the maximum extent provided for in this Agreement, and, to the extent that applicable law from time to time in effect shall permit indemnification that is broader than provided in this Agreement, then to the maximum extent authorized by law. All amounts payable under the Company's indemnification obligation shall be paid within thirty (30) days of Indemnitee's request therefor. (b) Actions Other Than Derivative Actions. In connection with any threatened, pending or completed claim, action, suit or proceeding to which Indemnitee is made or is threatened to be made a named defendant or respondent ("Party"), whether civil, criminal, administrative or investigative, and whether formal or informal (an "Action"), but not including any Action by or in the right of the Company (a "Derivative Action"), the Company hereby agrees to indemnify and hold Indemnitee harmless from and against any judgment, settlement, penalty, fine (including any excise tax assessed with respect to any employee benefit plan), interest and reasonable expense (including attorneys' fees) actually incurred by him or her by reason of the fact that Indemnitee is or was an officer, director, employee or agent of the Company, or has liability under Section 1l(a) of the Securities Act of 1933, as amended, or is or was serving at the request of the Company as an officer, director, agent or fiduciary of any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise; provided, that Indemnitee conducted himself or herself in good faith and reasonably believed (i) in the case of conduct in his of her official capacity, that such conduct was in the best interests of the Company; (ii) in all other cases, that such conduct was at least not opposed to the best interests of the Company; (iii) in the case of any criminal Action, that the Indemnitee had no reasonable cause to believe that such conduct was unlawful; and (iv) in the case of conduct with 2 3 respect to any employee benefit plan, that the Indemnitee acted in a manner he or she believed to be good faith to be in the interests of the participants in and beneficiaries of the plan. Whether an Action is threatened, and whether Indemnitee is threatened to be made a Party thereto, shall be determined by Indemnitee in his reasonable judgment. (c) Derivative Actions. In connection with any Derivative Action, the Company hereby agrees to indemnify and hold Indemnitee harmless from and against any reasonable expenses actually incurred by him or her (including amounts paid in settlement but not including amounts paid as a judgment, penalty or fine in respect of any such action) by reason of the fact that Indemnitee is or was an officer, director, partner, trustee, employee or agent of the Company; provided, that Indemnitee met the relevant standard of conduct described in Section 1(b) hereof. (d) Termination of Action. The termination of any Action by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that Indemnitee did not meet the relevant standard of conduct described in Section 1(b) hereof. (e) Conduct of Indemnitee. Notwithstanding any foregoing provision to the contrary, under no circumstance shall the Company indemnify or hold Indemnitee harmless from and against any liability for judgments, settlements, penalties, fines (including excise taxes assessed with respect to any employee benefit plan), or expenses (including attorneys' fees) incurred by Indemnitee in a proceeding in which Indemnitee is adjudged liable to the Company or is subjected to injunctive relief in favor of the Company (i) for any appropriation, in violation of his or her duties, of any business opportunity of the Company, (ii) for acts or omissions that involve intentional misconduct or knowing violation of law, (iii) for the types of liability set forth in Section 14-2-832 3 4 of the Georgia Business Corporation Code (unlawful distributions), or (iv) for any transaction from which he or she received an improper personal benefit. 2. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any liability (including judgments, settlements, penalties, fines (including excise taxes assessed with respect to any employee benefit plan), interest or reasonable expenses (including attorneys' fees)) actually incurred by him or her but not entitled to indemnification for all of the total amount thereof, the Company shall indemnify Indemnitee for such portion thereof to which Indemnitee is entitled. 3. Advancement of Expenses. The Company agrees to pay, in advance of the final disposition of any Action (including, for this purpose, any proceeding in Section 5 hereof) and within ten (10) days after Indemnitee's written request, all reasonable expenses incurred by Indemnitee in defending or acting as a witness in connection with such Action, including but not limited to the investigation, defense, settlement or appeal of any Action, to which Indemnitee is a Party or threatened in the reasonable judgment of Indemnitee to be made a Party by reason of the fact that Indemnitee is or was an officer, director, employee or agent of the Company, or has liability under Section 11 (a) of the Securities Act of 1933, as amended, or is or was serving at the request of the Company as an officer, director, agent or fiduciary of any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise. Indemnitee shall furnish the Company (i) a written affirmation of his or her good faith belief that he or she has met the standard of conduct set forth in Section 1(b) hereof or that the Action involves conduct for which liability has been eliminated under a provision of the Company's articles of incorporation; and (ii) a written undertaking to repay any funds advanced if it is ultimately determined that Indemnitee is not entitled to indemnification. 4 5 Indemnitee agrees to reimburse the Company for any such advancement if, when and to the extent it is ultimately determined (by a court in a proceeding described in Section 5 or otherwise) that Indemnitee is not entitled to indemnification pursuant to this Agreement. 4. Indemnification in Specific Actions. (a) The determination of whether, with respect to any specific Action, Indemnitee has met the applicable standard of conduct set forth in Section 1(b) hereof and is entitled to indemnification pursuant to Section 1 hereof shall be made (i) if there are two or more disinterested directors, by the Board of Directors by a majority vote of all the disinterested directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two or more disinterested directors appointed by such vote; (ii) if a determination cannot be made under (i) above, in a written opinion by independent legal counsel, selected in the manner described in the foregoing clause (i) or, if there are fewer than two disinterested directors, selected by the Board of Directors of the Company (in which selection directors who do not qualify as disinterested directors may participate); or (iii) if agreed to by Indemnitee, by the vote of a majority of shares of the Company entitled to vote thereon (excluding shares owned by, or the voting of which is controlled by, directors who do not qualify as disinterested directors). (b) In the event that the determination is made that Indemnitee is entitled to indemnification or advancement of expenses in a specific Action pursuant to Section 1 hereof, such a determination is binding upon the Company in any subsequent proceedings in connection with such Action. 5 6 5. Enforcement of this Agreement. (a) Reasonable expenses incurred by Indemnitee in connection with his or her request for indemnification hereunder shall be borne by the Company, unless Indemnitee is determined not to be entitled to indemnification for any liability or expense hereunder. In the event that Indemnitee is a party to or intervenes in any proceeding in which the validity or enforceability of this Agreement is at issue or seeks an adjudication or award in arbitration to enforce his or her rights under, or to recover damages for breach of, this Agreement, Indemnitee, if he or she prevails in whole or in part in such action, shall be entitled to recover from the Company and shall be indemnified by the Company against any expenses actually and reasonably incurred by him or her. (b) In any proceeding in which the validity or enforceability of this Agreement is at issue, or in which Indemnitee seeks an adjudication or award in arbitration to enforce his or her rights hereunder, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification hereunder. 6. Termination of Service. Indemnitee's right to indemnification and advancement of expenses pursuant to this Agreement shall continue regardless of whether Indemnitee has ceased for any reason to be a director of the Company and shall inure to the benefit of the heirs of Indemnitee and the executors or administrators of Indemnitee's estate. 7. Maintenance of Directors and Officers Liability Insurance. In the event the Company maintains policies of Directors and Officers Liability Insurance, Indemnitee shall be named as an insured in such manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's directors. 6 7 8. Subrogation. In the event Indemnitee receives a payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 9. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Action to the extent Indemnitee has otherwise actually received payment (under any insurance policy, bylaw provision or otherwise) of the amounts otherwise indemnifiable hereunder. 10. Non-Exclusivity. Indemnitee's rights under this Agreement shall be in addition to, and not in lieu of, any other rights Indemnitee may have under any provision of the Company's Articles of Incorporation or Bylaws, the Georgia Business Corporation Code or pursuant to any Directors and Officers Liability Insurance. Nothing in this Agreement shall be deemed to diminish or otherwise restrict Indemnitee's right to indemnification under any provision of the Company's Articles of Incorporation or Bylaws, the Georgia Business Corporation Code or pursuant to any Directors and Officers Liability Insurance, but the rights to indemnification hereunder shall in any event apply notwithstanding any contrary provision in, or conflict with, any provision of the Company's Articles of Incorporation or Bylaws, unless prohibited by law. 11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by merger or consolidation as provided in the Georgia Business Corporation Code), heirs, executors and administrators. 7 8 12. Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed, and governed by and in accordance with the laws of, the State of Georgia (without regard to the conflict of laws principles thereof). 13. Severability. The Company and Indemnitee agree that the agreements and provisions contained in this Agreement are severable and divisible, that each such agreement and provision does not depend upon any other provision or agreement for its enforceability, and that each such agreement and provision set forth herein constitutes an enforceable obligation between the Company and Indemnitee. Consequently, the parties hereto agree that neither the invalidity nor the unenforceability of any provision of this Agreement shall affect the other provisions hereof, and this Agreement shall remain in full force and effect and be construed in all respects as if such invalid or unenforceable provision were omitted. 14. Certain Amendments. The Company may enter into any amendment to this Agreement required by applicable law without shareholder approval of such amendment, unless shareholder approval is required by applicable law. 8 9 IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as the date first above written. INDEMNITEE ---------------------------------- Name: POST PROPERTIES, INC. Attest: By: By: ------------------------ ------------------------------ Secretary Name: Title: 9 EX-10.22 10 AMEND NO 1 TO PROFIT SHARING PLAN 1 EXHIBIT 10.22 AMENDMENT NUMBER ONE TO THE POST PROPERTIES, INC. PROFIT SHARING/sec. 401(K) PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1994 Pursuant to sec. 13.1 of the Post Properties, Inc. Profit Sharing/sec. 401(k) Plan as amended and restated effective as of January 1, 1984 ("Plan"), Post Properties, Inc. hereby amends the Plan as follows: 1. By amending sec. 3.19, Forfeiture, to substitute "sec. 8.4" for "sec. 8.5" where it appears in such section. 2. By amending sec. 6.1, Plan Sponsor and Company Action, to delete the last paragraph of such section. 3. By amending sec. 6.5, Account Debits and Allocation of Adjustment, to add the following sentence to the end of such section: "For purposes of allocating the Adjustment for any Valuation Date, the balance of an Account shall include the Before-Tax Contributions credited to such Accounts as of such Valuation Date but shall exclude the Profit Sharing Contributions credited to such Account as of such Valuation Date." 4. By amending subsection (2) of sec. 8.4(d), Forfeiture, to read as follows: "(2) the last day of the Plan Year in which the Employee's employment as such terminates, unless he or she is reemployed as an Employee on or before such date." 2 5. By amending sec. 13.1, Amendment, to add the following sentence to the end of such section: "Any amendments to the Plan shall be in writing and shall be signed by the Chairman or the President of the Plan Sponsor or their delegate." 6. This Amendment Number One shall be effective retroactively to January 1, 1994. IN WITNESS WHEREOF, Post Properties, Inc. has executed this Amendment Number One this 15th day of July, 1994. (CORPORATE SEAL) POST PROPERTIES, INC. By:/s/ --------------------------- Title: Sr. Vice President ATTEST:/s/ Sherry W. Cohen ------------------------ ------------------------- Title: Sr. V.P. & Secretary ------------------------- -2- EX-10.23 11 AMEND NO 2 TO PROFIT SHARING PLAN 1 EXHIBIT 10.23 AMENDMENT NUMBER TWO TO THE POST PROPERTIES, INC. PROFIT SHARING/sec. 401(K) PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1994 Pursuant to sec. 13.1 of the Post Properties, Inc. Profit Sharing/sec. 401(k) Plan as amended and restated effective as of January 1, 1994 ("Plan"), Post Properties, Inc. hereby amends the Plan as follows: 1. By amending sec. 12.2 to read as follows: "12.2. Individual Account Investments. The Trustee at the direction of the Plan Sponsor shall establish at least two separate investment funds within the Trust Fund, one of which shall invest primarily in "qualifying employer securities" (as defined for purposes of ERISA sec. 407) of the Plan Sponsor, and such funds as in effect from time to time shall be described in the summary plan description for this Plan or in such other materials as the Plan Sponsor furnishes from time to time to Employees and Beneficiaries. The Plan Sponsor from time to time shall establish and shall communicate in advance and in writing to Employees and Beneficiaries procedures for making investment elections under this sec. 12.2 between, or among, these investment funds as the Plan Sponsor in its absolute discretion deems necessary or appropriate under the circumstances for the proper administration of this Plan; provided, however, no Employee or Beneficiary shall have any right to make any investment elections with respect to his or her Matching Account, which Matching Account shall be invested solely in the investment fund that invests primarily in qualifying employer securities of the Plan Sponsor. Subject to such procedures, each Employee and each Beneficiary of a deceased Employee for whom an Individual Account continues to be maintained under the Plan shall have the right to elect how such Individual Account shall be invested as between or among such investment funds. All investment directions by Employees and Beneficiaries shall be timely furnished by the Plan Sponsor to the Trustee or by each Employee and Beneficiary directly to the Trustee or its delegate in accordance with procedures established by the Plan Sponsor. The Individual Account of an individual for whom no investment election is in effect under this sec. 12.2 shall (together with all contributions to such Individual Account) be invested automatically in the fund designated by the Plan Sponsor for such accounts. 2 All additional administrative expenses incurred to effect the investment elections made under this sec. 12.2 shall be paid by the Trust Fund and charged (in accordance with such reasonable rules as the Plan Sponsor deems appropriate under the circumstances) to the Individual Account of the person making such election, unless the Plan Sponsor elects that the Plan Sponsor (or the Plan Sponsor and each Company) shall pay such expenses. The Trustee shall (in accordance with the provisions of the Trust Agreement) pass through to each Employee or Beneficiary any voting, tender and other similar rights appurtenant to his or her interest in an investment fund that invests primarily in qualifying employer securities of the Plan Sponsor and that is allocated to his or her Individual Account and, to the extent required in the regulations under ERISA sec. 404(c), shall pass through to each Employee or Beneficiary any voting, tender and other similar rights appurtenant to other investment funds allocated to his or her Individual Account." 2. By adding a new sec. 15 to read as follows: "sec. 15. Matching Contributions. 15.1. Amount of Matching Contributions. The Plan Sponsor shall decide each Plan Year how much each Company shall contribute as a Matching Contribution for such Plan Year based on the extent to which the Plan Sponsor's actual funds from operations for such year meet the targeted funds from operations for such year. Forfeitures, if any, from Matching Accounts shall be applied when available against the Companies' obligation to make Matching Contributions, and no Matching Contribution shall be made directly by the Companies for any Plan Year to the extent that such Forfeitures are available to satisfy the Matching Contribution obligation for such Plan Year. 15.2. Allocation of Matching Contributions. Subject to the limitations set forth in this sec. 15 and in sec. 7, the Matching Contributions made for any Plan Year shall be allocated as of the last day of such Plan Year by, or at the direction of, the Plan Sponsor among the Matching Accounts of all Active Participants on whose behalf Before-Tax Contributions were made for such Plan Year. The Matching Contribution shall be allocated to each such Matching Account in the same proportion that the Before-Tax Contributions allocated to such Active -2- 3 Participant's Before-Tax Account for such Plan Year bears to the total of all Before-Tax Contributions allocated to all Before-Tax Accounts for such Plan Year; provided, however, no Before-Tax Contributions in excess of 3% of an Active Participant's Compensation for a Plan Year shall be taken into account in computing the numerator or denominator of such fraction. 15.3. Limitations on Matching Contributions for Highly Compensated Employees. (a) General. Subject to sec. 15.3(f), the Average Contribution Percentage for Highly Compensated Employees for any Plan Year shall not exceed the Maximum Contribution Percentage for such Plan Year. The Plan Sponsor shall determine the amount, if any, of the Excess Aggregate Contributions for such year for each affected Highly Compensated Employee in accordance with the rules under Code sec. 401(m). (b) Special Rules. (1) Other Plans or Arrangements. For purposes of this sec. 15.3, the Contribution Percentage for any Highly Compensated Employee who is eligible to have "employee contributions" (within the meaning of Code sec. 401(m)), "elective deferrals" (as described in Code sec. 402(g)(3)), or "matching contributions)' (as described in Code sec. 401(m)(4)) allocated to his or her account under two or more plans or arrangements described in Code sec. 401(a) or Code sec. 401(k) that are maintained by a Company or an Affiliate shall be determined as if all such contributions were made under this Plan. If this Plan satisfies the requirements of Code sec. 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Code sec. 410(b) only if aggregated with this Plan, then this sec. 15.3 shall be applied by determining the Contribution Percentages as if all such plans were a single plan. (2) Family Members. For purposes of determining the Contribution Percentage of each Employee who is a 5% owner or one of the 10 most highly paid Highly Compensated Employees for such Plan Year, the Matching Contributions and Compensation of such Employee's "family members" (as described in -3- 4 Code sec. 414(q)(6)) shall be treated as the Matching Contributions and Compensation of such Employee, and such family members shall be disregarded as separate Employees in determining the Contribution Percentage both for individuals who are Nonhighly Compensated Employees and for individuals who are Highly Compensated Employees. In the case of a Highly Compensated Employee whose Contribution Percentage is determined under these family aggregation rules, the determination of the amount of Excess Aggregate Contributions shall be made by reducing the Contribution Percentage in accordance with the "leveling" method described in Treas. Reg. sec. 1.401(m)-l(e)(2) and allocating the Excess Aggregate Contributions among the family members in proportion to the contributions of each family member that have been combined. (3) Other Requirements. The determination and treatment of the Matching Contributions and Contribution Percentage of any Employee shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (c) Distribution or Forfeiture of Excess Aggregate Contributions. Notwithstanding any other provision of this Plan, Excess Aggregate Contributions made for any Plan Year, plus any investment income and minus any loss allocable to such Excess Aggregate Contributions, shall be forfeited (if otherwise forfeitable under sec. 8.4 and sec. 15.4(b)) or distributed (if not so forfeitable) from the Individual Accounts of Highly Compensated Employees on whose behalf such Excess Aggregate Contributions were allocated for such Plan Year no later than the last day of the immediately following Plan Year. Such distributions or forfeitures shall be made to such Employees on the basis of the respective portions of the Excess Aggregate Contributions attributable to each such Employee, determined by first reducing the Contribution Percentage of the Highly Compensated Employee with the highest Contribution Percentage to the extent necessary to satisfy the Maximum Contribution Percentage limitations or to cause such Contribution Percentage to equal the Contribution Percentage of the Highly Compensated Employee with the next highest Contribution Percentage, and then repeating such process until the Maximum Contribution Percentage limitations is satisfied. -4- 5 (d) Determination of Income or Loss. The investment income or loss allocable to Excess Aggregate Contributions shall be determined in accordance with sec. 6.5 for the Plan Year for which such contributions were allocated (but not for the period between the end of such Plan Year and the date of distribution or forfeiture) in accordance with the regulations under Code sec. 401(m). (e) Order for Determining Excess Aggregate Contributions. Excess Aggregate Contributions shall be determined after first determining "excess deferrals" under sec. 7.3 and then determining "excess contributions" under sec. 7.4. (f) Multiple Use Limit. If in the same Plan Year the Maximum Deferral Percentage limitation is satisfied by using the alternate limit under sec. 3.24(b) and the Maximum Contribution Percentage limitation is satisfied by using the alternate limit under sec. 15.5(f)(2), the Plan Sponsor shall determine the amount, if any, of the reductions required to satisfy the rules under Code sec. 401(m) on the multiple use of such alternative limits. Any such reduction shall be treated as an Excess Aggregate Contribution and shall be distributed or forfeited in accordance with sec. 15.3(c). 15.4. Other Rules Applicable to Matching Accounts. (a) Vesting and Forfeitures. The vested portion of an Employee's Matching Account shall equal the percentage figure shown opposite the Employee's completed Years of Employment under the Vesting Schedule set forth in sec. 8.4(c), and the rules in sec. 8.4 shall apply to an Employee's Matching Account in the same manner as to his or her Profit Sharing Account; provided, however, Forfeitures, if any, from Matching Accounts shall be applied when available against the Companies' obligation to make Matching Contributions under sec. 15.1. (b) Top-Heavy. For purposes of the minimum top-heavy contribution under sec. 14.7(d), Matching Contributions shall be taken into account in calculating the highest percentage allocated to a key employee. (c) Code sec. 415 Limitations. Notwithstanding anything to the contrary in sec. 7.2(a), the sum of the Matching Contributions, Before-Tax Contributions, Profit Sharing Contributions and -5- 6 Forfeitures credited to an Eligible Employee's Individual Account for any Plan Year shall not exceed the Code sec. 415 limitation described in sec. 7.2(a) 15.5. Special Definitions. (a) Average Contribution Percentage -- means for each Plan Year the average (expressed as a percentage) of the Contribution Percentages computed separately (a) for the group of individuals who are Highly Compensated Employees during such Plan Year and (b) for the group of individuals who are Nonhighly Compensated Employees during such Plan Year. (b) Matching Account -- means the bookkeeping subaccount maintained as part of an Employee's Individual Account attributable to his or her Matching Contributions under this Plan. (c) Matching Contribution -- means the matching contribution made by a Company in accordance with this sec. 15. (d) Contribution Percentage -- means for each Plan Year for each Employee who has satisfied the employment requirement described in sec. 4.1 and who is an Eligible Employee at any time during the Plan Year, the ratio (expressed as a percentage) of (1) the Matching Contribution, if any, credited to his or her Individual Account for such Plan Year to (2) his or her Compensation for such Plan Year. The Contribution Percentage for an Employee who is eligible to make, but does not make, Before-Tax Contributions and is not credited with a Matching Contribution shall be zero. (e) Excess Aggregate Contributions -- means for each Highly Compensated Employee for each Plan Year the excess of (1) the Matching Contributions actually taken into account in determining the Contribution Percentage of such Highly Compensated Employee for such Plan Year over (2) the maximum amount of such contributions permitted for such Plan Year under Code sec. 401(m)(2)(A), where such maximum shall be determined by reducing such contributions made by or on behalf of such Highly Compensated Employees in order of their Contribution Percentages, beginning with the highest of such percentages. -6- 7 (f) Maximum Contribution Percentage -- means for any Plan Year the greater of (1) the Average Contribution Percentage for Nonhighly Compensated Employees for such Plan Year multiplied by 1.25, or (2) the lesser of (i) the Average Contribution Percentage for Nonhighly Compensated Employees for such Plan Year multiplied by 2 or (ii) the Average Contribution Percentage for Nonhighly Compensated Employees plus 2 percentage points." 3. This amendment shall be effective as of January 1, 1996. Except as otherwise expressly amended by this amendment, the Plan as in effect before this amendment shall remain in full force and effect. IN WITNESS WHEREOF, Post Properties, Inc. has caused this Amendment Number Two to be executed by its duly authorized officer this 2nd day of January, 1996.. POST PROPERTIES, INC. BY: /s/ ------------------------- TITLE: President ----------------------- -7- EX-10.24 12 AMEND NO 3 TO PROFIT SHARING PLAN 1 EXHIBIT 10.24 AMENDMENT NUMBER THREE POST PROPERTIES, INC. PROFIT SHARING/ss. 401(K) PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1994 Pursuant to ss. 13.1 of the Post Properties, Inc. Profit Sharing/ss. 401(k) Plan as amended and restated effective as of January 1, 1994 ("Plan"), Post Properties, Inc. hereby amends the Plan as follows: 1. By amending ss. 3.19, Forfeiture, to read as follows: "3.19. Forfeiture -- means the nonvested portion of an Individual Account of an Employee that is deducted from such Account in accordance with the terms of this Plan." 2. By amending ss. 6.2(a), Forfeitures, to insert the phrase "attributable to Profit Sharing Contributions" after the word "Forfeitures". 3. By amending the last sentence of ss. 6.5, Account Debits and Allocation of Adjustment, to read as follows: "For purposes of allocating the Adjustment for any Valuation Date, the Individual Accounts shall be adjusted for contributions, distributions, withdrawals and other applicable debits and credits in accordance with procedures established for such purpose by the Plan's recordkeeper." 4. By amending ss. 6.6, Allocation Report, to read as follows: "6.6. Allocation Report. At least annually and at such other times as determined by the Plan Sponsor, if any, each person for whom an Individual Account is maintained shall be provided with a statement showing the amounts allocated to and the new value of that Individual Account." 5. By amending the last sentence in ss. 8.4(b), Immediate Payment, to read as follows: "If the vested portion of an Employee's Individual Account is $3,500 or less at the time of his or her Employment Termination Date (or at the time of any prior distribution), such Employee shall be deemed to have requested an immediate payment under this ss. 8.4(b) and that vested portion shall be paid in accordance with ss. 9.1(c) and procedures established by the Plan Sponsor as soon as practicable after the Employee's Employment Termination Date." 2 6. By amending ss. 8.4(e), Reemployment, to read as follows: "(e) Reemployment. (1) If the former Employee is reemployed as an Employee before he or she has 6 consecutive Breaks in Service and the vested portion of his or her Profit Sharing Account and Matching Account was more than zero, the dollar amount that was treated as a Forfeiture under ss. 8.4(d) and ss. 15.4(a), if any, shall be restored (from Forfeitures and, if necessary, from the Profit Sharing Contribution) to the Employee's Individual Account only if the Employee repays to the Plan an amount equal to the dollar amount of the distribution from the Employee's Profit Sharing Account and Matching Account in accordance with this ss. 8.4(e). Such repayment must be made before the earlier of (1) five years after the first date on which the Employee is subsequently reemployed as an Employee or (2) the date the Employee has six consecutive Breaks in Service following the date of the distribution. If no such repayment is made, the dollar amount that was treated as a Forfeiture shall not be restored notwithstanding the former Employee's reemployment. (2) If the former Employee is reemployed as an Employee before he or she has six consecutive Breaks in Service and the vested portion of his or her Profit Sharing Account and Matching Account was zero and, the dollar amount that was treated as a Forfeiture under ss. 8.4(d) and ss. 15.4(a), if any, shall automatically be restored upon the Employee's reemployment. (3) If the former Employee is reemployed as an Employee after he or she has six consecutive Breaks in Service, the dollar amount that was treated as a Forfeiture shall not be restored. " 7. By amending the last sentence of ss. 3.14, Eligible Employee, to read as follows: "In addition, for purposes of eligibility to make Before-Tax Contributions under ss. 5.2, the term Eligible Employee shall not include an Employee who is classified on the Company's personnel or payroll records as a part-time employee who works less than 30 hours per week, unless such person has completed at least one "year of eligibility service" as described below. A "year of eligibility service" means (1) a period of 12 consecutive months beginning on an Employee's Employment Commencement Date during which such Employee is credited with at least 1,000 Hours of Service or (2) any Plan Year including an anniversary of such Employment Commencement Date during which such Employee is credited with at least 1,000 Hours of Service. For this purpose, an Employee's Hours of Service shall also include hours for which the Employee (i) is directly or indirectly paid, or entitled to -2- 3 payment, for a period of time (without regard to whether the employment relationship is terminated) when the Employee performs no duties as an Employee due to vacations, holidays, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, or (ii) is paid for any reason an amount as "back pay," irrespective of mitigation of damages, where such Hour of Service credit, if any, for periods when no duties are performed shall be calculated in accordance with then applicable Department of Labor Hour of Service regulations. 8. By amending ss. 8.7, Separate Accounts, to read as follows: "8.7. Separate Accounts. If a distribution is made from an Employee's Profit Sharing Account under ss. 8.5(a) or ss. 8.6 at a time when the Employee's vested portion was less than 100%, the Plan Sponsor thereafter shall determine the then vested portion of the Employee's Profit Sharing Account in accordance with the following formula: X = P (AB + (R x D)) - (R x D), where X = the current dollar amount, if any, of the vested portion of the Employee's Profit Sharing Account; P = the employee's current vested percentage under the vesting schedule in ss. 8.4(c); AB = the current dollar amount, if any, of the balance posted to the Employee's Profit Sharing Account; D = the dollar amount previously distributed to the Employee from his or her Profit Sharing Account; and R = AB divided by the dollar amount, if any, posted to the Employee's Profit Sharing Account immediately after the distribution. Finally, a separate Profit Sharing Account shall be established for such Employee if he or she subsequently becomes an Active Employee and both Profit Sharing Accounts shall be merged into one such account when the Employee's interest in each such account fully vests." 9. By amending the Plan to correct certain typographical errors as follows: a. By amending the first sentence in ss. 5.2(b)(5), Resumption After Termination, to substitute "ss. 5.2(b)(4)" for "ss. 5.2(c)(4)"; b. By amending the last sentence in ss. 6.1, Plan Sponsor and Company Action, to substitute "ss. 6.2(a)" for "ss. 6.3(a)"; c. By amending clause (2) in ss. 7.2(b), Corrections, to substitute "ss. 6.2" for "ss. 6.3"; -3- 4 d. By amending the last sentence in ss. 8.4(c), Vesting Schedule, to substitute "ss. 8.4(c)" for "ss. 5.4(c)"; e. By amending the first sentence in ss. 8.4(e), Reemployment, as in effect before the amendment made in Paragraph 6 of this Amendment Number Three, to substitute "ss. 8.4(c)" for "ss. 5.4(c)"; f. By amending ss. 8.5(b), Before-Tax Accounts, to substitute "ss. 8.5(b)" for "ss. 8.6(b)" each place it appears; g. By amending the second sentence in ss. 8.6, In-Service Withdrawals, to substitute "ss. 8.5" for "ss. 8.6"; h. By amending the last sentence in ss. 8.6, In-Service Withdrawals, to substitute "ss. 8.6" for "ss. 8.7" each place it appears; i. By amending the first sentence in ss. 8.7, Separate Accounts, as in effect before the amendment made in Paragraph 8 of this Amendment Number Three, to substitute "ss. 8.5(a)" for "ss. 8.6(a)" and to substitute "ss. 8.6" for "ss. 8.7"; and j. By amending the last sentence in ss. 9.1(c), Automatic Lump Sum Distributions, to substitute "ss. 8.5" for "ss. 8.6" and to substitute "ss. 8.6" for "ss. 8.7". 10. The provisions of Paragraphs 6, 7 and 8 of this Amendment shall be effective for individuals who are Employees on or after the date this Amendment is executed and all other provisions of this Amendment shall be effective retroactively to January 1, 1994. Except as otherwise expressly amended by this Amendment, the Plan as in effect before this Amendment shall remain in full force and effect. IN WITNESS WHEREOF, Post Properties, Inc. has caused this Amendment Number Three to be executed by its duly authorized officer as of this 29th day of May, 1997. POST PROPERTIES, INC. By: /s/ Judy Denman --------------------------------------- Title: Senior Vice President ------------------------------------ -4- EX-10.25 13 AMEND NO 4 TO PROFIT SHARING PLAN 1 EXHIBIT 10.25 AMENDMENT NUMBER FOUR POST PROPERTIES, INC. PROFIT SHARING/SS. 401(K) PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1994 Pursuant to ss. 13.1 of the Post Properties, Inc. Profit Sharing/ss. 401(k) Plan as amended and restated effective as of January 1, 1994 ("Plan"), Post Properties, Inc. hereby amends the Plan as follows: 1. The provisions set forth in Paragraph 7 of Amendment Number Three to the Plan, which amended the last sentence of ss. 3.14, Eligible Employee, shall be effective for individuals who are Employees in Plan Years beginning on or after January 1, 1995. 2. Except as otherwise expressly amended by this Amendment, the Plan as in effect before this Amendment shall remain in full force and effect. IN WITNESS WHEREOF, Post Properties, Inc. has caused this Amendment Number Four to be executed by its duly authorized officer as of this 12th day of September, 1997. POST PROPERTIES, INC. By: /s/ Judy Denman -------------------------------- Title: Senior Vice President ------------------------------ EX-10.28 14 AMEND TO EMP STOCK PUR PLAN 1 EXHIBIT 10.28 AMENDMENT POST PROPERTIES, INC. 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN Pursuant to the power reserved in sec. 12 in the Post Properties, Inc. 1995 NonQualified Employee Stock Purchase Plan ("Plan"), the following sections of the Plan are hereby amended as follows: 1. Sec. 2.9., Eligible Employee is hereby amended to read as follows: "Sec. 2.9. Eligible Employee shall mean each officer or employee of Post or a participating Employer (a) who is classified on the payroll records of Post or a Participating Employer as a full-time or part-time employee, and (b) who has completed at least one full calendar month of employment with Post or a Participating Employer." 2. Sec. 12., Amendment or Termination, is hereby amended to read as follows: "Sec. 12. Post shall have the right at any time and from time to time to amend the Plan, and any amendment to the Plan shall be in writing and shall be signed by the Chairman or President of Post or their delegate; provided, no amendment shall affect the rights or powers or duties of the Committee absent the approval of the Board. Furthermore, no amendment shall be retroactive unless Post in its discretion determines that such amendment is in the best interest of Post or such amendment is required by applicable law to be retroactive. Post may also terminate the Plan and any Purchase Period at any time (together with any related contribution elections) or may terminate any Purchase Period (together with any related contribution elections) at any time; provided, however, that no such termination shall be retroactive unless Post determines that applicable law requires a retroactive termination of this Plan. Any termination decision shall be evidenced in writing and shall be signed by the Chairman or President of Post or their delegate." 2 This Amendment to the Plan shall be effective as of the date that the Board of Directors of Post Properties, Inc. adopted this Amendment to the Plan. POST PROPERTIES, INC. BY: /s/ Sherry W. Cohen --------------------------- TITLE: Sr. V.P./Sec. ------------------------ DATE: October 14, 1997 ------------------------ EX-10.30 15 AMEND & RESTATED CREDIT AGRMT 4/09/97 1 EXHIBIT 10.30 $180,000,000 AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 9, 1997 among POST APARTMENT HOMES, L.P. The Banks Listed Herein, WACHOVIA BANK OF GEORGIA, N.A., as Administrative Agent and FIRST UNION NATIONAL BANK OF GEORGIA, as Co-Agent 2 TABLE OF CONTENTS AMENDED AND RESTATED CREDIT AGREEMENT
Page ---- ARTICLE I DEFINITIONS................................................... 1 SECTION 1.01. Definitions........................................................................................ 1 SECTION 1.02. Accounting Terms and Determinations................................................................ 17 SECTION 1.03. References......................................................................................... 18 SECTION 1.04. Use of Defined Terms............................................................................... 18 SECTION 1.05. Terminology........................................................................................ 18 ARTICLE II THE CREDITS................................................... 18 SECTION 2.01. Commitments to Lend Loans.......................................................................... 18 SECTION 2.02. Method of Borrowing Loans other than Transaction Rate Loans............................................................................. 20 SECTION 2.03. Money Market Loans................................................................................. 23 SECTION 2.04. Notes.............................................................................................. 26 SECTION 2.05. Maturity of Loans.................................................................................. 27 SECTION 2.06. Interest Rates..................................................................................... 29 SECTION 2.07. Fees............................................................................................... 32 SECTION 2.08. Optional Termination or Reduction of Commitments........................................................................................ 33 SECTION 2.09. Mandatory Termination of Commitments............................................................... 33
(i) 3 SECTION 2.10. Optional Prepayments............................................................................... 33 SECTION 2.11. Mandatory Prepayments.............................................................................. 34 SECTION 2.12. General Provisions as to Payments.................................................................. 34 SECTION 2.13. Computation of Interest and Fees................................................................... 37 ARTICLE III CONDITIONS TO BORROWINGS............................................. 37 SECTION 3.01. Conditions to First Borrowing...................................................................... 37 SECTION 3.02. Conditions to All Borrowings....................................................................... 39 ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................... 40 SECTION 4.01. Partnership or Corporate Existence and Power....................................................... 40 SECTION 4.02. Partnership or Corporate and Governmental Authorization; No Contravention.................................................................... 40 SECTION 4.03. Binding Effect..................................................................................... 40 SECTION 4.04. Financial and Property Information................................................................. 41 SECTION 4.05. No Litigation...................................................................................... 41 SECTION 4.06. Compliance with ERISA.............................................................................. 41 SECTION 4.07. Compliance with Laws; Payment of Taxes............................................................. 42 SECTION 4.08. Subsidiaries....................................................................................... 42 SECTION 4.09. Investment Company Act............................................................................. 42 SECTION 4.10. Public Utility Holding Company Act................................................................. 42 SECTION 4.11. Ownership of Property.............................................................................. 42 SECTION 4.12. No Default......................................................................................... 43
(ii) 4 SECTION 4.13. Full Disclosure.................................................................................... 43 SECTION 4.14. Environmental Matters.............................................................................. 43 SECTION 4.15. Partner Interests and Capital Stock................................................................ 44 SECTION 4.16. Margin Stock....................................................................................... 44 SECTION 4.17. Insolvency......................................................................................... 44 SECTION 4.18. Insurance.......................................................................................... 45 ARTICLE V COVENANTS.................................................... 45 SECTION 5.01. Information........................................................................................ 45 SECTION 5.02. Inspection of Property, Books and Records.......................................................... 47 SECTION 5.03. Consolidated Total Secured Debt.................................................................... 47 SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets.......................................................................... 48 SECTION 5.05. Interest Coverage.................................................................................. 48 SECTION 5.06. Restricted Payments................................................................................ 48 SECTION 5.07. Loans or Advances.................................................................................. 48 SECTION 5.08. Purchases of Stock by the Significant Subsidiaries....................................................................................... 49 SECTION 5.09. Investments........................................................................................ 49 SECTION 5.10. Dissolution........................................................................................ 49 SECTION 5.11. Consolidations, Mergers and Sales of Assets........................................................ 49 SECTION 5.12. Use of Proceeds.................................................................................... 50 SECTION 5.13. Compliance with Laws; Payment of Taxes............................................................. 50 SECTION 5.14. Insurance.......................................................................................... 51
(iii) 5 SECTION 5.15. Change in Fiscal Year.............................................................................. 51 SECTION 5.16. Maintenance of Property; Principal Business........................................................ 51 SECTION 5.17. Environmental Notices.............................................................................. 52 SECTION 5.18. Environmental Matters.............................................................................. 52 SECTION 5.19. Environmental Release.............................................................................. 52 SECTION 5.20. Transactions with Affiliates....................................................................... 52 SECTION 5.21. Qualification as a Real Estate Investment Trust; General Partner............................................................................. 52 SECTION 5.22. Certain Covenants Concerning Subsidiaries.......................................................... 53 ARTICLE VI DEFAULTS..................................................... 53 SECTION 6.01. Events of Default.................................................................................. 53 SECTION 6.02. Notice of Default.................................................................................. 56 ARTICLE VII THE ADMINISTRATIVE AGENT............................................. 56 SECTION 7.01. Appointment; Powers and Immunities................................................................. 56 SECTION 7.02. Reliance by Administrative Agent................................................................... 57 SECTION 7.03. Defaults........................................................................................... 57 SECTION 7.04. Rights of Administrative Agent as a Bank........................................................... 58 SECTION 7.05. Indemnification.................................................................................... 58 SECTION 7.06. Consequential Damages.............................................................................. 59 SECTION 7.07. Payee of Note Treated as Owner..................................................................... 59 SECTION 7.08. Nonreliance on Administrative Agent and Other Banks........................................................................................ 59
(iv) 6 SECTION 7.09. Failure to Act..................................................................................... 59 SECTION 7.10. Resignation or Removal of Administrative Agent.............................................................................................. 60 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION...................................... 60 SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair............................................................................... 60 SECTION 8.02. Illegality......................................................................................... 61 SECTION 8.03. Increased Cost and Reduced Return.................................................................. 61 SECTION 8.04. Base Rate Loans or Other Euro-Dollar Loans Substituted for Affected Euro-Dollar Loans......................................................... 64 SECTION 8.05. Compensation....................................................................................... 64 ARTICLE IX MISCELLANEOUS.................................................. 65 SECTION 9.01. Notices............................................................................................ 65 SECTION 9.02. No Waivers......................................................................................... 65 SECTION 9.03. Expenses; Documentary Taxes........................................................................ 65 SECTION 9.04. Indemnification.................................................................................... 65 SECTION 9.05. Setoff; Sharing of Setoffs......................................................................... 66 SECTION 9.06. Amendments and Waivers............................................................................. 67 SECTION 9.07. No Margin Stock Collateral......................................................................... 68 SECTION 9.08. Successors and Assigns............................................................................. 68 SECTION 9.09. Confidentiality.................................................................................... 71 SECTION 9.10. Representation by Banks............................................................................ 71
(v) 7 SECTION 9.11. Obligations Several................................................................................ 72 SECTION 9.12. Georgia Law........................................................................................ 72 SECTION 9.13. Severability....................................................................................... 72 SECTION 9.14. Interest........................................................................................... 72 SECTION 9.15. Interpretation..................................................................................... 73 SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction....................................................................................... 73 SECTION 9.17. Counterparts....................................................................................... 73 SECTION 9.18. Source of Funds -- ERISA........................................................................... 74
(vi) 8 EXHIBIT A-1 Form of Syndicated Loan Note EXHIBIT A-2 Form of Swing Loan Note EXHIBIT A-3 Form of Money Market Loan Note EXHIBIT B Form of Opinion of Counsel for the Borrower and Guarantor EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent EXHIBIT D Form of Assignment and Acceptance EXHIBIT E Form of Notice of Borrowing EXHIBIT F Form of Compliance Certificate EXHIBIT G Form of Closing Certificate EXHIBIT H Form of Guaranty EXHIBIT I Form of Borrowing Base Certificate EXHIBIT J Form of Money Market Quote Request EXHIBIT K Form of Money Market Quote Schedule 4.08 Subsidiaries (vii) 9 AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 9, 1997 among POST APARTMENT HOMES, L.P., the BANKS listed on the signature pages hereof, First Union National Bank of Georgia, as Co-Agent, and WACHOVIA BANK OF GEORGIA, N.A., as Administrative Agent. This Amended and Restated Credit Agreement is an amendment and restatement of the $180,000,000 Credit Agreement by and among the Borrower, Wachovia Bank of Georgia, N.A., First Union National Bank of Georgia, Trust Company Bank, Commerzbank AG, Atlanta Agency, Corestates Bank and Mellon Bank, N.A., as Banks, First Union National Bank of Georgia, as Co-Agent, and Wachovia Bank of Georgia, N.A., as the Administrative Agent, dated as of February 1, 1995, as amended prior to the date hereof by First Amendment to Credit Agreement and Release of Subsidiary Guarantors dated July 26, 1995, Second Amendment to Credit Agreement dated October 27, 1995, Third Amendment to Credit Agreement dated February 29, 1996 and Fourth Amendment to Credit Agreement dated December 1, 1996 (the "Original Agreement"), which is superseded hereby. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Affiliate" of any relevant Person means (i) any Person that directly, or indirectly through one or more intermediaries, controls the relevant Person (a "Controlling Person"), (ii) any Person (other than the relevant Person or a Subsidiary of the relevant Person) which is controlled by or is under common control with a Controlling Person, or (iii) any Person (other than a Subsidiary of the relevant Person) of which the relevant Person owns, directly or indirectly, 20% or more of the voting 10 common stock, general partnership interest in a general or limited partnership or equivalent equity interests in any other Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Administrative Agent" means Wachovia Bank of Georgia, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Banks hereunder, and its successors and permitted assigns in such capacity. "Administrative Agent's Letter Agreement" means that certain letter agreement, dated as of February 7, 1997 between the Borrower and the Administrative Agent relating to the structure of the Loans, and certain fees from time to time payable by the Borrower to the Administrative Agent, together with all amendments and supplements thereto. "Agreement" means this Amended and Restated Credit Agreement, together with all amendments and supplements hereto. "Anniversary Date" means April 30, 1998 and each April 30 thereafter. "Applicable Margin" has the meaning set forth in Section 2.06(a). "Assignee" has the meaning set forth in Section 9.08(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.08(c) in the form attached hereto as Exhibit D. "Authority" has the meaning set forth in Section 8.02. "Bank" means each bank listed on the signature pages hereof as having a Commitment, and its successors and its assigns permitted hereby. "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 2 11 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 Base Rate Loan. A Borrowing is a "Transaction Rate Borrowing" if such Loan is made as a Transaction Rate Loan. A Borrowing is a "Syndicated Loan Borrowing" if such Loans are made as Syndicated Loans. A Borrowing is a "Swing Loan Borrowing" if such Loans are made as Swing Loans. A Borrowing is a "Money Market Borrowing" if such Loans are made pursuant to Section 2.03. A Borrowing is a "Fixed Rate Borrowing" if such Loans are made as Fixed Rate Loans. "Borrowing Base" means the sum of each of the following, as determined by reference to the most recent Borrowing Base Certificate furnished pursuant to Section 3.01(i) or Section 5.01(h), as applicable: (i) an amount equal to the product of: (x) 7.42857; times (y) the Net Operating Income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is not subject to a Mortgage and which either was on average at least 90% economically occupied during, or with respect to which the Construction Period Termination Date occurred prior to the commencement of, such 12 month period; provided, that if an Eligible Property satisfies the criteria set forth in both this clause (i) and clause (iii) below, it shall be included in the calculations only in clause (iii) below; plus 3 12 (ii) an amount equal to the product of: (x) 7.42857; times (y) the Net Operating Income for the 12 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is financed as to Debt only by bonds, debentures, notes or other similar instruments which have been fully in substance defeased in accordance with GAAP; plus (iii) an amount equal to the product of: (x) 29.71428; times (y) the Net Operating Income for the 3 month period ending on the last day of the month just ended prior to the date of determination, from each Eligible Property which is not subject to a Mortgage and with respect to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period ending on the last day of the month just ended prior to the date of determination; plus (iv) an amount equal to the lesser of: (x) 50% of the aggregate amount of cash expenditures (including indirect costs internally allocated in accordance with GAAP) as of the last day of the month just ended prior to the date of determination on all Eligible Properties which are not subject to a Mortgage and which consist of apartment communities as to which the Construction Period Termination Date has not occurred as of such last day of the month just ended; and (y) $75,000,000 less the amount determined pursuant to clause (v); plus (v) an amount equal to the lesser of: (x) the sum of (A) 45% of the aggregate cost of all Eligible Properties which consist of raw land not subject to a Mortgage, or which consist of land acquired with existing improvements which are to be substantially demolished and the demolition of such improvements has commenced, plus (B) with respect to Eligible Properties which consist of land acquired with existing improvements which are to be substantially demolished, so long as such Eligible Property was on average at least 50% economically occupied during the 12 month period ending on the last day of the month just ended prior to the date of determination and demolition of such improvements has not commenced, the greater of 45% of the aggregate cost of such Eligible Property or 5.71429 times the Net Operating Income of such Eligible Property during such 12 month period; (y) $25,000,000; and (z) 33% of the sum of (A) the amounts determined pursuant to clauses (i) through (iv), inclusive (but without giving effect to clause (iv)(y)); less 4 13 (vi) an amount equal to the greater of: (x) all outstanding Debt of the Borrower and the Guarantor (other than the Loans and any Debt owing to the Borrower or the Guarantor) which is not secured by a Lien (excluding Debt consisting of a Guarantee, where the underlying Debt of the principal obligor is subject to a Lien on property of the principal obligor); and (y) all commitments (other than the Commitments) to the Borrower and the Guarantor then available to be advanced, to fund Debt of the type described in clause (vi)(x). "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit I, duly executed by an Executive Officer, setting forth in reasonable detail the calculations for each component of the Borrowing Base. "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 April 9, 1997. 5 14 "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.08. "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 Income Available for Debt Service" shall mean, calculated on a consolidated basis, the sum of the Borrower's and its Subsidiaries': (i) net income before Minority Interests and extraordinary items, plus (ii) depreciation and amortization, plus (iii) losses from sales or joint ventures, plus (iv) increases in deferred taxes and other non-cash items, minus (v) gains from sales or joint ventures, minus (vi) decreases in deferred taxes and other non-cash items, plus (vii) interest expense and plus (viii) taxes (excluding ad valorem taxes). "Consolidated Income Available for Distribution" means, in any calendar year, the sum of the following for such calendar year, calculated on a consolidated basis for the Borrower and its Subsidiaries: (i) Consolidated Income Available for Debt Service, less (ii) interest expense, and less (iii) taxes (excluding ad valorem taxes and taxes on gains described in clause (v) of the definition of Consolidated Income Available for Debt Service). "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Assets" shall mean (i) all Undepreciated Real Estate Assets plus (ii) all other tangible assets of the Borrower and its Subsidiaries. "Consolidated Total Debt" shall mean the total liabilities of the Borrower and its Subsidiaries, on a 6 15 consolidated basis (excluding liabilities on account of dividends which have been declared but not paid), plus the aggregate amount of Debt Guaranteed by the Borrower, the Guarantor and the Subsidiaries (other than of Debt of any of them) at the end of the Borrower's most recent Fiscal Quarter. "Consolidated Total Secured Debt" shall mean all Debt of the Borrower and its Subsidiaries consisting of (i) capitalized leases, and (ii) money borrowed or the deferred purchase price of real property which is also secured by a Mortgage on any real property owned by the Borrower or its Subsidiaries. "Construction Period Termination Date" means, with respect to construction of apartment communities for Eligible Properties, the date which is 3 months after the issuance of a permanent certificate of occupancy for the last unit of such apartment community on such Eligible Property. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument issued to assure the payment of Debt (but while such reimbursement obligation remains contingent due to there having been no presenting and honoring of a draft under any such letter of credit or similar instrument, only the principal component of the underlying Debt shall be included as Debt under this clause (vii)), (viii) all Debt of others secured by a Lien on any asset of such Person, whether or 7 16 not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person; provided, however, that the term Debt shall not include (A) any such obligations to the extent such obligations have been in substance defeased in accordance with GAAP, or (B) obligations under Redeemable Preferred Stock to the extent that any sinking fund payments have been made in connection therewith. "Debt Rating" means at any time whichever is the higher of the rating of the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, its prospective or implied credit rating for debt of such type) by Moody's Investor Service or Standard and Poor's (as such rating may change from time to time, either pursuant to Section 2.06(f) or otherwise) or if only one of them rates the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists, has in effect a prospective or implied rating for such debt), such rating. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (including the Applicable Margin) which may be applicable to any Loans hereunder. "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized by law to close. "Eligible Properties" means any Property of the Borrower consisting of real estate as to which the Administrative Agent has received or reviewed each of the following, each in form and substance satisfactory to the Administrative Agent, in its reasonable business judgment: (i) an environmental report; (ii) a boundary survey; and (iii) an owner's title insurance policy, without a general survey exception, issued by an insurer acceptable to the Administrative Agent, in its reasonable business judgment; provided, however, that for each apartment community which was or is being constructed in phases, the term 8 17 Eligible Property shall mean each such phase separately, except that all phases as to which a period of 12 months after the Construction Period Termination Date has occurred for each such phase shall be treated as a single Eligible Property. "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent, or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or order. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. 9 18 "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. "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 10 19 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. "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. "General Partner" means the sole general partner of the Borrower (which, on the Closing Date, is PPI) or, if there is more than one such general partner, the managing general partner of the Borrower. 11 20 "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. "Guarantor" means PPI. "Guaranty" means the Guaranty Agreement of even date herewith in substantially the form of Exhibit "H" to be executed by the Guarantor, unconditionally guaranteeing payment of the Loans, the Notes and all other obligations of the Borrower to the Administrative Agent, the Co-Agent and the Banks hereunder, including without limitation all principal, interest, fees, costs, and compensation and indemnification amounts. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof, or (d) pesticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the 12 21 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: 13 22 (a) any Interest Period (subject to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (b) no Interest Period may be selected which begins before the Termination Date and would otherwise end after the Termination Date. "Investment" means any investment in any Person, whether by means of purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such other office as such Bank may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, or preferential arrangement which has the practical effect of constituting any of the foregoing in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "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. 14 23 "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). "Margin Stock" means "margin stock" as defined in Regulations G, 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. "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, 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. 15 24 "Money Market Quote" has the meaning specified in Section 2.03. "Money Market Quote Request" has the meaning specified in Section 2.03(b). "Money Market Rate" has the meaning specified in Section 2.03(c)(ii)(C). "Mortgage" means a mortgage, deed to secure debt, deed of trust or similar instrument. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Operating Income" means, for any Eligible Property, the portion of Consolidated Income Available for Debt Service derived from such Eligible Property (which calculation excludes intracompany charges for management services that are eliminated in accordance with GAAP). "Notes" means the Syndicated Loan Notes, the Swing Loan Note or Money Market Loan Notes, or any one, or more, or all of them, as the context shall require. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Original Agreement" has the meaning set forth in the preamble hereto. "Original Notes" means the Notes executed and delivered pursuant to the Original Agreement. "Participant" has the meaning set forth in Section 9.08(b). "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. 16 25 "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 Guarantor or any Subsidiary, wherever located. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Termination Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Refunding Loan" means a new Loan made on the day on which an outstanding Loan is maturing or a Base Rate Borrowing is being converted to a Euro-Dollar Borrowing or a Transaction Rate Borrowing, if and to the extent that the proceeds thereof are used entirely for the purpose of paying such maturing Loan or Loan being converted, excluding any difference between the amount 17 26 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 G" means Regulation G 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 T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding principal amount of the sum of the (i) Syndicated Loans and (ii) Money Market Loans. "Restricted Payment" means (i) any distribution on any Partner Interests (other than distributions consisting solely of additional Partner Interests) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any Partner Interests or (b) any option, warrant or other right to acquire Partner Interests. "Significant Subsidiary" means any Subsidiary which either (x) has assets which constitute more than 5% of Consolidated Total Assets at the end of the most recent Fiscal Quarter, or (y) contributed more than 5% of Consolidated Income Available for Debt Service during the most recent Fiscal Quarter and the 3 Fiscal Quarters immediately preceding such Fiscal 18 27 Quarter (or, with respect to any Subsidiary which existed during the entire 4 Fiscal Quarter period but was acquired by the Borrower during such period, which would have contributed more than 5% of Consolidated Income Available for Debt Service during such period had it been a Subsidiary for the entire period). "Stated Maturity Date" means, with respect to any Money Market Loans, the Stated Maturity Date therefor specified by the Bank in the applicable Money Market Quote. "Subsidiary" means (i) any corporation or other entity the majority of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and the majority of the shares of the voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower, PPI, another Subsidiary, and/or one or more of John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary, and (ii) any other entity (other than PPI or the Borrower) the accounts of which are consolidated with the accounts of the Borrower. "Subsidiary Consolidated Total Assets" means the sum of (i) Consolidated Total Assets less (ii) Consolidated Total Assets. "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. 19 28 "Taxes" has the meaning set forth in Section 2.12(c). "Termination Date" means whichever is applicable of (i) the third Anniversary Date, or such later date to which it is extended by the Banks pursuant to Section 2.05(b) or (ii) any earlier date which constitutes the Termination Date pursuant to the provisions of and under the circumstances contained in Sections 2.08 or 2.09. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business. "Transaction Rate" has the meaning set forth in Section 2.01(b)(ii). "Transaction Rate Loan" means a Swing Loan to be made as a Transaction Rate Loan pursuant to Section 2.01(b). "Transaction Rate Request" has the meaning set forth in Section 2.01(b)(ii). "Transferee" has the meaning set forth in Section 9.08(d). "Undepreciated Real Estate Assets" shall mean the cost (original cost plus capital improvements, if any) of real estate assets of the Borrower and its Subsidiaries, before depreciation and amortization, in accordance with GAAP. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "Unused Commitment" means at any date, with respect to any Bank, an amount equal to its Commitment less the aggregate outstanding principal amount of its Syndicated Loans (but not, with respect to Wachovia, its Swing Loans, or with respect to any Bank, its Money Market Loans). 20 29 "Wachovia" means Wachovia Bank of Georgia, N.A., a national banking association, and its successors. "Wholly Owned Subsidiary" means any Subsidiary all of the shares of the non-voting capital stock or other equivalent ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower and/or PPI, and all of the shares of the voting capital stock or other equivalent ownership interests of which are at the time directly or indirectly owned by the Borrower, PPI, another Wholly Owned Subsidiary, and/or one or more John A. Williams and John T. Glover (or, in the event of death or disability of either of the foregoing individuals, his respective legal representative(s)), or such individuals' successors in office as an officer of such Subsidiary or the Secretary of such Subsidiary. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by PPI's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of PPI or the Borrower and its Consolidated Subsidiaries, as applicable, delivered to the Banks unless with respect to any such change concurred in by PPI's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Banks shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04). SECTION 1.03. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other Subdivisions are references to 21 30 articles, exhibits, schedules, sections and other subdivisions hereof. SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.05. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend Loans. (a) Syndicated Loans. Each Bank severally agrees, on the terms and conditions set forth herein, to make Syndicated Loans to the Borrower from time to time before the Termination Date; provided that, immediately after each such Syndicated Loan is made, (i) the aggregate principal amount of Syndicated Loans by such Bank shall not exceed the amount of its Commitment, and (ii) the aggregate outstanding amount of all Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base. Each Syndicated Loan Borrowing under this Section shall be in an aggregate principal amount of $5,000,000 or any larger multiple 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 22 31 permitted by Section 2.10, prepay Syndicated Loans and reborrow under this Section at any time before the Termination Date. (b) Swing Loans. (i) In addition to the foregoing, Wachovia shall from time to time, upon the request of the Borrower, if the applicable conditions precedent in Article III have been satisfied, make Swing Loans to the Borrower in an aggregate principal amount at any time outstanding not exceeding $5,000,000; provided that, immediately after such Swing Loan is made, the outstanding amount of the Syndicated Loans, Swing Loans and Money Market Loans shall not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base. Within the foregoing limits, the Borrower may borrow under this Section 2.01(b), prepay and reborrow under this Section 2.01(b) at any time before the Termination Date. All Swing Loans shall be made as either Base Rate Loans or, subject to the provisions of clause (ii) below, Transaction Rate Loans. (ii) Swing Loans may be Transaction Rate Loans, if the Administrative Agent shall have determined that such Transaction Rate Loan, including the principal amount thereof, the Interest Period and the Transaction Rate applicable thereto, has been expressly agreed to by the Borrower and Wachovia (such agreement may be obtained by telephone, confirmed promptly to the Administrative Agent in writing) pursuant to the following procedures. If the Borrower desires a Transaction Rate Loan, (a) the Borrower shall provide Wachovia, with a copy to the Administrative Agent, with notice of a request (a "Transaction Rate Request") for a quote for a Transaction Rate Borrowing prior to 1:00 p.m. (Atlanta, Georgia time) on the date (which shall be a Domestic Business Day) of the proposed Transaction Rate Borrowing, which Transaction Rate Request shall include the principal amount and proposed Interest Period of the relevant Transaction Rate Borrowing, (b) prior to 1:30 p.m. (Atlanta, Georgia time) on such date, Wachovia shall furnish the Borrower, with a copy to the Administrative Agent, with its rate quote (a "Transaction Rate Quote") via facsimile transmission, (c) the Borrower shall immediately inform Wachovia and the Administrative Agent of its decision as to whether to request a Transaction Rate Borrowing at the Transaction Rate specified in such Transaction Rate Quote (a "Transaction Rate") (which may be done by telephone and promptly confirmed in writing, and which decision shall be irrevocable), and (d) if the Borrower has so informed Wachovia and the Administrative Agent that it does desire a Transaction Rate Borrowing at the Transaction Rate specified in such 23 32 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 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 24 33 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 25 34 determines in its reasonable business judgment that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. Unless the Administrative Agent receives notice from a Bank, at the Administrative Agent's address referred to in or specified pursuant to Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Borrowing stating that such Bank will not make a Syndicated Loan in connection with such Borrowing, the Administrative Agent shall be entitled to assume that such Bank will make a Syndicated Loan in connection with such Borrowing and, in reliance on such assumption, the Administrative Agent may (but shall not be obligated to) make available such Bank's ratable share of such Borrowing to the Borrower for the account of such Bank. If the Administrative Agent makes such Bank's ratable share available to 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 26 35 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. 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 27 36 not exceed the lesser of (A) the aggregate amount of the Commitments and (B) the Borrowing Base; (iii) the Money Market Loans of any Bank will be deemed to be usage of the Commitments for the purpose of calculating availability pursuant to Section 2.01(a)(ii), 2.01(b)(ii) and 2.03(a)(ii) but will not reduce such Bank's obligation to lend its pro rata share of the remaining Unused Commitment; and (iv) the aggregate principal amount of all Money Market Loans shall not exceed fifty percent (50%) of the aggregate amount of the Commitments of all the Banks at such time. (b) When the Borrower wishes to request offers to make Money Market Loans, it shall give the Administrative Agent (which shall promptly notify the Banks) notice substantially in the form of Exhibit J hereto (a "Money Market Quote Request") so as to be received no later than 10:00 A.M. (Atlanta, Georgia time) at least 2 Domestic Business Days prior to the date of the Money Market Borrowing proposed therein (or such other time and date as the Borrower and the Administrative Agent, with the consent of the Required Banks, may agree), specifying: (i) the proposed date of such Money Market Borrowing, which shall be a Domestic Business Day (the "Money Market Borrowing Date"); (ii) the maturity date (or dates) (each a "Stated Maturity Date") for repayment of each Money Market Loan to be made as part of such Money Market Borrowing (which Stated Maturity Date shall be that date occurring not less than 7 days but not greater than 180 days from the date of such Money Market Borrowing); provided that the Stated Maturity 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 (iv) 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. 28 37 The Borrower may request offers to make Money Market Loans having up to 3 different Stated Maturity Dates in a single Money Market Quote Request; provided that the request for each separate Stated Maturity Date shall be deemed to be a separate Money Market Quote Request for a separate Money Market Borrowing. Except as otherwise provided in the immediately preceding sentence, after the first Money Market Quote Request has been given hereunder, no Money Market Quote Request shall be given until at least 5 Domestic Business Days after all prior Money Market Quote Requests have been fully processed by the Administrative Agent, the Banks and the Borrower pursuant to this Section 2.03. (c) (i) Each Bank may, but shall have no obligation to, submit a response containing an offer to make a Money Market Loan substantially in the form of Exhibit K hereto (a "Money Market Quote") in response to any Money Market Quote Request; provided that, if the Borrower's request under Section 2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but shall have no obligation to, make a single submission containing a separate offer for each such Stated Maturity Date and each such separate offer shall be deemed to be a separate Money Market Quote. Each Money Market Quote must be submitted to the Administrative Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date; provided that any Money Market Quote submitted by Wachovia may be submitted, and may only be submitted, if Wachovia notifies the Borrower of the terms of the offer contained therein not later than 9:45 A.M. (Atlanta, Georgia time) on the Money Market Borrowing Date (or 15 minutes prior to the time that the other Banks must have submitted their respective Money Market Quotes). Subject to Section 6.01, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall specify: (A) the proposed Money Market Borrowing Date and the Stated Maturity Date therefor; (B) the principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Money Market Quote, which principal amounts (x) may be greater than or less 29 38 than the Commitment of the quoting Bank, (y) shall be at least $5,000,000 or a larger integral multiple of $250,000, and (z) may not exceed the principal amount of the Money Market Borrowing for which offers were requested; (C) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) offered for each such Money Market Loan (such amounts being hereinafter referred to as the "Money Market Rate"); and (D) the identity of the quoting Bank. Unless otherwise agreed by the Administrative Agent and the Borrower, no Money Market Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Money Market Quote Request (other than setting forth the maximum principal amounts of the Money Market Loan which the quoting Bank is willing to make for the applicable Interest Period) and, in particular, no Money Market Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Money Market Loan for which such Money Market Quote is being made. (d) The Administrative Agent shall as promptly as practicable after the Money Market Quote is submitted (but in any event not later than 10:30 A.M. (Atlanta, Georgia time)) on the Money Market Borrowing Date, notify the Borrower of the terms (i) of any Money Market Quote submitted by a Bank that is in accordance with Section 2.03(c) and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the principal amounts of the Money Market Borrowing for which offers have been received and (B) the respective principal amounts and Money Market Rates so offered by each Bank (identifying the Bank that made each Money Market Quote). 30 39 (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 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 12:00 P.M. (Atlanta, Georgia time) on the Money Market Borrowing Date, make the appropriate amount of such Money Market Loan available to the Administrative Agent at its address referred to in Section 9.01 in immediately available funds. The amount so received by the 31 40 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. 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 32 41 assign its Syndicated Loan Notes or Money Market Loan Notes or Wachovia to assign its Swing Loan Note. Each Bank (and Wachovia, with respect to the Swing Loan) is hereby irrevocably authorized by the Borrower so to endorse its Syndicated Loan Notes or Money Market Loan Notes (or Swing Loan Note) and to attach to and make a part of any Syndicated Loan Note or Money Market Loan Note (or Swing Loan Note) a continuation of any such schedule as and when required. SECTION 2.05. Maturity of Loans. (a) Each Loan included in any Borrowing shall mature, and the principal amount 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 the third Anniversary Date, 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 each Extension Date (as such term is hereinafter defined), the Banks shall have the option (without any obligation whatsoever so to do) of extending the Termination Date for additional one-year periods on each of the first, second and third Anniversary Dates (each, an "Extension Date"). 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 relevant 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 relevant Anniversary Date, to purchase from the Terminating Banks, at any time after the relevant Anniversary Date and on or before the Termination Date (prior to its extension 33 42 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 relevant Anniversary Date and on or prior to the Termination Date (prior to its extension hereunder). Each Extending Bank desiring to purchase a portion of such Commitments and outstanding Loans shall notify the Administrative Agent and the Borrower of such election and shall deliver, in form satisfactory to the Administrative Agent and the Borrower, a commitment to effect such purchase, not later than fifteen (15) days prior to the relevant Anniversary Date. If any of the Extending Banks elect not to commit to make such a purchase, the Administrative Agent shall again notify the other Extending Banks as to the amount of Commitments available to be purchased by them in the same manner as set forth in this paragraph, with any commitment with respect to such purchase to be delivered to the Administrative Agent and the Borrower prior to the relevant Anniversary Date. (2) If on the relevant Anniversary 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 relevant Anniversary 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 relevant Anniversary 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 34 43 Commitments that are not subject to purchase commitments from Extending Banks or banks designated by the Borrower pursuant to paragraph (2) above, then the Administrative Agent shall again notify the Extending Banks of the Commitments available to be purchased, and the Extending Banks shall be entitled to purchase such Commitments in accordance with the procedure set forth in paragraph (1) above. (4) If on the Termination Date (prior to its extension hereunder) any Commitments of any Terminating Banks are not purchased as set forth above, the Aggregate Commitments under the Facility shall be reduced by the aggregate amount of such Commitments of such Terminating Banks, and the Loans of such Terminating Banks shall be paid in full. On each Extension Date on which the Termination Date is extended pursuant to the foregoing, the Borrower shall pay the extension fee as required by Section 2.07(a). SECTION 2.06. Interest Rates. (a) "Applicable Margin" means: (i) until the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, (y) for each Euro-Dollar Loan, 0.675%; 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) subject to the proviso at the end of Section 2.06(a) (i), from and after the first Performance Pricing Determination Date, (x) for any Base Rate Loan, 0.25%, and (y) for each Euro-Dollar Loan, the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below as to (1) 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, and (2) whether such 35 44 Performance Pricing Determination Date occurs prior to or after the third Anniversary Date; provided, that if there is no Debt Rating, the Applicable Margin for Euro-Dollar Loans shall be based upon Level V of the table below.
======================================================================================================= Level Level Level Level Level I II III IV V ======================================================================================================= Debt Rating Above BBB+/ BBB/ BBB-/ Below BBB+/ Baa Baa2 Baa3 BBB-/ Baa1 Baa3 - ------------------------------------------------------------------------------------------------------- Applicable Margin through 0.525% 0.675% 0.80% 0.95% 1.15% second Anniversary Date - ------------------------------------------------------------------------------------------------------- Applicable Margin after second 0.675% 0.825% .95% 1.10% 1.30% Anniversary Date - -------------------------------------------------------------------------------------------------------
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 36 45 such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day less the Applicable Margin. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (c) Subject to the proviso at the end of Section 2.06(a) (i), each Euro Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable London Interbank Offered Rate for such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 1 month, at intervals of 1 month after the first day thereof. Any overdue principal of and, to the extent permitted by law, overdue interest on any Euro Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rates appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, provided that (i) if more than one such offered rate appears on the Reuters Screen LIBO Page, the "London Interbank Offered Rate" will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of such offered rates; (ii) if no such offered rates appear on such page, the "London Interbank Offered Rate" for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York City, selected by the Administrative Agent, at approximately 10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of such Interest Period, for deposits in Dollars offered to leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Euro-Dollar Loan. 37 46 (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 each Extension Date on which the Termination Date is extended, the Borrower shall pay to the Administrative Agent, for the ratable account of each Bank which is an Extending Bank pursuant to such Section, a fully earned and non-refundable extension fee in the amount of 0.10% of the aggregate amount of the Commitments so extended (after giving effect to the amount of any Commitment which each such Extending Bank has committed to purchase pursuant to such Section). (b) The Borrower shall pay to the Administrative Agent for the ratable account of each Bank a facility fee (the "Facility Fee") on the maximum amount of the aggregate Commitments in effect for any relevant period, irrespective of usage, calculated in the manner provided in Section 2.06(a)(ii), at a rate per annum equal to (i) for the period commencing on the Closing Date to and including the first Performance Pricing 38 47 Determination Date, 0.125%; and (ii) from and after the first Performance Pricing Determination Date, the percentage determined on each Performance Pricing Determination Date by reference to the table set forth below and the Debt Rating for the quarterly or annual period ending immediately prior to such Performance Pricing Determination Date; provided, that if there is no Debt Rating, the Facility Fee shall be based upon Level V of the table below. The Facility Fee shall accrue at all times from and including the Closing Date to but excluding the Termination Date and shall be payable, in arrears, on each March 31, June 30, September 30 and December 31 and on the Termination Date.
============================================================================================================= Level Level Level Level Level I II III IV V ============================================================================================================= Debt Rating Above BBB+ BBB BBB- Below BBB+ BBB- - ------------------------------------------------------------------------------------------------------------- Facility Fee 0.125% 0.125% 0.15% 0.15% 0.15% =============================================================================================================
(c) The Borrower shall pay to the Administrative Agent, for the account and sole benefit of the Administrative Agent, such fees and other amounts at such times as set forth in the Administrative Agent's Letter Agreement. 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 39 48 Required Banks) may terminate the Commitments on a date specified in a notice to the Borrower, which date (i) must be at least 3 Domestic Business Days following the date of such notice, and (ii) shall constitute the Termination Date for all purposes hereunder. SECTION 2.10. Optional Prepayments. (a) The Borrower may, upon at least 1 Domestic Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 for Syndicated Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Banks (or of Wachovia, as to Swing Loans) included in such Base Rate Borrowing. (b) Subject to the provisions of Section 8.05(a) with respect to any prepayment not made on the last day of the relevant Interest Period, the Borrower may, upon at least 2 Euro-Dollar Business Days' notice (or same Domestic Business Days' notice as to Swing Loans) to the Administrative Agent, prepay any Fixed Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 or any larger multiple of $250,000 as to Syndicated Borrowings and Money Market Borrowings (with no minimum payment as to Swing Loan Borrowings), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment, together with any amount required to be paid pursuant to Section 8.05(a). Each such optional prepayment shall be applied to prepay ratably the Fixed Rate Loans of the several Banks (or of Wachovia, as to Swing Loans) included in such Fixed Rate Borrowing. (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 40 49 outstanding Loans, if any (together with interest accrued thereon and any amount required to be paid pursuant to Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the aggregate amount of the Commitments as then reduced. On the Termination Date, the Borrower shall make the payments required to be made pursuant to Section 2.09. (b) On each date on which the aggregate principal amount of the Loans outstanding exceeds the Borrowing Base on such date, the Borrower shall repay or prepay such principal amount of the outstanding Loans (together with interest thereon) as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the Borrowing Base on such date. (c) Each such payment or prepayment shall be applied to the Swing Loans or ratably to the Loans of the Banks outstanding on the date of payment or prepayment in the following order of priority: (i) first, to Swing Loans which are Base Rate Loans; (ii) secondly, to Transaction Rate Loans; (iii) thirdly, to Syndicated Loans which are Base Rate Loans; (iv) fourthly, to Euro-Dollar Loans; and (v) lastly, to Money Market Loans. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Syndicated Loans, Money Market Loans and Swing Loans and of fees hereunder, not later than noon (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks, and to Wachovia such payment received by the Administrative Agent on account of the Swing Loans. (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 41 50 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 42 51 with respect to any Loan or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to any Bank in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment, and shall pay to such Bank additional amounts as may be necessary in order that the amount received by such Bank after the required withholding or other payment shall equal the amount such Bank would have received had no such withholding or other payment been made. If no withholding or deduction of Taxes are payable in respect to any Loan or fee relating thereto, the Borrower shall furnish any Bank, at such Bank's written request, a certificate from each applicable taxing authority or an opinion of counsel reasonably acceptable to such Bank, in either case stating that such payments are exempt from or not subject to withholding or deduction of Taxes. If the Borrower fails to provide such original or certified copy of a receipt evidencing payment of Taxes or certificate(s) or opinion of counsel described in the preceding sentence, the Borrower hereby agrees to compensate such Bank for, and indemnify it with respect to, the tax consequences of the Borrower's failure to provide evidence of tax payments or tax exemption; provided, however, that the Borrower shall not be obligated to indemnify any party for penalties, additions to tax, interest or expenses associated with the payment of Taxes if the Bank's liability for such Taxes has arisen as a result of the fault of such Bank; and provided, further, that the Borrower shall not be obligated to indemnify any Bank for Taxes, penalties, additions to tax, interest or expenses incurred as a result of such Bank having voluntarily changed its Lending Office from a jurisdiction in which payments made to such Bank are exempt from United States withholding tax to a jurisdiction in which such payments are not so exempt. Such compensation or indemnification payment shall be made within 30 days from the date such Bank makes written request therefor. Any such request shall be made within 90 days after the date on which such payment of Taxes was made. Each such request shall be accompanied by a copy of the statement from the taxing authority demanding payment by such Bank of such Taxes or by a certificate from such Bank which certificate shall set forth in reasonable detail the basis for any additional amount payable to such party under this Section 2.12 (together with reasonable evidence of payment of such Taxes). Any Bank entitled to claim any additional amounts payable pursuant to this Section 2.12 shall use its best efforts 43 52 (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. 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 44 53 on Euro-Dollar Loans and Money Market Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 365 days and paid for the actual number of days elapsed (including the first day but excluding the last day). 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 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 Guarantor, dated as of the Closing Date, substantially in the form of Exhibit B and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Bank may reasonably request; 45 54 (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 and 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 the General Partner and the Guarantor, its Certificate of Incorporation, (iv) for the General Partner and the Guarantor, its Bylaws, (v) for 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 certificates of good standing or valid existence of the Borrower, the General Partner and the Guarantor as a foreign limited partnership or corporation, as the case may be, in each other jurisdiction in which it is required to be qualified and (vi) the action taken by the Board of Directors of the General Partner and the Guarantor authorizing (A) on behalf of the Borrower, the execution, 46 55 delivery and performance of this Agreement, the Notes 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; (g) a Notice of Borrowing or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; and (h) receipt of the fees then due and payable to the Administrative Agent pursuant to the Administrative Agent's Letter Agreement. In addition, if the Borrower desires funding of a Euro-Dollar Loan on the Closing Date, the Administrative Agent shall have received, the requisite number of days prior to the Closing Date, a funding indemnification letter satisfactory to it, pursuant to which (i) the Administrative Agent and the Borrower shall have agreed upon the interest rate, amount of Borrowing and Interest Period for such Euro-Dollar Loan, and (ii) the Borrower shall indemnify the Banks from any loss or expense arising from the failure to close on the anticipated Closing Date identified in such letter or the failure to borrow such Euro-Dollar Loan on such date. SECTION 3.02. Conditions to All Borrowings. The obligation of each Bank to make a Syndicated Loan or of Wachovia to make a Swing Loan on the occasion of each Borrowing (other than a Borrowing which consists solely of a Refunding Loan) is subject to the satisfaction of the following conditions, except as expressly provided in the last sentence of this Section 3.02: (a) receipt by the Administrative Agent of a Notice of Borrowing, acceptance of a Transaction Rate Quote or notification pursuant to Section 2.03(e) of acceptance of one or more Money Market Quotes, as applicable; (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 47 56 (d) the fact that, immediately after such Borrowing, the conditions set forth in clauses (i) and (ii) of Section 2.01 shall have been satisfied. Each Borrowing (Syndicated, Swing and Money Market) hereunder (other than a Borrowing which consists solely of a Refunding Loan) shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in paragraphs (b), (c) and (d) of this Section, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d). ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower and (by incorporation by reference in the Guaranty) the Guarantor, 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 Guarantor of the Guaranty (i) are within the Borrower's partnership powers and the 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 48 57 the Borrower or the articles of incorporation or by-laws of the Guarantor or of any material agreement, judgment, injunction, order, decree or F other instrument binding upon the Borrower, the Guarantor or any Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower, the Guarantor 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 Guarantor 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, 1995 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, in the case of PPI reported on by Price Waterhouse LLP, copies of which have been delivered to each of the Banks, and the unaudited financial statement of PPI and consolidated financial statements of the Borrower for the interim period ended September 30, 1996, copies of which have been delivered to each of the Banks, fairly present, in all material respects, in conformity with GAAP, subject in the case of quarterly statements to normal year end audit adjustments, the consolidated financial position of PPI and the Borrower and its Consolidated Subsidiaries, respectively, as of such dates and their consolidated results of operations and cash flows for such periods stated. (b) Since December 31, 1995, 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 49 58 Officers, threatened, against or affecting the Borrower, the Guarantor 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 Guarantor 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 Guarantor 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 Guarantor 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 Guarantor 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 Guarantor 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 Guarantor and the Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower and the Guarantor, adequate. United States income tax returns of PPI 50 59 have been examined for the 1991 and 1992 Fiscal Years and the examination reports with respect thereto have been accepted by the District Director of the Internal Revenue Service. SECTION 4.08. Subsidiaries. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08, as supplemented from time to time, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. SECTION 4.09. Investment Company Act. Neither the Borrower, the Guarantor 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 Guarantor 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 Guarantor have disclosed to the 51 60 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 Guarantor 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 Guarantor nor any Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent (and the Administrative Agent shall promptly furnish a copy of any such disclosure to the Banks). None of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA, except as disclosed in writing to the Administrative Agent. (b) No Hazardous Materials have been permitted or are being permitted to be used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, or, to the best of the knowledge of the Executive Officers, at or from any adjacent site or facility, except for Hazardous Materials, such as cleaning solvents, pesticides and other materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in all material respects in compliance with all applicable Environmental Requirements and except as disclosed in writing to the Administrative Agent. (c) The Borrower, the Guarantor 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 Guarantor's 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 52 61 and all other securities of the Borrower, the Guarantor 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 Guarantor nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. SECTION 4.17. Insolvency. After giving effect to the execution and delivery of the Loan Documents and the making of the Loans under this Agreement: (i) neither the Borrower nor the Significant Subsidiary will (x) be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code", or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction, whether current or contemplated, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with respect to the Loans will not be rendered avoidable under any Other Applicable Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable state law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time. 53 62 SECTION 4.18. Insurance. The Borrower, the Guarantor and each of the Subsidiaries has (either in the name of the Borrower, the Guarantor 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 Guarantor 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 Price Waterhouse 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; 54 63 (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, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement of income and statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by an Executive Officer; (c) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate, substantially in the form of Exhibit F (a "Compliance Certificate"), of an Executive Officer (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.09, inclusive, 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; 55 64 (g) if and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (h) within 60 days after the end of each Fiscal Quarter, a Borrowing Base Certificate as of the last day of the Fiscal Quarter just ended; provided, however, that at the Borrower's election, Borrower may, and or at the Administrative Agent's election on not less than 10 Domestic Business Days notice, Borrower shall, submit a Borrowing Base Certificate to the Administrative Agent on or before the fifteenth Domestic Business Day after the end of the first or second month in any Fiscal Quarter, as of the last day of such month; (i) by April 1 of each year, a report as of the end of such Fiscal Year containing the following information: (i) a schedule of all outstanding Debt, showing for each component of Debt, the lender, the total commitment, the total Debt outstanding, the interest rate, if fixed, or a statement that the interest rate floats, the term, the required amortization (if any) and the security (if any); (ii) a schedule of all interest rate protection agreements, showing for each such agreement, the total dollar amount, the type of agreement (i.e. cap, collar, swap, etc.) and the term thereof; and (iii) a development schedule of the announced development pipeline, including for each announced development project, the project name and location, the number of units, the expected construction start date, the expected date of delivery of the first units, the expected stabilization date, and the total anticipated cost. (j) from time to time such additional information regarding the financial position or business of the Borrower 56 65 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 Guarantor will (i) keep, and cause each other Consolidated Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and 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 Guarantor's 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 Guarantor 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 Guarantor and as often as may reasonably be desired. SECTION 5.03. Consolidated Total Secured Debt. The amount of Consolidated Total Secured Debt will not at any time exceed the greater of (x) 40% of Consolidated Total Assets or (y) the lesser of (i) 50% of Consolidated Total Assets or (ii) $375,000,000. SECTION 5.04. Ratio of Consolidated Total Debt to Consolidated Total Assets. The ratio of Consolidated Total Debt to Consolidated Total Assets will not at any time exceed 0.60 to 1.00. SECTION 5.05. Interest Coverage. The ratio of (x) Consolidated Income Available for Debt Service to (y) interest expense shall at all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. SECTION 5.06. Restricted Payments. The Borrower's Restricted Payments in any calendar year shall not exceed 95% of Consolidated Income Available for Distribution for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Consolidated Income Available for Distribution to permit PPI 57 66 to preserve its status as a real estate investment trust under the applicable provision of the Code, or (ii) PPI declares one or more capital gains dividends within such calendar year (in which event the amount of additional Restricted Payments that may be made as a result of such declaration as provided in this clause (ii) shall not exceed $30,000,000). In the event that the Borrower or PPI receives a public debt rating of BBB- or better from Standard & Poors or Baa3 or better from Moody's Investor's Service and so long as that rating is affirmed during each year, the Borrower's Restricted Payments in any calendar year will be limited to 100% of Consolidated Income Available for Distribution for such calendar year with the same exceptions contained in clauses (i) and (ii) of this Section 5.06. SECTION 5.07. Loans or Advances. Neither the Borrower, the Guarantor nor any Subsidiary shall make loans or advances to any Person except: (i) deposits required by government agencies or public utilities; (ii) loans and advances made to the Borrower, the Guarantor or any Subsidiary; provided, that loans and advances from the Borrower and the Guarantor to Subsidiaries, together with Investments in Subsidiaries permitted by clause (C) of Section 5.09, may not exceed an aggregate amount of $50,000,000 outstanding at any time; (iii) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000.00; and (iv) other loans or advances made in the ordinary course of business in the aggregate outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clause (iii) of this Section 5.07 and minus Investments made and permitted pursuant to Section 5.09(D); provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii), (iii) or (iv), the Borrower will be in full compliance with all the provisions of this Agreement. SECTION 5.08. Purchases of Stock by the Significant Subsidiaries. Except for purchases or acquisitions of shares of PPI's Capital Stock made for purposes of having such shares available for purchase by PPI shareholders pursuant to the Post Properties, Inc. Dividend Reinvestment and Stock Purchase Plan, as amended as of the Closing Date, and, subject to the approval of the Required Banks (not to be unreasonably withheld), as it may thereafter be amended, the Significant Subsidiaries shall not purchase or acquire any shares of PPI's 58 67 Capital Stock during any 12 month period in excess of the lesser of (i) 2.25% of all PPI's Capital Stock outstanding on the first day of such period, or (ii) an aggregate purchase price of $30,000,000. SECTION 5.09. Investments. Neither the Borrower nor the Guarantor shall make Investments in any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and/or (v) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (B) Investments permitted by clauses (i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) Investments made after July 26, 1995 in Subsidiaries in an aggregate amount, together with the aggregate outstanding amount of loans and advances from the Borrower and the Guarantor to Subsidiaries permitted by clause (ii) of Section 5.07, not in excess of $50,000,000. SECTION 5.10. Dissolution. Neither the Borrower, the Guarantor nor any of the Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock or that of any Subsidiary, except to the extent permitted by Section 5.11 and except for purchases by PPI of its own Capital Stock to the extent permitted by Section 5.08, and subject to the rights of limited partners of the Borrower to convert or exchange their Partner Interests in the Borrower to stock in PPI. SECTION 5.11. Consolidations, Mergers and Sales of Assets. The Borrower and the Guarantor will not, nor will the Borrower permit any other Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or 59 68 discontinue or eliminate any business line or segment, provided that (a) the Borrower, the 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 the 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) the Guarantor may merge with or transfer assets to the Borrower (with the Borrower as the survivor of any such merger), and any Subsidiary may merge with or transfer assets to the Borrower, the Guarantor, or another Subsidiary (with the Borrower or the Guarantor, as the case may be, as the survivor in any such merger in which the Borrower or the Guarantor is involved), and In the case of any Subsidiary which transfers substantially all of its assets pursuant to clause (c) of the preceding sentence, and in the case of any Subsidiary the stock of which is 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 may dissolve. SECTION 5.12. Use of Proceeds. The proceeds of the Loans may be used for general corporate and partnership purposes of the Borrower and the Guarantor, and the Subsidiaries. No portion of the proceeds of the Loans will be used by the Borrower or the Guarantor (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, unless such tender offer or other acquisition is to be made on a negotiated basis with the approval of the Board of Directors of the Person to be acquired or (ii) for any purpose in violation of any applicable law or regulation. SECTION 5.13. Compliance with Laws; Payment of Taxes. (a) The Borrower and the Guarantor 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 60 69 which does not have and is not reasonably expected to cause a Material Adverse Effect. The Borrower and the Guarantor 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 Guarantor or any other Subsidiary, except (A) liabilities being contested in good faith and against which, if requested by the Administrative Agent, the Borrower, the Guarantor 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 Guarantor 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 Guarantor and members of the Controlled Group to exceed $5,000,000 at any time. For purposes of this Section 5.13(b), the amount of withdrawal liability of the Borrower and members of 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 Guarantor and members of the Controlled Group have paid or as to which the Borrower and the Guarantor 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 Guarantor shall obtain prompt written advice from independent actuarial consultants supporting such determination. The Borrower and the Guarantor 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 Guarantor and members of the Controlled Group from each Multiemployer Plan, if any, and (ii) to transmit a copy of such statement to the Administrative Agent and the Banks within 15 days after the Borrower receives the same. SECTION 5.14. Insurance. The Borrower and the Guarantor will maintain, and will cause each of the Subsidiaries to maintain (either in the name of the Borrower or the Guarantor's or such other Subsidiary's own name), with 61 70 financially sound and reputable insurance companies having an A.M. Best rating of B+ or better, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 5.15. Change in Fiscal Year. The Borrower and the Guarantor will not, and will cause the Subsidiaries to not, change its Fiscal Year without the consent of the Required Banks. SECTION 5.16. Maintenance of Property; Principal Business. The Borrower and the Guarantor shall, and shall cause each other Subsidiary to, maintain all of its properties and assets in good condition, repair and working order, ordinary wear and tear excepted, and maintain all Property consisting of apartment communities (other than Property consisting of land acquired with existing improvements which are to be substantially demolished) in a first class manner. The principal business operations of the Borrower and the Subsidiaries, taken as a whole, will be directly or indirectly related to multi-family residential Properties. SECTION 5.17. Environmental Notices. Promptly upon any Executive Officer's becoming aware thereof, the Borrower and the Guarantor 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 5.18. Environmental Matters. The Borrower and the Guarantor 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. 62 71 SECTION 5.19. Environmental Release. The Borrower and the Guarantor agree that upon any Executive Officer's becoming aware of the occurrence of an Environmental Release at or on any of the Properties the Borrower will act immediately to investigate the extent of, and to take appropriate action to remediate such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority. SECTION 5.20. Transactions with Affiliates. Neither the Borrower, the Guarantor nor any of the Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower, the Guarantor or such other Subsidiary (which Affiliate is not PPI, the Borrower, the Guarantor or a Wholly Owned Subsidiary), except as permitted by law and in the ordinary course of business and pursuant to reasonable terms which are no less favorable to Borrower or such Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate. SECTION 5.21. Qualification as a Real Estate Investment Trust; General Partner. PPI shall at all times (i) remain qualified under the Code as a real estate investment trust and (ii) be the General Partner. The Borrower will not agree to amend or waive the requirements of Section 7.5A of the limited partnership agreement of the Borrower, as in effect on the date of this Agreement, as such requirements are applicable to the General Partner, without the prior written consent of the Required Banks (which consent the Banks hereby agree not to unreasonably withhold or delay). SECTION 5.22. Certain Covenants Concerning Subsidiaries. The Borrower and the Guarantor shall not permit: (a) the Subsidiary Consolidated Total Assets at any time to exceed $50,000,000; (b) any of the Subsidiaries 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; or (c) 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 63 72 either the "UFTA" or the "UFCA", or as defined or used in any "Other Applicable Law" (as those terms are defined below), or (y) be unable to pay its debts generally as such debts become due within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or (z) have an unreasonably small capital to engage in any business or transaction in which it is engaged or about to be engaged, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA. For purposes of this Section 5.22(c), "Bankruptcy Code" means Title 11 of the United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable state law pertaining to fraudulent transfers or acts voidable by creditors, in each case as such law may be amended from time to time. 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 the Guarantor shall fail to observe or perform any covenant contained in Sections 5.01(d), 5.02(ii), 5.03 to 5.06, inclusive, 5.08, 5.10 to 5.12, inclusive, 5.15 or 5.21; or (c) the Borrower or the 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 Guarantor by the Administrative Agent at the request of any Bank or (ii) 64 73 an Executive Officer otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made by the Borrower or the 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 the Guarantor shall fail to make any payment in respect of Debt in an aggregate amount in excess of $2,500,000 outstanding (other than the Notes) when due or within any applicable grace period; or (f) any event or condition shall occur which results in the acceleration of the maturity of Debt outstanding of the Borrower or the Guarantor in an aggregate amount in excess of $2,500,000 (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or the 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 the Guarantor); or (g) the Borrower or the Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (h) an involuntary case or other proceeding shall be commenced against the Borrower or the Guarantor seeking 65 74 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 the 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 $2,500,000; or (j) one or more judgments or orders for the payment of money in an aggregate amount in excess of $2,500,000 shall be rendered against the Borrower or the 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 the Guarantor under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing, except where in either such case (i) the aggregate amount involved is not in excess of $2,500,000, or 66 75 (ii) such lien did not arise in connection with a capital gains transaction and is being contested in good faith and against which the Borrower or Subsidiary has set up reserves in accordance with GAAP. then, and in every such event, the Administrative Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and the obligation to make Swing Loans and they shall thereupon terminate, (ii) any Bank may terminate its obligation to fund a Money Market Loan in connection with any relevant Money Market Quote, and (iii) if requested by the Required Banks (but not otherwise), by notice to the Borrower declare the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) to be, and the Syndicated Loan Notes, together with the Swing Loan Note and the Money Market Loan Notes, shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default; provided that if any Event of Default specified in paragraph (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments and the obligation to make Swing Loans shall thereupon terminate and the Syndicated Loan Notes, the Swing Loan Note and the Money Market Loan Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower together with interest thereon at the Default Rate accruing on the principal amount thereof from and after the date of such Event of Default. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Banks. 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. 67 76 EXHIBIT 10._ 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 68 77 ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Bank, except that it will hold in trust for the account of each Bank any monies received by it which are payable to such Bank hereunder. SECTION 7.02. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any 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 69 78 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 limitation, counsel fees and disbursements, but not including fees payable pursuant to the Administrative Agent's Letter Agreement), or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided that 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. 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 70 79 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 Person (or any 71 80 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. 72 81 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period: (a) the Administrative Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (b) the Required Banks advise the Administrative Agent that the London Interbank Offered Rate, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding the relevant type of Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make the type of Euro-Dollar Loans specified in such notice shall be suspended. Unless the Borrower notifies the Administrative Agent at least 2 Domestic Business Days before the date of any Borrowing of such type of Euro-Dollar Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances 73 82 giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Bank, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date hereof, a Change of Law or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement which is compensated by the payment of additional interest pursuant to the last paragraph of this Section 8.03(a)) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Lending Office); or (ii) shall impose on any Bank (or its Lending Office) or the London interbank market any other condition affecting its Fixed Rate Loans, its Syndicated Loan Notes or its Money Market Loan Notes or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Lending Office) of making or maintaining any Syndicated Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Lending Office) under this Agreement or under its Syndicated Loan Notes or Money Market Loan 74 83 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 75 84 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 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- 76 85 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 (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). 77 86 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 78 87 Documents. The Borrower shall indemnify the Administrative Agent and each Bank against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. SECTION 9.04. Indemnification. The Borrower shall indemnify the Administrative Agent, the Banks and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Bank hereunder or breach by the Borrower of this Agreement or any other Loan Document or from any investigation, litigation (including, without limitation, any actions taken by the Administrative Agent or any of the Banks to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Administrative Agent and each Bank, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any out-of-pocket expenses (including, without limitation, reasonable legal fees) actually incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred solely by reason of the breach of obligations under the Loan Documents or gross negligence or wilful misconduct of the Person to be indemnified. SECTION 9.05. Setoff; Sharing of Setoffs. (a) The Borrower agrees that the Administrative Agent and each Bank (and Wachovia, as to the Swing Loans) shall have a right of setoff for all indebtedness and obligations owing to them from the Borrower upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned to the Administrative Agent or any such Bank or otherwise in the possession or control of the Administrative Agent or any such Bank for any purpose for the account or benefit of the Borrower and including any balance of any deposit account or of any credit of the Borrower with the Administrative Agent or any such Bank, whether now existing or hereafter established, and the Borrower hereby authorizes the Administrative Agent and each Bank at any 79 88 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 Guarantor or Subsidiary for the purpose of (i) implementing a defeasance or "in substance" defeasance of Debt of the Borrower or the Guarantor or Subsidiary, or (ii) maintaining security deposits of tenants of any of the Properties. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Administrative Agent or any such Bank as soon as the same may be put in transit to it by mail or carrier or by other bailee. (b) Each Bank agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise (including, without limitation, from any collateral hereafter obtained), receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Syndicated Loan Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of all principal and interest owing with respect to the Syndicated Loan Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Syndicated Loan Notes held by the other Banks owing to such other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Syndicated Loan Notes held by the Banks owing to such other Banks shall be shared by the Banks pro rata; provided that (i) nothing in this Section shall impair the right of any Bank to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Syndicated Loan Notes, and (ii) if all or any portion of such payment received by the purchasing Bank is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be 80 89 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: (1) unless signed by Banks having at least 75% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 75% of the aggregate outstanding principal amount of the sum of the Syndicated Loans, change the definition of "Borrowing Base"; or (2) unless signed by all Banks, (i) change the Commitment of any Bank or subject any Bank to any additional obligation, (ii) change the principal of or rate of interest on any Loan or any fees (other than fees payable to the Administrative Agent) hereunder, (iii) change the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) change the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) release or substitute all or any substantial part of the collateral (if any) held as security for the Loans, or (viii) 81 90 release any Guarantee given to support payment of the Loans, except as expressly provided in the last sentence of Section 5.11. (b) The Borrower will not obtain from any Bank its written agreement to waive or amend any of the provisions of this Agreement except through the Administrative Agent, and the Administrative Agent shall be supplied by the Borrower with sufficient information to enable the Banks to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to the Administrative Agent for redelivery to each Bank forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Banks. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional 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. 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 82 91 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 expressly provided in the last sentence of Section 5.11. Each Bank selling a participating interest in any Loan, Note, Commitment or other interest under this Agreement, other than a Money Market Loan or Money Market Note or participating interest therein, shall, within 10 Domestic Business Days of such sale, provide the Borrower and the Administrative Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 8.03 and 8.05, subject to the provisions of Section 9.08(e), with respect to its participation in Loans outstanding from time to time. (c) Any Bank may at any time assign to one or more banks or financial institutions (each an "Assignee") all, or in the case of its Loans and Commitments, a proportionate part of all its Loans and Commitments, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance, executed by such Assignee, such transferor Bank and the Administrative Agent (and, in the case of an Assignee that is not then a Bank (or an Affiliate of a Bank), subject to clause (iii) below, by the Borrower); provided that (i) no interest may be sold by a Bank pursuant to this paragraph (c) unless the Assignee shall agree to 83 92 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. 84 93 (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. 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) and (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 85 94 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. SECTION 9.10. Representation by Banks. Each Bank hereby represents that it is a commercial lender or financial institution which makes Syndicated Loans and Money Market Loans in the ordinary course of its business and that it will make its Syndicated Loans and Money Market Loans hereunder for its own account in the ordinary course of such business; provided that, subject to Section 9.08, the disposition of the Note or Notes 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. 86 95 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, 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 87 96 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 88 97 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. [Signatures are contained on the following pages.] 89 98 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 Properties, Inc., its sole general partner By: /s/ Timothy A. Petersen ------------------------------- Timothy A. Petersen Executive Vice President Post Corporate Services Post Apartment Homes, L.P. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 404-951-1825 Confirmation number: 404-850-4400 COMMITMENTS WACHOVIA BANK OF GEORGIA, N.A., as Administrative Agent and as a Bank (SEAL) $60,000,000 By: /s/ ---------------------------------------- Title: Lending Office Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Telecopier number: 404-332-4005 Confirmation number: 404-332-6971 90 99 FIRST UNION NATIONAL BANK OF GEORGIA, as Co-Agent and as a Bank (SEAL) $60,000,000 By: /s/ ---------------------------------------- Title: Lending Office First Union National Bank of Georgia 999 Peachtree Street, N.E. Suite 610 Atlanta, GA 30309 Attention: Ms. Susan T. Miller Telecopier number: 404-225-4113 Confirmation number: 404-225-4030 SUNTRUST BANK, ATLANTA (SEAL) $30,000,000 By: /s/ ---------------------------------------- Title: Lending Office SunTrust Bank, Atlanta 25 Park Place, MC-081 Atlanta, GA 30303 Attention: Mr. W. John Neill Telecopier number: 404-827-6774 Confirmation number: 404-588-8248 91 100 CORESTATES BANK (SEAL) $20,000,000 By: /s/ ---------------------------------------- Title: Lending Office CoreStates Bank Real Estate Department 1339 Chestnut Street Philadelphia, PA 19107-7618 Attention: Mr. Glen Gallager Telecopier number: 215-786-6381 Confirmation number: 215-786-4221 COMMERZBANK AG, ATLANTA AGENCY (SEAL) $10,000,000 By: /s/ ---------------------------------------- Title: By: /s/ ---------------------------------------- Title: Lending Office Commerzbank AG, Atlanta Agency 1230 Peachtree Street 35th Floor Atlanta, GA 30309 Attention: Mr. Andreas K. Bremer Telecopier number: 404-888-6539 Confirmation number: 404-888-6500 92 101 EXHIBIT A-1 SYNDICATED LOAN NOTE Atlanta, Georgia April 9, 1997 For value received, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), promises to pay to the order of __________________________________________________, a ____________________ (the "Bank"), for the account of its Lending Office, the principal sum of ___________________________________ AND NO/100 DOLLARS ($__________), 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 of Georgia, 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. 93 102 This Syndicated Loan Note is one of the Syndicated Loan Notes referred to in the Amended and Restated Credit Agreement dated as of April 9, 1997 among the Borrower, the Banks listed on the signature pages thereof, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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. 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 Properties, Inc., its sole general partner By: ----------------------------------- Timothy A. Petersen Executive Vice President Post Corporate Services 94 103 Syndicated Loan Note (cont'd)
Syndicated Loans AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Base Rate Amount Amount of or Euro- of Principal Maturity Notation Date Dollar Loan Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
95 104 EXHIBIT A-2 SWING LOAN NOTE Atlanta, Georgia April 9, 1997 For value received, POST APARTMENT HOMES, L.P., a Georgia limited partnership (the "Borrower"), promises to pay to the order of WACHOVIA BANK OF GEORGIA, 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 of Georgia, 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 Amended and Restated Credit Agreement dated as of even 96 105 date herewith among the Borrower, the Banks listed on the signature pages thereof, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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. 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 Properties, Inc., its sole general partner By: ------------------------------------ Timothy A. Petersen Executive Vice President Post Corporate Services 97 106 Swing Loan Note (cont'd)
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98 107 EXHIBIT A-3 MONEY MARKET LOAN NOTE As of April 9, 1997 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 NINETY MILLION AND NO/100 DOLLARS ($90,000,000), 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 of Georgia, 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 Amended and Restated Credit 99 108 Agreement dated as of April 9, 1997 among the Borrower, the Banks listed on the signature pages thereof, Wachovia Bank of Georgia, N.A., as 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. 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 Properties, Inc., its sole general partner By: ----------------------------------- Timothy A. Petersen Executive Vice President Post Corporate Services 100 109 Money Market Loan Note (cont'd)
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101 110 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 of Georgia, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attn: Syndications Group Dear Sirs: We have acted as counsel for Post Apartments, L.P., a Georgia limited partnership (the "Borrower") and Post Properties, Inc., a Georgia corporation (the "Guarantor") in connection with the Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among the Borrower, the banks listed on the signature pages thereof, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, N.A., as Administrative Agent. Terms defined in the Amended and Restated Credit Agreement are used herein as therein defined. 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. We have assumed for purposes of our opinions set forth below that the execution and delivery of the Amended and Restated Credit Agreement by each Bank and by the Administrative Agent have been duly authorized by each Bank and by the Administrative Agent. 102 111 Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower is a limited partnership duly organized and validly existing under the laws of Georgia and has all partnership powers required to carry on its business as now conducted. The Guarantor is a corporation duly organized and validly existing under the laws of Georgia and has all corporate powers required to carry on its business as not conducted. The Guarantor is the sole and managing general partner of the Borrower. 2. The execution, delivery and performance by the Borrower of the Amended and Restated Credit Agreement and the Notes and by the Guarantor of the Guaranty (i) are within the Borrower's partnership and the Guarantor's 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, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or Guarantor or of any agreement, judgment, injunction, order, decree or other instrument which to our knowledge is binding upon the Borrower or the Guarantor and (v) to our knowledge, except as provided in the Amended and Restated Credit Agreement, do not result in the creation or imposition of any Lien on any asset of the Borrower, the Guarantor or any of the Subsidiaries. 3. Each of the Amended and Restated Credit Agreement and the Guaranty constitutes a valid and binding agreement of the Borrower and the Guarantor, respectively, enforceable against the Borrower and the Guarantor in accordance with its terms, and the Notes constitute valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity. 4. To our knowledge, there is no action, suit or proceeding pending, or threatened, against or affecting the Borrower, the Guarantor or any of the Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of PPI, 103 112 the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner questions the validity or enforceability of the Amended and Restated Credit Agreement or any Note. 5. Each of the Borrower's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 6. Neither the Borrower nor the Guarantor nor any of the Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 7. Neither the Borrower nor the Guarantor nor any of the Subsidiaries 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. We are qualified to practice in the State of Georgia and do not purport to be experts on any laws other than the laws of the United States and the State of Georgia and this opinion is rendered only with respect to such laws. We have made no independent investigation of the laws of any other jurisdiction. This opinion is delivered to you in connection with the transaction referenced above and may only be relied upon by you, any Transferee under the Amended and Restated Credit Agreement, and Jones, Day, Reavis & Pogue without our prior written consent. Very truly yours, 104 113 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 of Georgia, 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 Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among Post Apartment Homes, L.P., a Georgia limited partnership (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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. 105 114 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 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, 106 115 EXHIBIT D ASSIGNMENT AND ACCEPTANCE Dated ______ ___, _____ Reference is made to the Amended and Restated Credit Agreement dated as of April 9, 1997 (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), First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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 107 116 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 $____________ 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 108 117 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. 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 109 118 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] 110 119 WACHOVIA BANK OF GEORGIA, N.A., As Administrative Agent By: --------------------------------------- Title: POST APARTMENT HOMES, L.P. IF REQUIRED BY THE AMENDED AND RESTATED CREDIT AGREEMENT. By: Post Properties, Inc., its sole general partner By: ------------------------------------ [Name and title of Executive Officer] 111 120 EXHIBIT E NOTICE OF BORROWING _____________________, ______ Wachovia Bank of Georgia, N.A., as Administrative Agent 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Re: Amended and Restated Credit Agreement (as amended and modified from time to time, the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among Post Apartment Homes, L.P., the Banks from time to time parties thereto, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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]. - ---------- (1)Not to exceed the amount available to be borrowed as set forth in the next paragraph. 112 121 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) Borrowing Base per most recent Borrowing Base Certificate $_____________ (c) Principal amount outstanding under Syndicated Loans $_____________ (d) Principal amount outstanding under Swing Loans $_____________ (e) Principal amount outstanding under Money Market Loans $_____________ (f) Amount available to be borrowed (lesser of (a) or (b), less sum of (c), (d) and (e) $_____________
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 Properties, Inc., its sole general partner By: ----------------------------------- [President or other authorized designee] 113 122 EXHIBIT F COMPLIANCE CERTIFICATE Reference is made to the Amended and Restated Credit Agreement dated as of April 9, 1997 (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, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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 Properties, Inc., its sole general partner By: ---------------------------------- [Name and title of Executive Officer, other than Secretary] 114 123 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ 1. Consolidated Total Secured Debt (Section 5.03) The amount of Consolidated Total Secured Debt will not at any time exceed the greater of (x) 40% of Consolidated Total Assets or (y) the lesser of (i) 50% of Consolidated Total Assets or (ii) $375,000,000. (a) Consolidated Total Secured Debt Schedule - 1 $__________ (b) Consolidated Total Assets Schedule - 2 $__________ (c) 40% of (b) $__________ (d) 50% of (b) $__________ (e) lesser of (d) and $375,000,000 $__________
Maximum Consolidated Total Secured Debt (greater of (c) and (e)) $__________ 2. Ratio of Consolidated Total Debt to Consolidated Total Assets (Section 5.04) The ratio of Consolidated Total Debt to Consolidated Total Assets will not at any time exceed 0.60 to 1.00. (a) Consolidated Total Liabilities at end of most recent Fiscal Quarter $__________ (b) Aggregate amount of Debt Guaranteed by Borrower, the Guarantor and the other Subsidiaries (other than of Debt of
115 124 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ any of them) at end of most recent Fiscal Quarter $__________ (c) Total Consolidated Total Debt (sum of (a) plus (b)) $__________
116 125 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ (d) Consolidated Total Assets Schedule - 1 $__________ Actual Ratio of (c) to (d) ____ to 1.00 Maximum Ratio 0.60 to 1.00
3. Interest Coverage (Section 5.05) The ratio of (x) Consolidated Income Available for Debt Service to (y) interest expense shall at all times exceed 2.00 to 1.0, calculated at the end of each Fiscal Quarter, based on the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. (a) Consolidated Income Available for Debt Service Schedule - 3 $__________ (b) Interest expense Schedule - 3 $__________ Actual Ratio of (a) to (b) ____ to 1.00 Minimum Ratio 2.00 to 1.00
4. Restricted Payments (Section 5.06) The Borrower's Restricted Payments in any calendar year shall not exceed 95% of Consolidated Income Available for Distribution for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Consolidated Income Available for Distribution to permit PPI to preserve its status as a real estate investment trust under the applicable provision of the Code, or (ii) PPI declares one or more capital gains dividends 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 117 126 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ better 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 for Debt Service Schedule - 4 $___________ (b) 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. Loans and Advances (Section 5.07) Neither the Borrower, the Guarantor nor any other Subsidiary shall make loans or advances to any Person except: (i) deposits required by government agencies or public utilities; (ii) loans and advances made to the Borrower, the Guarantor or any Subsidiary; provided, that loans and advances from the Borrower and the Guarantor to Subsidiaries, together with Investments in Subsidiaries permitted by clause (C) of Section 5.09, may not exceed an aggregate amount of $50,000,000 outstanding at any 118 127 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ time; (iii) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000.00; and (iv) other loans or advances made in the ordinary course of business in the aggregate outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clause (iii) of this Section 5.07 and minus Investments made and permitted pursuant to Section 5.09(D); provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii), (iii) or (iv), the Borrower will be in full compliance with all the provisions of this Agreement. (a) To Subsidiaries $__________ (b) Sum of (a) and amount $__________ in paragraph 7(b) below Limitation $50,000,000 (c) To directors, officers and employees $__________ Limitation $ 2,500,000 (d) other $__________ Limitation $__________(1)
6. Purchases of Stock by the Guarantor (Section 5.08) Except for purchases or acquisitions of shares of PPI's Capital Stock made for purposes of having such shares available for - -------- (1)20,000,000 less amount in (c) of this paragraph 5 and amount in line (d) of paragraph 7 below. 119 128 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ purchase by PPI shareholders pursuant to the Post Properties, Inc. Dividend Reinvestment and Stock Purchase Plan, as amended as of the Closing Date, and, subject to the approval of the Required Banks (not to be unreasonably withheld), as it may thereafter be amended, the Guarantor shall not purchase or acquire any shares of PPI's Capital Stock during any 12 month period in excess of the lesser of (i) 2.25% of all PPI's Capital Stock outstanding on the first day of such period, or (ii) an aggregate purchase price of $30,000,000. (a) Aggregate number of shares of _____________ PPI's Capital Stock outstanding on first day of last 12 month period (b) 2.25% of (a) (based on the $____________ closing price on such first day as set forth in the Wall Street Journal) (c) Aggregate number of shares of _____________ PPI's Capital Stock purchased by Significant Subsidiaries in last 12 months (d) Aggregate purchase price of shares $____________ described in (c) Limitation (lesser of (b) and $30,000,000) [$]__________
7. Investments (Section 5.09) Neither the Borrower nor the Guarantor shall make Investments in any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard 120 129 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and/or (v) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding at any time an aggregate amount of $5,000,000; (B) Investments permitted by clauses (i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) Investments in Significant Subsidiaries and (D) other Investments not exceeding an aggregate amount outstanding at any time of $20,000,000, less loans and advances outstanding and permitted by clause (iv) of Section 5.07. (a) debt or equity securities rated $__________ at least BBB+ or Baa1 Limitation $ 5,000,000 (b) Investments in Subsidiaries $__________ after July 26, 1995 (c) Sum of (b) and amount $__________ in paragraph 5(a) above Limitation $50,000,000 (d) Other $__________
121 130 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ Limitation $____________(2)
- -------- (2) $20,000,000 less amount on line (d) of paragraph 5 above. 122 131 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ Schedule - 1 Consolidated Total Secured Debt
INTEREST FINAL RATE(3) MATURITY TOTAL ------- -------- ----- Money Borrowed ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ Total Money Borrowed $___________ Deferred Purchase Price ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ ___________________________ ___________ ___________ $___________ Total Deferred Purchase Price $___________
- -------- (3) If rate is fixed, insert contract rate. If rate is floating, state that. 123 132 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ Capitalized Leases $ - ---------------------------------------------------------- ----------- $ - ---------------------------------------------------------- ----------- Total Capitalized Leases $ ----------- Total Consolidated Total Secured Debt $ ===========
124 133 COMPLIANCE CHECK LIST Post Apartment Homes, L.P. -------------------------- _________________, _____ Schedule - 2 Consolidated Total Assets (a) net real estate assets $ ---------- (b) depreciation on fixed assets $ ---------- (c) other tangible assets $ ---------- Consolidated Total Assets (sum of (a) plus (b) plus (c) $ ==========
125 134 Schedule - 3 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
126 135 and non-cash items ($ ) ------------- plus increases in deferred taxes and non-cash items $ ------------- plus interest expense $ ------------- plus taxes $ -------------
127 136 ___ 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 (last 4 Fiscal Quarters) $ =============
128 137 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 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
129 138 and non-cash items $ ------------- plus increases in deferred taxes and non-cash items $ ------------- plus interest expense $ ------------- plus taxes $ -------------
130 139 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) $ =============
131 140 EXHIBIT G [NAME OF BORROWER] CLOSING CERTIFICATE Reference is made to the Amended and Restated Credit Agreement (the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among Post Apartment Homes, L.P., the Banks listed therein, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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 April 9, 1997. By: --------------------------------- [Name and title of Executive Officer] 132 141 EXHIBIT H GUARANTY THIS GUARANTY (this "Guaranty") is made April 9, 1997, by POST PROPERTIES, INC., a Georgia corporation (the "Guarantor") 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"), First Union National Bank of Georgia, as Co-Agent (the "Co-Agent") and WACHOVIA BANK OF GEORGIA, N.A., as Administrative Agent (the "Administrative Agent"), and certain other Banks from time to time party thereto have entered into a certain Amended and Restated Credit Agreement dated as of even date herewith (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 Guarantor; WHEREAS, it is required by Section 3.01(b) of the Amended and Restated Credit Agreement, that the Guarantor execute and deliver this Guaranty whereby the Guarantor shall 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 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 Guarantor, whether directly or indirectly, and in order to induce the Banks, the Co-Agent and the Administrative Agent to enter into the Amended and Restated Credit Agreement, the Guarantor is willing to guarantee the obligations of the Borrower under the 133 142 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: 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 Guarantor incorporates herein by reference as fully as if set forth herein all of the representations and warranties pertaining to the Guarantor contained in Article IV of the Amended and Restated Credit Agreement (which representations and warranties shall be deemed to have been renewed by the Guarantor upon each Borrowing under the Amended and Restated Credit Agreement). SECTION 3. Covenants. The Guarantor covenants 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 Guarantor will fully comply with those covenants set forth in Article V of the Amended and Restated Credit Agreement pertaining to the Guarantor, and the Guarantor incorporates herein by reference as fully as if set forth herein all of such covenants. SECTION 4. The Guaranty. The Guarantor hereby unconditionally guarantees 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 and Swing Loans and interest thereon, and all compensation and indemnification amounts and fees payable pursuant to the Amended and Restated Credit Agreement and the Administrative Agent'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, the Guarantor 134 143 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 Guarantor 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, any Note, any Loan Document, or any obligations of any other 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 the Guarantor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or the Guarantor, or any of their assets or any resulting release or discharge of any obligation of the Borrower or the Guarantor; (v) the existence of any claim, setoff or other rights which the Guarantor may have at any time against the Borrower, the Administrative Agent, the Co-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; 135 144 (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 Co-Agent, 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 Guarantor's obligations hereunder. SECTION 6. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. The Guarantor's 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 Guarantor's 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 Guarantor. The Guarantor 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 Principal 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 and 136 145 Restated Credit Agreement, any Note or any other Loan Document shall nonetheless be payable by the Guarantor 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 Co-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 Co-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 Guarantor without the prior written consent of the Administrative Agent and the Required Banks, and shall be binding upon the Guarantor 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 137 146 terminated orally, but only in writing signed by the Guarantor 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. THE GUARANTOR 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. THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE 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. THE GUARANTOR 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 Guarantor 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 Guarantor 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 Guarantor as to payments required to be made by the Guarantor hereunder. 138 147 IN WITNESS WHEREOF, the Guarantor 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: ---------------------------- Timothy A. Petersen Executive Vice President Post Corporate Services Address: Post Properties, Inc. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 770-951-1825 Confirmation number: 770-850-4400 139 148 EXHIBIT I BORROWING BASE CERTIFICATE Reference is made to the Amended and Restated Credit Agreement dated as of April 9, 1997 (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, First Union National Bank of Georgia, as Co-Agent and Wachovia Bank of Georgia, 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 [3.01(i)][5.01(h)] of the Amended and Restated Credit Agreement, ____________, the duly authorized [title of Executive Officer] of the General Partner, hereby (i) certifies to the Administrative Agent and the Banks that the calculation of the Borrowing Base contained in this Borrowing Base Certificate is true, accurate and complete in all material respects as of ____________, _____. The calculation of the Borrowing Base is as follows: (i) (a) Net Operating Income for the 12 month period ending on the last day of the month just ended, from each Eligible Property which is not subject to a Mortgage and which either was on average at least 90% economically occupied during, or with respect to which the Construction Period Termination Date occurred prior to the commencement of, such 12 month period $____________ (b) product of 7.42857 times (i)(a) $____________ (ii) (a) Net Operating Income for the 12 month period ending on the last day of the month just ended, from each Eligible Property which is financed as to Debt only by bonds, debentures, notes or other similar instruments which have been fully in substance defeased in accordance with GAAP $____________
140 149 (b) product of 7.42857 times (ii)(a) $____________ (iii)(a) Net Operating Income for the 3 month period ending on the last day of the month just ended, from each Eligible Property which is not subject to a Mortgage and with respect to which the Construction Period Termination Date did not occur prior to the commencement of the 12 month period ending on the last day of the month just ended prior to the date of determination $____________ (b) product of 29.71428 times (iii)(a) $____________ (iv) (a) aggregate amount of cash expenditures (including indirect costs internally allocated in accordance with GAAP) on all Eligible Properties which are not subject to a Mortgage and which consist of apartment communities as to which the Construction Period Termination Date has not occurred $____________ (b) 50% of (iv)(a) $____________ (c) amount in (v)(k) $____________ (d) $75,000,000 less (iv)(c) $____________ (e) lesser of (iv)(b) and (iv)(d) $____________ (v) (a) aggregate cost of all Eligible Properties which consist of raw land not subject to a Mortgage or which consist of land acquired with existing improvements which are to be substantially demolished and the demolition of such improvements has commenced $____________ (b) 45% of (v)(a) $____________
141 150 (c) aggregate cost of land acquired with existing improvements to be substantially demolished $____________ (d) 45% of (v)(c) $____________ (e) Net Operating Income for the 12 month period ending on the last day of the month just ended, from each Eligible Property not subject to a Mortgage consisting of land acquired with existing improvements which are to be substantially demolished, so long as such Eligible Property was on average at least 50% economically occupied during such 12 month period and demolition of such improvements has not commenced $____________ (f) product of 5.71429 times (v)(e) $____________ (g) greater of (v)(d) and (v)(f) $____________ (h) sum of (v)(b) plus (v)(g) $____________ (i) sum of (i)(b), plus (ii)(b), plus (iii)(b), plus (iv)(b) $____________ (j) 33% of (v)(i) $____________ (k) lesser of (v)(h), $25,000,000 and (v)(j) $____________ (vi) (a) outstanding Debt of the Borrower and the Guarantor (other than the Loans and any Debt owing to the Borrower or the Guarantor) which is not secured by a Lien $____________ (b) commitments (other than the Commitments) to the Borrower and the Guarantor, available to be advanced, to fund Debt of the type described in (vi)(a) $____________ (c) greater of (vi)(a) and (vi)(b) $____________
142 151 BORROWING BASE (sum of (i)(b), (ii)(b), (iii)(b), (iv)(e) and (v)(k), less (vi)(c)) $____________ POST APARTMENT HOMES, L.P.(SEAL) By: Post Properties, Inc., its sole general partner By: ------------------------------- [Name and title of Executive Officer] 143 152 EXHIBIT J MONEY MARKET QUOTE REQUEST Wachovia Bank of Georgia, 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 Amended and Restated Credit Agreement (as amended or modified from time to time, the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among POST APARTMENT HOMES, L.P., the Banks from time to time parties thereto, and FIRST UNION NATIONAL BANK OF GEORGIA, as Co-Agent, and WACHOVIA BANK OF GEORGIA, 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 ______________, 19_____ (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 J. 144 153 Very truly yours, POST APARTMENT HOMES, L.P. By: Post Properties, 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. 145 154 EXHIBIT K MONEY MARKET QUOTE Wachovia Bank of Georgia, 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 Amended and Restated Credit Agreement (as amended or modified from time to time, the "Amended and Restated Credit Agreement") dated as of April 9, 1997 among POST APARTMENT HOMES, L.P. (the "Borrower"), the Banks from time to time parties thereto, FIRST UNION NATIONAL BANK OF GEORGIA, as Co-Agent, and WACHOVIA BANK OF GEORGIA, 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 , 19 , 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 Stated Principal Maturity Amount(2) Date (3) Rate Per Annum(4) - --------- -------- -----------------
- ---------- * All numbered footnotes appear on the last page of this Exhibit K. 146 155 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. 147 156 (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). 148 157 Schedule 4.08 Subsidiaries
Name Jurisdiction of Incorporation/Creation - ---- -------------------------------------- Post Services, Inc. Georgia Post Asset Management, Inc. Georgia Post Landscape Services, Inc. Georgia RAM Partners, Inc. Georgia Cumberland Lake, Inc. Georgia A.T. Aviation, Inc. Georgia Rocky Point Management, Inc. Georgia Post Development Services Limited Partnership Georgia
149 EX-10.31 16 1ST AMEND TO CREDIT AGRMT 12/17/97 1 EXHIBIT 10.31 FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "First Amendment") is dated as of the 17th day of December, 1997 among POST APARTMENT HOMES, L.P. (the "Borrower"), WACHOVIA BANK, N.A., as Administrative Agent (the "Administrative Agent"), First Union National Bank, as Co-Agent, and WACHOVIA BANK, N.A., FIRST UNION NATIONAL BANK, SUNTRUST BANK, ATLANTA, CORESTATES BANK, COMMERZBANK AG, ATLANTA AGENCY, BANK ONE, TEXAS, N.A. and TEXAS COMMERCE BANK, N.A. (collectively, the "Banks"); W I T N E S S E T H: WHEREAS, the Borrower, the Administrative Agent, the Co-Agent and Wachovia Bank, N.A. (formerly Wachovia Bank of Georgia, N.A.), First Union National Bank (formerly First Union National Bank of Georgia), Suntrust Bank, Atlanta, Corestates Bank and Commerzbank AG, Atlanta Agency, executed and delivered that certain Amended and Restated Credit Agreement, dated as of April 9, 1997 (the "Credit Agreement"); WHEREAS, the Borrower has requested and the Administrative Agent, the Co-Agent and the Banks have agreed to certain amendments to the Credit Agreement, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Borrower, the Administrative Agent, the Co-Agent and the Banks hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. 2 2. Global Amendment. The term "Guarantor", wherever used in the Credit Agreement, hereby is deleted, and the term "Guarantors" hereby is substituted therefor. 3. Amendments to Section 1.01. (A) The following new definitions are hereby added in appropriate alphabetical order to Section 1.01 of the Credit Agreement: "Designated Bank" means a special purpose corporation sponsored by its Designating Bank that is identified as such on the signature pages hereto next to the caption "Designated Bank" as well as each special purpose corporation sponsored by its Designating Bank that (i) shall have become a party to this Agreement pursuant to Section 9.08(g), and (ii) is not otherwise a Bank. "Designated Bank Note" means a Money Market Loan Note, evidencing the obligation of the Borrower to repay Money Market Loans made by a Designated Bank, and "Designated Bank Notes" means any and all such Money Market Loan Notes to Designated Banks issued hereunder. "Designating Bank" shall mean each Bank that is identified as such on the signature pages hereto next to the caption "Designating Bank" and immediately above the signature of its Designated Bank as well as each Bank that shall designate a Designated Bank pursuant to Section 9.08(g). "Designation Agreement" means a designation agreement in substantially the form of Exhibit L, entered into by a Bank and a Designated Bank and acknowledged by the Borrower and the Administrative Agent. "First Amendment" means the First Amendment to Amended and Restated Credit Agreement dated as of December 17, 1997, among the Borrower, the Banks listed on the signature pages thereof, Wachovia Bank, N.A., as Administrative Agent and First Union National Bank, as Co- Agent. "GP Sub" means Post GP Holdings, Inc., a Georgia corporation which is a direct Subsidiary of PPI and the owner of a 1% general partner interest in the Borrower. 2 3 "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. "LP Sub" means Post LP Holdings, Inc., a Georgia corporation which is a direct Subsidiary of PPI and the owner (as of the date of the First Amendment) of approximately 84% of the limited partner interests in the Borrower. (B) The definitions of "Bank", "Commitment", "Guaranty", "Lending Office", "Money Market Loan Note" and Subsidiary Consolidated Total Assets" set forth in Section 1.01 are deleted in their entirety and the following new definitions thereof are substituted therefor: "Bank" means each bank listed on the signature pages of the First Amendment and the Designated Banks, if any; 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. "Commitment" means, with respect to each Bank, (i) the amount set forth opposite the name of such Bank on the signature pages of the First Amendment, 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 2.07 and 2.08. "Guarantor" means, individually and collectively, as the context shall require, GP Sub, LP Sub and PPI. "Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages of the First Amendment (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. 3 4 "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. "Subsidiary Consolidated Total Assets" means Consolidated Total Assets, but without including assets of the Borrower. 4. Amendment to Section 2.03. Section 2.03 of the Credit Agreement hereby is amended by adding a new paragraph (g) at the end thereof, as follows: (g) Money Market Loans by Designated Banks. For any Bank which is a Designating Bank, any Money Market Loan to be made by such Bank may from time to time be made by its Designated Bank in such Designated Bank's sole discretion, and nothing herein shall constitute a commitment to make Money Market Loans by such Designated Bank; provided that if any Designated Bank elects not to, or fails to, make any such Money Market Loan pursuant to a Money Market Quote that has been accepted by the Borrower in accordance with the foregoing, its Designating Bank hereby agrees that it shall make such Money Market Loan pursuant to the terms hereof on the date such Money Market Loan is otherwise required to be made to the Borrower hereunder. 5. Amendment to Section 5.07. Section 5.07 of the Credit agreement hereby is amended by deleting it in its entirety, and substituting the following therefor: SECTION 5.07. Loans or Advances. Neither the Borrower, the Guarantor nor any Subsidiary shall make loans or advances to any Person except: (i) deposits required by government agencies or public utilities; (ii) without duplication, loans and advances made to the Borrower, the Guarantor or any Subsidiary; provided, that loans and advances from the Borrower and the Guarantor to Subsidiaries, together with Investments in Subsidiaries permitted by clause (C) of Section 5.09, may not exceed an aggregate amount equal to 5% of Consolidated Total Assets at any time; (iii) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding 4 5 $2,500,000.00; and (iv) without duplication, other loans or advances made in the ordinary course of business in the aggregate outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clause (iii) of this Section 5.07 and minus Investments made and permitted pursuant to Section 5.09(D); provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii), (iii) or (iv), the Borrower will be in full compliance with all the provisions of this Agreement. 6. Amendment to Section 5.09. Section 5.09 of the Credit agreement hereby is amended by deleting it in its entirety, and substituting the following therefor: SECTION 5.09. Investments. Neither the Borrower nor the Guarantor shall make Investments in any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and/or (v) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (B) Investments permitted by clauses (i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) without duplication, Investments made after July 26, 1995 in Subsidiaries in an aggregate amount, together with the aggregate outstanding amount of loans and advances from the Borrower and the Guarantor to Subsidiaries permitted by clause (ii) of Section 5.07, not in excess of 5% of Consolidated Total Assets; and (D) without duplication, other Investments in an aggregate amount outstanding at any time not exceeding $20,000,000 minus all 5 6 amounts outstanding under clauses (iii) and (iv) of Section 5.07. 7. Amendment to Section 7.05. Section 7.05 of the Credit agreement hereby is amended by deleting the proviso at the end of the second to last sentence thereof, and substituting the following therefor: 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. 8. Amendment to Section 9.01. Section 9.01 of the Credit Agreement hereby is amended by deleting the word "hereof" in the fifth line thereof, and substituting therefor the words "of the First Amendment". 9. Amendment to Section 9.06. Section 9.06 of the Credit greement hereby is amended by adding thereto a new paragraph (c), as follows: (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 the Credit 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 Co-Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions. 10. Amendment to Section 9.08. Section 9.08 of the Credit agreement hereby is amended by adding thereto a new paragraph (g), as follows: 6 7 (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 the First Amendment 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 the First Amendment; provided, that any Bank and its Designated Bank executing the signatures pages of the First Amendment 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 Co-Agent and the Banks for each and every obligation of the Designating Bank and its related Designated Bank with respect to this 7 8 Agreement, including, without limitation, any indemnification obligations under Section 7.05 and any sums otherwise payable to the Borrower by the Designated Bank. Each Designating Bank shall serve as the administrative agent of its Designated Bank and shall on behalf of its Designated Bank: (i) receive any and all payments made for the benefit of such Designated Bank and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers, releases, consents and amendments under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver, consent or amendment shall be signed by a Designating Bank as administrative agent for its Designated Bank and need not be signed by such Designated Bank on its own behalf. The Borrower, the Administrative Agent, the Co-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). 11. Amendment to Section 9.09. Section 9.09 of the Credit agreement hereby is amended by (i) deleting the word "and" immediately before clause (viii) thereof and (ii) adding a new clause (ix) thereto, immediately after clause (viii) and before the first proviso, as follows: 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 Guarantor and their abilities to perform their obligations under this Agreement and the other Loan Documents. 8 9 12. New Section 9.18. A new Section 9.18 hereby is added to the Credit Agreement following Section 9.17 thereof, as follows: 9.18 No Bankruptcy Proceedings. Each of the Borrower, the Banks, the Administrative Agent and the Co-Agent agrees that it will not institute against any Designated Bank or join any other Person in instituting against any Designated Bank any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Bank. 13. Replacement of Form of Money Market Loan Note. Exhibit A-3 to the Credit Agreement hereby is deleted, and Exhibit A-3 hereto is substituted therefor. 14. Amendment to Exhibit F. Exhibit F to the Credit Agreement (the Compliance Certificate) hereby is amended by deleting paragraphs 5 and 7 thereof, and substituting therefor paragraphs 5 and 7 below: 5. Loans and Advances (Section 5.07) Neither the Borrower, the Guarantor nor any Subsidiary shall make loans or advances to any Person except: (i) deposits required by government agencies or public utilities; (ii) without duplication, loans and advances made to the Borrower, the Guarantor or any Subsidiary; provided, that loans and advances from the Borrower and the Guarantor to Subsidiaries, together with Investments in Subsidiaries permitted by clause (e) of Section 5.09, may not exceed an aggregate amount equal to 5% of Consolidated Total Assets at any time; (iii) loans or advances to directors, officers and employees in the ordinary course of business in the aggregate outstanding at any time not exceeding $2,500,000.00; and (iv) without duplication, other loans or advances made in the ordinary course of business in the aggregate outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clause (iii) of this Section 5.07 and minus Investments made and permitted pursuant to Section 5.09(D); provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii), 9 10 (iii) or (iv), the Borrower will be in full compliance with all the provisions of this Agreement. (a) To Subsidiaries $ ---------- (b) Sum of (a) and amount $ in paragraph 7(b) below ---------- (c) Consolidated Total Assets Schedule 2 $ ---------- (d) 5% of (c) $ ---------- Limitation (b) may not exceed (d) (e) To directors, officers and employees $ ---------- Limitation $2,500,000 (f) other $ ---------- Limitation $ (1) ----------
7. Investments (Section 5.09) Neither the Borrower nor the Guarantor shall make Investments in any Person except: (A) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either case maturing within 9 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by Standard & Poor's - -------------- (1)$20,000,000 less amount in (e) of this paragraph 5 and amount in line (f) of paragraph 7 below. 10 11 Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc. and/or (v) Investments in debt or equity securities rated at least BBB+ or the equivalent thereof by Standard & Poor's Corporation or at least Baa1 or the equivalent thereof by Moody's Investors Service not exceeding an aggregate amount outstanding at any time of $5,000,000; (B) Investments permitted by clauses (i), (ii) and (iii) of Section 5.07 or by Section 5.08; (C) without duplication, Investments made after July 26, 1995 in Subsidiaries in an aggregate amount, together with the aggregate outstanding amount of loans and advances from the Borrower and the Guarantor to Subsidiaries permitted by clause (ii) of Section 5.07, not in excess of 5% of Consolidated Total Assets; and (D) without duplication, other Investments in an aggregate amount outstanding at any time not exceeding $20,000,000 minus all amounts outstanding under clauses (iii) and (iv) of Section 5.07. (a) debt or equity securities rated $ at least BBB+ or Baa1 --------- Limitation $5,000,000 (b) Investments in Subsidiaries $ after July 26, 1995 --------- (c) Sum of (b) and amount $ in paragraph 5(a) above --------- (d) Consolidated Total Assets Schedule 2 $ --------- (e) 5% of (d) $ --------- Limitation (c) may not exceed (e) (f) Other $ --------- Limitation $ (2) ---------
- --------------- (2)$20,000,000 less amount in (e) of this paragraph 5 and amount in line (f) of paragraph 7 below. 11 12 15. Replacement of Form of Guaranty. Exhibit H to the Credit Agreement hereby is deleted, and Exhibit H hereto is substituted therefor. 16. New Exhibit L. Exhibit L (form of Designation Agreement) hereto hereby is added to the Credit Agreement as Exhibit L thereto. 17. Restatement of Representations and Warranties. The Borrower hereby restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof and with specific reference to this First Amendment and all other loan documents executed and/or delivered in connection herewith, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d) of the Credit Agreement. 18. Effect of Amendment. Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Borrower. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein. 19. Ratification. The Borrower hereby restates, ratifies and reaffirms each and every term, covenant and condition set forth in the Credit Agreement and the other Loan Documents effective as of the date hereof. 20. Counterparts. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 21. Section References. Section titles and references used in this First Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 22. No Default. To induce the Administrative Agent, the Co-Agent and the Banks to enter into this First Amendment and to continue to make advances pursuant to the Credit Agreement, the Borrower hereby acknowledges and agrees that, as of the date 12 13 hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim or objection in favor of the Borrower arising out of or with respect to any of the Loans or other obligations of the Borrower owed to the Banks under the Credit Agreement. 23. Further Assurances. The Borrower agrees to take such further actions as the Administrative Agent shall reasonably request in connection herewith to evidence the amendments herein contained to the Borrower. 24. Governing Law. This First Amendment shall be governed by and construed and interpreted in accordance with, the laws of the State of Georgia. 25. Conditions Precedent. This First Amendment shall become effective only upon execution and delivery to the Administrative Agent: (i) by each of the parties hereto, of this First Amendment; (ii) by the Borrower, of Syndicated Loan Notes payable to Bank One, Texas, N.A. and Texas Commerce Bank, N.A., respectively, each in the original principal amount of $10,000,000; (iii) by the Borrower, of new Money Market Loan Notes in substantially the form of Exhibit A-3 hereto in favor of the Banks (including a Designated Bank Note in favor of Four Winds Corporation, as the Designated Bank of Commerzbank AG, Atlanta Agency); (iv) by the Guarantors, of the Guaranty in substantially the form of Exhibit H; (v) of an opinion letter of King & Spalding, counsel for the Borrower and the Guarantors, dated as of the date hereof, substantially in the form delivered on the Closing Date of the Credit Agreement, but addressing the First Amendment Loan Documents and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Bank may reasonably request; (vi) of a certificate, dated as of the date hereof, signed by an Executive Officer (other than the Secretary) to the effect 13 14 that (a) no Default has occurred and is continuing on the date hereof and (b) the representations and warranties of the Borrower contained in Article IV are true on and as of the date hereof, except to the extent otherwise disclosed pursuant to Section 5.01(c) or (d) of the Credit Agreement; and (vii) of all other documents which the Administrative Agent or any Bank may reasonably request relating to the existence of the Borrower and the Guarantors, the corporate authority for and the validity of this First Amendment, the new Syndicated Loan Notes described in clause (ii) above, the new Money Market Loan Notes described in clause (iii) above and the Guaranty (collectively, the "First Amendment Loan Documents"), 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 each of the Guarantors, signed by the Secretary or an Assistant Secretary of the General Partner and such Guarantor, certifying as to the names, true signatures and incumbency of the officer or officers of the General Partner and such Guarantor authorized to execute and deliver the First Amendment Loan Documents on behalf of the Borrower or such Guarantor, and certified copies of the following items: (a) the Borrower's Certificate of Limited Partnership; (b) the Borrower's Partnership Agreement, (c) for the General Partner and each of the Guarantors, its Certificate of Incorporation, (d) for the General Partner and each of the Guarantor, its Bylaws, (e) for the Borrower, the General Partner and each of the Guarantors, a certificate of the Secretary of State of Georgia as to the valid existence of the Borrower, the General Partner or such Guarantor as a Georgia limited partnership or corporation, as the case may be, and (f) the action taken by the Board of Directors of the General Partner and each of the Guarantors authorizing the execution, delivery and performance of First Amendment Loan Documents to which it is a party. 14 15 IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Co-Agent and each of the Banks has caused this First Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. POST APARTMENT HOMES, L.P. (SEAL) By: Post GP Holdings, Inc., its sole general partner By: /s/ Timothy A. Peterson ---------------------------------------- Timothy A. Peterson Vice President Post Apartment Homes, L.P. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 404-951-1825 Confirmation number: 404-850-4400 COMMITMENTS WACHOVIA BANK, N.A., as Administrative Agent and as a Bank (SEAL) $60,000,000 By: /s/ ---------------------------------------- Title: Lending Office Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 Attention: Syndications Group Telecopier number: 404-332-4005 Confirmation number: 404-332-6971 15 16 FIRST UNION NATIONAL BANK, as Co-Agent and as a Bank (SEAL) $60,000,000 By: /s/ ---------------------------------------- Title: Lending Office First Union National Bank 999 Peachtree Street, N.E. Suite 610 Atlanta, GA 30309 Attention: Ms. Susan T. Miller Telecopier number: 404-225-4113 Confirmation number: 404-225-4030 SUNTRUST BANK, ATLANTA (SEAL) $30,000,000 By: /s/ ---------------------------------------- Title: Lending Office SunTrust Bank, Atlanta 25 Park Place, MC-081 Atlanta, GA 30303 Attention: Mr. W. John Neill Telecopier number: 404-827-6774 Confirmation number: 404-588-8248 16 17 CORESTATES BANK (SEAL) $20,000,000 By: /s/ ------------------------------------------------ Title: Lending Office CoreStates Bank Real Estate Department 1339 Chestnut Street Philadelphia, PA 19107-7618 Attention: Mr. Glen Gallager Telecopier number: 215-786-6381 Confirmation number: 215-786-4221 COMMERZBANK AG, ATLANTA AGENCY (SEAL) $10,000,000 By: /s/ ------------------------------------------------ Title: By: /s/ ------------------------------------------------ Title: Lending Office Commerzbank AG, Atlanta Agency 1230 Peachtree Street 35th Floor Atlanta, GA 30309 Attention: Mr. Mark Wortman Telecopier number: 404-888-6539 Confirmation number: 404-888-6500 Designating Bank with respect to Four Winds Funding Corporation FOUR WINDS FUNDING CORPORATION (SEAL) $0 By: Commerzbank AG, New York Branch, as Administrator and Attorney-in- Fact By: /s/ ------------------------------------------------ Title: By: /s/ ------------------------------------------------ Title: 17 18 Lending Office Four Winds Funding Corporation c/o Commerzbank AG, New York Branch 2 World Financial Center New York, New York 10281-1050 Attention: Mr. Howard Thompson Telecopier number: 212-266-7661 Confirmation number: 212-266-7474 Designated Bank of Commerzbank AG, Atlanta Agency BANK ONE, TEXAS, N.A. (SEAL) $10,000,000 By: /s/ ----------------------------------------------- Title: Lending Office Bank One, Texas, N.A. 1717 Main Street Dallas, Texas 75201 Attention: Mr. Dale Renner Telecopier number: 214-290-2275 Confirmation number: 214-290-2891 TEXAS COMMERCE BANK, N.A. (SEAL) $10,000,000 By: /s/ ----------------------------------------------- Title: Lending Office Texas Commerce Bank, N.A. 2200 Ross Avenue Dallas, Texas 75201 Attention: Mr. Joseph F. Griffith Telecopier number: 214-965-2290 Confirmation number: 214-965=2790 TOTAL COMMITMENTS $200,000,000 18 19 EXHIBIT A-3 MONEY MARKET LOAN NOTE As of December 17, 1997 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 MILLION AND NO/100 DOLLARS ($100,000,000), 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 Amended and Restated Credit Agreement dated as of April 9, 1997 among the Borrower, the Banks listed on the signature pages thereof, Wachovia Bank, N.A. (formerly Wachovia Bank of Georgia, 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. 19 20 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: ------------------------------------- Timothy A. Petersen Executive Vice President 20 21 Money Market Loan Note (cont'd)
MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount Amount of Stated Interest of Principal Maturity Notation Date Rate Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
21 22 EXHIBIT H GUARANTY THIS GUARANTY (this "Guaranty") is made December 17, 1997, by POST PROPERTIES, INC., POST GP HOLDINGS, INC. and POST LP HOLDINGS, INC., each a Georgia corporation (each individually a "Guarantor", and collectively, the "Guarantors") 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"), FIRST UNION NATIONAL BANK (formerly First Union National Bank of Georgia), as Co-Agent (the "Co-Agent") and WACHOVIA BANK, N.A. (formerly Wachovia Bank of Georgia, N.A.), as Administrative Agent (the "Administrative Agent"), and certain other Banks from time to time party thereto have entered into a certain Amended and Restated Credit Agreement dated as of April 9, 1997 (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 the First Amendment 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 Co-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; 22 23 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: 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 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 Administrative Agent'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: 23 24 (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, 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 Co-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 Co-Agent, 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. 24 25 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 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 Co-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 25 26 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 Co-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 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. 26 27 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: ------------------------------------- Timothy A. Petersen Executive Vice President Post Corporate Services Address: Post Properties, Inc. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 770-951-1825 Confirmation number: 770-850-4400 POST GP HOLDINGS, INC. (SEAL) By: ------------------------------------- Title: Address: Post GP Holdings, Inc. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 770-951-1825 Confirmation number: 770-850-4400 POST LP HOLDINGS, INC. (SEAL) By: ------------------------------------- Title: Address: Post LP Holdings, Inc. 3350 Cumberland Circle Suite 2200 Atlanta, Georgia 30339-3363 Attention: John T. Glover, President Telecopier number: 770-951-1825 Confirmation number: 770-850-4400 27 28 EXHIBIT L Form of Designation Agreement Dated __________________, _____ Reference is made to that certain Amended and Restated Credit Agreement dated as of April 9, 1997 (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. (formerly Wachovia Bank of Georgia, N.A.), as Administrative Agent (the "Administrative Agent") and First Union National Bank (formerly First Union National Bank of Georgia), as Co- 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 Co-Agent, the Designating Bank or any other Bank and based on such documents and 28 29 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 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 Co-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 9.18 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, 29 30 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 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 Co-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. 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 30 31 By: Title: [NAME OF DESIGNEE], as Designee By: Title: Lending Office (and address for notices): Acknowledged this _____ day Acknowledged this _____ day of ________________, ____ of ________________, ____ (the "Effective Date") WACHOVIA BANK, N.A. POST APARTMENT HOMES, L.P. as the Administrative Agent as the Borrower By: By: Post GP Holdings, Title: Inc., its sole general partner By: ------------------------- Timothy A. Petersen Executive Vice President 31 EX-21.1 17 LIST OF SUBSIDIARIES 1 Exhibit 21.1 SUBSIDIARIES OF POST PROPERTIES, INC.
Name Incorporation ---- ------------- 1. Post Apartment Homes, L.P. Georgia 2. Post Services, Inc. Georgia 3. Post LP Holdings, Inc. Georgia 4. Post GP Holdings, Inc. Georgia 5. A.T. Aviation, Inc. Georgia 6. Post Landscape Services, Inc. Georgia 7. RAM Partners, Inc. Georgia 8. Post Asset Management, Inc. Georgia 9. Rocky Point Management, Inc. Georgia 10. Cumberland Lake, Inc. Georgia 11. Briarcliff Commercial Property, LLC Georgia 12. Armada Homes, Inc. Delaware 13. Post Development Services Limited Partnership Georgia 14. Addison Circle Access, Inc. Delaware 15. Akard-McKinney Investment Company, LLC Texas 16. Post Uptown, LLC Texas 17. Greenwood Residential, LLC Texas 18 Columbus Management Services, LLC Texas 19. Uptown Denver, LLC Colorado 20. Addison Circle One, Ltd. Texas 21. Addison Circle Two, Ltd. Texas 22. Post Mississippi Properties, LLC Texas 23. Post Knox Park, LLC Texas 24. Post Rice Lofts, LLC Texas 25. Rice Lofts, L.P. Texas
EX-23.1 18 CONSENT OF PRICE WATERHOUSE S-8 (NO 333-38725) 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. 333-38725) of Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.2 19 CONSENT OF PRICE WATERHOUSE S-8 (NO 33-86674) 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. 33-86674) of Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.3 20 CONSENT OF PRICE WATERHOUSE S-3 (NO 33-81772) 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 Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.4 21 CONSENT OF PRICE WATERHOUSE S-3 (333-39461) 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-39461) of Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.5 22 CONSENT OF PRICE WATERHOUSE S-3 (333-3555) 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-36595) of Post Properties, Inc. and Post Apartment Homes, L.P. of our reports dated March 20, 1998 appearing on Pages 32 and 50 of this Form 10-K, respectively. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.6 23 CONSENT OF PRICE WATERHOUSE S-3 (333-47399) 1 EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-47399) of Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-23.7 24 CONSENT OF PRICE WATERHOUSE S-3 (88-00020) 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. 33-00020) of Post Properties, Inc. of our report dated March 20, 1998 appearing on Page 32 of this Form 10-K. Price Waterhouse LLP Atlanta, Georgia March 27, 1998 EX-27.1 25 FINANCIAL DATA SCHEDULE 12/31/97
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST PROPERTIES, INC. FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000903127 POST PROPERTIES, INC. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 12,421,000 0 0 0 0 0 1,936,011,000 201,095,000 1,780,563,000 0 821,209,000 0 30,000 306,000 756,584,000 1,780,563,000 0 200,116,000 0 101,750,000 0 0 24,658,000 64,308,000 0 50,040,000 0 75,000 0 49,965,000 2.11 2.09 REPRESENTS BASIC EARNINGS PER SHARE
EX-27.2 26 FINANCIAL DATA SCHEDULE 12/31/97
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001012271 POST APARTMENT HOMES, L.P. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 12,421,000 0 0 0 0 0 1,936,011,000 201,095,000 1,780,563,000 0 821,209,000 0 0 0 869,304,000 1,780,563,000 0 200,116,000 0 101,750,000 0 0 24,658,000 64,308,000 0 61,171,000 0 93,000 0 61,078,000 2.11 2.09 REPRESENTS BASIC EARNINGS PER SHARE
EX-27.3 27 FINANCIAL DATA SCHEDULE 12/31/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST PROPERTIES, INC. FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000903127 POST PROPERTIES, INC. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,381,000 0 0 0 0 0 1,109,342,000 177,672,000 958,675,000 0 434,319,000 10,000 0 219,000 398,764,000 958,675,000 0 170,708,000 0 85,983,000 0 0 22,131,000 52,599,000 0 432,406,000 0 0 0 42,406,000 1.95 1.94 REPRESENTS BASIC EARNINGS PER SHARE
EX-27.4 28 FINANCIAL DATA SCHEDULE 12/31/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001012271 POST APARTMENT HOMES, L.P. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,381,000 0 0 0 0 0 1,109,342,000 177,672,000 958,675,000 0 434,319,000 0 0 0 482,434,000 958,675,000 0 170,708,000 0 85,983,000 0 0 22,131,000 52,599,000 0 52,390,000 0 0 0 52,390,000 1.95 1.94 REPRESENTS BASIC EARNINGS PER SHARE
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