<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
POST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
GEORGIA 6513 58-1550675
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
3350 CUMBERLAND CIRCLE, SUITE 2200
ATLANTA, GEORGIA 30339
(770) 850-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
JOHN T. GLOVER
PRESIDENT AND CHIEF OPERATING OFFICER
POST PROPERTIES, INC.
3350 CUMBERLAND CIRCLE, SUITE 2200
ATLANTA, GEORGIA 30339
(770) 850-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<C> <C> <C>
JOHN J. KELLEY III MICHELLE P. GOOLSBY J. GREGORY MILMOE
KING & SPALDING WINSTEAD SECHREST & MINICK P.C. SKADDEN, ARPS, SLATE,
191 PEACHTREE STREET 5400 RENAISSANCE TOWER MEAGHER & FLOM LLP
ATLANTA, GEORGIA 30303 1201 ELM STREET 919 THIRD AVENUE
(404) 572-4600 DALLAS, TEXAS 75270-2199 NEW YORK, NEW YORK 10022
(214) 745-5400 (212) 735-3000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable following the effectiveness of this Registration Statement.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share... 8,500,000(2) $36.75 $312,375,000 $94,660
============================================================================================================================
</TABLE>
(1) Determined pursuant to Rule 457(f)(1) under the Securities Act of 1933, as
amended.
(2) This Registration Statement covers the maximum number of shares of common
stock of the registrant that are expected to be issued in connection with
the transactions described herein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE AS OF SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
[LETTERHEAD OF POST PROPERTIES, INC.]
October , 1997
Dear Shareholder:
You are cordially invited to attend an important Special Meeting of the
shareholders of Post Properties, Inc. ("Post") to be held on ,
November , 1997, at a.m., local time, at the offices of King & Spalding,
191 Peachtree Street, Atlanta, Georgia 30303.
At this meeting, you will be asked to consider and vote upon (i) a proposal
to approve and adopt the Agreement and Plan of Merger (the "Merger Agreement")
dated as of August 1, 1997 among Post, Columbus Realty Trust ("Columbus") and
Post LP Holdings, Inc., a wholly owned subsidiary of Post ("Merger Sub"), which
provides for the acquisition of Columbus by Post (the "Merger") and the issuance
of shares of common stock, par value $.01 per share, of Post (the "Post Common
Stock") in connection therewith (the "Stock Issuance") and (ii) a proposal to
amend Post's Employee Stock Plan in connection with the Merger (the "Employee
Stock Plan Amendment"). Pursuant to the Merger Agreement, Columbus would be
merged with and into Merger Sub. If the Merger is consummated, each outstanding
common share of beneficial interest, par value $.01 per share, of Columbus
("Columbus Common Shares"), will be converted into the right to receive 0.615
shares (the "Exchange Ratio") of Post Common Stock with cash being paid in lieu
of fractional shares of Post Common Stock. The accompanying Joint Proxy
Statement/Prospectus contains additional information regarding the proposed
acquisition of Columbus by Post.
The Merger Agreement has been approved and adopted by the Board of
Directors of Post and the Board of Trust Managers of Columbus. The Merger
Agreement, the Stock Issuance and the Employee Stock Plan Amendment are subject
to approval by the holders of Post Common Stock, and the Merger Agreement is
subject to approval by the holders of Columbus Common Shares. Approval of the
proposals being presented at the Special Meeting requires that a greater number
of votes be cast in favor of each matter than the number of votes cast opposing
such matter. Post's Board of Directors has received an opinion of its financial
advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to the effect that,
as of August 1, 1997, the Exchange Ratio is fair, from a financial point of
view, to Post.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS HAS DETERMINED THAT THE
PROPOSED MERGER IS IN THE BEST INTERESTS OF POST AND ITS SHAREHOLDERS, HAS
UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT, THE STOCK ISSUANCE AND
THE EMPLOYEE STOCK PLAN AMENDMENT AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT, THE STOCK ISSUANCE AND THE EMPLOYEE
STOCK PLAN AMENDMENT.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Joint Proxy Statement/Prospectus. Additional
information regarding Columbus and Post also is set forth in the Joint Proxy
Statement/Prospectus and incorporated therein by reference to other documents.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your proxy
card. Your prompt cooperation will be greatly appreciated.
Sincerely,
John A. Williams
Chairman of the Board and Chief
Executive Officer
<PAGE> 3
POST PROPERTIES, INC.
3350 CUMBERLAND CIRCLE
SUITE 2200
ATLANTA, GEORGIA 30339
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER , 1997
---------------------
Notice is hereby given that a Special Meeting of Shareholders of Post
Properties, Inc. ("Post") will be held on , November , 1997, at
a.m., local time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia, for the following purposes:
(1) 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 Post,
Columbus Realty Trust ("Columbus") and Post LP Holdings, Inc., a wholly
owned subsidiary of Post ("Merger Sub"), pursuant to which Columbus will be
merged with and into Merger Sub (the "Merger") and (b) approve the issuance
of shares of common stock, par value $.01 per share, of Post ("Post Common
Stock") pursuant to the Merger.
(2) To consider and act upon a proposal to amend Post's Employee Stock
Plan to increase the number of shares of Post Common Stock reserved for
issuance thereunder from 1,200,000 to shares.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 12,
1997 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Special Meeting and any adjournment
thereof. A list of shareholders entitled to vote at the Special Meeting will be
available at the Special Meeting for examination by any shareholder, his agent
or his attorney.
Your attention is directed to the Joint Proxy Statement/Prospectus
submitted with this Notice.
By order of the Board of Directors
Sherry W. Cohen
Senior Vice President and Secretary
Atlanta, Georgia
October , 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
[LETTERHEAD OF COLUMBUS REALTY TRUST]
October , 1997
Dear Shareholder:
You are cordially invited to attend an important Special Meeting of the
shareholders of Columbus Realty Trust ("Columbus") to be held on ,
November , 1997, at a.m., local time, at .
At this meeting, you will be asked to consider and vote upon a proposal to
approve the Agreement and Plan of Merger (the "Merger Agreement") dated as of
August 1, 1997 by and among Columbus, Post Properties, Inc. ("Post"), and Post
LP Holdings, Inc., a wholly owned subsidiary of Post ("Merger Sub"), which
provides for the acquisition of Columbus by Post. Pursuant to the Merger
Agreement, Columbus would be merged with and into Merger Sub (the "Merger"). If
the Merger is consummated, each outstanding common share of beneficial interest,
par value $.01 per share, of Columbus ("Columbus Common Shares"), will be
converted into the right to receive 0.615 shares (the "Exchange Ratio") of
common stock, par value $.01 per share, of Post (the "Post Common Stock"), with
cash being paid in lieu of fractional shares of Post Common Stock (the "Merger
Consideration"). The accompanying Joint Proxy Statement/Prospectus contains
additional information regarding the proposed acquisition of Columbus by Post.
The Merger Agreement has been unanimously approved and adopted by the Board
of Trust Managers of Columbus and the Board of Directors of Post, and the Merger
Agreement and the Merger are subject to approval by the holders of two-thirds of
the outstanding shares of Columbus Common Shares. Columbus' Board of Trust
Managers has received an opinion of its financial advisor, Prudential Securities
Incorporated, to the effect that, as of August 1, 1997, and based upon and
subject to certain assumptions, limitations and other matters stated therein,
the Merger Consideration is fair, from a financial point of view, to the
shareholders of Columbus.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUST MANAGERS HAS DETERMINED
THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF COLUMBUS AND ITS
SHAREHOLDERS, HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Joint Proxy Statement/Prospectus. Additional
information regarding Columbus and Post is also set forth in the Joint Proxy
Statement/Prospectus and incorporated therein by reference to other documents.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your proxy
card. Your prompt cooperation will be greatly appreciated.
Sincerely,
Robert L. Shaw
Chief Executive Officer
<PAGE> 5
COLUMBUS REALTY TRUST
15851 DALLAS PARKWAY
SUITE 855
DALLAS, TEXAS 75248
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER , 1997
---------------------
Notice is hereby given that a Special Meeting of Shareholders of Columbus
Realty Trust ("Columbus") will be held on , November , 1997, at
a.m., local time, at , for the following purposes:
(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger dated as of August 1, 1997 among Columbus, Post Properties,
Inc. ("Post") and Post LP Holdings, Inc., a wholly owned subsidiary of Post
("Merger Sub"), pursuant to which (i) Columbus will be merged with and into
Merger Sub (the "Merger") and (ii) each outstanding common share of
beneficial interest, par value $.01 per share, of Columbus will be
converted into the right to receive 0.615 shares of common stock, par value
$.01 per share, of Post, with cash being paid in lieu of fractional shares.
The terms of the Merger are described in the accompanying Joint Proxy
Statement/Prospectus.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Trust Managers has fixed the close of business on September
23, 1997 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Special Meeting and at any adjournment
thereof.
Your attention is directed to the Joint Proxy Statement/Prospectus
submitted with this Notice.
By order of the Board of Trust
Managers
Richard R. Reupke
Chief Financial Officer and Secretary
Dallas, Texas
October , 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 6
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1997
---------------------
JOINT PROXY STATEMENT
POST PROPERTIES, INC. COLUMBUS REALTY TRUST
SPECIAL MEETING TO BE HELD SPECIAL MEETING TO BE HELD
ON NOVEMBER , 1997 ON NOVEMBER , 1997
PROSPECTUS
POST PROPERTIES, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
---------------------
This Joint Proxy Statement/Prospectus is being furnished to shareholders
(the "Post Shareholders") of Post Properties, Inc., a Georgia corporation
(together with its subsidiaries, "Post"), and shareholders (the "Columbus
Shareholders") of Columbus Realty Trust, a Texas real estate investment trust
(together with its subsidiaries, "Columbus"), in connection with the
solicitation of proxies by the Board of Directors of Post (the "Post Board") for
use at the Special Meeting of Post Shareholders (including any adjournments or
postponements thereof) (the "Post Special Meeting") and by the Board of Trust
Managers of Columbus (the "Columbus Board") for use at the Special Meeting of
Columbus Shareholders (including any adjournments or postponements thereof) (the
"Columbus Special Meeting" and, together with the Post Special Meeting, the
"Special Meetings"), each to be held on , November , 1997 at the
time and place set forth in the accompanying notices.
The purpose of the Special Meetings is to consider and vote upon an
Agreement and Plan of Merger, dated as of August 1, 1997 (the "Merger
Agreement"), among Post, Post LP Holdings, Inc. ("Merger Sub"), a Georgia
corporation and a wholly owned subsidiary of Post, and Columbus. The Merger
Agreement is attached to this Joint Proxy Statement/ Prospectus as Annex A and
is incorporated herein by this reference.
The Merger Agreement provides that Columbus will merge with and into Merger
Sub (the "Merger," which term includes, where the context so indicates, the
other transactions contemplated by the Merger Agreement). Upon consummation of
the Merger, each common share of beneficial interest, $.01 par value per share,
of Columbus (the "Columbus Common Shares") will be converted into the right to
receive 0.615 shares (the "Exchange Ratio") of common stock, $.01 par value per
share, of Post (the "Post Common Stock"), with cash in lieu of fractional shares
of Post Common Stock (the "Merger Consideration"). The Exchange Ratio is fixed
and will not increase or decrease by reason of fluctuations in the market price
of Post Common Stock or Columbus Common Shares.
Based on the closing price of Post Common Stock on the New York Stock
Exchange (the "NYSE") of $ per share on , 1997, if the
Merger Agreement is approved and the Merger is consummated, the total market
value of Post would be approximately $ . Based on the number of shares
of Post and Columbus outstanding on that date, approximately % of the
shares of Post expected to be outstanding after the Merger would be issued to
Columbus Shareholders. Based on the Exchange Ratio and the closing price of Post
Common Stock on the NYSE on , 1997, each Columbus Shareholder will
receive in the Merger Post Common Stock worth $ for each Columbus
Common Share owned on that date. For a description of the Merger Agreement, see
"The Merger."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of Post
relating to the issuance of shares of Post Common Stock to Columbus Shareholders
pursuant to the terms of the Merger Agreement. Post has filed a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") covering the shares of Post Common Stock to be
issued in connection with the Merger.
This Joint Proxy Statement/Prospectus and the accompanying proxy cards are
first being mailed to shareholders of Post and Columbus on or about October ,
1997.
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, SEE
"RISK FACTORS" BEGINNING ON PAGE 19.
THE SHARES OF POST COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Joint Proxy Statement/Prospectus is October , 1997.
<PAGE> 7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Joint Proxy Statement/Prospectus are
forward looking statements within the meaning of the federal securities laws.
Although Post and Columbus believe that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, they can give
no assurance that their expectations will be achieved. Factors that could cause
actual results to differ materially from Post's and Columbus' current
expectations include, but are not limited to, general economic conditions, local
real estate conditions, the timely development and lease-up of communities and
the other risks detailed herein under the heading "Risk Factors" and included
from time to time in Post's and Columbus' reports filed with the Commission,
including the reports on Form 10-K and, in the case of Columbus, Form 10-K/A for
the year ended December 31, 1996.
AVAILABLE INFORMATION
Both Post and Columbus are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information filed with the Commission by Post and Columbus can be
inspected and copied at the office of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its Regional Offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Copies of documents
electronically filed with the Commission also may be obtained at the
Commission's Internet address at "http://www.sec.gov". Shares of Post and
Columbus are listed on the NYSE, and copies of documents filed with the
Commission can be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM, IN THE CASE OF POST, SHERRY W. COHEN,
SECRETARY, POST PROPERTIES, INC., 3350 CUMBERLAND CIRCLE, SUITE 2200, ATLANTA,
GEORGIA 30339; TELEPHONE NUMBER (770) 850-4400 AND, IN THE CASE OF COLUMBUS, J.
MICHAEL LEWIS, COLUMBUS REALTY TRUST, 15851 DALLAS PARKWAY, SUITE 855, DALLAS,
TEXAS 75248; TELEPHONE NUMBER (972) 387-1492. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE
BY OCTOBER 15, 1997.
Post has filed with the Commission the Registration Statement under the
Securities Act. This Joint Proxy Statement/Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information relating to Post and the shares of Post Common Stock offered
hereby, reference is hereby made to the Registration Statement, including the
exhibits and schedules thereto, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates.
Statements contained in this Joint Proxy Statement/Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
All information contained in this Joint Proxy Statement/Prospectus with
respect to Post, Post Apartment Homes, L.P. (the "Operating Partnership") and
Post's subsidiaries has been supplied by Post, and all information with respect
to Columbus and its subsidiaries has been supplied by Columbus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER OF
POST COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY POST, COLUMBUS OR ANY OTHER PERSON. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO PURCHASE POST COMMON STOCK IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SUCH POST COMMON STOCK SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
(ii)
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Special Note Regarding Forward-Looking Statements........... ii
Available Information....................................... ii
Incorporation of Certain Documents by Reference............. v
Summary..................................................... 1
Parties to the Merger Agreement........................... 1
The Special Meetings...................................... 1
Record Date; Votes Required............................... 2
Recommendations........................................... 3
Exchange Ratio............................................ 4
Structure of the Merger................................... 4
Opinions of Financial Advisors............................ 4
Exchange for Post Common Stock............................ 5
Terms of Merger Agreement................................. 5
Interests of Certain Persons in the Merger................ 7
Anticipated Accounting Treatment.......................... 8
Resales of Post Common Stock.............................. 8
Regulatory Approval....................................... 8
Federal Income Tax Consequences........................... 8
Dissenters' Rights........................................ 9
Differences in the Rights of Security Holders............. 9
Amendment of Employee Stock Plan.......................... 9
Markets and Market Prices................................. 10
Comparative Per Share Information......................... 11
Summary Historical and Pro Forma Financial Data........... 12
Risk Factors................................................ 19
Stock Price Fluctuations.................................. 19
Status of Merger as Tax-Free Reorganization............... 19
Benefits to Certain Directors and Officers of Columbus;
Possible Conflicts of Interest......................... 19
Loss of Rights by Columbus Shareholders................... 20
Termination Payments if Merger Fails to Occur............. 20
Real Estate Investment Risks.............................. 20
No Limitation on Amount of Debt that May be Incurred and
Possible Inability to Repay Debt....................... 21
Adverse Consequences of Failure to Qualify as a REIT...... 21
The Special Meetings........................................ 22
The Merger.................................................. 24
Background of and Reasons for the Merger.................. 24
Opinions of Financial Advisors............................ 32
Exchange Ratio and Exchange for Post Common Stock......... 42
Structure of the Merger................................... 43
Terms of the Merger Agreement............................. 43
Interest of Certain Persons in the Merger................. 51
Anticipated Accounting Treatment.......................... 52
Resale of Post Common Stock............................... 53
Dissenters' Rights........................................ 53
Regulatory Approval....................................... 53
Post Properties, Inc. Unaudited Pro Forma Combined Balance
Sheet..................................................... 54
Post Properties, Inc. Unaudited Pro Forma Combined
Statements of Operations.................................. 56
Notes to Unaudited Pro Forma Balance Sheet and Statements of
Operations................................................ 59
Comparative Rights of Shareholders.......................... 62
</TABLE>
(iii)
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Certain Federal Income Tax Consequences..................... 70
Policies of Post with Respect to Certain Activities......... 82
Policies of Columbus with Respect to Certain Activities..... 85
Amendment of Employee Stock Plan............................ 86
Experts..................................................... 87
Legal Opinions.............................................. 87
Shareholder Proposals....................................... 87
Other Matters............................................... 87
Annex A: Merger Agreement.................................. A-1
Annex B: Fairness Opinion of Merrill Lynch, Pierce, Fenner
& Smith, Incorporated..................................... B-1
Annex C: Fairness Opinion of Prudential Securities
Incorporated.............................................. C-1
</TABLE>
(iv)
<PAGE> 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Post are
incorporated by reference into this Joint Proxy Statement/Prospectus:
(i) Post's Annual Report on Form 10-K for the year ended December 31,
1996 (the "Post 1996 Annual Report");
(ii) The portions of the Post Proxy Statement for the Annual Meeting
of Shareholders held May 22, 1997 that have been incorporated by reference
into the Post 1996 Annual Report;
(iii) Post's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(iv) Post's Current Reports on Form 8-K filed on February 27, 1997 and
August 5, 1997; and
(v) The description of the Post Common Stock included in Post's
Registration Statement on Form 8-A, dated July 22, 1993.
The following documents previously filed with the Commission by Columbus
are incorporated by reference into this Joint Proxy Statement/Prospectus:
(i) Columbus' Annual Report on Form 10-K for the year ended December
31, 1996, as amended by Columbus' Form 10-K/A (the "Columbus 1996 Annual
Report");
(ii) The portions of the Columbus Proxy Statement for the Annual
Meeting of Shareholders held May 23, 1997 that have been incorporated by
reference into the Columbus 1996 Annual Report;
(iii) Columbus' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(iv) Columbus' Current Reports on Form 8-K filed on June 5, 1997 and
August 5, 1997; and
(v) The description of the Columbus Common Shares included in
Columbus' Registration Statement on Form 8-A, dated December 16, 1993.
All documents filed by Post or Columbus pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the Special Meetings shall be deemed to be
incorporated by reference into this Joint Proxy Statement/Prospectus and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained in this Joint
Proxy Statement/Prospectus, or in any other subsequently filed document which is
also incorporated herein by reference, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed to constitute a
part of this Joint Proxy Statement/Prospectus except as so modified or
superseded.
(v)
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SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding Post and Columbus and the matters considered at the
Special Meetings and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Joint Proxy Statement/Prospectus,
the annexes hereto and the documents referred to herein.
THE MERGER
PARTIES TO THE MERGER AGREEMENT
Post. Post is a self-administered and self-managed equity real estate
investment trust (a "REIT") and one of the largest developers and operators of
upscale multifamily apartment communities in the Southeastern United States. As
of June 30, 1997, Post owned 49 stabilized communities (the "Post Communities")
containing 17,648 apartment units located primarily in metropolitan Atlanta,
Georgia and Tampa, Florida. In addition, as of June 30, 1997, Post had under
construction or in initial lease-up ten new communities and additions to two
existing communities in the Atlanta, Georgia; Tampa, Florida; Nashville,
Tennessee and Charlotte, North Carolina metropolitan areas that will contain an
aggregate of 4,025 apartment units when completed. For the six months ended June
30, 1997, the average economic occupancy rate of the 48 Post Communities
stabilized for the entire period was 94.3%. The average monthly rental rate per
apartment unit at these Post Communities for the same period was $800. Post also
manages through affiliates one community with 260 apartment units under the
Post(R) brand name for a third party and approximately 7,800 additional
apartment units owned by third parties. Post is a fully-integrated organization
with multifamily development, acquisition, operation and asset management
expertise and has approximately 1,200 employees.
Post conducts all of its operations through Post Apartment Homes, L.P. (the
"Operating Partnership") and its subsidiaries. Post is the sole general partner
of, and controls a majority of the limited partnership interests in, the
Operating Partnership. As of June 30, 1997, Post owned 80.9% of the outstanding
partnership interests in the Operating Partnership.
Post is a Georgia corporation that was founded in 1971. The Operating
Partnership is a Georgia limited partnership that was formed in 1993. Post's and
the Operating Partnership's executive offices are located at 3350 Cumberland
Circle, Suite 2200, Atlanta, Georgia 30339, and their telephone number is (770)
850-4400.
Columbus. Columbus is a self-administered and self-managed REIT which
develops, owns and operates upscale multifamily residential properties primarily
in urban communities in the Southwestern United States. As of June 30, 1997,
Columbus owned 39 total properties: 28 completed multifamily residential
properties containing an aggregate of 6,045 apartment units located primarily in
the Dallas/Fort Worth metropolitan area, two industrial properties, one retail
property, six multifamily development sites in various stages of construction
and two sites acquired for future development. The average economic occupancy
for the stabilized residential properties during the six months ended June 30,
1997 was 96.0%, with an average collected rent per unit of $761 per month.
Columbus was formed on October 12, 1993, pursuant to the Texas Real Estate
Investment Trust Act (the "TRA"). Columbus' executive offices are located at
15851 Dallas Parkway, Suite 855, Dallas, Texas 75248, and its telephone number
is (972) 387-1492.
THE SPECIAL MEETINGS
Post. The Post Special Meeting will be held on , November ,
1997 at a.m. local time, at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303. At the Post Special Meeting, holders of Post
Common Stock will be asked to consider and vote upon a proposal to (i) approve
and adopt the Merger Agreement, (ii) approve the issuance of Post Common Stock
in connection with the Merger (the "Stock Issuance") and (iii) approve a
proposal to amend Post's Employee Stock Plan in connection with the Merger ( the
"Employee Stock Plan Amendment"). See "The Special Meetings -- Post Special
Meeting."
<PAGE> 12
Columbus. The Columbus Special Meeting will be held on ,
November , 1997 at a.m. local time, at the offices of
. At the Columbus Special Meeting, holders of Columbus Common
Shares will be asked to consider and vote upon a proposal to approve the Merger
Agreement. See "The Special Meetings -- Columbus Special Meeting."
RECORD DATE; VOTES REQUIRED
Post. Only holders of record of shares of Post Common Stock at the close
of business on September 12, 1997 (the "Post Record Date") are entitled to
notice of and to vote at the Post Special Meeting. As of such date, there were
shares of Post Common Stock issued and outstanding held by
approximately holders of record. Holders of record of Post Common
Stock on the Post Record Date are entitled to one vote per share on any matter
that may properly come before the Post Special Meeting.
The presence in person or by proxy of the holders of a majority of the
shares of Post Common Stock outstanding on the Post Record Date will constitute
a quorum for the transaction of business at the Post Special Meeting or any
adjournment thereof. The approval of the matters being presented to the Post
Shareholders at the Post Special Meeting require a greater number of votes cast
in favor of the matter than the number of votes cast opposing such matter.
Shares of Post Common Stock held by nominees for beneficial owners will be
counted for purposes of determining whether a quorum is present if the nominee
has the discretion to vote on at least one of the matters presented even if the
nominee may not exercise discretionary voting power with respect to other
matters and voting instructions have not been received from the beneficial owner
(a "broker non-vote"). Broker non-votes will not be counted as votes for or
against matters presented for shareholder consideration. Abstentions with
respect to a proposal are counted for purposes of establishing a quorum. If a
quorum is present, abstentions have no effect on the outcome of any vote.
As of the Post Record Date, the executive officers and directors of Post
beneficially owned an aggregate of shares of Post Common Stock
(including units of limited partnership of the Operating Partnership and
not including shares of Post Common Stock that may be acquired upon
exercise of stock options ("Post Employee Options") held by such persons), or
approximately % of the shares of Post Common Stock then outstanding. See
"The Special Meetings -- Post Special Meeting."
Columbus. Only holders of record of Columbus Common Shares at the close of
business on September 23, 1997 (the "Columbus Record Date") are entitled to
notice of and to vote at the Columbus Special Meeting. As of such date, there
were Columbus Common Shares issued and outstanding held by
approximately holders of record. Holders of record of Columbus Common
Shares on the Columbus Record Date are entitled to one vote per share on any
matter that may properly come before the Columbus Special Meeting.
The presence in person or by proxy of the holders of a majority of the
Columbus Common Shares outstanding as of the Columbus Record Date is necessary
to constitute a quorum at the Columbus Special Meeting or any adjournment
thereof. The affirmative vote of the holders of two-thirds of the shares of
Columbus Common Shares outstanding and entitled to vote as of the Columbus
Record Date is necessary to approve the Merger Agreement. Pursuant to the
Amended and Restated Bylaws of Columbus, as amended (the "Columbus Bylaws"),
abstentions and broker non-votes will be included in the determination of the
number of Columbus Common Shares present at the Columbus Special Meeting for
quorum purposes. Also pursuant to the Columbus Bylaws, abstentions and broker
non-votes will not be deemed to be entitled to vote and therefore will not be
counted in the tabulations of votes cast on proposals presented to the Columbus
Shareholders.
As of the Columbus Record Date, the executive officers and trust managers
of Columbus beneficially owned an aggregate of shares of Columbus
Common Shares (not including shares of Columbus Common Shares that may be
acquired upon exercise of Columbus Employee Options (as hereinafter defined)
held by such persons), or approximately % of the shares of Columbus Common
Shares then outstanding. See "The Special Meetings -- Columbus Special Meeting."
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<PAGE> 13
RECOMMENDATIONS
The Post Board, the Columbus Board and the Board of Directors of Merger Sub
have approved and adopted the Merger Agreement, and each Board recommends a vote
FOR approval of the Merger Agreement. See "The Special Meetings" and "The
Merger."
In determining to recommend the Merger, the Post Board considered the
following expected benefits from the Merger: (i) entry into new Southwestern
growth markets; (ii) access to Columbus' development experience in other markets
and increased development opportunities; (iii) favorable positioning for future
portfolio acquisitions; (iv) increased geographic diversification of Post's
portfolio; (v) elimination of redundant activities in the combined organization
and the resulting savings in costs and expenses; (vi) the potential for
accretion to Post's funds from operations per share ("FFO"); (vii) increased
size and increased liquidity in Post Common Stock and related improvement in
access to equity and debt capital and (viii) the opinion of Post's financial
advisor that the Exchange Ratio (as hereinafter defined) is fair to Post from a
financial point of view. FFO is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") to mean net income (computed in accordance
with generally accepted accounting principles) ("GAAP"), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation of real
estate assets, and after adjustments for unconsolidated partnerships and joint
ventures. FFO does not represent cash flows from operating activities as defined
by GAAP and should not be considered as an alternative to net income as an
indication of Post's operating performance. See "The Merger -- Background of and
Reasons for the Merger -- Post's Reasons for the Merger."
The Post Board also considered the following potential adverse consequences
of the Merger: (i) expansion into a new region and new markets with which Post
has little prior experience; (ii) the potential current imbalance between supply
of and demand for apartments in certain of these new markets; (iii) the
potential difficulties of integrating Columbus' operations into Post; (iv) the
higher risk associated with increased development activities; (v) increased debt
to market capitalization and encumbrances of assets; (vi) the significant costs
involved in connection with consummating the Merger; (vii) the substantial time
and effort of Post management required to effectuate the Merger, integrate the
business of Columbus into Post and manage the increased and more diverse
property portfolio and (viii) the risk that the anticipated benefits of the
Merger might not be fully realized. The Post Board believes that the benefits
and advantages of the Merger far outweigh the negative factors and risks.
If the Merger is not consummated for any reason, Post will continue to
execute its strategic objective of being a leading apartment owner and developer
in major Sunbelt markets. To the extent such opportunities are available, it
would likely consider other potential combinations with public or private
apartment owners that the Post Board and management believe add value and
enhance the future earnings of Post and otherwise are in the best interests of
the Post Shareholders.
In determining to recommend the Merger, the Columbus Board considered the
following factors which were material to its decision to approve the Merger: (i)
Post's lower cost of capital and the increased access of the combined companies
to the debt and equity capital markets; (ii) the long-term prospects for growth
of the combined companies and increase in shareholder value; (iii) savings in
general and administrative costs as certain redundant functions are eliminated;
(iv) the economic and other terms of the Merger including the stock-for-stock,
tax-free nature of the transaction; (v) immediate geographic diversification;
(vi) long-term development opportunities based upon the combined expertise of
the companies and (vii) the opinion of Columbus' financial advisor that the
Merger Consideration is fair to the Columbus Shareholders from a financial point
of view. See "The Merger -- Background of and Reasons for the
Merger -- Columbus' Reasons for the Merger."
The Columbus Board also considered the following potentially adverse
consequences of the Merger: (i) the fact that, because the Exchange Ratio is
fixed, a decline in the value of Post Common Stock would reduce the value of the
consideration to be received by the Columbus Shareholders in the Merger; (ii)
the current level of supply and demand for multifamily properties in Atlanta,
Post's primary market; (iii) the significant costs involved in connection with
the consummation of the Merger; (iv) the risk that the anticipated benefits of
the Merger may not be realized and (v) the terms of the Merger Agreement
prohibiting
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<PAGE> 14
Columbus from soliciting another transaction which could be more attractive to
the Columbus Shareholders. The Columbus Board believes that the benefits and
advantages of the Merger far outweigh the negative factors and risks.
If the Merger is not consummated for any reason, Columbus intends to
continue to expand its development program within its existing markets as well
as new markets. To the extent opportunities are available in the future for
strategic alliances or mergers, Columbus would likely consider such
opportunities to the extent consistent with its goals of maximizing long-term
value to the Columbus Shareholders.
EXCHANGE RATIO
At the Effective Time of the Merger, each outstanding share of Columbus
Common Shares will be converted into the right to receive 0.615 shares of Post
Common Stock (the "Exchange Ratio"), with cash in lieu of fractional shares of
Post Common Stock. See "The Merger -- Exchange Ratio and Exchange for Post
Common Stock."
Based on the closing price of Post Common Stock on the NYSE of $ per
share on , 1997, if the Merger Agreement is approved and the Merger
is consummated, the total market value of Post would be approximately $ .
Based on the number of shares of Post and Columbus outstanding on that date,
approximately % of the shares of Post expected to be outstanding after the
Merger would be issued to Columbus Shareholders. Based on the Exchange Ratio and
the closing price of Post Common Stock on the NYSE on , 1997, each
Columbus Shareholder will receive in the Merger Post Common Stock worth
$ for each Columbus Common Share owned on that date. For a description
of the Merger Agreement, see "The Merger."
STRUCTURE OF THE MERGER
The Merger Agreement provides for a merger of Columbus with and into Merger
Sub, a wholly owned subsidiary of Post. At the Effective Time of the Merger (as
hereinafter defined), each outstanding share of Columbus Common Shares will be
converted into the right to receive 0.615 shares of Post Common Stock, with cash
being paid in lieu of fractional shares of Post Common Stock. See "The
Merger -- Exchange Ratio and Exchange for Post Common Stock."
Prior to the closing date of the Merger (the "Closing Date"), Post will
contribute its existing limited partnership interests in the Operating
Partnership to Merger Sub, a newly organized, wholly owned corporate qualified
REIT subsidiary of Post. Post will contribute its 1% general partner interest to
Post GP Holdings, Inc. ("GP Sub"), a newly organized wholly owned corporate
qualified REIT subsidiary. Pursuant to the Merger Agreement, Columbus will be
merged with and into Merger Sub at the Effective Time and Merger Sub will be the
surviving corporation in the Merger.
Following the Merger, Merger Sub intends to contribute all of the assets
and liabilities acquired from Columbus to the Operating Partnership in exchange
for limited partnership interests. In addition, Merger Sub will convert the
wholly owned qualified REIT subsidiaries of Columbus into single member limited
liability companies with 100% of the beneficial interests held by the Operating
Partnership.
OPINIONS OF FINANCIAL ADVISORS
Post. Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), financial advisor to Post, has rendered an opinion to the Post Board
that the Exchange Ratio is fair to Post from a financial point of view. A copy
of the fairness opinion, dated as of August 1, 1997, setting forth the
information reviewed, assumptions made and matters considered, is attached
hereto as Annex B. The fairness opinion of Merrill Lynch should be read in its
entirety.
Merrill Lynch is an internationally recognized investment banking firm and
continually is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings and secondary distributions of listed and unlisted securities, and
valuations for estate, corporate and other purposes. Post selected Merrill Lynch
as its financial advisor because of Merrill
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<PAGE> 15
Lynch's reputation and substantial experience in transactions such as the Merger
and Merrill Lynch's familiarity with Post and its business.
Post has agreed to pay Merrill Lynch certain fees to reimburse Merrill
Lynch for certain of its reasonable out-of-pocket expenses and to indemnify
Merrill Lynch against certain liabilities, including liabilities under the
federal securities laws.
For additional information concerning Merrill Lynch and its opinion, see
"The Merger -- Opinions of Financial Advisors -- Post" and Merrill Lynch's
opinion, dated as of August 1, 1997, attached hereto as Annex B.
Columbus. Prudential Securities Incorporated ("Prudential Securities"),
financial advisor to Columbus, rendered an opinion dated August 1, 1997 to the
Columbus Board to the effect that as of such date, the Merger Consideration is
fair to the Columbus Shareholders from a financial point of view. A copy of the
fairness opinion, setting forth the information reviewed, assumptions made and
matters considered, is attached hereto as Annex C. The fairness opinion of
Prudential Securities should be read in its entirety.
Prudential Securities is an internationally recognized investment banking
firm engaged in the valuation of businesses and their securities in connection
with mergers, acquisitions and other purposes, and has substantial experience in
transactions similar to the Merger. Columbus selected Prudential Securities as
its financial advisor because of Prudential Securities' reputation and
substantial experience in transactions such as the Merger and Prudential
Securities' familiarity with Columbus and its business.
Columbus has agreed to pay Prudential Securities certain fees, to reimburse
Prudential Securities for certain of its reasonable out-of-pocket expenses and
to indemnify Prudential Securities against certain liabilities, including
liabilities under the federal securities laws. For additional information
concerning Prudential Securities and its opinion, see "The Merger -- Opinions of
Financial Advisors -- Columbus" and Prudential Securities' opinion, dated as of
August 1, 1997, attached hereto as Annex C.
EXCHANGE FOR POST COMMON STOCK
As soon as reasonably practicable after the Effective Time, instructions
and a letter of transmittal will be furnished to all Columbus Shareholders for
use in exchanging the certificates evidencing the Columbus Common Shares held by
them for certificates evidencing the shares of Post Common Stock they will be
entitled to receive as a result of the Merger. COLUMBUS SHAREHOLDERS SHOULD NOT
SUBMIT THEIR SHARE CERTIFICATES FOR EXCHANGE UNTIL INSTRUCTIONS AND A LETTER OF
TRANSMITTAL ARE RECEIVED.
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that Columbus will be merged with
and into Merger Sub at the Effective Time. Merger Sub, a wholly owned subsidiary
of Post, will be the surviving company in the Merger. As a result of the Merger,
the separate existence of Columbus will cease. See "The Merger -- Terms of the
Merger Agreement -- General."
Conversion of Shares. Upon the Effective Time, each Columbus Common Share
issued and outstanding will be converted into the right to receive from Post
0.615 of a fully paid and nonassessable share of Post Common Stock. Cash will be
paid in lieu of fractional shares of Post Common Stock in an amount equal to the
fractional proportion of the arithmetic mean of the closing sales prices of a
share of Post Common Stock on the NYSE over the ten trading days immediately
preceding the Closing Date.
Effective Time of the Merger. The Merger will become effective upon the
filing of the articles of merger or other appropriate documents relating thereto
(the "Articles of Merger") with the office of the County Clerk of Dallas County,
Texas and the Secretary of State of Georgia, or such later time as the parties
have agreed upon and designated in such filings (the "Effective Time"). The
Merger Agreement provides that the parties thereto will file the Articles of
Merger as soon as practicable following the satisfaction or waiver of each of
the conditions to consummation of the Merger.
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<PAGE> 16
Conditions to the Merger. Consummation of the Merger is subject to
satisfaction or waiver of certain conditions, including, among other things,
obtaining the requisite approval of the Post Shareholders and the Columbus
Shareholders, and receipt by Post and Columbus of either (i) a ruling from the
Internal Revenue Service ("IRS") or (ii) opinions of their respective counsel
that the Merger should qualify as a tax-free reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") and that the
surviving company will constitute a qualified REIT subsidiary under Section
856(i) of the Code. See "The Merger -- Terms of the Merger
Agreement -- Conditions to the Merger."
No Solicitation; Board Action. The Merger Agreement provides that neither
Post nor Columbus will, directly or indirectly, solicit or, with certain
exceptions, facilitate mergers, sales of significant assets, tender offers or
similar transactions with other persons prior to the Effective Time. See "The
Merger -- Terms of the Merger Agreement -- No Solicitation; Board Action."
Conduct of Business Pending the Merger. Each of Post and Columbus has
agreed in the Merger Agreement to operate its business in the ordinary course
and to refrain from taking certain actions relating to the operation of its
business pending consummation of the Merger without the prior approval of the
other party, except as otherwise permitted by the Merger Agreement. See "The
Merger -- Terms of the Merger Agreement -- Conduct of Business Pending the
Merger."
Board of Directors. Post has agreed to take all steps necessary to cause
the appointment as of the Effective Time of Mr. Robert L. Shaw, Vice Chairman
and Chief Executive Officer of Columbus, to the Post Board, or such other person
as shall be selected prior to the Effective Time by the Columbus Board and as
shall be acceptable to Post. See "The Merger -- Terms of the Merger
Agreement -- Board of Directors."
Indemnification Obligations. Post has agreed in the Merger Agreement to
indemnify the officers, directors and trust managers of Columbus for a period of
six years from the Effective Time against liabilities arising prior to the
Effective Time, including all liabilities arising out of, or pertaining to, the
Merger Agreement and the transactions contemplated thereby. See "The
Merger -- Terms of the Merger Agreement -- Indemnification Obligations."
Amendment. The Merger Agreement may be amended by the parties in writing
by action of the Post Board and the Columbus Board at any time before or after
the approvals of the Post Shareholders and the Columbus Shareholders are
obtained and prior to the filing of the Articles of Merger. After the approvals
of the Post Shareholders and the Columbus Shareholders are obtained, no such
amendment, modification or supplement shall alter the amount or change the form
of the consideration to be delivered to the Columbus Shareholders or alter or
change any of the terms or conditions of the Merger Agreement if such alteration
or change would adversely affect the Columbus Shareholders or the Post
Shareholders. See "The Merger -- Terms of the Merger Agreement -- Amendment."
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after the approval of the Merger Agreement
by the Post Shareholders and the Columbus Shareholders, under certain
circumstances. See "The Merger -- Terms of the Merger Agreement -- Termination."
Termination Fees and Expenses. The Merger Agreement provides for the
payment by Columbus of a termination fee up to $10,000,000 if the Merger is
terminated by Post or Columbus under certain circumstances. The Merger Agreement
also provides for the reimbursement of expenses by Columbus of up to $1,500,000
if the Merger is terminated by Post or Columbus under certain circumstances. The
Merger Agreement provides for the payment by Post of a termination fee up to
$10,000,000 if the Merger is terminated by Post or Columbus under certain
circumstances. The Merger Agreement also provides for the reimbursement of
expenses by Post of up to $1,500,000 if the Merger is terminated by Post or
Columbus under certain circumstances. See "The Merger -- Terms of the Merger
Agreement -- Termination Fees and Expenses."
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<PAGE> 17
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, holders of Post Common Stock and Columbus Common
Shares should be aware that the Columbus Shareholders and certain executive
officers and trust managers of Columbus have certain interests in the Merger
that may present them with potential conflicts of interests with respect to the
Merger.
In connection with the Merger, Post will employ Mr. Robert L. Shaw, Vice
Chairman and Chief Executive Officer of Columbus. For a description of the terms
of his employment, see "The Merger -- Terms of the Merger Agreement -- Interests
of Certain Persons in the Merger -- Future Employment." In addition, Post has
agreed to take all steps necessary to cause the appointment as of the Effective
Time of Mr. Shaw to the Post Board, or such other person as shall be selected
prior to the Effective Time by the Columbus Board and as shall be acceptable to
Post. Under existing employment agreements previously approved by the Columbus
Board, certain officers of Columbus, including Mr. Richard L. Bloch, Chairman of
the Board of Columbus, Mr. Shaw, Vice Chairman, Chief Executive Officer and a
Trust Manager of Columbus, and Mr. Will Cureton, Chief Operating Officer and a
Trust Manager of Columbus, will be entitled to receive certain cash payments and
Columbus Common Shares. For a summary of these payments, see "The
Merger -- Interests of Certain Persons in the Merger -- Existing Employment
Agreements."
Pursuant to the Merger Agreement, Post has agreed to take certain actions
with respect to, and to provide certain benefits to Columbus employees under,
its stock incentive plans. Pursuant to the Merger Agreement, Post has also
agreed to take certain actions with respect to certain restricted stock awards
and Columbus Common Shares. See "The Merger -- Interests of Certain Persons in
the Merger -- Stock Incentive Plans."
From and after the Effective Time, Post has agreed to indemnify, to the
fullest extent permitted under the TRA and the Georgia Business Corporation Code
("GBCC"), as applicable, each officer and trust manager of Columbus against all
losses, claims, damages, liabilities, costs, expenses, liabilities or judgments
(including attorneys' fees) arising out of acts or omissions, or alleged acts or
omissions, by them in their capacities as such officers or trust managers. Such
indemnification rights of each Columbus officer and trust manager are in
addition to any other rights that such officers and trust managers may have
under the Columbus Declaration of Trust (the "Columbus Charter") or the Columbus
Bylaws, under the GBCC or otherwise. Post shall also either extend Columbus'
existing directors' and officers' liability insurance policy as of the date of
the Merger Agreement against any liabilities for acts or omissions occurring
prior to the Effective Time arising out of or pertaining to the transactions
contemplated by the Merger Agreement or add such persons to Post's existing
directors' and officers' liability insurance policy for a period of six years
after the date of the Merger Agreement to the fullest extent permitted under
applicable law. Notwithstanding the previous sentence, in no event shall Post or
Merger Sub be required to expend, on average over such six year period, in
excess of 125% of the annual premium currently paid by Columbus for such
coverage.
After the Effective Time, Post will provide benefits to the employees of
Columbus and the Columbus subsidiaries that are not less favorable to such
employees than those provided to similarly situated employees of Post and the
Post subsidiaries.
Simultaneously with the execution of the Merger Agreement, Columbus, Armada
Homes, Inc. ("Armada"), a non-qualified REIT subsidiary of Columbus, Robert L.
Shaw and Will Cureton, executive officers of Columbus, and John A. Williams and
John T. Glover, executive officers of Post, entered into a Stock Purchase
Agreement (the "Armada Stock Purchase Agreement") providing for the sale by
Messrs. Shaw and Cureton of all the issued and outstanding voting stock of
Armada owned by Messrs. Shaw and Cureton to Messrs. Williams and Glover for a
purchase price of $100 in cash. Armada, which conducts Columbus' condominium
development business, is an affiliate of Columbus in which Columbus owns 95% of
the economic interest, with the remaining 5% owned by Messrs. Shaw and Cureton.
Simultaneously with the execution of the Merger Agreement, Columbus,
Addison Circle Access, Inc. ("Addison"), a non-qualified REIT subsidiary of
Columbus, Messrs. Shaw, Cureton, Williams and Glover entered into a Stock
Purchase Agreement (the "Addison Stock Purchase Agreement" and collectively,
with the Armada Stock Purchase Agreement, the "Stock Purchase Agreements")
providing for the sale by
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Messrs. Shaw and Cureton of all the issued and outstanding voting stock of
Addison owned by Messrs. Shaw and Cureton to Messrs. Williams and Glover for a
purchase price of $5,000 in cash. Addison, which holds certain rights in
connection with the supply of utilities to the Addison developments, is an
affiliate of Columbus in which Columbus owns 91% of the economic interest, with
the remaining 9% owned by Messrs. Shaw and Cureton.
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting,
as described in Accounting Principles Board Opinion No. 16 and the
interpretations thereof, pursuant to which the assets and liabilities of
Columbus will be adjusted to their respective fair values and included with
those of Post as of the Effective Time. Net income of Post subsequent to the
Effective Time will include net income of Columbus, and the historical results
of operations of Post for periods prior to the Effective Time will not be
restated. See "The Merger -- Anticipated Accounting Treatment."
RESALES OF POST COMMON STOCK
Shares of Post Common Stock received in the Merger will be freely
transferable by the holders thereof except for those shares held by holders who
may be deemed to be "affiliates" (generally including trust managers, directors,
certain executive officers and ten percent or more shareholders) of Post or
Columbus under applicable federal securities laws. Columbus has agreed to use
commercially reasonable efforts to provide to Post the written agreements of
certain "affiliates" of Columbus that they will not dispose of Post Common Stock
received by them in the Merger except in compliance with the Securities Act. See
"The Merger -- Resales of Post Common Stock."
REGULATORY APPROVAL
In connection with the Merger, the following filings with, or approvals of,
governmental authorities are required: (i) the Commission's declaring effective
the Registration Statement containing this Prospectus/Joint Proxy Statement;
(ii) approvals in connection with compliance with applicable Blue Sky or state
securities laws; (iii) the filing of the Articles of Merger with the office of
the County Clerk of Dallas County, Texas and the Secretary of State of the State
of Georgia; (iv) the filing of such reports under Section 13(a) of the Exchange
Act as may be required in connection with the Merger Agreement and other related
transactions and (v) such filings as may be required in connection with the
payment of any Transfer and Gains Taxes (as defined in the Merger Agreement).
FEDERAL INCOME TAX CONSEQUENCES
Post and Columbus believe that the Merger should qualify as a tax-free
reorganization for federal income purposes and, accordingly no gain or loss
should be recognized by Columbus Shareholders, except in respect of cash
received in lieu of fractional shares. The obligation of each of Post and
Columbus, respectively, to consummate the Merger is conditioned upon the receipt
of either (i) a ruling from the Internal Revenue Service or (ii) opinions dated
as of the Closing Date from King & Spalding, counsel to Post, and Winstead
Sechrest & Minick P.C. and Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Columbus, to the effect that the Merger should qualify as a reorganization under
the provisions of Section 368(a) of the Code and that, accordingly, no gain or
loss should be recognized by Columbus or Post as a result of the Merger and no
gain or loss should be recognized by a Columbus Shareholder who receives Post
Common Stock for Columbus Common Shares exchanged therefor (except with respect
to any cash received in lieu of a fractional interest in Post Common Stock). See
"Certain Federal Income Tax Consequences."
King & Spalding, counsel to Post, will also deliver an opinion to Columbus
that for its taxable year ended December 31, 1993 and for all subsequent taxable
years ending on or before the Closing Date, Post was organized and has operated
in conformity with the requirements for qualification as a REIT under the Code
and that, after giving effect to the Merger, Post's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a REIT. Winstead Sechrest & Minick P.C., counsel to
8
<PAGE> 19
Columbus, will deliver an opinion to Post that for its taxable year ended
December 31, 1993 and for all subsequent taxable years ending on or before the
Closing Date, Columbus was organized and has operated in conformity with the
requirements for qualification as a REIT under the Code.
Each Columbus Shareholder should consult with such shareholder's own tax
advisor regarding the tax consequences of the Merger.
DISSENTERS' RIGHTS
Columbus Shareholders will not have dissenters' rights under the TRA with
respect to the Merger, and Post Shareholders will not have dissenters' rights
under the GBCC with respect to the Merger. See "The Merger -- Dissenters'
Rights."
DIFFERENCES IN THE RIGHTS OF SECURITY HOLDERS
Post is incorporated under the laws of the State of Georgia, and Columbus
is a real estate investment trust formed under the laws of the State of Texas.
Columbus Shareholders will, upon consummation of the Merger, become Post
shareholders, and their rights as such will be governed by Georgia law and
Post's Articles of Incorporation (the "Post Charter") and Amended and Restated
Bylaws (the "Post Bylaws"). See "Comparative Rights of Shareholders."
AMENDMENT OF EMPLOYEE STOCK PLAN
If the Merger Agreement is approved by the Post Shareholders and the
Columbus Shareholders and the Merger is consummated, the employee stock options
held by employees of Columbus will be converted into employee stock options of
Post issued under Post's Employee Stock Plan. To accommodate the issuance of
options to employees of Columbus pursuant to the Merger Agreement, the Post
Shareholders will be asked to approve an amendment to the Employee Stock Plan to
increase the shares of Post Common Stock that are reserved for issuance
thereunder. The Post Board has approved the Employee Stock Plan Amendment and
recommends a vote FOR approval of the Employee Stock Plan Amendment. See
"Amendment of Employee Stock Plan."
9
<PAGE> 20
MARKETS AND MARKET PRICES
POST COMMON STOCK
Post Common Stock is listed on the NYSE under the symbol "PPS." As of
August 29, 1997, there were approximately 1,258 holders of record of Post Common
Stock. The following table sets forth for the calendar quarter indicated the
high and low closing prices per share of Post Common Stock as reported on the
NYSE through August 29, 1997.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
- ------------- -------- ------- ---------
<S> <C> <C> <C>
1995:
First Quarter............................................... $31.875 $28.500 $0.49
Second Quarter.............................................. 32.250 28.750 0.49
Third Quarter............................................... 32.000 29.625 0.49
Fourth Quarter.............................................. 32.250 29.250 0.49
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 (through August 29)........................... 40.3125 37.000 0.595
</TABLE>
On August 1, 1997, the last trading date prior to the public announcement
of the Merger, the closing sale price of Post Common Stock, as reported on the
NYSE, was $39.9375 per share. On , 1997, the last trading day before mailing
this Joint Proxy Statement/Prospectus, the closing sale price of Post Common
Stock, as reported on the NYSE was $ . Shareholders of Post and
Columbus are urged to obtain current market quotations for shares of Post Common
Stock.
COLUMBUS COMMON SHARES
Columbus Common Shares are listed on the NYSE under the symbol "CLB." As of
August 29, 1997, there were approximately 671 holders of record of Columbus
Common Shares. The following table sets forth for the calendar quarter indicated
the high and low closing prices per share of Columbus Common Shares as reported
on the NYSE through August 29, 1997.
<TABLE>
<CAPTION>
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
- ------------- ------- ------- ---------
<S> <C> <C> <C>
1995:
First Quarter............................................... $18.875 $16.000 $0.375
Second Quarter.............................................. 20.000 17.625 0.375
Third Quarter............................................... 20.125 18.125 0.375
Fourth Quarter.............................................. 19.875 17.750 0.375
1996:
First Quarter............................................... $20.750 $18.875 $0.375
Second Quarter.............................................. 20.125 18.250 0.395
Third Quarter............................................... 20.750 18.750 0.395
Fourth Quarter.............................................. 23.250 20.375 0.395
1997:
First Quarter............................................... $23.750 $20.000 $0.395
Second Quarter.............................................. 23.500 20.000 0.395
Third Quarter (through August 29)........................... 24.375 22.500
</TABLE>
On August 1, 1997, the last trading date prior to the public announcement
of the Merger, the closing sale price of Columbus Common Shares, as reported on
the NYSE, was $23.5625 per share.
10
<PAGE> 21
COMPARATIVE PER SHARE INFORMATION
The following summary presents selected comparative unaudited per share
information for Post and Columbus on a historical basis and Post and Columbus on
a pro forma combined basis assuming the combination had been effective
throughout the periods presented. Columbus pro forma equivalent per share
amounts are presented with respect to pro forma information. Such per share
amounts allow comparison of historical information with respect to the value of
one share of Columbus Common Shares to the corresponding information with
respect to the pro forma value of one share of Columbus Common Shares as a
result of the Merger and are computed by multiplying the pro forma amounts by
the Exchange Ratio.
For each of Post and Columbus, income statement information for the year
ended December 31, 1996 and balance sheet information as of December 31, 1996
are based on, and should be read in conjunction with, the consolidated audited
financial statements of Post and Columbus incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." The remaining financial
information is based on the respective historical consolidated unaudited
financial statements of Post and Columbus and the notes thereto. In the opinion
of the respective managements of Post and Columbus, all adjustments necessary to
present a fair statement of results of interim periods of Post and Columbus
(which adjustments were of a normal recurring nature) have been included.
Results for Post and Columbus for the six months ended June 30, 1997 are not
necessarily indicative of results to be expected for their entire fiscal years,
nor are pro forma amounts necessarily indicative of results that will be
obtained on a combined basis.
<TABLE>
<CAPTION>
PER SHARE
---------------------------------------------
INCOME CASH BOOK VALUE
(LOSS) DIVIDENDS DECLARED (END OF PERIOD)
------ ------------------ ---------------
<S> <C> <C> <C>
Post -- Historical
Year ended December 31, 1996.......................... $1.95 $2.16 $18.20
Six months ended June 30, 1997........................ 1.10 1.19 18.17
Columbus -- Historical
Year ended December 31, 1996.......................... $0.94 $1.56 $13.79
Six months ended June 30, 1997........................ 0.50 0.79 13.64
Post and Columbus -- Pro Forma Combined
Year ended December 31, 1996.......................... $1.79 $2.16
Six months ended June 30, 1997........................ 1.06 1.19 $23.24
Columbus -- Pro Forma Equivalent(1)
Year ended December 31, 1996.......................... $1.10 $1.33
Six months ended June 30, 1997........................ 0.65 0.73 $14.29
</TABLE>
- ---------------
(1) Determined by multiplying the Exchange Ratio (0.615) by the Post and
Columbus pro forma combined per share amounts so that the per share amounts
are equated to the comparative values for each Columbus Common Share.
11
<PAGE> 22
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth the summary historical financial data for
Post and Columbus and the unaudited pro forma combined financial data for Post
and Columbus as a combined entity, giving effect to the Merger as if it had
occurred on the dates indicated herein, after giving effect to the pro forma
adjustments and further adjustments described in the notes to the unaudited pro
forma combined financial statements appearing elsewhere in this Joint Proxy
Statement/Prospectus. The summary historical operating, balance sheet and cash
flow data for each of the years ended December 31, 1992, 1993, 1994, 1995 and
1996 are derived from the audited financial statements of Post and Columbus as
reported in their Annual Reports on Form 10-K and the summary historical
operating, balance sheet and cash flow data for each of the interim periods
ended June 30, 1996 and 1997 are derived from the unaudited financial statements
of Post and Columbus as reported in their Quarterly Reports on Form 10-Q.
The unaudited pro forma combined operating and other data are presented as
if the Merger had been consummated at the beginning of the earliest period
presented. The unaudited pro forma combined balance sheet data at June 30, 1997
is presented as if the Merger had occurred on June 30, 1997. In the opinion of
management of Post, all adjustments necessary to reflect the effects of these
transactions have been made. The Merger has been accounted for under the
purchase method of accounting in accordance with the Accounting Principles Board
Opinion No. 16.
The pro forma financial information should be read in conjunction with, and
are qualified in their entirety by, the respective historical audited financial
statements and notes thereto of Post and Columbus incorporated by reference into
this Joint Proxy Statement/Prospectus and the unaudited pro forma financial
statements and notes thereto appearing elsewhere in the Joint Proxy
Statement/Prospectus.
The unaudited pro forma operating data and other data are presented for
comparative purposes only and are not necessarily indicative of what the actual
combined results of operations of Post and Columbus would have been for the
periods presented, nor does such data purport to represent the results of future
periods.
12
<PAGE> 23
POST PROPERTIES, INC. SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
POST PROPERTIES, INC.
POST PROPERTIES, INC. HISTORICAL AND PREDECESSORS
---------------------------------------------------- COMBINED HISTORICAL
SIX MONTHS ENDED YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER 31,(1)
------------------- ------------------------------ ---------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental............................. $ 84,131 $ 76,058 $157,735 $133,817 $115,309 $104,482 $ 94,754
Property management-third
party(2)......................... 1,092 1,466 2,828 2,764 2,508 3,057 2,793
Landscape services-third
party(2)......................... 2,446 2,221 4,834 4,647 3,799 3,829 2,240
Other.............................. 3,011 2,527 5,311 3,477 3,123 2,879 2,750
-------- -------- -------- -------- -------- -------- --------
Total revenues............... 90,680 82,272 170,708 144,705 124,739 114,247 102,537
-------- -------- -------- -------- -------- -------- --------
Property operating and maintenance
expense (exclusive of items shown
separately below).................. 31,132 27,658 57,335 49,912 43,376 41,209 39,080
Depreciation (real estate assets).... 12,563 10,796 22,676 20,127 19,967 19,427 19,085
Depreciation (non-real estate
assets)............................ 495 513 927 692 241 303 195
Property management-third party(2)... 814 1,050 2,055 2,166 2,229 2,453 2,057
Landscape services-third party(2).... 2,031 1,863 3,917 3,950 3,098 3,151 1,998
Interest............................. 11,070 10,768 22,131 22,698 19,231 34,309 41,548
Amortization of deferred loan
costs.............................. 552 732 1,352 1,967 1,999 969 2,105
General and administrative........... 3,419 4,017 7,716 6,071 6,269 4,384 5,015
REIT formation expense............... -- -- -- -- -- 2,783 --
Minority interest in consolidated
property partnership............... -- -- -- 451 680 692 655
-------- -------- -------- -------- -------- -------- --------
Total expenses............... 62,076 57,397 118,109 108,034 97,090 109,680 111,738
-------- -------- -------- -------- -------- -------- --------
Income (loss) before net gain on sale
of assets, minority interest of
unitholders in Operating
Partnership and extraordinary
item............................... 28,604 24,875 52,599 36,671 27,649 4,567 (9,201)
Net gain on sale of assets........... 3,512 -- 854 1,746 1,494 -- --
Minority interest of unitholders in
Operating Partnership.............. (5,751) (4,746) (9,984) (8,429) (6,951) (1,935) --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item............................... 26,365 20,129 43,469 29,988 22,192 2,632 (9,201)
Extraordinary item, net of minority
interest of Unitholders in
Operating Partnership.............. (75)(3) -- -- (870)(3) (3,293)(3) (7,855)(3) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............ 26,290 20,129 43,469 29,118 18,899 (5,223) (9,201)
Dividends to preferred
shareholders....................... (2,125) -- (1,063) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) available
to common shareholders..... $ 24,165 $ 20,129 $ 42,406 $ 29,118 $ 18,899 $ (5,223) $ (9,201)
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
COMBINED
POST PROPERTIES, INC. HISTORICAL
----------------------------------------- --------------
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
-------------- ----------------------- --------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA:
Income before extraordinary item (net of preferred
dividend).............................................. $1.10 $0.93 $1.95 $1.63 $1.32 $0.34 N/A
Net income (loss) available to common shareholders....... 1.10 0.93 1.95 1.58 1.12 (0.67) N/A
Dividends declared....................................... 1.19 1.08 2.16 1.96 1.80 0.77(4) N/A
</TABLE>
13
<PAGE> 24
<TABLE>
<CAPTION>
PREDECESSOR
COMBINED
POST PROPERTIES, INC. HISTORICAL
-------------------------------------------------------------- ---------------------
JUNE 30, DECEMBER 31, DECEMBER 31,
----------------------- ------------------------------------ ---------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation......................... $1,174,934 $1,034,809 $1,109,342 $ 937,924 $ 828,585 $ 722,266 $616,289
Real estate, net of accumulated
depreciation......................... 989,866 866,829 931,670 781,100 686,009 599,898 513,651
Total assets........................... 1,013,773 892,590 958,675 812,984 710,973 627,322 536,961
Total debt............................. 473,683 421,378 434,319 349,719 362,045 357,809 540,900
Shareholders' equity (deficit)......... 400,516 345,039 398,993 343,624 240,196 177,864 (25,812)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
COMBINED
POST PROPERTIES, INC. HISTORICAL
-------------------------------------------------------------- ---------------------
JUNE 30, DECEMBER 31, DECEMBER 31,
----------------------- ------------------------------------ ---------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided from (used in):
Operating activities................. $ 53,580 $ 43,408 $ 78,966 $ 57,362 $ 43,807 $ 2,412 $ 11,400
Investing activities................. $ (61,596) $ (98,170) $ (166,762) $ (114,531) $ (99,364) $ (51,152) $(28,696)
Financing activities................. $ 9,284 $ 47,378 $ 79,021 $ 60,885 $ 46,508 $ 49,647 $ 19,902
Funds from operations(5)............... $ 39,042 $ 35,671 $ 74,212 $ 56,798 $ 47,616 $ 26,777 $ 9,884
Weighted average common shares
outstanding.......................... 21,989,132 21,700,779 21,787,648 18,382,299 16,847,999 7,824,311 N/A
Weighted average shares and units
outstanding.......................... 27,206,432 26,818,135 26,917,723 23,541,639 22,125,890 13,574,767 N/A
Total stabilized communities (at end of
period).............................. 49 47 49 42 42 41 40
Total stabilized apartment units (at
end of period)....................... 17,648 16,996 17,930 14,962 14,845 14,270 14,088
Average economic occupancy (stabilized
communities) (6)..................... 94.0% 95.5% 95.3% 96.0% 96.4% 94.7% 93.0%
</TABLE>
- ---------------
(1) On July 22, 1993, Post completed an initial public offering and business
combination involving entities under common ownership. The summary
historical financial data for 1992 and 1993 reflects the combined accounts
of the entities included in the business combination, collectively referred
to as Post Properties Group ("PPG"). For 1993, the year of the business
combination, PPG and Post operations are combined since there was a high
degree of common ownership before and after the transaction.
(2) 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 Post that operate under the Post(R) name).
(3) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced by
the portion related to the minority interest of the unitholders calculated
on the basis of weighted average Units outstanding for the year.
(4) The dividend paid by Post for the portion of the quarter ended September 30,
1993 after its initial public 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).
(5) Post 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 net income available to common
shareholders of Post 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
14
<PAGE> 25
companies use the same definition. However, Post'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 Post's financial performance or to
cash flow from operating activities (determined in accordance with GAAP) as
a measure of Post's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of Post's needs or ability to service
indebtedness or make distributions.
(6) 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 93.4% and 95.0%
for the six months ended June 30, 1997 and 1996, respectively). Concessions
were $313 and $143 and employee discounts were $135 and $136 for the six
months ended June 30, 1997 and 1996, respectively. A community is considered
by Post 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.
15
<PAGE> 26
COLUMBUS REALTY TRUST SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
COLUMBUS REALTY
TRUST AND
COLUMBUS REALTY TRUST HISTORICAL PREDECESSORS
------------------------------------------------------------- COMBINED HISTORICAL
SIX MONTHS ENDED YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------- ----------------------------------- -------------------
1997 1996 1996 1995 1994 1993(1) 1992(1)
---------- ---------- ---------- ---------- --------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental..................... $ 26,879 $ 21,367 $ 45,910 $ 39,023 $ 28,963 $ 19,365 $ 16,220
Property management........ 71 149 298 479 640 453 482
Interest and other......... 1,357 1,180 2,322 1,749 1,278 846 882
---------- ---------- ---------- ---------- --------- -------- --------
Total revenues...... 28,307 22,696 48,530 41,251 30,881 20,664 17,584
---------- ---------- ---------- ---------- --------- -------- --------
Operating expenses:
Property operating and
maintenance(2)........... 7,314 5,830 12,459 10,118 7,526 5,757 4,613
General and
administrative(3)........ 3,466 2,949 5,979 5,362 4,612 3,183 2,694
Interest................... 4,898 3,364 7,884 5,596 2,848 7,795 6,520
Interest related to
amortization of deferred
financing costs............ 252 159 393 515 474 357 102
Depreciation and
amortization............... 6,201 4,931 10,603 9,232 6,660 4,335 3,333
---------- ---------- ---------- ---------- --------- -------- --------
Total expenses...... 22,131 17,233 37,318 30,823 22,120 21,427 17,262
---------- ---------- ---------- ---------- --------- -------- --------
Gain on sale of real
estate..................... 561 42 246 -- -- -- --
---------- ---------- ---------- ---------- --------- -------- --------
Income (loss) before gain on
sale of real estate........ 6,176 5,463 11,212 10,428 8,761 (763) 322
Net income (loss) before
extraordinary item......... $ 6,737 $ 5,505 $ 11,458 $ 10,428 $ 8,761 $ (763) $ 322
Net income per common share
(primary and fully
diluted)................... $ 0.50 $ 0.47 $ 0.94 $ 0.90 $ 0.89 -- --
Dividends per common share... $ 0.79 $ 0.77 $ 1.56 $ 1.50 $ 1.50 -- --
Weighted average number of
common shares outstanding:
Primary.................... 13,455,592 11,718,145 12,099,291 11,536,110 9,832,417 -- --
Fully diluted.............. 13,496,035 11,723,562 12,142,069 11,556,269 9,845,759 -- --
</TABLE>
<TABLE>
<CAPTION>
COLUMBUS REALTY TRUST PREDECESSORS COMBINED
--------------------------------------------------------------- HISTORICAL
JUNE 30, DECEMBER 31, ---------------------------
------------------- ----------------------------------------- DECEMBER 28, DECEMBER 31,
1997 1996 1996 1995 1994 1993 1993(1) 1992(1)
-------- -------- -------- -------- -------- -------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before
accumulated
depreciation....... $453,356 $374,834 $399,813 $335,046 $267,786 $158,946 $133,491 $124,249
Total assets......... 430,713 357,791 374,576 320,976 253,370 149,681 122,619 116,898
Total debt........... 231,477 183,803 179,855 145,492 79,324 28,063 101,836 104,842
Shareholders'
equity............. 182,894 155,863 180,078 156,827 161,859 115,460 15,417 6,018
</TABLE>
16
<PAGE> 27
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided by (used in):
Operating activities............ $ 5,458 $ 4,063 $ 19,417 $ 22,423 $ 19,520 $ 3,931 $ 3,295
Investing activities............ $(47,816) $(39,587) $(67,777) $(64,937) $(109,440) $(35,824) $(16,570)
Financing activities............ $ 46,405 $ 30,565 $ 40,247 $ 48,764 $ 90,385 $ 35,718 $ 13,004
Funds from operations(4).......... $ 12,870 $ 10,372 $ 21,921 $ 19,450 $ 15,560 $ 3,571 $ 3,655
Total stabilized communities (at
end of period).................. 24 20 22 19 17 13 10
Total stabilized apartment units
(at end of period).............. 6,045 4,884 5,410 4,542 3,790 2,552 1,864
Average economic occupancy
(stabilized communities)(5)..... 96.0% 95.3% 95.6% 95.9% 95.3% N/A N/A
</TABLE>
- ---------------
(1) Represents the audited combined historical financial statements of the
Columbus Group and the Texana Group. In 1993, the audited consolidated
financial statements of Columbus Realty Trust are also included.
(2) Property operating and maintenance includes repairs and maintenance,
utilities, real estate taxes and other property operating expenses.
(3) General and administrative includes advertising expenses, corporate general
and administrative expenses, and property general and administrative
expenses.
(4) Columbus calculates FFO in accordance with the definition approved by the
Board of Governors of NAREIT in March 1995 which defines funds from
operations as net income (loss), computed in accordance with GAAP, excluding
gains and losses from debt restructuring and sales of property, plus real
estate related depreciation and amortization (excluding amortization of
financing costs), and after adjustments for unconsolidated partnerships and
joint ventures. Columbus believes that the presentation of FFO provides
investors with an industry accepted measurement which helps facilitate
understanding of Columbus' ability to meet required dividend payments,
capital expenditures and principal payments on its debt. Although Columbus
calculates FFO in accordance with the NAREIT-approved definition, there can
be no assurance that Columbus' basis for computing FFO is comparable with
that of other real estate investment trusts. FFO does not represent cash
flow and is not necessarily indicative of cash flow or liquidity available
to Columbus, nor should it be considered as an alternative to net income as
an indicator of operating performance.
(5) Average economic occupancy is defined as total rent collected divided by
gross potential rent for the period, expressed as a percentage. Gross
potential rent is defined as the maximum rent collectible, based on signed
leases for occupied units and market rates for vacant units.
17
<PAGE> 28
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
1997 DECEMBER 31, 1996
--------------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
OPERATING DATA:
Revenues:
Rental.................................................... $111,010 $203,645
Property management-third party........................... 1,163 3,126
Landscape services-third party............................ 2,446 4,834
Interest.................................................. 196 554
Other..................................................... 4,172 7,079
-------- --------
Total revenues.................................... 118,987 219,238
-------- --------
Operating expenses:
Property operating and maintenance expense (exclusive of
items shown separately below).......................... 40,581 73,700
Depreciation (real estate assets)......................... 18,905 35,359
Depreciation (non-real estate assets)..................... 640 1,273
Property management-third party........................... 814 2,055
Landscape services-third party............................ 2,031 3,917
Interest.................................................. 15,625 29,733
Amortization of deferred loan costs....................... 617 1,460
General and administrative................................ 4,025 8,339
-------- --------
Total expenses.................................... 83,238 155,836
-------- --------
Income before net gain on sale of assets, minority interest
of unitholders in Operating Partnership and extraordinary
item...................................................... 35,749 63,402
Net gain on sale of assets.................................. 4,073 1,100
Minority interest of unitholders in Operating Partnership... (5,501) (9,177)
-------- --------
Net income before extraordinary item.............. 34,321 55,325
Dividends to preferred shareholders......................... (2,125) (1,063)
-------- --------
Net income available to common shareholders before
extraordinary item.............................. $ 32,196 $ 54,262
-------- --------
Net income per share available to common
shareholders before extraordinary item.......... $ 1.06 $ 1.80
======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $1,807,459
Real estate, net of accumulated depreciation................ 1,575,815
Total assets................................................ 1,619,344
Total debt.................................................. 726,103
Shareholders' equity........................................ 707,714
</TABLE>
18
<PAGE> 29
RISK FACTORS
In considering whether to approve the Merger Agreement, the Post
Shareholders and the Columbus Shareholders should carefully consider, in
addition to the other information in this Joint Proxy Statement/Prospectus, the
following matters.
STOCK PRICE FLUCTUATIONS
The relative stock prices of the Post Common Stock and the Columbus Common
Shares at the Effective Time of the Merger may vary significantly from the
prices as of the date of execution of the Merger Agreement, the date hereof or
the date on which the Post Shareholders and the Columbus Shareholders vote on
the Merger Agreement due to changes in the business, operations and prospects of
Post or Columbus, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions and
other factors.
The Exchange Ratio was fixed at 0.615 at the time of execution of the
Merger Agreement by the parties and is not subject to adjustment. Any increase
or decrease of the market price of the Post Common Stock will correspondingly
increase or decrease the value of Merger Consideration to be received by the
Columbus Shareholders pursuant to the Merger.
Further, there can be no assurance as to the trading volume or price of the
Post Common Stock after the Merger. Events outside the control of Post which
could adversely affect the market value of Post's assets, as well as the market
value of the Post Common Stock, may occur during the period from the date of
this Joint Proxy Statement/Prospectus to the date the Merger is consummated or
thereafter. All of the Post Common Stock to be issued to the Columbus
Shareholders, other than affiliates of Columbus, in connection with the Merger
will be freely tradeable. Sales of a substantial number of shares of Post Common
Stock by current Columbus Shareholders following the consummation of the Merger,
or the perception that such sales could occur, could adversely affect the market
price for Post Common Stock after the Merger.
An increase in market interest rates may lead prospective purchasers of
Post Common Stock to demand a higher anticipated annual yield from future
dividends. Such an increase in the required anticipated dividend yield may
adversely affect the market price of the Post Common Stock.
STATUS OF MERGER AS TAX-FREE REORGANIZATION
Counsels to Post and Columbus are of the opinion that the Merger should
qualify as a tax-free reorganization under Section 368(a) of the Code. The
Internal Revenue Service (the "IRS") could assert, however, that the
contribution of the assets and liabilities of Columbus to the Operating
Partnership following the Merger causes the Merger to fail to qualify as a
tax-free reorganization. If the IRS were successful in such contention, or if
for any other reason the Merger were to fail to qualify as a tax-free
reorganization, each Columbus Shareholder would recognize gain or loss equal to
the difference between the shareholder's tax basis in the Columbus Common Shares
and the fair market value of Post Common Stock received in the Merger. In
addition, Columbus would recognize approximately $7.8 million of built-in gains
which would be subject to corporate-level tax (under Treasury Regulations
announced by the IRS but not yet issued), and such tax liability would be
transferred to Merger Sub in the Merger. See "Certain Federal Income Tax
Consequences."
BENEFITS TO CERTAIN DIRECTORS AND OFFICERS OF COLUMBUS; POSSIBLE CONFLICTS OF
INTEREST
In considering the recommendation of the Columbus Board with respect to the
Merger Agreement and the transactions contemplated thereby, Columbus
Shareholders should be aware that certain members of the Columbus Board and
management of Columbus have certain interests in the Merger that are in addition
to the interests of the Columbus Shareholders generally. See "The
Merger -- Interests of Certain Persons in the Merger." No special procedures
were put in place to resolve any conflicts resulting from these interests.
However, the Columbus Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
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<PAGE> 30
LOSS OF RIGHTS BY COLUMBUS SHAREHOLDERS
The rights of the holders of Columbus Common Shares are presently governed
by Texas law, the Columbus Charter and the Columbus Bylaws. After consummation
of the Merger, the rights of the holders of Columbus Common Shares that are
converted into Post Common Stock will be governed by Georgia law, the Post
Charter and the Post Bylaws. Certain differences may reduce certain existing
rights of Columbus Shareholders. See "Comparative Rights of Shareholders."
TERMINATION PAYMENTS IF MERGER FAILS TO OCCUR
No assurance can be given that the Merger will be consummated. The Merger
Agreement provides for the payment by Columbus or Post of a termination fee of
up to $10,000,000 if the Merger is terminated by Columbus or Post under certain
circumstances, or reimbursement of expenses of up to $1,500,000 if the Merger is
terminated by Columbus or Post under other circumstances.
The obligation to make such payment may adversely affect the ability of
Columbus or Post to engage in another transaction in the event the Merger is not
consummated and may have an adverse impact on the financial condition of the
company incurring such obligation. See "The Merger -- Terms of the Merger
Agreement -- Termination Fees and Expenses."
REAL ESTATE INVESTMENT RISKS
Acquisition Risks. Assuming consummation of the Merger, Post will have
increased its portfolio of completed apartment units owned from 17,648 at June
30, 1997 to 23,693 at the Effective Time, an increase of 34.3%. All the
properties acquired by Post from Columbus are in markets where Post has not
previously owned properties. Due primarily to the number and relative geographic
diversity of its properties after the Merger, Post may not have adequate
management or other personnel or adequate systems or other resources to manage
its portfolio or its properties to the same level of efficiency after the
Merger, which could adversely affect operations and result in less cash
available for distributions to shareholders. Furthermore, upon consummation of
the Merger, Post will own the two industrial properties and one retail property
currently owned by Columbus. Post has no experience in managing such property
types and there can be no assurance that Post will adequately manage such
properties. Additionally, one of the anticipated benefits of the Merger is the
elimination of redundant activities in the combined organization and the
resulting savings in costs and expenses. An inability to achieve these savings
could adversely affect the operating results and financial performance of Post
after the Merger.
Dependence on Geographical Regions. Following the Merger, the properties
of Post will be located primarily in the Southwest and Southeast regions of the
United States. A decline in the economic conditions in those regions and in the
market for apartments therein may have an adverse impact on the performance of
Post's property portfolio.
Development Risks. Risks associated with Post's development and
construction activities include: (i) development opportunities may be abandoned;
(ii) construction costs of a multifamily property may exceed original estimates,
possibly making the multifamily property uneconomical; (iii) occupancy rates and
rents at a newly completed multifamily property may not be sufficient to make
the multifamily property profitable; (iv) financing may not be available on
favorable terms for development of a multifamily property; and (v) construction
and lease-up may not be completed on schedule, resulting in increased debt
service and construction costs. Development activities are also subject to risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy and other required governmental permits
and authorizations. There can be no assurance that Post will undertake to
develop any particular site or that it will be able to complete such development
if it is undertaken.
Financing of Development and Acquisitions. Post anticipates that future
development and acquisitions will be financed, in whole or in part, under
existing unsecured credit facilities, unsecured medium term notes or other forms
of secured or unsecured financing or through the issuance of additional equity
by Post. The use of equity financing, rather than debt, for future developments
or acquisitions could have a dilutive effect on the
20
<PAGE> 31
interests of Post Shareholders. If new developments are financed under existing
unsecured lines of credit, there is a risk that, unless substitute financing is
obtained, further availability under the lines of credit for new development may
not be available or may be available only on disadvantageous terms.
Illiquidity of Real Estate. Real estate investments are relatively
illiquid and, therefore, will tend to limit the ability of Post to vary its
portfolio promptly in response to changes in economic or other conditions.
NO LIMITATION ON AMOUNT OF DEBT THAT MAY BE INCURRED AND POSSIBLE INABILITY TO
REPAY DEBT
No Limitation on Debt and Increased Indebtedness. Post intends to adhere
to a policy of maintaining a debt-to-total-market-capitalization ratio of less
than 60%. However, the organizational documents of Post do not limit the amount
or percentage of indebtedness that it may incur. Therefore, the Post Board may
change this policy without shareholder approval. Accordingly, Post could become
more leveraged, resulting in an increased risk of default on its obligations and
in an increase in its debt service requirements, both of which could adversely
affect the financial condition of Post. Furthermore, the
debt-to-total-market-capitalization ratio will increase in connection with the
Merger, although Post intends to decrease the ratio subsequent to consummation
of the Merger. See "Policies of Post with Respect to Certain
Activities -- Financing Policies."
Post has maintained on a quarterly basis a financial structure with no more
than 38.2% total debt to total market capitalization since July 1993. Post's
debt-to-market capitalization on June 30, 1997, giving effect to the Merger on a
pro forma basis, would have been 33.0%. Any substantial increase in Post's total
debt as a result of Post's assumption of Columbus' debt pursuant to the Merger
may have an adverse affect on the ability of Post to meet its current
obligations. Additionally, a substantial increase in Post's total debt could
adversely affect Post's ability to access debt as well as equity capital markets
in the future in the event that Post has a decreased ability to service debt.
Debt Financing and Existing Debt Maturities. Post is subject to the risks
normally associated with debt financing, including the risk that Post's FFO
might be insufficient to meet required payments of principal and interest, the
risk that existing indebtedness (which in all cases will not have been fully
amortized at maturity) might not be able to be refinanced or that the terms of
such refinancing might not be as favorable as the terms of the existing
indebtedness.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Tax Liabilities as a Consequence of the Failure to Qualify as a REIT. Post
believes it is organized and has operated so as to qualify as a REIT under the
Code. A qualified REIT generally is not taxed at the corporate level on income
it currently distributes to its shareholders as long as it distributes at least
95% of its taxable income. No assurance can be given, however, that Post will so
qualify or be able to remain so qualified. No assurance can be given that
legislation, new regulations, administrative interpretations or court decisions
will not significantly change the tax laws with respect to Post's qualification
as a REIT or the federal income tax consequences of such qualification.
Among the requirements for REIT qualification is that the value of any one
issuer's securities held by a REIT may not exceed 5% of the value of the REIT's
total assets on certain testing dates. See "Certain Federal Income Tax
Consequences -- Qualification and Taxation of Post as a REIT"; "-- Requirements
for Qualification -- Asset Tests." Post believes that the value of the debt and
equity securities of its nonqualified REIT subsidiary corporations in each case
will be less than 5% of the value of Post's total assets. In rendering its
opinion as to the qualification of Post as a REIT, King & Spalding, tax counsel
to the Company, is relying on the conclusion of Post regarding the value of such
subsidiaries.
If Post fails to qualify as a REIT, it will be subject to federal income
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. In addition, unless entitled to relief under certain
statutory provisions, Post will be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification is lost. The
additional tax would significantly reduce the cash flow available for
distribution. See "Certain Federal Income Tax Consequences -- Failure to
Qualify."
21
<PAGE> 32
If Columbus were disqualified as a REIT for any taxable year prior to the
Merger, any resulting corporate-level tax liability of Columbus would be
transferred to the surviving company in the Merger.
Other Tax Liabilities. Even if Post qualifies as a REIT, it will be
subject to certain federal, state and local taxes on its income and property. In
addition, the net income, if any, of Post Services, Inc. (and its wholly owned
subsidiaries) and any other nonqualified REIT subsidiaries will be subject to
Federal income tax. See "Certain Federal Income Tax Consequences -- Other Tax
Consequences."
THE SPECIAL MEETINGS
POST SPECIAL MEETING
General. The Post Special Meeting will be held on , November ,
1997 at a.m. local time, at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303. At the Post Special Meeting, holders of Post
Common Stock will be asked to consider and vote upon proposals to (i) approve
and adopt the Merger Agreement (ii) approve the Stock Issuance and (iii) approve
the Employee Stock Plan Amendment. A copy of the Merger Agreement is attached
hereto as Annex A and is incorporated herein by this reference.
Record Date and Shares Entitled to Vote. Only holders of record of shares
of Post Common Stock at the close of business on the Post Record Date are
entitled to notice of and to vote at the Post Special Meeting. As of such date,
there were shares of Post Common Stock issued and outstanding held by
approximately holders of record. Holders of record of Post Common Stock on
the Post Record Date are entitled to one vote per share on any matter that may
properly come before the Post Special Meeting.
EACH HOLDER OF POST COMMON STOCK IS REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO POST IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE OR BY FACSIMILE. THE MERGER WILL BE APPROVED IF IT
RECEIVES A GREATER NUMBER OF VOTES THAN THE NUMBER OF VOTES CAST OPPOSING THE
MERGER AT THE POST SPECIAL MEETING IF A QUORUM IS PRESENT OR REPRESENTED BY
PROXY.
Vote Required. The presence in person or by proxy of the holders of a
majority of the shares of Post Common Stock outstanding on the Post Record Date
will constitute a quorum for the transaction of business at the Post Special
Meeting or any adjournment thereof. The approval of the matters being presented
to the Post Shareholders at the Post Special Meeting require a greater number of
votes cast in favor of the matter than the number of votes cast opposing such
matter. Shares of Post Common Stock held by nominees for beneficial owners will
be counted for purposes of determining whether a quorum is present if the
nominee has the discretion to vote on at least one of the matters presented even
if the nominee may not exercise discretionary voting power with respect to other
matters and voting instructions have not been received from the beneficial owner
(a "broker non-vote"). Broker non-votes will not be counted as votes for or
against matters presented for shareholder consideration. Abstentions with
respect to a proposal are counted for purposes of establishing a quorum. If a
quorum is present, abstentions have no effect on the outcome of any vote.
As of the Post Record Date, the executive officers and directors of Post
beneficially owned an aggregate of shares of Post Common Stock
(including units of limited partnership of the Operating Partnership
and not including shares of Post Common Stock issuable upon the
exercise of Post Employee Options held by such persons), or approximately
of the shares of Post Common Stock then outstanding.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Post Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement, the Stock
22
<PAGE> 33
Issuance and the Employee Stock Plan Amendment and, in the discretion of the
proxy holder, as to any other matter which may properly come before the Post
Special Meeting.
Any Post Shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Post prior to the Post
Special Meeting, at Post's principal executive offices, either a written
revocation of such proxy or a duly executed proxy bearing a later date or (ii)
attending the Post Special Meeting and voting in person, regardless of whether a
proxy has previously been given. Presence at the Post Special Meeting will not
revoke a shareholder's proxy unless such shareholder votes in person.
Post has retained Corporate Communications, Inc. to aid in the solicitation
of proxies. It is estimated that the cost of these services will be
approximately $3,500 plus expenses. The cost of soliciting proxies will be borne
by Post. Proxies may be solicited by personal interview, mail or telephone. In
addition, Post may reimburse brokerage firms and other persons representing
beneficial owners of shares of Post Common Stock for their expenses in
forwarding solicitation materials to beneficial owners. Proxies may also be
solicited by certain of Post's executive officers, directors and regular
employees, without additional compensation, personally or by telephone or
facsimile transmission.
Recommendation. For the reasons described herein, the Post Board approved
the Merger Agreement. The Post Board believes the Merger is fair to and in the
best interests of Post and its shareholders and unanimously recommends that the
Post Shareholders vote FOR approval of the Merger Agreement, the Stock Issuance
and the Employee Stock Plan Amendment. In making its recommendation, the Post
Board considered, among other things, the opinion of Merrill Lynch that the
Exchange Ratio is fair to Post from a financial point of view. See "The
Merger -- Background of and Reasons for the Merger -- Post's Reasons for the
Merger" and "-- Opinions of Financial Advisors -- Post."
Other Matters. Post is unaware of any matter to be presented at the Post
Special Meeting other than the proposal to approve the Merger Agreement, the
Stock Issuance and the Employee Stock Plan Amendment.
COLUMBUS SPECIAL MEETING
General. The Columbus Special Meeting will be held on , November
, 1997 at a.m. local time, at . At the Columbus
Special Meeting, holders of Columbus Common Shares will be asked to consider and
vote upon a proposal to approve the Merger Agreement. A copy of the Merger
Agreement is attached hereto as Annex A.
Record Date; Vote Required. Only holders of record of Columbus Common
Shares at the close of business on the Columbus Record Date are entitled to
notice of and to vote at the Columbus Special Meeting. As of such date, there
were shares of Columbus Common Shares issued and outstanding held by
approximately holders of record. Holders of record of Columbus Common
Shares on the Columbus Record Date are entitled to one vote per share on any
matter that may properly come before the Columbus Special Meeting.
EACH HOLDER OF COLUMBUS COMMON SHARES IS REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO COLUMBUS IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE OR BY FACSIMILE. FAILURE TO RETURN YOUR PROPERLY EXECUTED
PROXY OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT.
COLUMBUS SHAREHOLDERS SHOULD NOT FORWARD ANY SHARE CERTIFICATES WITH THEIR
PROXIES.
The presence in person or by proxy of the holders of a majority of the
shares of Columbus Common Shares outstanding on the Columbus Record Date will
constitute a quorum at the Columbus Special Meeting or any adjournment thereof.
The affirmative vote of the holders of two-thirds of the shares of Columbus
Common Shares outstanding and entitled to vote as of the Columbus Record Date is
necessary to approve the Merger Agreement. Pursuant to the Columbus Bylaws,
abstentions and broker non-votes will be included in
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<PAGE> 34
the determination of the number of Common Shares present at the Columbus Special
Meeting for quorum purposes. Also pursuant to the Columbus Bylaws, abstentions
and broker non-votes will not be deemed to be entitled to vote and therefore
will not be counted in the tabulations of votes cast on proposals presented to
the Columbus Shareholders.
As of the Columbus Record Date, the executive officers and trust managers
of Columbus beneficially owned an aggregate of shares of Columbus
Common Shares (not including shares of Columbus Common Shares issuable
upon the exercise of options held by such persons), or approximately
of the shares of Columbus Common Shares then outstanding.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Columbus Common Shares
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement and, in the discretion of the proxy holder, as
to any other matter which may properly come before the Columbus Special Meeting.
Any Columbus Shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Columbus prior to the
Columbus Special Meeting, at Columbus' principal executive offices, either a
written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Columbus Special Meeting and voting in person, regardless
of whether a proxy has previously been given. Presence at the Columbus Special
Meeting will not revoke a shareholder's proxy unless such shareholder votes in
person.
Columbus has retained Corporate Investors Communications, Inc. to aid in
the solicitation of proxies. It is estimated that the cost of these services
will be approximately $4,500 plus expenses. The cost of soliciting proxies will
be borne by Columbus. Proxies may be solicited by personal interview, mail or
telephone. In addition, Columbus may reimburse brokerage firms and other persons
representing beneficial owners of shares of Columbus Common Shares for their
expenses in forwarding solicitation materials to beneficial owners. Proxies may
also be solicited by certain of Columbus' executive officers, trust managers and
regular employees, without additional compensation, personally or by telephone
or facsimile transmission.
Recommendation. For the reasons described herein, the Columbus Board
unanimously approved the Merger Agreement. The Columbus Board believes that the
Merger is fair to and in the best interests of Columbus and its shareholders and
unanimously recommends that the Columbus Shareholders vote FOR approval of the
Merger Agreement. In making its recommendation, the Columbus Board has
considered, among other things, the opinion of Prudential Securities that, as of
August 1, 1997, the Merger Consideration is fair to the Columbus Shareholders
from a financial point of view. See "The Merger -- Background of and Reasons for
the Merger -- Columbus' Reasons for the Merger" and "The Merger -- Opinions of
Financial Advisors -- Columbus."
Other Matters. Columbus is unaware of any matter to be presented at the
Columbus Special Meeting other than the proposal to approve the Merger
Agreement.
THE MERGER
THE DETAILED TERMS OF THE MERGER ARE CONTAINED IN THE MERGER AGREEMENT
ATTACHED AS ANNEX A TO THIS JOINT PROXY STATEMENT/PROSPECTUS. THE FOLLOWING
DISCUSSION DESCRIBES THE MORE IMPORTANT ASPECTS OF THE MERGER AND THE TERMS OF
THE MERGER AGREEMENT. THIS DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE MERGER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE HEREIN AND WHICH THE
POST SHAREHOLDERS AND THE COLUMBUS SHAREHOLDERS ARE URGED TO READ CAREFULLY.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Since 1994 various officers and employees of
Post and Columbus have met periodically to tour the properties of the other
company, generally discuss developments in the multifamily
24
<PAGE> 35
residential development and management business and share their views, ideas and
experiences with respect to the best practices in the industry.
On April 1, 1997, Messrs. Williams and Glover met with Messrs. Shaw and
Cureton in Dallas and discussed generally Post's anticipated expansion into the
Dallas market. At the meeting, Messrs. Williams, Glover, Shaw and Cureton
discussed very generally the possibility of forming a strategic alliance or
joint venture between Post and Columbus in certain geographic locations or the
potential combination of the companies.
On April 16, 1997, Mr. Shaw received an informal inquiry from the chief
executive officer of another publicly-traded REIT as to whether Columbus had an
interest in pursuing a possible strategic alliance or business combination with
that REIT.
On April 23, 1997, the Executive Committee of the Columbus Board (the
"Executive Committee") met and discussed Columbus' long-term growth and
capitalization plans and the benefit of lower cost of capital and access to
equity and debt capital markets enjoyed by REITs with larger market
capitalization. The Executive Committee further discussed the trend toward
consolidation in the multifamily REIT industry. The Executive Committee
determined that Mr. Shaw should further explore the inquiries made by Post and
the other publicly-traded REIT to determine whether the level of interest and
proposed terms of a combination were sufficient to bring the inquiries to the
attention of the Columbus Board.
On April 30, 1997, Messrs. Shaw and Cureton, together with certain other
executive officers of Columbus, met with representatives of Prudential
Securities to discuss the decision of the Executive Committee and the methods
for exploring the inquiries from Post and the other publicly-traded REIT. At
such meeting, a decision was made to meet the following week in Dallas with Mr.
Bloch, legal counsel to Columbus and other representatives from Prudential
Securities.
On May 1, 1997, Mr. Shaw met with the chief executive officer of the other
publicly-traded REIT and generally discussed the synergies which would result
from a proposed combination of the companies and certain proposed terms of a
potential merger. On the basis of such discussion, the parties agreed to
continue to analyze and discuss a potential merger. No discussions were held at
this meeting with respect to valuations, exchange ratio or consideration to the
Columbus Shareholders.
On May 2, 1997, Mr. Shaw met with Messrs. Williams and Glover in Atlanta to
discuss whether a proposed merger of the companies would be in the best interest
of each company and its shareholders. The parties discussed proposed terms of a
potential merger and concluded that discussions between the parties should
continue. No discussions were held at this meeting with respect to valuations,
exchange ratio or consideration to the Columbus Shareholders.
On May 6, 1997, Messrs. Bloch and Shaw, together with Mr. J. Michael Lewis,
the Treasurer and Senior Vice President of Columbus, and Mr. Richard R. Reupke,
the Chief Financial Officer of Columbus, met in Dallas with legal counsel and
representatives of Prudential Securities. Mr. Shaw described his discussions to
date with Post and the other publicly-traded REIT. Mr. Shaw stated his views as
to the significant interest of both Post and the other publicly-traded REIT in
pursuing discussions regarding a strategic merger with Columbus and the various
synergies and the potential benefits to the Columbus Shareholders from a merger
with either Post or the other publicly-traded REIT and certain other
publicly-traded REITs. Prudential Securities then reported on the market
perception of each of Post, the other publicly-traded REIT and certain other
publicly-traded REITs. The group then discussed the fiduciary duties of the
Columbus trust managers to the Columbus Shareholders and the mechanics and
process involved in a potential merger. Prudential Securities also recommended
that Columbus not hold exclusive discussions with either Post or any third party
so as to maximize the potential value to the Columbus Shareholders.
On May 12, 1997, Messrs. Williams and Glover met in Dallas with Messrs.
Bloch, Shaw and Cureton to further discuss the desirability of a potential
merger between the companies.
25
<PAGE> 36
As of May 16, 1997, Columbus entered into a confidentiality agreement with
Post pursuant to which each of the parties agreed to maintain the
confidentiality of the materials provided for a period of five years and Post
agreed to certain standstill arrangements for a two year period.
A special telephonic meeting of the Columbus Board was held on May 19,
1997. At the meeting, Mr. Shaw described to the Columbus Board his discussions
with executives of Post and the other publicly-traded REIT. Mr. Shaw stated his
views of the advantages to Columbus and its shareholders from a strategic merger
with either Post or the other publicly-traded REIT, including lower cost of
capital, geographic diversification, increased market capitalization and balance
sheet strength and various synergies and long-term opportunities arising as a
result of the combined skill, expertise and reputation of the companies. After a
lengthy discussion, the Columbus Board concluded that it was in the best
interests of Columbus and its shareholders to pursue discussions regarding a
potential strategic merger. The Columbus Board authorized the executive officers
of Columbus to engage Prudential Securities to act as financial advisor to
Columbus and ratified the execution of confidentiality agreements to facilitate
the exchange of information with Post and certain other publicly-traded REITs.
Following the Columbus Board's approval of the engagement of Prudential
Securities, Prudential Securities and Columbus' management began preparing
information regarding Columbus and its properties.
On May 22, 1997, the Post Board held a regular meeting in Atlanta following
the annual meeting of the Post Shareholders. Messrs. Williams and Glover
described to the Post Board the business and operations of Columbus and
discussed the status of the ongoing discussions with Columbus. The Post Board
authorized Messrs. Williams and Glover to continue the discussions with Columbus
regarding a possible transaction. No formal action was taken at the meeting with
respect to the Merger.
On May 23, 1997, the Columbus Board held a regular meeting in Dallas
following the annual meeting of the Columbus Shareholders. Mr. Shaw described to
the Columbus Board the business and operations of Post and the other
publicly-traded REIT, including specifically the quality of their respective
developments, their market capitalization, their cost of capital and their
development efforts. The Columbus Board further discussed generally the
perceived benefits to Columbus and its shareholders of a merger with Post and a
merger with the other publicly-traded REIT. No action was taken at the meeting
with respect to the Merger.
On June 4, 1997, Messrs. Shaw and Cureton met in Atlanta with Messrs.
Williams and Glover to discuss the potential merger. At that meeting, Columbus
offered to reimburse Post for its actual out-of-pocket costs and expenses up to
a maximum of $500,000 in the event of an acceptance or approval by the trust
managers or shareholders of Columbus of a proposal to acquire Columbus by an
entity other than Post.
On June 4, 1997, Columbus and the other publicly-traded REIT entered into a
confidentiality agreement pursuant to which each of the parties agreed to
maintain the confidentiality of the materials provided for a period of two years
and such REIT agreed to a standstill provision for a one year period. In
addition, Columbus agreed to reimburse the other party for its actual
out-of-pocket costs and expenses up to a maximum of $500,000, in the event of an
acceptance or approval by the trust managers or shareholders of Columbus of a
proposal to acquire Columbus by an entity other than such publicly-traded REIT.
After execution of the confidentiality agreements, Prudential Securities
delivered confidential memoranda containing information regarding Columbus and
its properties to Post and the other publicly-traded REIT and their respective
financial advisors. Prudential Securities requested that Post and the other
publicly-traded REIT provide preliminary expressions of interest regarding a
merger with Columbus (including proposed exchange ratios and other proposed
terms) by June 13, 1997.
During the following weeks, representatives of Post and the other
publicly-traded REIT met with Columbus representatives to obtain and review
certain information and to conduct their financial due diligence of Columbus.
On June 13, 1997, Prudential Securities received preliminary expressions of
interest, including proposed exchange ratios and other terms, from each of Post
and the other publicly-traded REIT through their respective financial advisors.
Each of the expressions of interest contemplated a stock-for-stock, tax-free
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merger with proposed exchange ratios resulting in valuations for Columbus which
were not significantly different. Each of Post and the other publicly-traded
REIT indicated that it would continue discussions only on an exclusive basis. On
June 14, 1997, Prudential Securities contacted the financial advisors for each
of Post and the other publicly-traded REIT and requested that they reconsider
and resubmit their proposals on June 15, 1997. On June 15, 1997, the financial
advisor to Post requested an extension of time within which to resubmit
proposals to June 16, 1997 and Prudential Securities agreed to such
postponement.
On June 16, 1997, the Columbus Board held a special telephonic meeting.
Representatives of Prudential Securities and Columbus' legal counsel also
participated in the meeting. Prudential Securities described to the Columbus
Board the process undertaken to obtain proposals regarding a strategic merger
with Columbus. Prudential Securities further described the anticipated terms of
both expected proposals and the anticipated timeline for the negotiation and
execution of a definitive agreement. No action was taken at the meeting with
respect to the Merger.
On June 16, 1997, each of Post and the other publicly-traded REIT
resubmitted proposals to Prudential Securities. The proposal submitted by the
other publicly-traded REIT reflected a higher value for the Columbus Common
Shares than that submitted by Post. In addition, such proposal required a ten
business day exclusivity period in which to negotiate a definitive agreement.
Accordingly, on June 16, 1997, Columbus agreed, through June 30, 1997, not to
discuss any potential merger or other sale or consolidation with any third
party.
Commencing June 17, 1997, legal counsel to and representatives of the other
publicly-traded REIT conducted additional due diligence reviews of Columbus. On
June 18, 1997, legal counsel to Columbus distributed a proposed form of
agreement and plan of merger to the other publicly-traded REIT and its legal
counsel and financial advisors.
On June 18, 1997, certain senior executive officers of the other
publicly-traded REIT met in Dallas with certain senior executive officers of
Columbus and discussed the terms of a proposed merger and toured certain of
Columbus' properties. On June 19, 1997, certain senior executive officers of
Columbus traveled to various locations to tour properties of the other
publicly-traded REIT.
During the week of June 23, 1997, legal counsel to and representatives of
Columbus conducted their due diligence investigation of the other
publicly-traded REIT and began negotiations of a definitive merger agreement.
During such week, the other publicly-traded REIT modified its initially proposed
exchange ratio such that the consideration to the Columbus Shareholders was no
longer attractive. As of June 30, 1997 (the expiration of the exclusivity
period), the parties had not reached agreement on the consideration to be paid
to the Columbus Shareholders or the structure and terms of the proposed merger.
On July 1, 1997, Prudential Securities contacted Post's financial advisor
to inform it that the exclusivity period with the other publicly-traded REIT had
expired and inquired whether Post would still have an interest in pursuing a
strategic merger. Representatives from Merrill Lynch indicated that they
believed Post continued to have an interest and that they would contact the
senior executive officers of Post.
On July 2, 1997, legal counsel to Columbus distributed to Merrill Lynch the
proposed form of agreement and plan of merger.
During the weeks of July 7 and July 14, representatives from Merrill Lynch,
Post and legal counsel to Post conducted their due diligence investigation of
Columbus.
On July 16, 1997, Messrs. Shaw, Cureton and Reupke, together with
representatives from Prudential Securities, met in Atlanta with Messrs. Glover
and Williams and representatives from Merrill Lynch to discuss the potential
terms of a strategic merger between Post and Columbus. The parties discussed
their views of the benefits of such a strategic merger to both companies and
their shareholders. Post confirmed its proposed exchange ratio of 0.615 and
discussed certain issues to be resolved in connection with the proposed
agreement and plan of merger.
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Following the meeting, representatives of each of the parties and their
legal counsel discussed various structural issues, including tax-related issues
in connection with the structure of the proposed merger as a tax-free
reorganization.
On July 21, 1997, Columbus held its regularly scheduled quarterly meeting
of the Columbus Board. The Executive Committee briefed the Columbus Board
regarding the expiration of the exclusivity period with the other
publicly-traded REIT as well as the discussions with Post the preceding week.
The Columbus Board discussed the history, business and operations of Post as
well as its market capitalization and cost of capital. The Columbus Board
discussed Post's expansion of its development efforts beyond the Southeast and
the potential general and administrative savings from a strategic merger between
Columbus and Post. The Executive Committee indicated that it expected to call a
special meeting of the Columbus Board in the near future for the purpose of
considering a definitive agreement for a strategic merger with Post.
On July 22, 1997, representatives from Columbus and its legal counsel
traveled to Atlanta to conduct a due diligence investigation of Post. On July
24, 1997, legal counsel to Post and Columbus began negotiations of the terms of
the Merger Agreement. Such negotiations continued through August 1, 1997.
On July 28, 1997, the Post Board met telephonically to discuss the proposed
Merger with Columbus, including the proposed exchange ratio and the terms and
conditions on which Post's proposal had been accepted. The Post Board also
discussed the financial terms of the Merger and the analysis undertaken by
Merrill Lynch to determine the fairness of the Exchange Ratio in the Merger.
Following the Post Board's discussion, the Post Board adjourned the meeting
until the morning of August 1, 1997.
On the morning of August 1, 1997, the Post Board reconvened its July 28
meeting and met telephonically with certain of Post's senior executive officers,
legal counsel and Merrill Lynch to review the final agreements and structure and
to consider and formally act upon the proposed Merger. Following an oral
presentation by Merrill Lynch regarding its financial analysis of the
transaction, Merrill Lynch delivered to the Post Board the written fairness
opinion that, as of August 1, 1997 and, subject to certain assumptions, factors
and limitations set forth in the opinion, the Exchange Ratio was fair to Post
from a financial point of view. See "-- Opinions of Financial Advisors -- Post"
for a discussion of the Merrill Lynch fairness opinion. After a discussion of
the Merger Agreement and the ancillary documents by legal counsel, the Post
Board discussed the terms of the Merger and the proposed timetable of the
transaction. Following such discussions, the Post Board approved the Merger, the
proposed Merger Agreement and the ancillary documents.
On the afternoon of August 1, 1997, a special meeting of the Columbus Board
was held at which members of management and representatives of Columbus'
financial and legal advisors were present. At such meeting Mr. Shaw provided the
Columbus Board with a discussion of the background and events leading up to the
meeting with respect to the proposed merger with Post. Mr. Shaw then set forth
the reasons he believed a strategic merger with Post would be beneficial to
Columbus and its shareholders, such reasons being (i) immediate geographic
diversification, (ii) Post's lower cost of capital and access to debt and equity
markets to support Columbus' existing and future developments, (iii) the
reputation of Post in the industry and its commitment (comparable to that of
Columbus) to quality developments and resident satisfaction and (iv) the
compatibility of the cultures, philosophies and management of the companies.
Legal counsel then described for the Columbus Board the due diligence
investigation of Post which had been conducted. Representatives of Prudential
Securities made a presentation regarding the proposed merger with Columbus.
Prudential Securities' presentation included, among other things, (i) a summary
of the key transaction terms and a description of the Merger, (ii) an analysis
of the stock trading history of each of Columbus and Post, (iii) valuation
analyses of Columbus and Post, (iv) a comparison of each of Columbus and Post
with selected publicly-traded companies, (v) a comparison of the proposed
financial terms of the Merger with the financial terms of other relevant mergers
and acquisitions, and (vi) a pro forma merger analysis. Prudential Securities
delivered to the Columbus Board its opinion that as of that date, based upon the
facts and circumstances as they existed at that time, and subject to certain
assumptions, limitations and other matters, the Merger Consideration to be
received by the holders of Columbus Common Shares pursuant to the Merger was
fair to the Columbus Shareholders from a financial point of view.
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Columbus' legal counsel then made a presentation to the Columbus Board in
which it explained the material terms of the proposed merger, including closing
conditions, termination rights and liquidated damages and expense reimbursement
provisions, briefed the Columbus Board on certain legal issues raised by the
proposed merger and advised the Columbus Board of its fiduciary duties in
connection with such transaction.
Following such presentations, and after extensive discussion of the
advantages and disadvantages of the proposed Merger transaction as described
under "-- Columbus' Reasons for the Merger" and "-- Opinions of Financial
Advisors -- Columbus," the Columbus Board concluded that the advantages of the
Merger outweighed the potential risks, and unanimously approved the Merger, the
Merger Agreement and all transactions contemplated thereby.
Post's Reasons for the Merger. The Post Board believes that the terms of
the Merger Agreement and the Merger and the other transactions contemplated
thereby are fair from a financial point of view to, and are in the best
interests of, Post and the Post Shareholders. Accordingly, the Post Board has
approved the Merger Agreement and recommends approval of the Merger Agreement
and such transactions by the Post Shareholders. In reaching its decision, the
Post Board in two separate meetings, considered several factors, consulted with
Post's management and legal counsel and was advised by Merrill Lynch, its
financial advisor in this transaction. The principal reasons, to which relative
weights were not assigned, for the Post Board's approval of the Merger Agreement
and its recommendation to the Post Shareholders are as follows:
(1) Post's strategic objective has been to focus on specific core
markets located in high growth areas of the Southeast. Post currently has
activities in Atlanta, Tampa, Orlando, Charlotte, Nashville and Northern
Virginia. The Merger adds Dallas as an additional core market. Management
considers Dallas to be an attractive market, with the Texas market
exhibiting growth patterns similar to those in Atlanta and other southern
cities. Prior to announcing the Merger, the Post Board had targeted Dallas
as the next major market in which to introduce Post Apartment Homes, and
Post was actively seeking opportunities in both Dallas and Houston. The
Merger will immediately provide Post with a critical mass of outstanding
upscale apartment communities in Dallas and a strong base for continued
expansion in that market, and in Houston and Denver, where Columbus is also
active. Following the merger, Post's investment will be spread among seven
core markets, with Atlanta representing 55.1% and Dallas representing 22.4%
of Post's apartment units at completed properties. The Post Board believes
that this geographic diversification will result in enhanced growth
opportunities. These markets create a broader platform for access to
opportunities for future development and acquisitions and enable Post to be
more selective in choosing opportunities, which could result in higher
returns on investment.
(2) Both Post and Columbus have significant development and operating
experience. Columbus and Post have similar strategic approaches to
development, operations and training and both have proven track records of
building successful upscale apartment communities in niche and infill
locations. The Merger provides Post the platform to expand its development
program into other solid development markets, capitalizing on the best
practices and experience of both companies.
(3) Geographic diversification also reduces the dependence on any one
market. Recessions often affect economies of different regions at different
times. With a substantial number of apartment units in both the Southeast
and Southwest, there is a reduction in the risk that a regional economic
downturn could affect all of the apartment communities simultaneously.
Thus, the geographic diversification as a result of the Merger may smooth
Post's performance through the economic cycles.
(4) The combined organization will allow the elimination of several
redundant positions and activities, including the integration of
information systems, support functions and public company expenses. The
Post Board believes that the Merger will allow Post to realize economies of
scale by spreading certain general and administrative costs over a larger
number of units, thereby improving Post's operating margin. In addition, by
taking advantage of the "best practices" of each company, the Post Board
believes the operating results of Post are likely to be enhanced.
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(5) Analyses by management show that the Merger should be accretive to
Post's FFO per share in 1998. FFO is a widely accepted measure of an equity
REIT's operating performance.
(6) The Merger increases Post's total market capitalization from
$1,615.6 million to an estimated $2,203.8 million and increases the market
equity of its common stock and units of the Operating Partnership from
$1,091.9 million to an estimated $1,427.7 million (based on $39.9375 per
share, the closing price of Post Common Stock on August 1, 1997). This
increased size affords several benefits. First, the increased number of
shares in the market are expected to result in greater liquidity for
holders of Post Common Stock. The Post Board believes that larger
capitalization companies generally have greater trading liquidity, which
allows the purchase and sale of larger volumes of shares without disrupting
the market for such shares. Furthermore, larger capitalization companies
are more attractive to certain institutional investors and, therefore, the
Merger is expected to increase the universe of potential buyers of Post's
fixed income and equity securities. Finally, the Post Board believes that
the Merger will not affect the rating given to Post's fixed income
securities by credit rating agencies. Subsequent to Post's and Columbus'
announcement of the Merger, such credit rating agencies confirmed the
rating of Post's fixed income securities.
(7) The financial presentation of Merrill Lynch and the August 1, 1997
written opinion of Merrill Lynch, which was further confirmed in writing on
the date of this Joint Proxy Statement/Prospectus, that the Exchange Ratio
was fair, from a financial point of view, to Post as of the date of such
opinion and based upon and subject to certain matters stated therein.
(8) Presentations from, and discussions with, certain executive
officers of Post and outside legal counsel regarding the business, real
estate assets, financial, accounting and legal due diligence with respect
to Columbus and the terms and conditions of the Merger Agreement.
The Post Board also discussed certain potential negative factors and risks
that could arise or do arise from the Merger. These included, among others, the
expansion into a new region and new markets with which Post has little prior
experience, potential current imbalance between supply of, and demand for,
apartments in certain of these new markets, the potential difficulties of
integrating Columbus' operations into Post, the higher risk associated with
increased development activities, increased debt to market capitalization and
encumbrances of assets, the significant costs involved in connection with
consummating the Merger, the substantial time and effort of Post management
required to effectuate the Merger, integrate the business of Columbus into Post,
and manage the increased and more diverse property portfolio and the risk that
the expected benefits of the Merger might not be fully realized. The Post Board
believed that the benefits and advantages of the Merger far outweighed the
negative factors and risks.
THE POST BOARD BELIEVES THAT THE MERGER, INCLUDING THE EXCHANGE RATIO, IS
FAIR AND IN THE BEST INTERESTS OF THE POST SHAREHOLDERS AND HAS APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THAT THE POST SHAREHOLDERS VOTE FOR APPROVAL OF
THE MERGER AGREEMENT AND THE STOCK ISSUANCE.
In the event the Merger is not consummated for any reason, Post will return
to executing its strategic objective of being a leading apartment owner and
developer in major Sunbelt markets. To the extent such opportunities are
available, it would likely consider other potential combinations with public or
private apartment owners that the Post Board and management believe add value
and enhance the future earnings of Post and otherwise are in the best interests
of the Post Shareholders.
Columbus' Reasons for the Merger. The Columbus Board believes that the
terms of the Merger Agreement and the Merger and the other transactions
contemplated thereby are fair from a financial point of view to, and are in the
best interests of, Columbus and the Columbus Shareholders. Accordingly, the
Columbus Board has unanimously approved the Merger Agreement and recommends
approval of the Merger Agreement and such transactions by the Columbus
Shareholders. In reaching its decision, the Columbus Board in two separate
meetings considered several factors, consulted with Columbus' management and
legal counsel and was advised by Prudential Securities, its financial advisor in
this transaction. The principal
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reasons, to which relative weights were not assigned, for the Columbus Board's
approval of the Merger Agreement and its recommendation to the Columbus
Shareholders are as follows:
(1) Information and analyses relating to the financial performance,
condition, business operations and prospects of Columbus and Post, and
current industry, economic and market conditions. In this regard, the
Columbus Board placed special emphasis on, and viewed as favorable to its
determination, Post's lower cost of equity and debt capital, its lower
leverage ratio, and its investment grade rating for unsecured debt
(resulting in less dependence on secured mortgage indebtedness) and
increased access to debt and equity capital markets.
(2) Possible strategic alternatives to the Merger for enhancing
long-term shareholder value, including transactions with other potential
strategic merger partners or strategic equity investors. In particular,
Columbus and Prudential Securities had contacted and entered into
negotiations with another potential strategic merger partner. When the
negotiations between Columbus and such strategic merger partner failed, the
Columbus Board determined that the Merger with Post represented the best
available alternative for enhancing long-term value to the Columbus
Shareholders.
(3) The combined organization will allow the elimination of several
redundant positions and activities, including the integration of office
facilities, information systems, support functions and public company
expenses. The Columbus Board believes that the Merger will allow the
organization to realize economies of scale by spreading certain general and
administrative costs over a larger number of units, thereby improving the
combined organization's profit margin. In addition, by taking advantage of
the "best practices" of each company, the Columbus Board believes that the
operating results of the combined organization will be enhanced.
(4) The economic terms of the Merger Agreement, including the Exchange
Ratio and the 25.5% equity interest in the combined equity to be received
by the Columbus Shareholders. In regard to the Exchange Ratio, the Columbus
Board considered that (a) the Exchange Ratio had been determined through
arm's-length negotiations, (b) the Exchange Ratio represented an implied
value to the Columbus Shareholders of $24.56 based upon Post's trading
price ($39.94) on July 30, 1997 (or a premium of 8% over the closing price
on June 30, 1997), and (c) the implied value to the Columbus Shareholders
referred to in clause (b) were above or within the ranges of stand-alone
values of Columbus using each of the valuation methodologies (including net
asset value) employed by Prudential Securities.
(5) The other terms and conditions of the Merger Agreement, including
the mutuality of most of the representations and warranties and covenants,
the requirement that each party consult with the other on significant
business and financial matters prior to consummation of the Merger, the
ability of the Columbus Board to designate Mr. Shaw to the Post Board, and
the ability of the Columbus Board to pursue an unsolicited superior
competing transaction should its fiduciary duties so require.
(6) The structure of the Merger. In this regard, the Columbus Board
placed special emphasis on, and viewed as favorable to its determination,
the fact that the Merger, as a "stock-for-stock" rather than a
"cash-for-stock" transaction, will provide an opportunity for the Columbus
Shareholders to share in any future appreciation of the stock price of the
combined entity and should be a tax-free transaction currently.
(7) The similarities between the two companies and synergies resulting
from their combination. In this regard, the Columbus Board noted that Post
and Columbus both have significant acquisition and development expertise,
with a commitment to high quality, upscale multifamily residential
properties. The combination provides greater opportunity to expand the
development program into additional markets and further reduce the
dependence on the Atlanta and Dallas markets.
(8) Geographic diversification also reduces the dependence on any one
market. Recessions often affect economies of different regions at different
times. With a substantial number of apartment units in both the Southwest
and Southeast, there is a reduction in the risk that a regional economic
downturn affects all of the apartment communities simultaneously. Thus, the
geographic diversification as a result of the Merger may smooth the
combined organization's performance through the economic cycles.
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(9) The financial presentation of Prudential Securities and the August
1, 1997 formal opinion of Prudential Securities that the Merger
Consideration was fair, from a financial point of view, to the Columbus
Shareholders as of the date of such opinion and based upon and subject to
certain matters stated therein.
(10) Presentations from, and discussions with, certain executive
officers of Columbus and outside legal counsel regarding the business, real
estate assets, financial, accounting and legal due diligence with respect
to Post and the terms and conditions of the Merger Agreement.
The Columbus Board also considered the following potentially negative
factors in its deliberations concerning the Merger:
(1) The fact that, because the Exchange Ratio is fixed, a decline in
the value of Post Common Stock would reduce the value of the consideration
to be received by the Columbus Shareholders in the Merger. This factor was
mitigated, in the Columbus Board's view, by the fact that because of the
fixed Exchange Ratio, the Columbus Shareholders would benefit from any
appreciation in the price of Post Common Stock.
(2) The current level of supply and demand for multifamily properties
in Atlanta, which is Post's primary market.
(3) The significant costs involved in connection with the consummation
of the Merger.
(4) The risk that the anticipated benefits of the Merger may not be
realized.
(5) The fact that under the terms of the Merger Agreement, Columbus
and its directors, trust managers, officers, employees, agents and
representatives are prohibited from initiating, soliciting or encouraging
any inquiries or from making any proposal that constitutes, or may
reasonably be expected to lead to, a transaction which would compete with
the Merger except that if the Columbus Board determines in good faith after
consultation with outside legal counsel that it is required by its
fiduciary obligations to do so, the Columbus Board may, among other things,
respond to and engage in discussions and negotiations with persons making
unsolicited proposals or inquiries and may approve or recommend such a
transaction, and the possibility that Columbus may be required, if the
Merger Agreement is terminated under certain circumstances, to pay Post a
termination fee of $10 million or to reimburse Post for up to $1.5 million
of its out-of-pocket expenses incurred in connection with the Merger. The
Columbus Board recognized that the inclusion of such provisions in the
Merger Agreement would render it less likely that a more attractive offer
would be presented to Columbus and the Columbus Shareholders; however, the
Columbus Board believed that, based on the process it engaged in to find a
strategic partner, the Merger Agreement represents the best opportunity to
enhance long-term shareholder value.
THE COLUMBUS BOARD BELIEVES THAT THE MERGER, INCLUDING THE EXCHANGE RATIO,
IS FAIR AND IN THE BEST INTERESTS OF THE COLUMBUS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE COLUMBUS
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
OPINIONS OF FINANCIAL ADVISORS
Post. Merrill Lynch was engaged by Post to deliver a fairness opinion to
assist Post in evaluating a strategic merger between Post and Columbus. On
August 1, 1997, Merrill Lynch delivered its opinion (the "Merrill Lynch
Opinion") to the Post Board stating that, as of August 1, 1997, and based upon
the assumptions made, matters considered and limits of review set forth therein,
the Exchange Ratio is fair, from a financial point of view, to Post.
The full text of the Merrill Lynch Opinion, which sets forth assumptions
made, matters considered and limits on the review undertaken, is attached to
this Joint Proxy Statement/Prospectus as Annex B and is incorporated herein by
this reference. The description of the Merrill Lynch Opinion set forth herein is
qualified in its entirety by reference to the full text of the Merrill Lynch
Opinion. Post Shareholders are urged to read the opinion in its entirety. In the
opinion of Post, no events or significant changes in information have
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occurred that would alter the opinion of Merrill Lynch. However, if such an
event or change does occur, including, without limitation, an amendment to the
Merger Agreement which materially affects the financial terms of the Merger
Agreement, a revised fairness opinion may be requested.
THE MERRILL LYNCH OPINION IS ADDRESSED TO THE POST BOARD AND ADDRESSES ONLY
THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO AND DOES NOT
ADDRESS THE MERITS OF THE UNDERLYING DECISION BY POST TO ENGAGE IN THE
TRANSACTION AND DOES NOT CONSTITUTE, NOR SHOULD IT BE CONSTRUED AS, A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
POST SPECIAL MEETING. THE EXCHANGE RATIO WAS DETERMINED ON THE BASIS OF
NEGOTIATIONS BETWEEN POST AND COLUMBUS AND WAS APPROVED BY THE POST BOARD.
In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch, among other things: (i) reviewed certain publicly available business and
financial information relating to Post and Columbus which Merrill Lynch deemed
to be relevant; (ii) reviewed certain information, including financial
forecasts, relating to the business, earnings, funds from operations, adjusted
funds from operations, cash flow, assets, liabilities and prospects of Post and
Columbus furnished to Merrill Lynch by Post and Columbus, as well as the amount
and timing of the cost savings and related expenses and synergies expected to
result from the Merger (the "Expected Synergies") furnished to Merrill Lynch by
Post and Columbus; (iii) conducted discussions with members of senior management
of Post and Columbus concerning the matters described in clauses (i) and (ii)
above, as well as their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies; (iv) reviewed the market
prices and valuation multiples for the Post Common Stock and the Columbus Common
Shares and compared them with those of certain publicly traded companies that
Merrill Lynch deemed relevant; (v) reviewed the results of operations of Post
and Columbus and compared them with those of certain publicly traded companies
that Merrill Lynch deemed to be relevant; (vi) compared the proposed financial
terms of the Merger with the financial terms of certain other transactions which
Merrill Lynch deemed to be relevant; (vii) participated in certain discussions
and negotiations among representatives of Post and Columbus and their financial
and legal advisors; (viii) reviewed the potential pro forma impact of the
Merger; (ix) reviewed the Merger Agreement; and (x) reviewed such other
financial studies and analyses and took into account such other matters as
Merrill Lynch deemed necessary, including its assessment of general economic,
market and monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available, and Merrill Lynch has not assumed any responsibility for
independently verifying such information or undertaken an independent evaluation
or appraisal of any of the assets or liabilities of Post or Columbus or been
furnished with any such evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct any physical inspection of the properties
or facilities of Post or Columbus. With respect to the financial forecast
information and the Expected Synergies furnished to or discussed with Merrill
Lynch by Post or Columbus, Merrill Lynch assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgment of
Post's or Columbus' management as to the expected future financial performance
of Post or Columbus, as the case may be, and the Expected Synergies. Merrill
Lynch further assumed that the Merger will qualify as a tax-free reorganization
for United States federal income tax purposes.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the Merrill Lynch Opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger. Merrill Lynch also assumed that the Merger
will not change the REIT status of the pro forma entity.
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At the meeting of the Post Board held on August 1, 1997, Merrill Lynch
presented certain financial analyses accompanied by written materials in
connection with the delivery of the Merrill Lynch Opinion. The following is a
summary of the material financial and comparative analyses performed by Merrill
Lynch in arriving at the Merrill Lynch Opinion.
Valuation of Columbus
Historical Trading Performance and Current Capitalization. Merrill
Lynch reviewed certain trading information for Columbus and, on the basis
thereof, calculated its market value, market capitalization and trading
multiples based on its stock price as of July 25, 1997 of $24.00. For this
purpose, Merrill Lynch defined "total market capitalization" as market
value of Columbus' common equity, plus preferred stock at liquidation value
plus total debt. Merrill Lynch then calculated the market value of Columbus
as a multiple of projected FFO (based on mean estimates of FFO provided by
First Call, an industry service provider of earnings estimates based on an
average of earnings estimates published by various investment banking firms
("First Call")) and FFO less recurring capital expenditures ("AFFO") (based
on estimates of AFFO from analysts' reports from Merrill Lynch Equity
Research). Columbus' FFO multiples for 1997 and 1998 were 12.3x and 11.4x,
respectively, and the AFFO multiples for 1997 and 1998 were 13.4x and
12.4x, respectively.
Merrill Lynch reviewed Post's offer for Columbus and, on the basis
thereof and using publicly available share price information for the Post
Common Stock as of July 25, 1997, calculated an aggregate net offer value
(the "Net Offer Value") of $350.5 million. The Net Offer Value consisted of
$387.6 million of Post Common Stock less option proceeds of $36.1 million
dollars. Using an estimation of Columbus' debt balances as of December 31,
1997 provided by Columbus' management, Merrill Lynch also calculated an
aggregate transaction value (the "Transaction Value") of $619.2 million
which consisted of the Net Offer Value plus debt of $297.5 million, less an
estimation of Columbus' cash balance at December 31, 1997 of $28.7 million.
Merrill Lynch also calculated Net Offer Value transaction multiples based
on projections provided by Columbus' management of its FFO and AFFO of
13.2x and 14.4x, respectively, for 1997 and 10.8x and 11.8x, respectively,
for 1998.
Analysis of Selected Comparable Publicly Traded Companies. Using
publicly available information and estimates of future financial results
published by First Call and taken from Merrill Lynch Equity Research,
Merrill Lynch compared certain financial and operating information and
ratios for Columbus with the corresponding financial and operating
information for a group of publicly traded companies engaged primarily in
the ownership, management, operation and acquisition of multifamily
properties which Merrill Lynch deemed to be reasonably comparable to
Columbus. For the purpose of its analyses, the following companies were
used as comparable companies to Columbus: Gables Residential Trust, Post
Properties, Inc. and Summit Properties, Inc. (collectively, the "Columbus
Comparable Companies").
Merrill Lynch's calculations resulted in the following relevant ranges
for the Columbus Comparable Companies and for Columbus as of July 25, 1997:
a range of market value as a multiple of projected 1997 FFO of 10.5x to
13.6x, with a mean of 11.6x (as compared to Columbus at 12.3x); a range of
market value as a multiple of projected 1998 FFO of 9.6x to 12.4x, with a
mean of 10.7x (as compared to Columbus at 11.4x); a range of market value
as a multiple of projected 1997 AFFO of 11.5x to 14.4x, with a mean of
12.8x (as compared to Columbus at 13.4x); and a range of market value as a
multiple of projected 1998 AFFO of 10.6x to 13.2x, with a mean of 11.8x (as
compared to Columbus at 12.4x).
None of the Columbus Comparable Companies is, of course, identical to
Columbus. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Columbus Comparable
Companies and other factors that could affect the public trading volume of
the Columbus Comparable Companies, as well as that of Columbus. In
addition, the multiples of market value to estimated 1997 and projected
1998 FFO and AFFO for the
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Columbus Comparable Companies are based on projections prepared by research
analysts using only publicly available information. Accordingly, such
estimates may or may not prove to be accurate.
Comparable Transactions Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of other selected mergers and
strategic transactions involving REITs which Merrill Lynch deemed to be
relevant. These transactions were Equity Residential Property Trust's
merger with Wellsford Residential Property Trust, Camden Property Trust's
merger with Paragon Group, Inc., and United Dominion Realty, Inc.'s merger
with South West Property Trust Inc.
Using publicly available information and estimates of financial
results as published by First Call, Merrill Lynch calculated the premium of
the implied offer value per share relative to the acquired company's stock
price on the day before announcement of the respective transaction and the
implied offer value per share for the acquired company as of the day before
the announcement of the respective transaction, as a multiple of the
estimated FFO per share for such company for the current year, if the deal
was announced in the first half of the year, or for the next year, if the
deal was announced in the second half of the year. This analysis yielded a
range of premiums of 10.3% to 19.5% with a mean of 13.9% and a range of
transaction FFO multiples of 10.6x to 12.3x with a mean of 11.4x. This
results in a per share valuation of between $22.15 and $25.82.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted
cash flow analyses (i.e., analyses of the present value of the projected
levered cash flows for the periods using the discount rates indicated) of
Columbus based upon projections provided by Columbus' management of its
AFFO for the years 1998 through 2002, inclusive, using discount rates
reflecting an equity cost of capital ranging from 17.0% to 19.0% and
terminal value multiples of calendar year 2002 AFFO ranging from 13.0x to
14.0x. Based upon Columbus' projection of AFFO per share for the years 1998
through 2002, the range of present values per share of Common Stock was
$23.72 to $26.92 using the discounted AFFO method.
Net Asset Valuation Analysis. Merrill Lynch performed a net asset
valuation for Columbus based on an asset-by-asset real estate valuation of
Columbus' properties, an estimation of the current value for Columbus'
other assets and liabilities, and an estimation of Columbus' debt balances
as of December 31, 1997. The real estate valuation utilized property
specific projections prepared by Columbus' management for the calendar year
1998. For the operating portfolio of Columbus, the valuation utilized the
direct capitalization method on 1998 property net operating income and a
range of capitalization rates of 8.25% to 8.75%. These calculations
indicated a per share net asset valuation range for Columbus of $23.37 to
$25.70.
Valuation of Post
Historical Trading Performance and Current Capitalization. Merrill
Lynch reviewed certain trading information for Post and, on the basis
thereof, calculated its market value, market capitalization and trading
multiples based on its stock price as of July 25, 1997 of $40.94. For this
purpose, Merrill Lynch defined "total market capitalization" as market
value of Post's common equity, plus preferred stock at liquidation value
plus total debt. Merrill Lynch then calculated the market value of Post as
a multiple of projected FFO (based on mean estimates of FFO provided by
First Call, an industry service provider of earnings estimates based on an
average of earnings estimates published by various investment banking
firms) and AFFO (based on estimates of AFFO from analysts' reports from
Merrill Lynch Equity Research). Post's FFO multiples for 1997 and 1998 were
13.6x and 12.4x, respectively, and the AFFO multiples for 1997 and 1998
were 14.4x and 13.2x, respectively.
Analysis of Selected Comparable Publicly Traded Companies. Using
publicly available information and estimates of future financial results
published by First Call and taken from Merrill Lynch Equity Research,
Merrill Lynch compared certain financial and operating information and
ratios for Post with the corresponding financial and operating information
for a group of publicly traded companies engaged primarily in the
ownership, management, operation and acquisition of multifamily properties
which Merrill Lynch deemed to be reasonably comparable to Post. For the
purpose of its analyses, the following
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companies were used as comparable companies to Post: Avalon Properties,
Inc., Columbus Realty Trust, Gables Residential Trust and Summit
Properties, Inc. (collectively, the "Post Comparable Companies").
Merrill Lynch's calculations resulted in the following relevant ranges
for the Post Comparable Companies and for Post as of July 25, 1997: a range
of market value as a multiple of projected 1997 FFO of 10.5x to 14.1x, with
a mean of 11.9x (as compared to Post at 13.6x); a range of market value as
a multiple of projected 1998 FFO of 9.6x to 12.7x, with a mean of 11.0x (as
compared to Post at 12.4x); a range of market value as a multiple of
projected 1997 AFFO of 11.5x to 15.0x, with a mean of 13.1x (as compared to
Post at 14.4x); and a range of market value as a multiple of projected 1998
AFFO of 10.6x to 13.5x, with a mean of 12.0x (as compared to Post at
13.2x).
None of the Post Comparable Companies is, of course, identical to
Post. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Post Comparable Companies,
and other factors that could affect the public trading volume of the Post
Comparable Companies, as well as that of Post. In addition, the multiples
of market value to estimated 1997 and projected 1998 FFO and AFFO for the
Post Comparable Companies are based on projections prepared by research
analysts using only publicly available information. Accordingly, such
estimates may or may not prove to be accurate.
Comparable Transactions Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of other selected mergers and
strategic transactions involving REITs which Merrill Lynch deemed to be
relevant. These transactions were Equity Residential Property Trust's
merger with Wellsford Residential Property Trust, Camden Property Trust's
merger with Paragon Group, Inc., and United Dominion Realty, Inc.'s merger
with South West Property Trust Inc.
Using publicly available information and estimates of financial
results as published by First Call, Merrill Lynch calculated the premium of
the implied offer value per share relative to the acquired company's stock
price on the day before announcement of the respective transaction and the
implied offer value per share for the acquired company as of the day before
the announcement of the respective transaction, as a multiple of the
estimated FFO per share for such company for the current year, if the deal
was announced in the first half of the year, or for the next year, if the
deal was announced in the second half of the year. This analysis yielded a
range of premiums of 10.3% to 19.5% with a mean of 13.9% and a range of
transaction FFO multiples of 10.6x to 12.3x with a mean of 11.4x. This
results in a per share valuation of between $35.34 and $41.19.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted
cash flow analyses (i.e., analyses of the present value of the projected
levered cash flows for the periods using the discount rates indicated) of
Post based upon projections provided by Post's management of its AFFO for
the years 1998 through 2002, inclusive, using discount rates reflecting an
equity cost of capital ranging from 17.0% to 19.0% and terminal value
multiples of calendar year 2002 AFFO ranging from 13.0x to 14.0x. Based
upon Post's projection of AFFO per share for the years 1998 through 2002,
the range of present values per share of Post Common Stock was $38.16 to
$43.33 using the discounted AFFO method.
Merrill Lynch also performed a net asset valuation for Post based on
an asset-by-asset real estate valuation of Post's properties, an estimation
of the current values for Post's other assets and liabilities, and an
estimation of Post's debt balances as of December 31, 1997. The real estate
valuation utilized property specific projections prepared by Post's
management for the calendar year 1998. For the operating portfolio of Post,
the valuation utilized the direct capitalization method on 1998 property
net operating income and a range of capitalization rates of 8.25% to 8.75%.
These calculations indicated a per share net asset valuation range for Post
of $40.55 to $43.78.
Pro Forma Merger Consequences
Relative Discounted Cash Flow Analyses. Merrill Lynch utilized the
results of the discounted cash flow analyses of Post and Columbus described
above to calculate a range of implied exchange ratios based
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<PAGE> 47
on a comparison of the relative ranges of discounted cash flow value for
Post and Columbus at a 0.0%, 23.8% and 100.0% allocation to Columbus of
Expected Synergies. When 0.0% of the Expected Synergies were allocated to
Columbus' discounted cash flow value and compared to Post's discounted cash
flow value, the analysis yielded an implied exchange ratio range of .621 to
.622. An allocation of 23.8% of the Expected Synergies to Columbus yielded
an implied exchange ratio of .623 and a 100.0% allocation yielded an
implied exchange ratio of .629.
Pro Forma Combination Analysis. Merrill Lynch analyzed the pro forma
effects resulting from the Merger, including the potential impact on Post's
projected stand-alone FFO per share and the anticipated accretion (i.e.,
the incremental increase) to Post's FFO per share resulting from the
Merger. Merrill Lynch observed that, after giving effect to the Expected
Synergies, the Merger would be accretive to Post's projected FFO per share
in each of the years 1997 through 2002, inclusive. Merrill Lynch also
observed that the indicated annual dividend per share of Post Common Stock
pro forma for the Merger would be $2.38 per share of Post Common Stock,
implying no reduction in Post's current indicated dividend rate.
Capitalization. In addition, Merrill Lynch compared Post's projected
book capitalization as of December 31, 1997 to (i) Post's pro forma
projected book capitalization as of December 31, 1997 after giving effect
to the Merger and (ii) based on projections of Post's and Columbus'
management, Post's pro forma implied market capitalization as of December
31, 1997 after giving effect to the Merger. The projected total debt to
implied market capitalization was 36.8%, 33.8% and 32.2% on a pro forma
basis as of December 31, 1997, 1998 and 1999, respectively.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch in arriving at the Merrill Lynch
Opinion. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial or summary description. Merrill Lynch
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create a misleading view of the
process underlying the Merrill Lynch Opinion. In its analyses, Merrill Lynch
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond Post's,
Columbus' and Merrill Lynch's control. Any estimates contained in Merrill
Lynch's analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimated values
do not purport to be appraisals and do not necessarily reflect the prices at
which businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
The Post Board selected Merrill Lynch to render a fairness opinion because
Merrill Lynch is an internationally recognized investment banking firm with
substantial experience in transactions similar to the Merger and because it is
familiar with Post and its business. Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private placements.
Pursuant to a letter agreement dated June 12, 1997, Post paid Merrill Lynch
fees as follows: (i) a fee of $50,000, payable one month from the date of such
letter agreement; (ii) an additional fee of $1,000,000, plus reimbursable
expenses, on the date that the Merger Agreement was executed and (iii) on the
date that the Merger is consummated, .67% of the purchase price (as defined in
the letter agreement) subject to a maximum payment of $4,020,000, with any fees
paid under the first two clauses above used to offset any amount due under the
third clause above. Post also reimbursed Merrill Lynch for its reasonable
out-of-pocket expenses incurred in connection with its advisory work, including
the reasonable fees and disbursements of its legal counsel, subject to certain
limitation, and to indemnify Merrill Lynch and certain related persons against
certain liabilities arising out of or in conjunction with its rendering of
services under such letter agreement, including certain liabilities under the
federal securities law.
Merrill Lynch may provide financial advisory and financing services to Post
and may receive fees for the rendering of such services. In the ordinary course
of its business, Merrill Lynch may actively trade in the securities of Post or
Columbus for its own account and the account of its customers and, accordingly,
may at any time hold a long or short position in such securities.
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Columbus. On August 1, 1997, Prudential Securities delivered its written
opinion (the "Prudential Securities Opinion") to Columbus' Board that, as of
such date subject to certain assumptions, limitations and other matters set
forth in the Prudential Securities Opinion, the Merger Consideration to be
received by the Columbus Shareholders is fair to the Columbus Shareholders from
a financial point of view. At the meeting of the Columbus Board held on August
1, 1997, Prudential Securities presented certain financial analyses accompanied
by written materials in connection with the delivery of the Prudential
Securities Opinion. These analyses, as presented to the Columbus Board, are
summarized herein. Members of the Columbus Board were present (either in person
or via teleconference) at the meeting and had an opportunity to ask questions of
Prudential Securities. Prudential Securities discussed with the Columbus Board
the information in the report and the financial data and other factors
considered by Prudential Securities in conducting its analyses, all of which are
summarized herein.
Except with respect to one other publicly-traded REIT, Prudential
Securities was not asked to and did not solicit indications of interest in a
possible acquisition or merger of Columbus. No other limitations were imposed by
the Company or Prudential Securities with respect to the investigation made or
the procedure followed by Prudential Securities in rendering its opinion. A copy
of the Prudential Securities Opinion, which sets forth the assumptions made,
matters considered and limits on the review undertaken, is attached to this
Joint Proxy Statement/Prospectus as Annex C and is incorporated herein by
reference. The summary of the Prudential Securities Opinion set forth below is
qualified in its entirety by reference to the full text of the Prudential
Securities Opinion. Columbus' shareholders are urged to read the Opinion in its
entirety.
THE PRUDENTIAL SECURITIES OPINION IS ADDRESSED TO THE COLUMBUS BOARD AND
ADDRESSES ONLY THE FAIRNESS AS OF THE DATE OF SUCH OPINION, FROM A FINANCIAL
POINT OF VIEW, OF THE MERGER CONSIDERATION AND DOES NOT ADDRESS THE MERITS OF
THE UNDERLYING DECISION BY COLUMBUS TO ENGAGE IN THE TRANSACTION AND DOES NOT
CONSTITUTE, NOR SHOULD IT BE CONSTRUED AS, A RECOMMENDATION TO ANY SHAREHOLDER
AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE COLUMBUS SPECIAL MEETING. THE
CONSIDERATION TO BE RECEIVED IN THE MERGER PURSUANT TO THE TRANSACTION WAS
DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN POST AND COLUMBUS AND WAS
APPROVED BY THE COLUMBUS BOARD.
In conducting its analysis and arriving at the Prudential Securities
Opinion, Prudential Securities reviewed such information and considered such
financial data and other factors as Prudential Securities deemed relevant under
the circumstances, including:
(i) certain publicly available historical financial and operating data
of Columbus including (a) the Annual Report to Shareholders and Annual
Report on Form 10-K and Form 10-K/A of Columbus for the three fiscal years
ended December 31, 1994, 1995 and 1996, (b) the Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and internal management reports
for the quarter ended June 30, 1997, (c) the Proxy Statement for the Annual
Meeting of Shareholders held on May 23, 1997, (d) the Prospectus dated
December 21, 1993 relating to the sale of 6,898,566 shares of Columbus
Common Shares and (e) the Prospectus dated July 22, 1994 relating to the
sale of 2,700,000 shares of Columbus Common Shares;
(ii) certain publicly-available historical, financial and operating
data for Post including (a) the Annual Report on Form 10-K and Form 10-K/A
for the three fiscal years ended December 31, 1994, 1995 and 1996, (b) the
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
internal reports for the quarter ended June 30, 1997 and (c) a press
release dated July 22, 1997 announcing financial results for the quarter
ended June 30, 1997;
(iii) certain information relating to Columbus, including projected
income statements for the fiscal years ending December 1997, 1998 and 1999,
prepared by the management of Columbus;
(iv) certain information relating to Post, including forecasts for the
fiscal years ending December 31, 1997, 1998, 1999 and 2000 prepared by the
management of Post;
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(v) operating and unaudited financial information of certain Post
properties and certain Columbus properties for the six months ending June
30, 1997;
(vi) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses Prudential Securities
deemed comparable to Columbus and Post, respectively, or otherwise relevant
to its inquiry;
(vii) the financial terms of certain recent transactions Prudential
Securities deemed relevant to its inquiry;
(viii) the historical stock prices and trading volumes of Columbus
Common Shares and Post Common Stock and certain publicly traded companies
which Prudential Securities deemed to be comparable to Columbus and Post,
respectively;
(ix) the financial terms of certain recent merger transactions
Prudential Securities deemed relevant;
(x) a draft dated July 27, 1997 of the Merger Agreement; and
(xi) such other financial studies, analyses and investigations as
Prudential Securities deemed appropriate.
Prudential Securities discussed with senior management of Columbus and
Post: (i) the prospects for their respective businesses; (ii) their estimate of
such businesses' future financial performance; (iii) the potential financial
impact of the Merger on Columbus and Post and (iv) such other matters as
Prudential Securities deemed relevant. The Prudential Securities Opinion is
necessarily based on economic, financial and market conditions as they existed
and could be evaluated as of the date of the Prudential Securities Opinion.
In connection with its review and analysis in arriving at the Prudential
Securities Opinion, Prudential Securities assumed and relied upon the accuracy
and completeness of the financial and other information provided to Prudential
Securities or which was publicly available, and did not undertake to verify
independently any such information. Prudential Securities neither made nor
obtained any independent valuations or appraisals of any of Columbus' assets.
With respect to certain financial projections of Columbus and Post,
respectively, Prudential Securities assumed that the information was reasonably
prepared and that the projections represented each respective management's best
currently available estimate as to the future financial performance of Columbus
and Post.
The Prudential Securities Opinion is predicated on the Merger qualifying
(i) as a tax-free reorganization within the meaning of Section 368(a) of the
Code, and (ii) for "purchase" accounting treatment under Accounting Principles
Board Opinion No. 16. Further, the Prudential Securities Opinion is necessarily
based on economic, financial and market conditions as they exist and can only be
evaluated as of the date thereof.
Prudential Securities assumed that the draft Merger Agreement reviewed by
it will conform in all material respects to those documents when in final form,
that the disclosure letters and due diligence contemplated by that agreement
will not identify any adverse condition, and that the Merger will be consummated
substantially as contemplated by the draft Merger Agreement.
Prudential Securities expressed no opinion as to what the value of the Post
Common Stock will be when issued to the Columbus Shareholders or the prices at
which the Post Common Stock will trade after the Merger. In addition, the
Prudential Securities Opinion does not evaluate the relative merits of the
Merger as compared to any other alternative business strategy.
In arriving at the Prudential Securities Opinion, Prudential Securities
performed a variety of financial analyses, including those summarized herein.
The summary set forth herein of the analyses presented to the Columbus Board at
the August 1, 1997 meeting does not purport to be a complete description of the
analyses performed. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analyses and the application of these methods to the
particular circumstances and, therefore, such an opinion is not necessarily
susceptible to partial analysis or summary description. Prudential Securities
believes that its analysis must be considered as a whole and that selecting
portions thereof or portions of the factors considered by it, without
considering all the analyses and
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<PAGE> 50
factors, could create an incomplete view of the evaluation process underlying
the Prudential Securities Opinion. Prudential Securities made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Columbus and Post. Any estimates contained in Prudential Securities'
analyses are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the values of businesses and securities do
not purport to be appraisals or necessarily reflect the prices at which
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.
Subject to the foregoing, the following is a summary of the material
financial analyses performed by Prudential Securities in arriving at the
Prudential Securities Opinion.
In the following analyses, Prudential Securities assumed the implied
purchase price per share for Columbus Common Shares was $24.56 (the "Implied
Purchase Price"). Prudential Securities arrived at this amount by multiplying
the 0.615 Exchange Ratio by $39.94, the closing price of Post Common Stock on
the New York Stock Exchange on July 30, 1997.
Comparable Transaction Analysis. Prudential Securities analyzed the
consideration paid in several recent acquisition and merger transactions
deemed by Prudential Securities to be reasonably similar to the Merger and
considered the multiple of the equity purchase price ("EPP") to the
target's FFO during the last twelve months ("LTM") preceding announcement
and the target's estimated FFO over the twelve months after announcement
("FTM"). The transactions considered were the combinations of: (i) Equity
Residential Property Trust with Wellsford Residential Property Trust; (ii)
Camden Property Trust with Paragon Group, Inc.; (iii) United Dominion
Realty Trust, Inc. with South West Property Trust, Inc. and (iv) BRE
Properties, Inc. with Real Estate Investment Trust of California. Such
transactions yielded an EPP equal to 11.1 to 14.1 times LTM FFO and 10.5 to
13.1 times FTM FFO. Applying such multiples to Columbus' LTM and FTM
FFO/share resulted in an implied equity valuation per share based on LTM
FFO/share of $20.85 to $26.48 (median at $23.18) and $21.28 to $26.51 based
on FTM FFO/share (median at $21.74). The Implied Purchase Price for
Columbus of $24.56 is above the median of the implied valuation of Columbus
and thus, such analysis supports Prudential Securities' conclusion that the
Merger Consideration to be received by the Columbus Shareholders pursuant
to the Merger is fair to the Columbus Shareholders from a financial point
of view.
Comparable Company Analysis. Prudential Securities compared selected
financial ratios for Columbus with a group of 12 publicly traded companies
engaged in the acquisition, operation and management of multi-family
residential properties which Prudential Securities considered to be
reasonably comparable to Columbus for purposes of its analysis. The
companies considered were: (i) Amli Residential Properties Trust; (ii)
Associated Estates Realty Corp.; (iii) Berkshire Realty Company, Inc.; (iv)
Essex Property Trust, Inc., (v) Evans Withycombe Residential, Inc.; (vi)
Home Properties of NY, Inc.; (vii) Mid-America Apartment Communities, Inc.;
(viii) Oasis Residential, Inc.; (ix) Pacific Gulf Properties Inc.; (x)
Summit Properties, Inc.; (xi) The Town and Country Trust and (xii) Walden
Residential Properties Trust (collectively, the "Columbus Comparable
Companies"). As of July 30, 1997, the Columbus Comparable Companies were
found to have equity market capitalizations ranging between $232.2 million
and $579.5 million (with Columbus at $320.7 million).
Prudential Securities calculated a transaction multiple based on the
Implied Purchase Price of $24.56 per share and Columbus' estimated 1997 and
1998 FFO per share ("FFO/Share") (each, a "Transaction Multiple") and
compared it to the Columbus Comparable Companies' stock price to estimated
1997 and 1998 FFO/Share multiples (each, an "FFO Multiple"). For the
Columbus Comparable Companies, the range of 1997 FFO Multiples was
estimated to be equal to 9.7x to 13.3x, and the range of 1998 FFO Multiples
was estimated to be equal to 9.1x to 12.1x. Applying such multiples to
Columbus' estimated 1997 and 1998 FFO/Share resulted in an implied equity
valuation per Columbus Common Share of $18.94 to $25.91 based on 1997
FFO/Share (mean at $21.01) and $19.21 to $25.33 based on 1998 FFO/Share
(mean at $20.96). Prudential Securities observed that the Implied Purchase
Price for Columbus is above the mean of the implied equity valuation of
Columbus and thus, such
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analysis supports Prudential Securities' conclusion that the Merger
Consideration to be received by the shareholders of Columbus pursuant to
the Merger is fair to such shareholders from a financial point of view.
The FFO estimates utilized in this analysis were from First Call. The
estimates published by First Call were not prepared in connection with the
Merger or at Prudential Securities' request.
Pro Forma Funds From Operations Per Share Analysis. Prudential
Securities also analyzed the pro forma effect of the Merger on FFO. An
analysis of anticipated future results based on projections provided by
management of Columbus and Post indicated that the Merger will result in an
increase in pro forma FFO per share of Post Common Stock.
Net Asset Value Analysis. Prudential Securities also analyzed the
increase in the premium of Columbus' equity value per share relative to its
net asset value per share as of July 30, 1997 and upon consummation of the
Merger based upon the Implied Purchase Price of $24.56 per share. The
market price of the Columbus Common Shares on July 30, 1997 reflected a
15.9% premium over the estimated net asset value per share. The Implied
Purchase Price of $24.56 reflected a 22.1% premium over the estimated net
asset value per share.
Net asset value per share for Columbus was obtained on July 25, 1997
from Realty Stock Review, a publication of the Dow Jones Financial
Publishing Corp., which presents market analyses of real estate investment
trusts and operating companies. The net asset valuation data was not
prepared on behalf of the Merger or at Prudential Securities' request.
Contribution Analysis. Prudential Securities examined Columbus' and
Post's relative contributions of actual and projected FFO, net income, book
value and undepreciated real estate assets to the combined entity and
compared this to the percentage of post-Merger Post Common Stock that
Columbus Shareholders would hold. Columbus Shareholders are estimated to
hold 25.4% of the post-Merger shares of Post Common Stock (on a fully
diluted basis). Columbus contributed 22.8%, 25.0% and 26.0% to the pro
forma FFO of the combined entity for the years 1996 (based on return
results), 1997 and 1998 (in each case, based on projected financial
information prepared by Columbus and Post), respectively. Columbus
contributed 21.3% and 21.5% to the pro forma net income of the combined
entity for the year ended December 31, 1996 and the twelve months ended
June 30, 1997. Columbus contributed 31.3% of the book value and 25.0% of
the undepreciated real estate assets to the pro forma combined entity as of
June 30, 1997.
Projected financial and other information concerning Columbus and the
impact of the Merger upon the shareholders of Columbus is not necessarily
indicative of future results. All projected financial information is subject to
numerous contingencies beyond the control of Columbus' and Post's management.
Columbus retained Prudential Securities to render a fairness opinion and to
provide other financial advisory services in connection with the Merger because
it is an internationally recognized investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers,
acquisitions and other purposes, has substantial experience in transactions
similar to the Merger and is familiar with Columbus and its business. The
engagement letter with Prudential Securities provides that Columbus will pay
Prudential Securities an advisory fee equal to 0.60% of the total consideration
(as defined in the engagement letter) paid by Post upon consummation of the
Merger. In addition, the engagement letter with Prudential Securities provides
that Columbus will reimburse Prudential Securities for its out-of-pocket
expenses and will indemnify Prudential Securities and certain related persons
against certain liabilities, including liabilities under securities laws,
arising out of the Merger or its engagement.
In the ordinary course of business, Prudential Securities may actively
trade Columbus Common Shares and Post Common Stock for its own account and for
the accounts of customers, and accordingly, may at any time hold a long or short
position in such securities.
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EXCHANGE RATIO AND EXCHANGE FOR POST COMMON STOCK
The Exchange Ratio was arrived at through arms'-length negotiations between
Post and Columbus. See "-- Background of and Reasons for the Merger." Each
Columbus Common Share issued and outstanding at the Effective Time of the Merger
will cease to be outstanding and will be converted into and exchanged for the
right to receive 0.615 shares of Post Common Stock.
Notwithstanding any other provision of the Merger Agreement, each holder of
Columbus Common Shares exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Post Common Stock (after
taking into account all certificates delivered by such holder) will receive cash
in lieu of such fractional shares of Post Common Stock.
At the Effective Time, all employee stock options of Columbus that have
been authorized but are unissued under a stock incentive or other employee
benefit plan of Columbus shall terminate.
As soon as reasonably practicable after the Effective Time, Post and
Columbus will cause the Exchange Agent to send to each holder of record of
Columbus Common Shares at such time, transmittal materials for use in exchanging
all of their certificates representing Columbus Common Shares for a certificate
or certificates representing shares of Post Common Stock and a check for any
fractional share interest, as applicable. The transmittal materials will contain
information and instructions with respect to the surrender of certificates of
Columbus Common Shares in exchange for certificates representing shares of Post
Common Stock.
COLUMBUS SHAREHOLDERS SHOULD NOT SEND IN THEIR SHARE CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Following the Effective Time of the Merger and upon surrender of all of the
certificates representing Columbus Common Shares registered in the name of a
holder of Columbus Common Shares (or indemnity satisfactory to Post or the
Exchange Agent if any of such certificates are lost, stolen or destroyed),
together with a properly completed letter of transmittal, the Exchange Agent
will mail to such holder a certificate or certificates representing the number
of shares of Post Common Stock to which such holder is entitled, together with
all undelivered dividends or distributions, less the amount of any withholding
taxes which may be required thereon in respect of such shares and, where
applicable, a check in lieu of fractional shares.
Except for Columbus' regular quarterly dividends not in excess of $0.395
per share of Columbus Common Shares, or except with respect to the Final
Columbus Dividend (as defined below), Columbus has agreed not to declare, set
aside or pay any dividends on Columbus Common Shares. To the extent necessary to
satisfy the requirements of Section 857(a)(1) of the Code for the taxable year
of Columbus ending at the Effective Time, Columbus will declare a dividend (the
"Final Columbus Dividend") to holders of Columbus Common Shares, the record date
for which shall be the close of business on the last business day prior to the
Effective Time, in an amount equal to the minimum dividend sufficient to permit
Columbus to satisfy such requirements. If Columbus determines it necessary to
declare the Final Columbus Dividend, it will notify Post at least ten days prior
to the date for the Columbus Special Meeting, and Post may declare a dividend
per share to holders of Post Common Stock, the record date for which will be the
close of business on the last business day prior to the Effective Time, in an
amount per share equal to the quotient obtained by dividing (x) the Final
Columbus Dividend per share of Columbus Common Shares paid by Columbus by (y)
the Exchange Ratio. The Final Company Dividend payable to holders of Columbus
Common Shares under the Merger Agreement will be paid upon presentation of the
certificates of Columbus Common Shares for exchange and will be payable solely
from the separate funds of Columbus, which will be provided to the Exchange
Agent on or prior to the Effective Time.
Dividends declared by Post after the Effective Time will include dividends
on all Post Common Stock issued in the Merger, but no dividend or other
distribution payable to the holders of record of Post Common Stock at or as of
any time after the Effective Time will be paid to the holder of any certificates
of Columbus Common Shares until such holder physically surrenders all such
certificates as described above. Promptly after such surrender, all undelivered
dividends and other distributions, less the amount of any withholding taxes
which may be required thereon and, where applicable, a check for the amount
representing
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any fractional share interest, will be delivered to such holder (in each case,
without interest). After the Effective Time, the stock transfer books of
Columbus will be closed and there will be no transfers on the transfer books of
Columbus of the shares of Columbus Common Shares that were outstanding
immediately prior to the Effective Time.
STRUCTURE OF THE MERGER
Prior to the Closing Date, Post will contribute its existing limited
partnership interests in the Operating Partnership to Merger Sub, a newly
organized corporation which is a wholly owned qualified REIT subsidiary of Post.
Post will contribute its 1% general partner interest to GP Sub. Pursuant to the
Merger Agreement, Columbus will be merged with and into Merger Sub at the
Effective Time, and Merger Sub will be the surviving company in the Merger.
Following the Merger, Merger Sub currently intends to contribute all of the
assets and liabilities acquired from Columbus to the Operating Partnership in
exchange for limited partnership interests. In addition, Merger Sub will convert
the qualified REIT subsidiaries of Columbus into single member limited liability
companies with 100% of the beneficial interests held by the Operating
Partnership.
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that, following approval of the
Merger Agreement by the Post Shareholders and the Columbus Shareholders and the
satisfaction or waiver of the other conditions to the Merger, Columbus will be
merged with and into Merger Sub at the Effective Time in accordance with the
GBCC and the TRA. Merger Sub, a wholly owned subsidiary of Post, will be the
surviving company in the Merger. As a result of the Merger, the separate
existence of Columbus will cease. The Articles of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, will be the Articles of
Incorporation of the surviving company, until duly amended in accordance with
applicable law. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, will be the Bylaws of the surviving company, until duly amended
in accordance with applicable law. The directors and officers of Merger Sub
immediately prior to the Effective Time will be the directors and officers of
the surviving company until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
Conversion of Shares. Upon the Effective Time, each Columbus Common Share
issued and outstanding will be converted into the right to receive from Post the
Merger Consideration. Cash will be paid in lieu of fractional shares of Post
Common Stock in an amount equal to the fractional proportion of the arithmetic
mean of the closing sales prices of a share of Post Common Stock on the NYSE
over the ten trading days immediately preceding the Closing Date.
Effective Time of the Merger. The Merger will become effective upon the
filing of the Articles of Merger with the office of the County Clerk of Dallas
County, Texas and the Secretary of State of Georgia, or such later time as the
parties have agreed upon and designated in such filings. The Merger Agreement
provides that the parties thereto will file the Articles of Merger as soon as
practicable following the satisfaction or waiver of each of the conditions to
consummation of the Merger.
Conditions to the Merger. The respective obligations of Post and Columbus
to effect the Merger and to consummate the other transactions contemplated to
occur on the Closing Date are subject to the satisfaction or waiver of certain
conditions, including the following: (i) approval of the Merger Agreement by the
Post Shareholders and the Columbus Shareholders; (ii) approval of the listing of
the shares of Post Common Stock to be issued to Columbus Shareholders in the
Merger by the NYSE; (iii) the effectiveness under the Securities Act of the
Registration Statement and the absence of any stop order or proceeding by the
Commission seeking a stop order; (iv) the absence of any temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions contemplated by the
Merger Agreement and (v) consummation of the transactions contemplated by the
Stock Purchase Agreements.
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Consummation of the Merger is also subject to the satisfaction or waiver of
various other conditions specified in the Merger Agreement, including, among
others: (i) the accuracy of the representations and warranties of each party
contained in the Merger Agreement as of the Closing Date; (ii) the performance
by each party in all material respects of all obligations required to be
performed by it under the Merger Agreement at or prior to the Effective Time;
(iii) the absence of any material adverse change to either party since the date
of the Merger Agreement; (iv) the receipt by each party of an opinion of
counsel, dated as of the Closing Date, that, for such party's taxable year ended
December 31, 1993 and all subsequent taxable years ending on or before the
Closing Date, such party was organized and has operated in conformity with the
requirements for qualification as a REIT under the Code; (v) the receipt by each
party of either (A) a ruling from the IRS or (B) an opinion of counsel dated as
of the Closing Date to the effect that the Merger should qualify as a
reorganization under the provisions of Section 368(a) of the Code and that the
surviving company will constitute a "qualified REIT subsidiary" under Section
856(i) of the Code and (vi) the receipt of all consents and waivers from third
parties necessary in connection with the consummation of the transactions
contemplated by the Merger Agreement.
No Solicitation; Board Action. Columbus has agreed not to, directly or
indirectly, (i) initiate, solicit or encourage (including by way of furnishing
nonpublic information or assistance) any inquiries or the making of any proposal
that constitutes or may reasonably be expected to lead to any Competing
Transaction (as hereinafter defined) or (ii) enter into or maintain or continue
discussions or negotiate with any person in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to endorse any Competing Transaction,
or authorize or permit any affiliates to take any such action. Columbus agreed
to immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Competing Transaction and to take the steps necessary to inform such
parties of the obligations undertaken. "Competing Transaction" means any of the
following with respect to Columbus (other than the transactions contemplated by
the Merger Agreement or a transaction with Post or a Post subsidiary): (i) with
respect only to Columbus or any group of Columbus subsidiaries (acting in a
single transaction or series of related transactions) holding 20% or more of the
assets of Columbus, any merger, consolidation, share exchange, business
combination or similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 20% or more of the assets or equity
securities of Columbus, in a single transaction or series of related
transactions, excluding any bona fide financing transactions which do not,
individually or in the aggregate, have as a purpose or effect the sale or
transfer of control of such assets; (iii) any tender offer or exchange offer for
20% or more of the outstanding shares of beneficial interest of Columbus; (iv)
any transaction resulting in the issuance of shares representing 20% or more of
the outstanding shares of beneficial interest of Columbus or the filing of a
registration statement under the Securities Act in connection therewith or (v)
any public announcements of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Notwithstanding the above-described non-solicitation provision and other
provisions of the Merger Agreement, to the extent, and only to the extent, that
the Columbus Board, after consultation with outside legal counsel, determines in
good faith that such action is required for the Columbus Board to comply with
its fiduciary duties to shareholders imposed by applicable law, Columbus may:
(i) disclose to the Columbus Shareholders any information that is required to be
disclosed under applicable law; (ii) to the extent applicable, comply with Rule
14e-2(a) promulgated under the Exchange Act with respect to a Competing
Transaction; (iii) in response to an unsolicited request therefor, participate
in discussions or negotiations with or furnish information with respect to
Columbus pursuant to a confidentiality agreement not materially less favorable
to Columbus than the confidentiality agreement between Post and Columbus (the
"Confidentiality Agreement"), or otherwise respond to or deal with any person in
connection with a bona fide Competing Transaction proposed by such person in
writing, provided that Columbus shall have notified Post of such unsolicited
requests or its participation in discussions or negotiations in accordance with
the Merger Agreement and (iv) approve or recommend (and in connection therewith
withdraw or modify its approval or recommendation of the Merger Agreement or the
Merger) a Superior Competing Transaction and enter into an agreement with
respect to such Superior Competing Transaction. A "Superior Competing
Transaction" means a bona fide proposal of a Competing Transaction made by a
third party which has not been solicited or initiated by Columbus in violation
of the Merger Agreement and which a majority of the members of the
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Columbus Board determines in good faith (A) to be more favorable to the Columbus
Shareholders than the Merger and (B) is reasonably capable of being consummated.
Post has agreed not to, directly or indirectly, (i) initiate, solicit or
encourage (including by way of furnishing non-public information or assistance)
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Alternative Transaction (as hereinafter defined), or
(ii) enter into or maintain or continue discussions or negotiate with any person
in furtherance of such inquiries or to obtain an Alternative Transaction, or
agree to or endorse any Alternative Transaction, or authorize or permit any of
the officers, directors or other representatives retained by Post to take any
such action. Post agreed to immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Alternative Transaction and to take the steps
necessary to inform such parties of the obligations undertaken. "Alternative
Transaction" means any of the following with respect to Post (other than the
transactions contemplated by the Merger Agreement or a transaction with Columbus
or a Columbus subsidiary): (i) with respect only to Post or any group of Post
subsidiaries (acting in a single transaction or series of related transactions)
holding 20% or more of the assets of Post, any merger, consolidation, share
exchange, business combination or similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets or equity securities of Post, in a single transaction or series of
related transactions, excluding any bona fide financing transactions which do
not, individually or in the aggregate, have as a purpose or effect the sale or
transfer of control of such assets; (iii) any tender offer or exchange offer for
20% or more of the outstanding shares of capital stock of Post; (iv) any
transaction resulting in the issuance of shares representing 20% or more of the
outstanding shares of capital stock of Post or the filing of a registration
statement under the Securities Act in connection therewith or (v) any public
announcements of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
Notwithstanding the above-described non-solicitation provision and other
provisions of the Merger Agreement, to the extent, and only to the extent, that
the Post Board, after consultation with outside legal counsel, determines in
good faith that such action is required for the Post Board to comply with its
fiduciary duties to shareholders imposed by applicable law, Post may: (i)
disclose to the Post Shareholders any information that is required to be
disclosed under applicable law; (ii) to the extent applicable, comply with Rule
14e-2(a) promulgated under the Exchange Act with respect to an Alternative
Transaction; (iii) in response to an unsolicited request therefor, participate
in discussions or negotiations with or furnish information with respect to Post
pursuant to a confidentiality agreement not materially less favorable to Post
than Columbus' obligations under the Confidentiality Agreement, or otherwise
respond to or deal with any person in connection with a bona fide Alternative
Transaction proposed by such person in writing, provided that Post shall have
notified Columbus of such unsolicited requests or its participation in
discussions or negotiations in accordance with the Merger Agreement; and (iv)
approve or recommend (and in connection therewith withdraw or modify its
approval or recommendation of the Merger Agreement or the Merger) an Alternative
Transaction and enter into an agreement with respect to such an Alternative
Transaction.
Conduct of Business Pending the Merger. During the period from the date of
the Merger Agreement to the Effective Time, each of the parties has agreed to
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as previously conducted and to use commercially
reasonable efforts to preserve intact their respective current business
organization, goodwill and ongoing businesses, to keep available the services of
its present officers, employees and consultants and to preserve the present
relationships of its tenants, landlords, customers, suppliers and other persons
with which it has significant business relationships.
In addition, during the period from the date of the Merger Agreement to the
earlier of the termination of the Merger Agreement or the Effective Time, except
as otherwise expressly permitted or contemplated by the Merger Agreement,
Columbus has agreed not to, without the prior written consent of Post:
(i) (A) except for the Final Columbus Dividend and its regular
quarterly dividends not in excess of $0.395 per Columbus Common Share,
declare, set aside or pay any dividends on, or make any other distributions
in respect of any of Columbus' shares of beneficial interest; (B) split,
combine or reclassify
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any shares of beneficial interest or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
such shares of beneficial interest or (C) except in connection with the use
of Columbus Common Shares to pay the exercise price or tax withholding in
connection with Columbus' Employee Stock Plans or as otherwise contemplated
by or required by the Merger Agreement, purchase, redeem or otherwise
acquire any shares of beneficial interests of Columbus or any options,
warrants or rights to acquire, or security convertible into, shares of such
beneficial interests;
(ii) except as contemplated under or required pursuant to the Merger
Agreement, Columbus' Amended and Restated Dividend Reinvestment Share
Purchase Plan and Employee Share Purchase Plan and the exercise of share
options or issuance of shares pursuant to stock rights, restricted share or
performance share awards or warrants outstanding on the date of the Merger
Agreement, issue, deliver or sell, or grant any option or other right in
respect of, any shares of beneficial interest, any other voting securities
of Columbus or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities; provided, however, that with respect to such Dividend
Reinvestment Share Purchase Plan, such shares may only be issued, with
respect to any dividend payment date after the date of the Merger
Agreement, in an amount equal to the dividend payments and not with respect
to any optional cash payments;
(iii) amend the charter, articles or certificate of incorporation,
declaration of trust, bylaws, partnership agreement or other comparable
charter or organizational documents of Columbus or any Columbus subsidiary
or enter into, assume or amend any material contract, agreement or
commitment, except in the ordinary course of business and consistent with
past practice;
(iv) in the case of Columbus or any other Columbus subsidiary, merge
or consolidate with any person;
(v) in any transaction or series of related transactions involving
capital, securities or other assets (including cash) or indebtedness of
Columbus or any combination thereof in excess of $100,000 individually or
$500,000 in the aggregate: (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing all or a substantial portion of the
equity securities or all or substantially all of the assets of, or by any
other manner, any business or any corporation, partnership, limited
liability company, joint venture, association, real estate investment
trust, business trust or other business organization or division thereof or
interest therein; (B) sell, lease or otherwise dispose of any of Columbus'
properties or any assets (other than sales of Columbus subsidiaries' "for
sale" housing units and condominiums sold or developed for sale in the
ordinary course of business) or, except for any Development Properties (as
defined in the Merger Agreement) or Future Development Properties (as
defined in the Merger Agreement), assign or encumber the right to receive
income, dividends, distributions and the like, or otherwise subject any of
Columbus' properties or assets to any encumbrance or lien; (C) make or
agree to make any development or capital expenditures, except (w) in
accordance with capital expenditure budgets previously delivered to and
approved in writing by Post or in accordance with construction and
development budgets pertaining to the Development Properties (the
"Development Budgets"), that were previously delivered to and approved in
writing by Post, provided that within any Development Budget for a
Development Property, Columbus may allocate and reallocate the development
and capital expenditures as it determines, or (x) in connection with
pre-development, investigation and due diligence activities related to the
Future Development Properties, which amounts shall not exceed $100,000
individually or $500,000 in the aggregate; or (y) in connection with
acquisition, development, pre-development, investigation and due diligence
activities related to the Future Development Properties, which are
previously disclosed to Post or (z) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person (except as
contemplated by subparagraph (C) above), issue or sell any debt securities
or warrants or other rights to acquire any debt securities of Columbus,
guarantee any debt securities of another person, enter into any "keep well"
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, prepay or refinance any indebtedness or make any loans,
advances or capital contributions to, or investments in, any other person;
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(vi) make any tax election (unless required by law or necessary to
preserve Columbus' status as a REIT or of any Columbus subsidiary as a
partnership for federal income tax purposes);
(vii) (A) change in any manner any of its methods, principles or
practices of accounting in effect at June 30, 1997, or (B) make or rescind
any express or deemed election relating to taxes, settle or compromise any
claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to taxes, except in the case of settlements
or compromises relating to taxes on real property or sales taxes in an
amount not to exceed, individually or in the aggregate, $100,000, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
return for the most recently completed taxable year except, in the case of
clause (A), as may be required by the Commission, applicable law or GAAP;
(viii) except as specifically agreed to by Post in connection with the
execution of the Merger Agreement, increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees of Columbus or the Columbus subsidiaries who are not
officers of Columbus in the ordinary course of business in accordance with
past practice; grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, trust manager, officer
or other employee of Columbus or amend or modify in any respect any
existing employment or severance agreement; adopt any new employee benefit
plan, incentive plan, severance plan, stock option or similar plan, grant
new stock appreciation rights or amend any existing plan or rights, except
such changes as are required by law;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
objections (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of Columbus included in documents filed by Columbus with the
Commission prior to the date of the Merger Agreement or incurred in the
ordinary course of business consistent with past practice; settle any
shareholder derivative or class action claims arising out of or in
connection with any of the transactions contemplated by the Merger
Agreement; and
(x) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of the date hereof, are
executive officers, trust managers or directors of Columbus or any Columbus
subsidiary.
Post has also agreed, during the period from the date of the Merger
Agreement to the Effective Time, except as otherwise expressly permitted or
contemplated by the Merger Agreement not to, without the prior written consent
of Columbus:
(i) (A) except for regular quarterly dividends not in excess of $0.595
per share of Post Common Stock, with customary record and payment dates,
declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, stock or property or any combination thereof) in respect
of, any of the capital stock of Post or partnership interests or stock in
any Post subsidiary that is not directly or indirectly wholly owned by
Post, (B) except in connection with the transactions contemplated by the
Merger Agreement, split, combine or reclassify any capital stock or
partnership interests or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of such
capital stock or partnership interests or (C) except in connection with the
use of Post Common Stock to pay the exercise price or tax withholding in
connection with Post's employee stock plan purchase, redeem or otherwise
acquire any shares of capital stock of Post or any options, warrants or
rights to acquire, or security convertible into, shares of capital stock of
Post;
(ii) except as contemplated under or required pursuant to the Merger
Agreement, Post's dividend reinvestment and stock purchase plan, Post's
employee stock purchase plan and Post Employee Stock Plans, and the
exercise of stock options or warrants outstanding on the date of the Merger
Agreement, issue, deliver or sell, or grant any option or other right in
respect of, any shares of capital stock, any other voting securities of
Post or any Post Subsidiary or any securities convertible into, or any
rights, warrants
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or options to acquire, any such shares, voting securities or convertible
securities except to Post or a Post subsidiary;
(iii) except as otherwise contemplated by the Merger Agreement, amend
the charter, articles or certificate of incorporation, bylaws, code of
regulations, partnership agreement or other comparable charter or
organizational documents of Post or any Post subsidiary;
(iv) in the case of Post or the Operating Partnership merge or
consolidate with any person;
(v) in any transaction or series of related transactions involving
capital, securities, other assets (including cash) or indebtedness of Post
or any Post subsidiary or any combination thereof acquire or agree to
acquire by merging or consolidating with, or by purchasing all or a
substantial portion of the equity securities or all or substantially all
the assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association, real
estate investment trust, business trust or other business organization or
division thereof or interest therein if such acquisition would result in
such acquired entity being a "Significant Subsidiary" within the meaning of
Rule 1-02(w) of Regulation S-X, substituting 20% for 10% in the tests used
therein to determine a "Significant Subsidiary" (or, in connection with an
asset acquisition, would have resulted in the entity acquiring such assets
being a "Significant Subsidiary" (substituting 20% for 10% in the tests
used therein to determine a "Significant Subsidiary") if such acquisition
would have been made by a newly created subsidiary with no other assets);
(vi) make or rescind any tax election (unless required by law or
necessary to preserve Post's status as a REIT or the status of any Post
subsidiary as a partnership for federal income tax purposes); and
(vii) change in any material manner any of its methods, principles or
practices of accounting in effect as of June 30, 1997, except as may be
required by the Commission, applicable law or GAAP;
Board of Directors. Post has agreed to take all steps necessary to cause
the appointment as of the Effective Time of Mr. Robert L. Shaw, Vice Chairman
and Chief Executive Officer of Columbus, to the Post Board, or such other person
acceptable to Post that the Columbus Board shall select prior to the Effective
Time.
Indemnification Obligations. Post has agreed to indemnify each present and
former officer, trust manager or director of Columbus or any Columbus
subsidiary, determined as of the Effective Time from and after the Effective
Time, against any liabilities arising out of or pertaining to matters existing
or occurring at or prior to the Effective Time to the fullest extent that a
corporation or Texas REIT would be permitted under the GBCC or the TRA, as the
case may be. Post has also agreed to either extend Columbus' existing directors'
and officers' liability insurance policy as of the date of the Merger Agreement
against any liabilities for acts or omissions occurring prior to the Effective
Time arising out of or pertaining to the transactions contemplated by the Merger
Agreement or add such persons to Post's existing directors' and officers'
liability insurance policy for a period of six years after the date of the
Merger Agreement to the fullest extent permitted under applicable law.
Notwithstanding the previous sentence, in no event will Post be required to
expend, on average over such six year period, in excess of 125% of the annual
premium currently paid by Columbus for such coverage.
Additional Covenants. Columbus and Post have agreed to: (i) prepare and
file a preliminary prospectus and Registration Statement with the Commission;
(ii) hold the Special Meetings to obtain the approval of Post and Columbus
Shareholders of the Merger and the Merger Agreement as well as of other relevant
actions; (iii) afford to the other party and to its respective representatives
access to all its and its respective subsidiaries' properties, books, contracts,
commitments, personnel and records; (iv) hold and cause its and its respective
subsidiaries' and joint ventures' representatives and affiliates to hold, any
nonpublic information in confidence to the extent required by, and in accordance
with the Confidentiality Agreement; (v) cooperate with one another in
determining which filings, consents, approvals, permits or authorizations are
required from, governmental or regulatory authorities and any third parties in
connection with the execution and delivery of the Merger Agreement and the
transactions contemplated therein and in timely making all such filings and
timely seeking all such consents, approvals, permits and authorizations; (vi)
take, or cause to be
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taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated in the Merger Agreement; (vii) give prompt notice to the other
party of (A) any representation or warranty made by it contained in the Merger
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (B) the failure by it
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under the Merger Agreement;
(viii) coordinate with the other party regarding the declaration and payment of
dividends in respect of Post Common Stock and Columbus Common Shares and the
record dates and payment dates relating thereto; (ix) use commercially
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Sections 368(a) of the Code and obtain the opinions of counsel
with respect thereto; (x) consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any press release or
other public statements with respect to the transactions contemplated in the
Merger Agreement and not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange; (xi) cause to be delivered to the other party
"comfort" letters from their respective independent public accountants; and
(xii) cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any Transfer and Gains
Taxes (as defined in the Merger Agreement) which become payable in connection
with the transactions contemplated in the Merger Agreement. From and after the
Effective Time, Post has agreed to cause the Merger Sub to pay all Transfer and
Gains Taxes (other than any such taxes that are solely the liability of the
holders of Columbus Common Shares under applicable state law) and to prepare and
submit to the NYSE a supplemental listing application covering Post Common Stock
issuable in the Merger. Columbus has agreed to either (i) redeem, effective
immediately prior to the Effective Time, all the then outstanding Purchase
Rights (as hereinafter defined) for cash pursuant to and in compliance with
Section 23 of the Rights Agreement (as hereinafter defined) or (ii) take such
other action to terminate the Rights Agreement as of that time, as Columbus and
Post may mutually agree.
Amendment. The Merger Agreement may be amended by the parties in writing
by action of their respective Boards of Directors or Board of Trust Managers, as
the case may be, at any time before or after the approvals of the Post
Shareholders and the Columbus Shareholders are obtained and prior to the filing
of the Articles of Merger in Texas and Georgia. After the approvals of the Post
Shareholders and the Columbus Shareholders are obtained, no such amendment,
modification or supplement shall alter the amount or change the form of the
consideration to be delivered to the Columbus Shareholders or alter or change
any of the terms or conditions of the Merger Agreement if such alteration or
change would adversely affect the Columbus Shareholders or the Post
Shareholders.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after either the approval of the Post
Shareholders or the Columbus Shareholders is obtained: (i) by mutual written
consent duly authorized by the Post Board and the Columbus Board; (ii) by Post,
upon a breach of any representation, warranty, covenant or agreement on the part
of Columbus set forth in the Merger Agreement, or if any representation or
warranty of Columbus shall have become untrue (in either case such that the
breaches are in the aggregate reasonably expected to have a material adverse
effect on Columbus or Columbus shall not have performed in all material respects
all obligations required to be performed by it under the Merger Agreement at or
prior to the Effective Time) and such conditions would be incapable of being
satisfied by January 31, 1998 (or as otherwise extended); (iii) by Columbus,
upon a breach of any representation, warranty, covenant or agreement on the part
of Post set forth in the Merger Agreement, or if any representation or warranty
of Post shall have become untrue (in either case such that the breaches are in
the aggregate reasonably expected to have a material adverse effect on Post or
Post shall not have performed in all material respects all obligations required
to be performed by it under the Merger Agreement at or prior to the Effective
Time) and such conditions would be incapable of being satisfied by January 31,
1998 (or as otherwise extended); (iv) by either Post or Columbus, if any
judgment, injunction, order, decree or action by any governmental entity of
competent authority preventing the consummation of the Merger or requiring
actions as a condition precedent to the Merger which would result in a material
adverse change shall have become final and nonappealable; (v) by either Post or
Columbus, if the Merger is not consummated
49
<PAGE> 60
before January 31, 1998; (vi) by either Columbus or Post if, upon a vote at the
Columbus Special Meeting or any adjournment thereof, the approval of the
Columbus Shareholders is not obtained as contemplated by the Merger Agreement;
(vii) by either Post or Columbus if, upon a vote at the Post Special Meeting or
any adjournment thereof, the approvals of the Post Shareholders are not obtained
as contemplated by the Merger Agreement; (viii) by Columbus, if prior to the
Columbus Special Meeting, the Columbus Board withdraws or modifies in any manner
adverse to Post its approval or recommendation of the Merger or the Merger
Agreement in connection with, or approved or recommended, a Superior Competing
Transaction; provided, however, that such termination will not be effective
prior to the payment of the Break-Up Fee (as hereinafter defined) to the extent
required by the Merger Agreement; (ix) by Post, if prior to the Post Special
Meeting, the Post Board withdraws or modifies in any manner adverse to Columbus
its approval or recommendation of the Merger or the Merger Agreement in
connection with, or approved or recommended, an Alternative Transaction;
provided however, that such termination will not be effective prior to the
payment of the Termination Fee to the extent required by the Merger Agreement;
(x) by Post, if (A) prior to the Columbus Special Meeting, the Columbus Board
withdraws or modifies in any manner adverse to Post its approval or
recommendation of the Merger or the Merger Agreement in connection with, or
approved or recommended, any Superior Competing Transaction or (B) Columbus has
entered into a definitive agreement with respect to any Competing Transaction;
provided, however, that such termination will not be effective prior to the
payment of the Break-Up Fee to the extent required by the Merger Agreement; and
(xi) by Columbus, if (A) prior to the Post Special Meeting, the Post Board
withdraws or modifies in any manner adverse to Columbus its approval or
recommendation of the Merger or the Merger Agreement in connection with, or
approved or recommended, any Alternative Transaction or (B) Post has entered
into a definitive agreement with respect to any Alternative Transaction;
provided, however, that such termination will not be effective prior to the
payment of the Termination Fee (as hereinafter defined) to the extent required
by the Merger Agreement.
Termination Fees and Expenses. Except as described below or agreed to in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such cost or expense. However, Columbus has
agreed that if the Merger Agreement is terminated (i) because (a) Columbus
breaches any representation, warranty, covenant or agreement such that the
conditions to the consummation of the Merger would be incapable of being
satisfied by January 31, 1998 (or as otherwise extended), (b) Columbus does not
obtain the required approval of the Columbus Shareholders, or (c) Columbus,
prior to the Columbus Special Meeting, withdraws or adversely modifies its
approval or recommendation of the Merger or the Merger Agreement in connection
with, or approves or recommends, a Superior Competing Transaction, and, with
respect to (i)(a)-(b), following the date of the Merger Agreement and prior to
termination, Columbus has received a proposal constituting a Competing
Transaction and within 12 months following termination, Columbus enters into a
definitive agreement providing for a Competing Transaction, then Columbus will
pay (provided that Post was not in material breach of any of its
representations, warranties, covenants or agreements at the time of termination)
as directed by Post a fee in an amount up to $10,000,000 (as defined in the
Merger Agreement, the "Break-Up Fee"). Additionally, Columbus has agreed that if
the Merger Agreement is terminated because (i) Columbus breaches any
representation, warranty, covenant or agreement or (ii) the Columbus
Shareholders do not approve the Merger Agreement, then Columbus will pay, as
directed by Post, an amount up to $1,500,000 (as defined in the Merger
Agreement, the "Break-Up Expenses"). The Break-Up Fee will be reduced by any
amounts previously paid in respect of Break-Up Expenses. Columbus's obligation
to pay any unpaid portion of the Break-Up Fee or the Break-Up Expenses will
terminate five years from the date of the Merger Agreement.
Additionally, Post has agreed that if the Merger Agreement is terminated
(i) because (a) Post breaches any representation, warranty, covenant or
agreement such that the conditions would be incapable of being satisfied by
January 31, 1998 (or as otherwise extended), (b) Post does not obtain the
required approval of the Post Shareholders, or (c) Post, prior to the Post
Special Meeting, withdraws or adversely modifies its approval or recommendation
of the Merger or the Merger Agreement in connection with, or approves or
recommends, an Alternative Transaction, and, with respect to (i)(a)-(b),
following the date of the Merger Agreement and prior to termination, Post has
received a proposal constituting an Alternative Transaction and within
50
<PAGE> 61
12 months following termination, Post entered into a definitive agreement
providing for an Alternative Transaction, then Post will pay (provided that
Columbus was not in material breach of any of its representations, warranties,
covenants or agreements at the time of termination) as directed by Columbus a
fee in an amount up to $10,000,000 (as defined in the Merger Agreement, the
"Termination Fee"). Additionally, Post has agreed that if the Merger Agreement
is terminated because (i) Post breaches any representation, warranty, covenant
or agreement or (ii) Post does not get the required shareholder vote then Post
will pay, as directed by Columbus, an amount up to $1,500,000 (as defined in the
Merger Agreement, the "Termination Expenses"). The Termination Fee will be
reduced by any amounts previously paid in respect of Termination Expenses.
Post's obligation to pay any unpaid portion of the Termination Fee or the
Termination Expenses will terminate five years from the date of the Merger
Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Post Shareholders and the Columbus
Shareholders should be aware that certain executive officers and trust managers
of Columbus have certain interests in the Merger that may present them with
potential conflicts of interests with respect to the Merger.
Future Employment. In connection with the Merger, Post will employ Robert
L. Shaw, Vice Chairman and Chief Executive Officer of Columbus, for a three year
term, as an executive officer of Post with responsibility on a full business
time basis for the portfolio and operations of the Texas Division of Post, which
will succeed to the assets and business formerly conducted by Columbus. Mr.
Shaw's compensation will include a base salary of $225,000 per annum, subject to
any increases in base compensation approved by the Compensation Committee of the
Post Board, and Mr. Shaw will have the right to participate as a senior officer
in Post's incentive compensation plans. In connection with his employment, Mr.
Shaw will be granted options to purchase 100,000 shares of Post Common Stock, of
which 50,000 will be granted as of the Closing Date and 50,000 will be granted
during the first quarter of 1998. Such options will have an exercise price equal
to the fair market value of the Post Common Stock on the date of grant. Post has
also agreed to take all steps necessary to cause the appointment as of the
Effective Time of Mr. Shaw to the Post Board, or such other person acceptable to
Post that the Columbus Board shall select prior to the Effective Time.
Existing Employment Agreements. Under existing employment agreements
previously approved by the Columbus Board, certain officers of Columbus,
including Mr. Shaw, the Vice Chairman and Chief Executive Officer of Columbus,
will be entitled to receive from Post in connection with the consummation of the
Merger in the following amounts:
<TABLE>
<CAPTION>
NAME TITLE AMOUNT
- ---- ----- ------
<S> <C> <C>
Robert L. Shaw................. Vice Chairman and Chief Executive Officer $2,510,581
Will Cureton................... Chief Operating Officer 2,407,556
Richard L. Bloch............... Chairman of the Board 1,019,288
J. Michael Lewis............... Treasurer and Senior Vice President 699,065
Richard R. Reupke.............. Chief Financial Officer and Secretary 661,502
</TABLE>
In addition, Messrs. Bloch and Cureton are entitled to receive certain insurance
benefits, or the cash equivalent thereof, for three years following the Merger.
Messrs. Bloch, Shaw and Cureton are also entitled to require Post to purchase
all of their stock options at a purchase price per option equal to the excess of
the price of Columbus Common Shares on the date of consummation of the Merger
over the exercise price for such options.
Prior to or as of the Effective Time (i) in accordance with the terms of
Columbus' restricted stock awards, 161,300 Columbus Common Shares held by
certain senior executive officers and independent trust managers of Columbus
will become fully vested and no longer subject to forfeiture, (ii) in accordance
with the terms of the performance based stock and dividend equivalent awards,
100,000, 100,000 and 60,000 Columbus Common Shares will be issued to Messrs.
Shaw, Cureton and Bloch, respectively, and (iii) in accordance with the terms of
their employment agreements, options to acquire 101,646 Columbus Common Shares
held by
51
<PAGE> 62
certain senior executive officers of Columbus will become fully vested and no
longer subject to forfeiture. In addition, in connection with Columbus'
performance based stock and dividend equivalent awards Messrs. Shaw, Cureton and
Bloch will be entitled to cash payments in an amount equal to the dividends that
would have been paid with respect to such shares if such shares had been
outstanding since the date of the awards, plus earnings thereon, assuming such
dividends had been continuously invested and reinvested in Columbus' Dividend
Reinvestment Plan.
Indemnification. From and after the Effective Time, Post has agreed to
indemnify, to the fullest extent permitted under the TRA and the GBCC, each
officer and trust manager of Columbus against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees) arising out of acts
or omissions, or alleged acts or omissions, by them in their capacities as such
officers or trust managers. Such indemnification rights of each Columbus officer
and trust manager are in addition to any other rights that such officers and
trust managers may have under the Columbus Charter or the Columbus Bylaws, under
the GBCC or otherwise. Post has also agreed to purchase directors and officers
insurance for the officers and trust managers of Columbus. See "-- Terms of the
Merger."
Benefit Plans. After the Effective Time, Post will provide benefits to the
employees of Columbus and the Columbus subsidiaries that are not less favorable
to such employees than those provided to similarly situated employees of Post
and the Post subsidiaries.
Stock Incentive Plans. Prior to or as of the Effective Time and solely
with respect to individuals employed by Columbus or a Columbus subsidiary, the
options to acquire 1,940,000 shares of Columbus Shares subject to stock options
granted under the Columbus stock incentive plans will be converted and
exchanged, without any action on the part of the holder thereof, into options to
acquire, upon payment of the exercise price (which shall equal the exercise
price per share for the option immediately prior to the Merger, divided by the
Exchange Ratio multiplied by the number of shares to which the option relates),
the number of shares of Post Common Stock the option holder would have received
pursuant to the Merger if the holder had exercised his or her option immediately
prior thereto, rounded to the next lowest whole number.
Stock Purchase Agreements. Simultaneously with the execution of the Merger
Agreement, Columbus, Armada, Messrs. Robert L. Shaw and Will Cureton, executive
officers of Columbus, and Messrs. John A. Williams and John T. Glover, executive
officers of Post, entered into the Armada Stock Purchase Agreement providing for
the sale by Shaw and Cureton of all the issued and outstanding voting stock of
Armada owned by Messrs. Shaw and Cureton to Messrs. Williams and Glover for a
purchase price of $100 in cash. Armada, which conducts Columbus' condominium
development business, is an affiliate of Columbus in which Columbus owns 95% of
the economic interest, with the remaining 5% owned by Messrs. Shaw and Cureton.
Simultaneously with the execution of the Merger Agreement, Columbus,
Addison, Messrs. Shaw and Cureton and Messrs. Williams and Glover entered into
the Addison Stock Purchase Agreement providing for the sale by Messrs. Shaw and
Cureton of all the issued and outstanding voting stock of Addison owned by
Messrs. Shaw and Cureton to Messrs. Williams and Glover for a purchase price of
$5,000 in cash. Addison, which holds certain rights in connection with the
supply of utilities to the Addison developments, is an affiliate of Columbus in
which Columbus owns 91% of the economic interest, with the remaining 9% owned by
Messrs. Shaw and Cureton.
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting,
as described in Accounting Principles Board Opinion No. 16 and the
interpretations thereof, pursuant to which the assets and liabilities of
Columbus will be adjusted to their respective fair values and included with
those of Post as of the Effective Time. Net income of Post subsequent to the
Effective Time will include net income of Columbus, and the historical results
of operations of Post for periods prior to the Effective Time will not be
restated. See "Post Properties, Inc. Unaudited Pro Forma Combined Balance Sheet"
and "Post Properties, Inc. Unaudited Pro Forma Combined Statement of
Operations".
52
<PAGE> 63
RESALE OF POST COMMON STOCK
Shares of Post Common Stock to be issued to Columbus Shareholders in
connection with the Merger will be freely transferrable under the Securities
Act, except for shares issued to any person who, as of the date of the Columbus
Special Meeting, may be deemed to be an "affiliate" of Columbus within the
meaning of Rule 145 under the Securities Act. In general, affiliates of Columbus
include its executive officers and trust managers and any other person or entity
who controls, is controlled by, or is under control with, Columbus. Rule 145,
among other things, imposes certain restrictions upon the resale of securities
received by affiliates in connection with certain reclassifications, mergers,
consolidations or asset transfers. Post Common Stock received by affiliates of
Columbus in the Merger will be subject to the applicable resale limitations of
Rule 145.
In the Merger Agreement, Columbus has agreed to deliver to Post a letter
identifying all persons who are, as of the date of the Special Meetings,
affiliates within the meaning of Rule 145 under the Securities Act. In addition,
Columbus agreed to use commercially reasonable efforts to cause each such
affiliate to deliver to Post on or prior to the Closing Date a written statement
to the effect that such person will not sell, transfer or otherwise dispose of
any shares of Post Common Stock received in the Merger by such affiliate unless
(i) such sale, transfer or other disposition is registered under the Securities
Act, and (ii) such sale, transfer or other disposition is made in conformity
with the volume and other limitations of Rule 145 under the Securities Act or
(iii) in the opinion of counsel reasonably acceptable to Post, such sale,
transfer or other disposition is otherwise exempt from registration under the
Securities Act. Post may place legends on certificates representing shares of
Post Common Stock which are issued to affiliates of Columbus in the Merger to
restrict such transfers. As of the Columbus Record Date, shares of
Columbus Common Shares (representing approximately % of the shares of
Columbus Common Shares then outstanding) were held by affiliates of Columbus.
DISSENTERS' RIGHTS
Columbus Shareholders will not have dissenters' rights under the TRA with
respect to the Merger, and Post Shareholders will not have dissenters' rights
under the GBCC with respect to the Merger.
REGULATORY APPROVAL
In connection with the Merger, the following filings with, or approvals of,
governmental authorities are required: (i) the Commission's declaring effective
the Registration Statement containing this Prospectus/Joint Proxy Statement;
(ii) approvals in connection with compliance with applicable Blue Sky or state
securities laws; (iii) the filing of the Articles of Merger with the office of
the County Clerk of Dallas County, Texas and the Secretary of State of the State
of Georgia; (iv) the filing of such reports under Section 13(a) of the Exchange
Act as may be required in connection with the Merger Agreement and other related
transactions and (v) such filings as may be required in connection with the
payment of any Transfer and Gains Taxes (as defined in the Merger Agreement).
53
<PAGE> 64
POST PROPERTIES, INC.
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
JUNE 30, 1997
The Post Properties, Inc. Unaudited Pro Forma Combined Balance Sheet gives
effect to the proposed Merger of Post and Columbus as if the Merger had occurred
on June 30, 1997. The Unaudited Pro Forma Combined Balance Sheet gives effect to
the Merger under the "purchase" method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the Merger have been
made.
The Unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position of Post and Columbus would have been at June 30, 1997, nor
does it purport to represent the future combined financial position of Post and
Columbus. This Post Properties, Inc. Unaudited Pro Forma Combined Balance Sheet
should be read in conjunction with, and is qualified in its entirety by, the
respective historical financial statements and notes thereto of Post and
Columbus incorporated by reference into this Joint Proxy Statement/Prospectus.
54
<PAGE> 65
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS(B) COMBINED
------------- ------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Real estate assets
Land..................................... $ 149,071 $ 46,663 $ 21,907(C) $ 217,641
Building and improvements................ 736,891 331,380 154,204(C) 1,222,475
Furniture, fixtures and equipment........ 76,835 4,912 81,747
Construction in progress (includes land
on properties under development)...... 203,477 73,459 276,936
Land held for future development......... 8,660 -- 8,660
---------- -------- -------- ----------
1,174,934 456,414 176,111 1,807,459
Less: accumulated depreciation........... (185,068) (46,576) (231,644)
---------- -------- -------- ----------
Real estate held for investment.......... 989,866 409,838 176,111 1,575,815
Cash and cash equivalents................ 1,771 6,688 8,459
Restricted cash.......................... 1,016 313 1,329
Deferred charges, net.................... 9,652 1,361 375(D) 11,388
Other assets............................. 11,468 12,963 (2,078)(E) 22,353
---------- -------- -------- ----------
Total assets..................... $1,013,773 $431,163 $174,408 $1,619,344
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable.............................. $ 473,683 $231,477 $ 20,943(F) $ 726,103
Accrued interest payable................... 4,305 332 4,637
Dividend and distribution payable.......... 16,220 -- 16,220
Accounts payable and accrued expenses...... 30,573 11,722 42,295
Security deposits and prepaid rents........ 5,179 2,225 7,404
Other liabilities.......................... -- 2,063 2,063
---------- -------- -------- ----------
Total liabilities................ 529,960 247,819 20,943 798,722
---------- -------- -------- ----------
Minority interest of unitholders in
Operating Partnership.................... 83,297 -- 29,611(G) 112,908
---------- -------- -------- ----------
Shareholders' equity
Preferred stock.......................... 10 -- 10
Common stock............................. 220 134 (50)(H) 304
Additional paid-in capital................. 400,286 213,981 93,133(I) 707,400
Accumulated earnings(deficit).............. -- (30,765) 30,765(J) 0
Treasury stock............................. -- (6) 6(J) 0
---------- -------- -------- ----------
Total shareholders' equity....... 400,516 183,344 123,854 707,714
---------- -------- -------- ----------
Total liabilities and
shareholders' equity........... $1,013,773 $431,163 $174,408 $1,619,344
========== ======== ======== ==========
</TABLE>
55
<PAGE> 66
POST PROPERTIES, INC.
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
The Post Properties, Inc. Unaudited Pro Forma Combined Statements of
Operations for the six months ended June 30, 1997 and the year ended December
31, 1996 are presented as if the Merger had occurred on January 1, 1996. The
Post Properties, Inc. Unaudited Pro Forma Combined Statements of Operations give
effect to the Merger under the "purchase" method of accounting in accordance
with Accounting Principles Board Opinion No. 16. and assumes that the combined
entity qualifying as a REIT distributing at least 95% of its taxable income, and
therefore, incurring no federal income tax liability for the year. In the
opinion of management, all significant adjustments necessary to reflect the
effects of these transactions have been made.
The Post Properties, Inc. Unaudited Pro Forma Combined Statements of
Operations are presented for comparative purposes only and are not necessarily
indicative of what the actual combined results of Post and Columbus would have
been for the six months ended June 30, 1997 and the year ended December 31,
1996, nor do they purport to be indicative of the results of operations in
future periods. The Post Properties, Inc. Unaudited Pro Forma Combined
Statements of Operations should be read in conjunction with, and are qualified
in their entirety by, the respective historical financial statements and notes
thereto of Post and Columbus incorporated by reference into this Joint Proxy
Statement/Prospectus.
56
<PAGE> 67
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(K) HISTORICAL(K) ADJUSTMENTS COMBINED
------------- ------------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental................................ $ 84,131 $ 26,879 $ 111,010
Property management - third party..... 1,092 71 1,163
Landscape services - third party...... 2,446 -- 2,446
Interest.............................. 15 181 196
Other................................. 2,996 1,176 4,172
---------- ---------- ---------- -----------
Total revenues................ 90,680 28,307 118,987
---------- ---------- ---------- -----------
Expenses:
Property operating and maintenance
(exclusive of items shown
separately below).................. 31,132 9,449 40,581
Depreciation (real estate assets)..... 12,563 6,056 286(L) 18,905
Depreciation (non-real estate
assets)............................ 495 145 640
Property management - third party..... 814 -- 814
Landscape services - third party...... 2,031 -- 2,031
Interest.............................. 11,070 4,898 (343)(M) 15,625
Amortization of deferred loan costs... 552 252 (187)(N) 617
General and administrative............ 3,419 1,331 (725)(O) 4,025
---------- ---------- ---------- -----------
Total expenses................ 62,076 22,131 (969) 83,238
---------- ---------- ---------- -----------
Income before net gain on sale of
assets, minority interest of
unitholders in Operating
Partnership and extraordinary
item............................... 28,604 6,176 969 35,749
Net gain on sale of assets............ 3,512 561 4,073
Minority interest of unitholders in
Operating Partnership.............. (5,751) -- 250(P) (5,501)
---------- ---------- ---------- -----------
Net income before extraordinary
item............................... 26,365 6,737 1,219 34,321
Dividend to preferred shareholders.... (2,125) -- (2,125)
---------- ---------- ---------- -----------
Net income available to common
shareholders before extraordinary
item............................... $ 24,240 $ 6,737 $ 1,219 $ 32,196
========== ========== ========== ===========
Per common share data:
Weighted average common shares
outstanding -- primary............. 21,989,132 13,496,035 (5,089,205)(Q) 30,395,962
Net income available to common
shareholders before extraordinary
item............................... $ 1.10 $ 0.50 $ (0.54) $ 1.06
</TABLE>
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<PAGE> 68
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(K) HISTORICAL(K) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental.............................. $ 157,735 $ 45,910 $ 203,645
Property management - third party... 2,828 298 3,126
Landscape services - third party.... 4,834 - 4,834
Interest............................ 326 228 554
Other............................... 4,985 2,094 7,079
---------- ---------- ---------- ----------
Total revenues.............. 170,708 48,530 -- 219,238
---------- ---------- ---------- ----------
Expenses:
Property operating and maintenance
(exclusive of items shown
separately below)................ 57,335 16,365 73,700
Depreciation (real estate assets)... 22,676 10,257 2,426(L) 35,359
Depreciation (non-real estate
assets).......................... 927 346 1,273
Property management - third party... 2,055 - 2,055
Landscape services - third party.... 3,917 - 3,917
Interest............................ 22,131 7,884 (282)(M) 29,733
Amortization of deferred loan
costs............................ 1,352 393 (285)(N) 1,460
General and administrative.......... 7,716 2,073 (1,450)(O) 8,339
---------- ---------- ---------- ----------
Total expenses.............. 118,109 37,318 409 155,836
---------- ---------- ---------- ----------
Income before net gain on sale of
assets, minority interest of
unitholders in Operation
Partnership and extraordinary
item............................. 52,599 11,212 (409) 63,402
Net gain on sale of assets.......... 854 246 1,100
Minority interest of unitholders in
Operating Partnership............ (9,984) -- 807(P) (9,177)
---------- ---------- ---------- ----------
Net income before extraordinary
item............................. 43,469 11,458 398 55,325
Dividend to preferred
shareholders..................... (1,063) (1,063)
---------- ---------- ---------- ----------
Net income available to common
shareholders before extraordinary
item............................. $ 42,406 $ 11,458 $ 398 $ 54,262
========== ========== ========== ==========
Per common share data:
Weighted average common shares
outstanding - primary............ 21,787,648 12,142,069 (3,735,239)(Q) 30,194,478
Net income available to common
shareholders before extraordinary
item............................. $ 1.95 $ 0.94 $ (1.09) $ 1.80
</TABLE>
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<PAGE> 69
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) Represents the respective historical balance sheet of Post and Columbus as
of June 30, 1997. Certain reclassifications have been made to Columbus'
historical balance sheet to conform to Post's balance sheet presentation.
(B) Represents adjustments to record the Merger in accordance with the purchase
method of accounting, based upon the assumed purchase price of $602,889
assuming a market value of $40.09 per share of Post's Common Stock, as
follows:
<TABLE>
<S> <C>
Issuance of 8,407 shares of Post Common Stock based on the
0.615 exchange for 13,669 Columbus Common Shares, which
includes 260 Columbus Common Shares issued immediately
prior to the Merger....................................... $337,009
Assumption of Columbus' liabilities (including $2,240 of
purchase adjustments)..................................... 249,859
Merger costs (see calculation below)........................ 18,703
--------
$605,571
========
</TABLE>
The following is a calculation of the estimated fees and other expenses
related to the Merger:
<TABLE>
<S> <C>
Buyout of employment agreements............................. $ 8,800
Advisory fees............................................... 7,453
Legal and accounting fees................................... 1,500
Other, including printing, filing and transfer costs........ 950
-------
Total............................................. $18,703
=======
</TABLE>
(C) Represents the estimated increase in Columbus' real estate assets, net
based upon Post's purchase price and the adjustment to eliminate the basis
of Columbus' net assets acquired:
<TABLE>
<S> <C>
Purchase Price (see Note B)................................. $605,571
Less: Historical basis of Columbus' net assets acquired
Real estate assets..................................... (409,838)
Other assets, net of purchase adjustments.............. (19,622)
--------
Step-up to record fair value of Columbus' real estate
assets.................................................... $176,111
========
</TABLE>
The allocation to land and building and improvements to record the step-up
was based upon relative fair values of Columbus' real estate assets.
(D) Increase due to estimated loan costs incurred to refinance Columbus' debt
($1,345) net of elimination of Columbus' historical deferred loan costs
($970).
(E) Decrease due to recognition of historical deferred compensation expense
upon vesting of certain options of Columbus prior to the Merger.
(F) Increase to notes payable reflects the financing of the following:
<TABLE>
<S> <C>
Transaction costs........................................... $18,703
Loan costs on refinanced debt............................... 1,345
Prepayment penalties on existing debt....................... 695
Registration costs.......................................... 200
-------
$20,943
=======
</TABLE>
59
<PAGE> 70
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA -- (CONTINUED)
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(G) The pro forma allocation to the Minority Interest in Operating Partnership
is based upon the percentage owned by such Minority Interest as follows:
<TABLE>
<S> <C>
Total Shareholders' Equity and Minority Interest in
Operating Partnership..................................... $820,622
Less: Equity related to Post's Preferred Stock.............. (48,613)
--------
772,009
Minority Interest percentage ownership in Operating
Partnership (see Note I).................................. 14.6%
--------
Pro Forma Combined Minority Interest ownership in Operating
Partnership............................................... 112,908
Post historical Minority Interest ownership in Operating
Partnership............................................... 83,297
--------
Adjustment to Minority Interest ownership in Operating
Partnership............................................... $ 29,611
========
</TABLE>
(H) Decrease results from elimination of Columbus Common Shares at $.01 par
value ($134) net of the issuance of Post Common Stock at $.01 par value
($84) (see Note I).
(I) Increase to paid-in capital to reflect the following:
<TABLE>
<S> <C>
Issuance of 8,407 shares of Post Common Stock at $40.09 per
share..................................................... $ 337,009
Less: Par value of Common Stock issued.................... (84)
Registration costs incurred in connection with the
Merger.............................................. (200)
Columbus' historical paid in capital............... (213,981)
Adjustment to Minority Interest in Operating
Partnership (see Note G)........................... (29,611)
---------
$ 93,133
=========
</TABLE>
The Minority Interest ownership in Post, is calculated as follows:
<TABLE>
<CAPTION>
SHARES UNITS
------ -----
<S> <C> <C>
Columbus' historical Common Shares outstanding............ 13,669
======
Post Common Stock to be issued based on the .615 Merger
exchange ratio.......................................... 8,407
Post's historical Common Stock/Units outstanding.......... 22,044 5,216
------ -----
Post's pro forma Common Stock/Units outstanding........... 30,451 5,216
====== =====
Post's ownership percentage of the Operating
Partnership............................................. 85.4%
======
Minority Interest ownership percentage of the Operating
Partnership............................................. 14.6%
======
</TABLE>
(J) Reflects the elimination of Columbus' distribution in excess of accumulated
earnings and treasury stock to paid in capital, as a result of the Merger.
(K) Represents the respective historical statement of operations of Post and
Columbus for the period indicated. Certain reclassifications have been made
to Columbus' Historical Statement of Operations to conform to Post's
Statement of Operations presentation.
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<PAGE> 71
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA -- (CONTINUED)
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(L) Represents the net increase in depreciation of real estate owned as a
result of recording Columbus' real estate assets at fair value versus
historical cost. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets which have a useful life of
approximately 35 years.
The calculation of the fair value of depreciable real estate assets at June
30, 1997 is as follows:
<TABLE>
<S> <C>
Historical basis of Columbus' real estate property, net..... $409,838
Plus: Step up to Columbus' real estate property, net (see
Note C)................................................... 176,111
--------
Pro forma basis of Columbus' real estate property at fair
value..................................................... 585,949
Less: Fair value allocated to land.......................... (68,570)
Construction in progress.............................. (73,459)
--------
Pro forma basis of Columbus' depreciable real estate
property at fair value.................................... $443,920
========
</TABLE>
Calculation of depreciation of real estate property for the six months
ended June 30, 1997:
<TABLE>
<S> <C>
Depreciation expense based upon an estimated useful life of
approximately 35 years.................................... $ 6,342
Less: Historic Columbus depreciation of real estate
property.................................................. (6,056)
-------
Pro forma adjustment........................................ $ 286
=======
</TABLE>
Calculation of depreciation of real estate property for the year ended
December 31, 1996 is as follows:
<TABLE>
<S> <C>
Depreciation expense based upon an estimated useful like of
approximately 35 years.................................... $12,683
Less: Historic Columbus depreciation of real estate
property.................................................. 10,257
-------
Pro forma adjustment........................................ $ 2,426
=======
</TABLE>
(M) Decrease results from refinancing of Columbus' debt at lower interest
rates.
(N) Decrease results from the elimination of amortization of Columbus' deferred
financing costs, which costs would be eliminated in connection with the
Merger, net of estimated amortization of deferred financing costs for
refinanced debt.
(O) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Merger as follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 650
Reduction in salaries and benefits.......................... 600
Other....................................................... 200
------
Annual total...................................... $1,450
======
</TABLE>
(P) A portion of income was allocated to Minority Interest representing
interests in the Operating Partnership not owned by Post. The pro forma
allocation to Minority Interest is based upon the percentage estimated to
be owned by such Minority Interests as a result of the pro forma
transactions.
(Q) Decrease of Weighted Average Common Shares Outstanding based on the
conversion of Columbus Common Shares to Post Common Stock at a conversion
ratio of 0.615 Columbus Common Shares per Post Common Stock and a par value
of $.01.
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<PAGE> 72
COMPARATIVE RIGHTS OF SHAREHOLDERS
CAPITALIZATION
Post. Post is authorized to issue 100,000,000 shares of Post Common Stock,
of which shares were issued and outstanding as of the Post Record Date.
Post also is authorized to issue 20,000,000 shares of Preferred Stock (the "Post
Preferred Stock") of which 1,000,000 shares have been designated 8 1/2% Series A
Cumulative Redeemable Preferred Shares and were outstanding as of the Post
Record Date.
The Charter authorizes the Post Board, without further action by the Post
Shareholders, to provide for the issuance of Post Preferred Stock in one or more
series and to fix the voting powers, designations, preferences, exchange or
conversion rights, options, restrictions, special rights or relations, dividend
rights or limitations, qualifications or terms, or conditions of redemption
thereof, by adopting a resolution or resolutions creating and designating such
series. The rights of the holders of Post Common Stock are subject to the rights
and preferences of the holders of any Post Preferred Stock or series thereof
that the Post Board may issue. See "-- Anti-Takeover Provisions."
Columbus. Columbus is authorized to issue 100,000,000 common shares of
beneficial interest and 10,000,000 shares of Preferred Shares (the "Columbus
Preferred Shares"). Columbus had shares of Columbus Common Shares issued
and outstanding as of the Columbus Record Date and no shares of Columbus
Preferred Shares issued and outstanding.
The Columbus Charter authorizes the Columbus Board, without shareholder
approval, to provide for the issuance of Columbus Preferred Shares in one or
more series and to fix the preferences, conversion and other rights, voting
rights, restrictions and limitations as to dividends, qualifications and terms
and conditions of redemption as the Columbus Board may determine. The rights of
the holders of Columbus Common Shares are subject to the rights and preferences
of the holders of any Columbus Preferred Shares or series thereof that the
Columbus Board may issue. See "-- Anti-Takeover Provisions."
VOTING RIGHTS
Post. Each holder of Post Common Stock is entitled to one vote per share
and to the same and identical voting rights as other holders of Post Common
Stock. Holders of Post Common Stock do not have cumulative voting rights. Except
as may otherwise be provided in a designation of a series of Post Preferred
Stocks or as otherwise expressly required by law, holders of Post Preferred
Stock do not have any voting rights.
Columbus. Each holder of Columbus Common Shares is entitled to one vote
per share and to the same and identical voting rights as other holders of
Columbus Common Shares. Holders of Columbus Common Shares do not have cumulative
voting rights. Holders of Columbus Preferred Shares have such voting rights, if
any, as established by the Columbus Board in the designation of a series of
Columbus Preferred Shares or as otherwise expressly required by law.
DIRECTORS
Post. The number of persons constituting the Post Board is six. The Post
Bylaws provide that the Post Board shall have between three and fifteen
directors. The directors of Post are divided into three classes, with
approximately one-third of the directors elected by the shareholders annually.
Consequently, members of the Post Board serve staggered three-year terms.
Vacancies and newly created directorships may be filled by the vote of the
holders or the remaining directors (even though less than a quorum remains). A
member of the Post Board may be removed with or without cause by the
shareholders.
Columbus. The number of persons constituting the Columbus Board is eight.
The Columbus Bylaws provide that the Columbus Board shall have between two and
eleven trust managers. The trust managers of Columbus are divided into three
classes, with approximately one-third of the directors elected by the
shareholders annually. Consequently, members of the Columbus Board serve
staggered three-year terms.
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<PAGE> 73
Vacancies and newly created trust manager positions may be filled by the
vote of two-thirds of the shares outstanding or the remaining trust managers
(even though less than a quorum remains). A member of the Columbus Board may be
removed with or without cause by the shareholders.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the GBCC, the TRA, the Post Charter and the Columbus
Charter may discourage an attempt to acquire control of Post or Columbus,
respectively, that a majority of either corporation's shareholders determined
was in their best interests. These provisions also may render the removal of one
or all directors or trust managers more difficult or deter or delay a change of
control that the Post Board or Columbus Board, respectively, did not approve.
Provisions of the Post Charter and Columbus Charter intended to preserve
qualified REIT status under the Code may have the same effects. See " -- REIT
Qualification Provisions."
Post
Authorized Preferred Stock. The rights of holders of Post Common Stock
will be subject to, and may be adversely affected by, the rights of holders of
any Post Preferred Stock that may be issued in the future. Any such issuance may
adversely affect the interests of holders of Post Common Stock by limiting the
control that such holders may exert by exercise of their voting rights, by
subordinating their rights in liquidation to the rights of the holders of such
Post Preferred Stock, and otherwise. In addition, the issuance of Post Preferred
Stock, in some circumstances, may deter or discourage takeover attempts and
other changes in control of Post by making it more difficult for a person who
has gained a substantial equity interest in Post to obtain control or to
exercise control effectively. Post has no current plans or agreements with
respect to the issuance of any Post Preferred Stock.
Georgia Legislation. Under the GBCC, certain "business combinations"
(including a merger, consolidation, asset transfer or reclassification of equity
securities) between a Georgia corporation and any person who beneficially owns,
directly or indirectly, ten percent or more of the voting power of the
corporation's voting stock (an "Interested Shareholder"), are prohibited for
five years from the time that such Interested Shareholder becomes an Interested
Shareholder unless (i) prior to such time the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the shareholder becoming an Interested Shareholder; (ii) in the
transaction which resulted in the shareholder becoming an interested
shareholder, the interested shareholder became the beneficial owner of at least
90% of the corporation's outstanding shares at the time the transaction
commenced, excluding shares owned by directors and officers of the corporation,
subsidiaries of the corporation, and certain employee stock plans of the
corporation; or (iii) subsequent to becoming an Interested Shareholder, such
shareholder acquired additional shares resulting in the Interested Shareholder
being the beneficial owner of at least 90% of the outstanding voting stock of
the corporation, excluding shares owned by directors and officers of the
corporation, subsidiaries of the corporation and certain employee stock plans of
the corporation.
Furthermore, the GBCC provides that a business combination must be either
(i) unanimously approved by the continuing directors provided that the
continuing directors constitute at least three members of the board of directors
at the time of such approval; or (ii) recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled to be cast
by holders of voting shares, other than voting shares beneficially owned by the
interested shareholder unless, among other conditions, the Georgia corporation's
common shareholders receive a minimum price (as defined in the GBCC) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for its shares.
These GBCC provisions do not apply to business combinations with Interested
Shareholders unless the bylaws of the corporation so provide. The Post Bylaws do
not contain such a provision.
63
<PAGE> 74
Columbus
Authorized Preferred Shares. The Columbus Board may authorize the issuance
of Columbus Preferred Shares at such times, for such purposes and for such
consideration as it may deem advisable without further shareholder approval. The
issuance of Columbus Preferred Shares under certain circumstances may have the
effect of discouraging an attempt by a third party to acquire control of
Columbus by, for example, authorizing the issuance of a series of Columbus
Preferred Shares with rights and preferences designed to impede the proposed
transaction, or by making it more difficult for a person who has gained a
substantial equity interest in Columbus to obtain control or to exercise control
effectively.
Certain Business Combinations. The Columbus Charter requires that, except
in certain circumstances, a Business Combination (as hereinafter defined)
between Columbus and a Related Person (as hereinafter defined) be approved by
the affirmative vote of the holders of 80% of the outstanding Columbus Common
Shares, including the vote of the holders of not less than 50% of the Columbus
Common Shares not owned by the Related Person.
The Columbus Charter defines a "Business Combination" to include: (i) any
merger or consolidation of Columbus with or into a Related Person; (ii) any
sale, lease, pledge, transfer or other disposition, of more than 35% of the book
value of the total assets of Columbus as of the end of the last fiscal year, to
or with a Related Person; (iii) the issuance or transfer by Columbus (other than
by way of a pro rata dividend to all Columbus Shareholders) of any securities of
Columbus to a Related Person; (iv) any reclassification of securities or
recapitalization by Columbus that would increase the voting power of the Related
Person; or (v) the adoption of any plan for the liquidation or dissolution of
Columbus proposed by or on behalf of a Related Person which involves any
transfer of assets or any other transaction in which the Related Person has any
direct or indirect interest (except proportionately as a Columbus Shareholder).
The Columbus Charter defines a "Related Person" to include any individual,
corporation, partnership or other person and the affiliates and associates
thereof which individually or together is the beneficial owner in the aggregate
of more than 50% of Columbus Common Shares.
The 50% voting requirement referred to above is not applicable if the
Business Combination is approved by the affirmative vote of holders of not less
than 90% of the outstanding Columbus Common Shares. Neither the 80% nor the 50%
voting requirements outlined above apply in certain circumstances, if: (i) the
Columbus Board, by a vote of not less than 80% of the trust managers then
holding office, (A) have expressly approved in advance the acquisition of
Columbus Common Shares that caused the Related Person to become a Related Person
or (B) have expressly approved the Business Combination prior to the date on
which the Related Person involved in the Business Combination shall have become
a Related Person; or (ii) the Business Combination is proposed to be consummated
within one year of the consummation of a Fair Tender Offer (as defined in the
Columbus Charter) by the Related Person in which Business Combination the cash
or the Fair Market Value (as defined in the Columbus Charter) of the property,
securities or other consideration to be received per Columbus Common Share by
all remaining holders of Columbus Common Shares in the Business Combination is
not less than the price offered in the Fair Tender Offer; or (iii) the Rights
(as hereinafter defined) shall have become exercisable; or (iv) all of the
following conditions shall have been met: (A) the Business Combination is a
merger or consolidation, consummation of which is proposed to take place within
one year of the date of the transaction pursuant to which such person became a
Related Person and the cash or Fair Market Value of the property, securities or
other consideration to be received per share by all remaining holders of
Columbus Common Shares in the Business Combination is not less than the highest
per Columbus Common Share price paid by the Related Person in acquiring any of
its holdings of Columbus Common Shares, determined as of the date of
consummation of such Business Combination (a "Fair Price"); (B) the
consideration to be received by such holders in either cash or, if the Related
Person shall have acquired the majority of its holdings of Columbus Common
Shares for a form of consideration other than cash, in the same form of
consideration with which the Related Person acquired such majority; (C) after
such person has become a Related Person and prior to consummation of such
Business Combination; (1) except as approved by a majority of the unaffiliated
trust managers continuing in office, there shall have been no reduction in the
annual rate of dividends, if any, paid per share on the Columbus Common Shares
except any reduction proportionate with any decline in the Company's net income,
and (2) such Related Person shall not
64
<PAGE> 75
have received the benefit, directly or indirectly, of any loans, guarantees,
pledges or other financial assistance or any tax credits or other tax advantages
provided by the Company prior to the consummation of such Business Combination
(other than in connection with financing a Fair Tender Offer); and (D) a proxy
statement that conforms with the provisions of the Exchange Act is mailed to the
Columbus Shareholders for the purpose of soliciting shareholder approval of the
Business Combination.
If a person has become a Related Person and within one year after the date
of the transaction (the "Acquisition Date") pursuant to which the Related Person
became a Related Person (x) a Business Combination meeting all of the
requirements of clause (iv) above regarding the applicability of the 80% voting
requirement shall not have been consummated and (y) a Fair Tender Offer shall
not have been consummated and (z) Columbus shall not have been dissolved and
liquidated, then, in such event, the beneficial owner of each share (not
including shares beneficially owned by the Related Person) (each such beneficial
owner is a "Holder") will have the right (individually a "Right" and
collectively the "Rights"), which may be exercised, subject to certain
conditions, commencing at the opening of business on the one-year anniversary
date of the Acquisition Date and continuing for a period of ninety (90) days
thereafter (the "Exercise Period"), to sell to Columbus one share upon exercise
of such Right. At 5:00 p.m., Dallas, Texas time, on the last day of the Exercise
Period, each Right not exercised will become void, and, except as otherwise
provided in the Columbus Charter, the certificates representing shares
beneficially owned by a Holder will no longer represent Rights. The purchase
price for a share upon exercise of an accompanying Right generally will be equal
to the then-applicable Fair Price paid by the Related Person pursuant to the
exercise of the Right relating thereto.
Shareholder Rights Plan. The Columbus Board adopted a Rights Plan and
declared a dividend of one preferred share purchase right (individually, a
"Purchase Right" and collectively the "Purchase Rights") for each outstanding
Columbus Common Share. Each Purchase Right entitles the registered holder to
purchase from Columbus one one-hundredth of a share of Series A Junior
Participating Preferred Share, par value $.01 per share (the "Preferred
Shares"), of Columbus at a price of $70.00 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Purchase Rights are set forth in a Rights Agreement (the "Rights
Agreement") between Columbus and BankBoston N.A., as Rights Agent.
Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
Columbus Common Shares or (ii) ten business days (or such later date as may be
determined by action of the Columbus Board prior to such time as any person or
group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Columbus Common
Shares (the earlier of such dates being called the "Distribution Date"), the
Purchase Rights will be evidenced by the certificates representing the Columbus
Common Shares.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Purchase Rights), the Purchase Rights will be
transferred with and only with the Columbus Common Shares.
The Purchase Rights are not exercisable until the Distribution Date. The
Purchase Rights will expire on June 9, 2007 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Purchase Rights are
earlier redeemed or exchanged by Columbus, in each case, as described below.
At any time following the Distribution Date, Rights (other than Purchase
Rights owned by an Acquiring Person and the Acquiring Person's affiliates and
associates, which will have become void) may be exercised (subject to their
earlier termination, expiration or exchange) to acquire, in lieu of Preferred
Shares, at the then current Purchase Price of the Purchase Right, that number of
Columbus Common Shares (or if there are insufficient Columbus Common Shares,
Preferred Shares or fractions thereof) which at such time will have a market
value of two times the Purchase Price of the Purchase Right.
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<PAGE> 76
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Purchase Rights, are
subject to adjustment from time to time to prevent dilution.
In the event that Columbus is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Purchase Right (other than an
Acquiring Person and the affiliates and associates of such Acquiring Person,
whose Purchase Rights will have become void) will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Purchase Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
Purchase Price of the Purchase Right. In the event that any person or group of
affiliated or associated persons becomes an Acquiring Person, proper provision
shall be made so that each holder of a Purchase Right, other than Purchase
Rights beneficially owned by the Acquiring Person or the affiliates and
associates of such Acquiring Persons (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Columbus
Common Shares having a market value of two times the Purchase Price of the
Purchase Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Columbus Common Shares, the Columbus Board may exchange the Purchase Rights
(other than Purchase Rights owned by such person or group and their respective
affiliates and associates which have become void), in whole or in part, at an
exchange ratio of one Columbus Common Share, or one one-hundredth of a Preferred
Share (or of a share of a class or series of Columbus' preferred stock having
equivalent rights, preferences and privileges), per Purchase Right (subject to
adjustment).
At any time prior to or within 10 business days following the acquisition
by a person or group of affiliated or associated persons of beneficial ownership
of 15% or more of the outstanding Columbus Common Shares, the Columbus Board may
redeem the Purchase Rights in whole, but not in part, at a price of $.01 per
Purchase Right (the "Redemption Price"). The redemption of the Purchase Rights
may be made effective at such time on such basis with such conditions as the
Columbus Board in its sole discretion may establish. Immediately upon any
redemption of the Purchase Rights, the right to exercise the Purchase Rights
will terminate and the only right of the holders of Purchase Rights will be to
receive the Redemption Price.
REIT QUALIFICATION PROVISIONS
Post. The Post Charter, subject to certain exceptions, provides that no
holder may own, or be deemed to own by virtue of the attribution provisions of
the Code, more than 6.0% (which may be increased to not more than 9.8%) (the
"Ownership Limit") of the total outstanding Post Common Stock. The Post Board
may exempt a person from the Ownership Limit upon certain circumstances.
Further, any transfer of Post Common Stock that would (i) result in the Post
Common Stock being directly or indirectly owned by less than 100 persons; or
(ii) result in Post being "closely held" within the meaning of Section 856(h) of
the Code, is considered to be null and void (collectively, the "Post Transfer
Restrictions"), and the intended transferee will acquire no rights in the
shares, except as provided in the Post Charter regarding Excess Securities (as
hereinafter defined).
The Post Charter provides that Post Common Stock owned, or deemed to be
owned, or transferred to a shareholder in excess of the Ownership Limit or in
violation of the Post Transfer Restrictions will automatically be deemed to be
"Excess Securities" and as such will be deemed to have been transferred to the
transferee as agent on behalf of Post. Such person shall be deemed to hold the
Excess Securities in trust on behalf and for the benefit of Post. While the
Excess Securities are held in trust, they will not be entitled to vote, and they
will not be entitled to participate in dividends or other distributions. The
transferee's sole right with respect to the Excess Securities will be to receive
at Post's sole and absolute discretion either (i) consideration for the Excess
Securities interests upon the resale of the Excess Securities as directed by
Post as provided in the Post Charter or (ii) the Redemption Price (as
hereinafter defined).
Within six months after receiving notice of a transfer that violates the
Ownership Limit or the Post Transfer Restrictions, the Post Board shall either
(i) direct the transferee of the Excess Securities to sell all
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<PAGE> 77
Excess Securities held in trust for Post for cash in such manner as the Post
Board directs or (ii) redeem the Excess Securities for the redemption price (the
"Redemption Price") on such date within such six month period as the Post Board
may determine. If the Post Board directs the transferee to sell the Excess
Securities, the transferee shall receive such proceeds as trustee for Post and
pay to Post out of the proceeds of such sale all expenses incurred by Post in
connection with such sale plus any remaining amount of such proceeds that
exceeds the amount paid by the transferee for the Excess Securities, and the
transferee shall be entitled to retain only the proceeds in excess of such
amounts required to be paid to Post.
Each shareholder of record, and every actual holder, of more than 5% (or
such lower percentage as may be required by the Code or applicable Treasury
Regulations) of the outstanding Post Common Stock shall, within 30 days after
December 31 of each year, give written notice to Post stating the name and
address of such shareholder, the number of shares beneficially owned by it, and
a description of how such shares are held.
The Ownership Limit may have the effect of precluding acquisition of
control of Post unless the Post Board and the Post Shareholders determine that
maintenance of REIT status is no longer in the best interest of Post.
Columbus. The Columbus Charter provides that, subject to certain
exceptions, no shareholder may directly or indirectly acquire or hold a
beneficial ownership interest (determined in accordance with the attribution
rules applicable to ownership of REIT shares under the Code) in more than 9.8%
of the outstanding shares (the "Percentage Limit") of any class or series of
shares of Columbus.
The Columbus Board may waive the Percentage Limit with respect to a
particular shareholder under certain circumstances. Additionally, any transfer
of Columbus shares that would (i) result in Columbus shares being owned by less
than 100 persons; (ii) result in Columbus being "closely held" within the
meaning of Section 856(h) of the Code or (iii) result in the disqualification of
Columbus as a REIT, shall be void ab initio and the intended transferee shall
acquire no rights in the shares.
Subject to certain exceptions, if any person acquires or holds Columbus
shares in excess of the applicable Percentage Limit (the "Excess Shares"), such
Excess Shares will automatically be deemed to have been transferred to Columbus,
as trustee for the exclusive benefit of such beneficiary to whom an interest in
such Excess Shares may later be transferred.
Excess Shares may not be voted and are not entitled to distributions or
dividends. The purported transferee may designate a beneficiary of an interest
in the trust if (i) the Excess Shares held in the trust would not be Excess
Shares in the hands of such beneficiary and (ii) the purported transferee does
not receive a price from such beneficiary that reflects a price per share for
such Excess Shares that exceeds (x) the price per share such purported
transferee paid for the shares in the purported transfer that resulted in the
Excess Shares or (y) if the purported transferee did not give value for such
Excess Shares, a price per share equal to the market price on the date of the
purported transfer that resulted in Excess Shares. If a purported transferee
receives a price for designating a beneficiary of an interest in the trust that
exceeds the amounts allowable as set forth above, such purported transferee
shall pay, or cause such beneficiary to pay, such excess to Columbus.
Excess Shares shall be deemed to have been offered for sale to Columbus, or
its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that created such Excess Shares and (ii) the market
price on the date Columbus accepts such offer. Columbus has the right to accept
such offer for a period of 90 days after the later of (x) the date of the
transfer which resulted in such Excess Shares and (y) the date the trust
managers determined in good faith that a transfer resulting in Excess Shares has
occurred.
Each person who owns more than 5% of Columbus' outstanding shares during
any taxable year of Columbus shall file with Columbus an affidavit setting forth
the number of shares owned directly and indirectly by such person.
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PREEMPTIVE RIGHTS
Neither the Post Shareholders nor the Columbus Shareholders have preemptive
rights. Thus, if additional shares of Post Common Stock or Columbus Common
Shares were issued, the proportions of capital stock ownership of the holders
thereof would be reduced to the extent they did not participate in such
additional issuance of shares.
ASSESSMENT
All outstanding shares of Post Common Stock are, and those to be issued
pursuant to the Agreement will be, fully paid and nonassessable. The Columbus
Common Shares presently outstanding are fully paid and nonassessable.
CONVERSION; REDEMPTION; SINKING FUND
Neither Post Common Stock nor Columbus Common Shares is convertible,
redeemable or entitled to any sinking fund.
LIQUIDATION RIGHTS
Post. In the event of the liquidation, dissolution or winding-up of the
affairs of Post, holders of outstanding Post Common Stock are entitled to share,
in proportion to their respective interests, in Post's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of Post. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of Post, the holders of Post Preferred Stock will be
entitled to receive out of the assets of Post available for distribution to
shareholders, before any distribution is made to holders of Post Common Stock,
liquidation preferences in the amounts prescribed by the applicable series
designation. The holders of any series of Post Preferred Stock will not be
entitled to receive the liquidation preference of such series until the
liquidation preference of any other series of Post Preferred Stock ranking
senior to such series with respect to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of Post, the assets of Post shall be insufficient to make such full payments to
holders of Post Preferred Stock, then such assets shall be distributed pro rata
among holders of Post Preferred Stock. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of Post
Preferred Stock will not be entitled to any further participation in any
distribution of assets by Post. Neither a consolidation or merger of Post with
or into another corporation nor a merger of another corporation with or into
Post nor a sale, lease or conveyance of all or any part of Post's property or
business shall be considered a liquidation, dissolution or winding up of Post.
Columbus. In the event of liquidation, dissolution or winding up of
Columbus, whether voluntary or involuntary, the holders of Columbus Common
Shares would be entitled to share ratably in any of its net assets or funds
which are available for distribution to its shareholders after the satisfaction
of its liabilities or after adequate provision is made therefor, subject to the
rights of the holders of any Columbus Preferred Shares outstanding at the time.
DIVIDENDS AND OTHER DISTRIBUTIONS
In order to remain qualified as a REIT under the Code, each of Post and
Columbus must distribute to its shareholders at least 95% of its taxable income
(other than net capital gain) annually. See "Certain Federal Income Tax
Consequences -- Requirements for Qualification -- Distribution Requirements."
Post. Holders of Post Common Stock are entitled to cash dividends when, if
and as declared by the Post Board. There can be no assurance as to the payment
of dividends on Post Common Stock in the future because such payment will depend
upon the earnings and financial condition of Post, as well as other related
factors. The GBCC provides that Post may not pay dividends if after giving
effect to the dividend, Post would not be able to pay its debt as they become
due in the usual course of business or Post's total assets would be
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less than the sum of its total liabilities plus the amount that would be needed,
if Post were to be dissolved at such time, to satisfy any preferential rights
upon dissolution held by its shareholders whose preferential rights are superior
to those receiving the dividend.
Columbus. The holders of Columbus Common Shares are entitled to share
ratably in dividends when and as declared by the Columbus Board out of funds
legally available therefor. The Columbus Declaration of Trust permits the
issuance of Columbus Preferred Shares having the right to receive dividends
before dividends on the Columbus Common Shares are declared or paid. The TRA
provides that Columbus may not pay dividends if after giving effect to the
distribution, Columbus would be insolvent or if the dividend exceeds the surplus
of Columbus.
SHAREHOLDER MEETINGS
Post. Under the Post Bylaws, special meetings of Post shareholders may be
called by the Post Board, the Chairman of the Post Board, the President or the
written request of the holders of at least 50% of all of the shares entitled to
vote at such meeting.
Columbus. Under the Columbus Bylaws, special meetings of the shareholders
may be called at any time by the Columbus Board, any executive officer or
Secretary of Columbus or the written request of the holders of at least 10% of
all the shares entitled to vote at such meeting.
SHAREHOLDER NOMINATIONS
Post. Under the Post Bylaws, only persons nominated in accordance with the
procedures set forth therein will be eligible for election as directors. Post
Shareholders are entitled to nominate persons for election to the Post Board
only if a timely notice in writing is sent to the Secretary of Post. To be
timely, a shareholder's notice must be received at the principal executive
offices of Post not less than 60 days prior to the date of the meeting at which
directors are to be elected (subject to limited exceptions). Such notice must
set forth certain information, including, among other things, (i) with respect
to each person whom the shareholder proposes to nominate for election as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors pursuant to
Regulation 14(a) under the Exchange Act, and (ii) with respect to such
shareholder giving such notice, (a) the name and address of such shareholder and
(b) the class and number of shares of Post beneficially owned by such
shareholder.
Columbus. The Columbus Bylaws contain no restrictions on the ability of
Columbus Shareholders to nominate persons for election as a trust manager of
Columbus.
SHAREHOLDER PROPOSALS
Post. Under the Post Bylaws, at an annual meting of shareholders, only
business properly brought before the meeting may be conducted. For business to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary of Post. To be
timely, a shareholder's notice must be received at the principal executive
offices of Post not less than 60 days prior to the annual meeting (with limited
exceptions). Such notice must set forth as to each matter the shareholder
proposes to bring before the annual meeting (i) a brief description of the
business to be brought and the reasons for conducting such business, (ii) the
name and address of such shareholder, (iii) the class and number of shares of
Post beneficially owned by such shareholder and (iv) any material interest of
the shareholder in such business.
Columbus. The Columbus Charter and the Columbus Bylaws contain no such
restrictions on the ability of Columbus Shareholders to make shareholder
proposals.
INDEMNIFICATION
Post. Under the GBCC, a corporation may indemnify a director, officer,
employee or agent, acting in his capacity as such, for judgments, settlements,
penalties, fines or reasonable expenses incurred with respect to a threatened,
pending or completed action, suit or proceeding if he acted in a manner he
believed in good faith
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to be in or not opposed to the best interests of the corporation and, in the
case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful. Indemnification in connection with a proceeding by or in
the right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding. A corporation may pay for or reimburse the
reasonable expenses incurred by a party to a proceeding in advance of final
disposition of the proceeding if (i) he furnishes the corporation a written
affirmation of his good faith belief that he has met the required standard of
conduct and (ii) he furnishes the corporation a written undertaking to repay any
advances if it is ultimately determined that he is not entitled to
indemnification under the GBCC. Under the Post Bylaws, Post is required to
indemnify, to the fullest extent permitted by the GBCC, any individual made a
party to a proceeding because he is or was a director or officer against
liability incurred in the proceeding, if he acted in a manner he believed in
good faith to be in or not opposed to the best interests of Post and, in the
case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful.
Columbus. The TRA permits a Texas REIT to indemnify a person who was, is
or is threatened to be made a named defendant or respondent in a threatened,
pending or completed action, suit or proceeding because the person is or was a
trust manager only if it is determined that the person (i) conducted himself in
good faith, (ii) reasonably believed (a) in the case of conduct in his official
capacity as a trust manager of the real estate investment trust, that his
conduct was in the real estate investment trust's best interests; and (b) in all
other cases, that his conduct was at least not opposed to the real estate
investment trust's best interests, and (iii) in the case of any criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The Columbus Charter is governed by this provision.
DIRECTOR AND TRUST MANAGER LIABILITY
As permitted by the GBCC and the TRA, respectively, the Post Charter and
the Columbus Declaration of Trust eliminate the liability of trust managers,
directors and officers of Post and Columbus, respectively, for monetary damages
in a shareholder or derivative proceeding.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary sets forth the principal federal income tax
consequences of the Merger. The summary is based on the provisions of the Code,
the Treasury Regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date hereof. Such laws or
interpretations are subject to change at any time (possibly with retroactive
effect), and the relevant facts may differ at the Effective Time. The obligation
of each of Post and Columbus, respectively, to consummate the Merger is
conditioned upon the receipt of either (i) a ruling from the IRS or (ii) an
opinion dated as of the Closing Date from each of Post and Columbus' respective
counsel to the effect that (A) the Merger should qualify as a reorganization
under the provisions of Section 368(a) of the Code and (B) the surviving company
will constitute a "qualified REIT subsidiary" under Section 856(i) of the Code.
The tax treatment of each Columbus Shareholder will depend in part upon
such shareholder's particular situation. Special tax consequences not described
below may be applicable to particular classes of taxpayers, including financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are legal entities formed under the laws of jurisdictions
outside the United States, and Columbus Shareholders who acquired their shares
through the exercise of employee stock options or otherwise as compensation. The
discussion set forth below is included for general information only. It is not
intended to be, nor should it be construed to be, legal or tax advice to any
particular holder of Post Common Stock or Columbus Common Shares. All Columbus
Shareholders should consult with their own tax advisors as to the particular tax
consequences of the Merger to them, including the applicability and effect of
any state, local and foreign tax laws.
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TAX CONSEQUENCES OF THE MERGER TO COLUMBUS SHAREHOLDERS, COLUMBUS, AND POST
In accordance with the opinions of counsel to Post and Columbus,
respectively, the Merger should be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section 368(a) of the Code and
Columbus and Post should each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In that event,
(i) no gain or loss will be recognized by a Columbus Shareholder who
receives Post Common Stock for Columbus Common Shares exchanged therefor
(except with respect to any cash received in lieu of a fractional interest
in Post Common Stock);
(ii) the aggregate tax basis of the Post Common Stock to be received
by Columbus Shareholders pursuant to the Merger will be the same as the
aggregate tax basis in the Columbus Common Shares surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received);
(iii) the holding period of the Post Common Stock to be received by a
Columbus Shareholder pursuant to the Merger will include the holding period
of the Columbus Common Shares surrendered in exchange therefor, provided
that the Columbus Common Shares were held as a capital asset at the
Effective Time; and
(iv) no gain or loss will be recognized by Columbus or Post as a
result of the Merger.
Cash received in lieu of a fractional interest in Post Common Stock will be
treated under Section 302 of the Code as received in exchange for such
fractional interest, and gain or loss will be recognized, measured by the
difference between the amount of cash received and the portion of the basis of
the Columbus Common Shares allocable to such fractional interest. Such gain or
loss will constitute capital gain or loss if the Columbus Common Shares were
held as a capital asset at the Effective Time, and will be long-term capital
gain or loss if the holding period for such shares was greater than one year at
the Effective Time. Any capital gain recognized as a result of the Merger will
be taxed at rates applicable to capital gains. The tax rate applicable to
capital gains of an individual taxpayer varies depending on the taxpayer's
holding period for the shares. Pursuant to recently enacted legislation, in the
case of an individual, any such capital gain will be subject to a maximum
federal income tax rate of (A) 20% if the holder's holding period in such stock
was more than 18 months on the date of the Effective Time and (B) 28% if the
holder's holding period was more than one year but not more than 18 months on
the date of the Effective Time. The deductibility of capital losses is subject
to limitations for both individuals and corporations.
Following the Merger, Merger Sub currently intends to contribute all of
Columbus' assets and liabilities to the Operating Partnership. The IRS has
issued proposed regulations (which have a prospective effective date and
therefore would not apply to the Merger if finalized in their present form)
which indicate that the contribution of Columbus' assets and liabilities to the
Operating Partnership subsequent to the Merger as contemplated will not
adversely affect the Merger's qualification as a tax-free reorganization because
Post will own (through its qualified REIT subsidiaries) a substantial portion
(in excess of 80%) of the aggregate interests, as well as the sole general
partnership interest, in the Operating Partnership. The proposed regulations
reflect a change in the position taken by the IRS in certain informal
pronouncements that a post-reorganization contribution by the acquiring
corporation of all of a target corporation's assets to a partnership would
prevent the acquisition from qualifying as a tax-free reorganization. Although
the proposed regulations will not apply to the Merger, the respective tax
counsels to Post and Columbus believe that the proposed regulations, which are
interpretive rather than legislative, correctly interpret existing law and that
a court should not reach a contrary conclusion under existing statutory and
judicial authorities. Accordingly, counsel to Post and counsel to Columbus are
of the opinion that the Merger should qualify as a tax-free reorganization.
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If, for any reason, the Merger did not qualify as a tax-free reorganization
for federal income tax purposes, the Merger would be treated as a taxable
exchange and, accordingly,
(i) a Columbus Shareholder would recognize gain or loss, measured by
the difference between the fair market value of the Merger Consideration
(including any cash received for a fractional share interest) received and
the Columbus Shareholder's tax basis in the Columbus Common Shares
exchanged therefor. Such gain or loss would constitute capital gain or loss
if the Columbus Common Shares were held as a capital asset at the Effective
Time, and would be long-term capital gain or loss if the holding period for
such shares were greater than one year at the Effective Time;
(ii) the tax basis of the Post Common Stock received in connection
with the Merger by a Columbus Shareholder would be the fair market value at
the Effective Time of such Post Common Stock; and
(iii) the holding period of the Post Common Stock received by a
Columbus Shareholder pursuant to the Merger would commence on the day
following the date of the Effective Time.
Further, if the Merger does not qualify as a tax-free reorganization, Columbus
will recognize gain or loss equal to the difference between Columbus' basis in
its properties and assets and the sum of the fair market value of the Merger
Consideration and the debt assumed by Post in the Merger. In computing its
taxable income for its taxable year ended on the date of the Merger, Columbus
generally would be entitled to a dividends paid deduction equal to the fair
market value of the Merger Consideration received by the Columbus Shareholders.
To the extent that the gain, if any, exceeds the fair market value of the Merger
Consideration, such gain generally would be taxable to Columbus. In addition,
Columbus would recognize approximately $7.8 million of built-in gain (as
estimated by Columbus) with respect to certain assets previously acquired from a
C corporation in a carryover basis transaction, which gain would be subject to a
corporate-level tax under Treasury Regulations announced by the IRS but not yet
issued. See "-- Qualification and Taxation of Post as a REIT" below. Any such
tax liability of Columbus will be transferred to the surviving company in the
Merger.
QUALIFICATION AND TAXATION OF POST AS A REIT
Each of Post and Columbus currently has in effect an election to be taxed
as a REIT under Sections 856 through 860 of the Code. Each of Post and Columbus
believes that it has, since its inception, been organized and operated in such a
manner so as to qualify for taxation as a REIT under the Code. In this regard,
as a condition to the Merger, Post will obtain an opinion from Columbus' counsel
that Columbus, for its taxable year ended December 31, 1993 and for all
subsequent taxable years through the Effective Time of the Merger, was organized
and has operated in conformity with the requirements for qualification and
taxation as a REIT. Furthermore, counsel to Post will deliver an opinion to each
of Post and Columbus that for its taxable year ended December 31, 1993 and for
all subsequent taxable years ended prior to the Effective Time, Post was
organized and has operated in conformity with the requirements for qualification
and taxation as a REIT, and that, after giving effect to the Merger, Post's
proposed method of operation will enable it to continue to meet the requirements
for qualification and taxation as a REIT under the Code. Such opinion will be
based on various assumptions and representations relating to the organization
and operation of Columbus, Post and the Operating Partnership. Post intends to
continue to operate in a manner so as to qualify as a REIT following the
Effective Time, but no assurance can be given that Post will qualify or remain
qualified as a REIT. Further, King & Spalding will not review Post's compliance
with the various REIT tests on a continuing basis.
As a result of the Merger, Columbus' separate existence will cease as of
the Effective Time. Accordingly, the following discussion addresses the taxation
of Post subsequent to the Effective Time.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth certain
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its shareholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change prospectively or retroactively.
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So long as Post continues to qualify for taxation as a REIT, it generally
will not be subject to federal corporate income tax on its net income that is
distributed currently to its shareholders. That treatment substantially
eliminates the "double taxation" (i.e., taxation at both the corporate and
shareholder levels) that generally results from investment in a corporation.
However, Post will be subject to federal income tax in the following
circumstances. First, Post will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, Post may be subject to the "alternative
minimum tax" on items of tax preference, if any. Third, if Post has (i) net
income from the sale or other disposition of "foreclosure property" (which is,
in general, property acquired by foreclosure or otherwise on default of a loan
or lease secured by the property) that is held primarily for sale to customers
in the ordinary course of business or (ii) other nonqualifying income from
foreclosure property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if Post has net income from prohibited transactions (which
are, in general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if Post
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and nonetheless has maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amounts by which it
fails the 75% or 95% gross income test. Sixth, if Post should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain net income for such year
and (iii) any undistributed taxable income from prior periods, it would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Finally, if Post acquires any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a transaction in which the basis of the asset in Post's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and Post recognizes gain on the disposition of such asset
during the ten-year period beginning on the date on which such asset was
acquired by Post, then, to the extent of such property's "built-in" gain (the
excess of the fair market value of such property at the time of acquisition by
Post over the adjusted basis of such property at such time), such gain will be
subject to the highest corporate rate applicable (as provided in retroactive IRS
regulations that were announced in IRS Notice 88-19 but which have not yet been
promulgated), provided an election is made by Post to apply the principles of
Section 1374 of the Code to such gain (a "Notice 88-19 election").
When Columbus was formed in 1993, it acquired certain built-in gain assets
from a C corporation in a carryover basis transaction. Columbus believes that
the aggregate built-in gain with respect to such assets is approximately $7.8
million. Columbus filed a Notice 88-19 election with its first REIT tax return
for the taxable year ended December 31, 1993. Accordingly, Post (as Columbus'
successor) should be subject to a Section 1374 corporate-level tax (assuming the
retroactive regulations announced in Notice 88-19 are eventually issued by the
IRS) if Post or the Operating Partnership sells a built-in gain asset in a
taxable transaction during the ten-year period commencing on the date such
assets were originally acquired by Columbus. Post will likewise file a Notice
88-19 election with respect to the built-in gain assets acquired from Columbus,
but Post has no current intention to sell any of the built-in gain assets that
will be acquired from Columbus.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for Sections 859 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding shares of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year which has not been revoked or terminated) and satisfies
all relevant filing and other administrative requirements established by the IRS
that must be met in order to elect and maintain REIT status; (viii) that uses a
calendar year for federal income tax purposes and complies with the
recordkeeping
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requirements of the Code and Treasury Regulations promulgated thereunder; and
(ix) that meets certain other tests, described below, regarding the nature of
its income and assets. The Code provides that conditions (i) to (iv), inclusive,
must be met during the entire taxable year and that condition (v) must be met
during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. For purposes of
determining stock ownership under the 5/50 Rule, a supplemental unemployment
compensation benefits plan, a private foundation or a portion of a trust
permanently set aside or used exclusively for charitable purposes generally is
considered an individual. A trust that is a qualified trust under Section 401(a)
of the Code, however, generally is not considered an individual and
beneficiaries of such trust are treated as holding shares of a REIT in
proportion to their actuarial interests in such trust for purposes of the 5/50
Rule. Finally, under the Taxpayer Relief Act of 1997 signed by the President on
August 5, 1997 (the "1997 Act"), for its taxable years beginning after December
31, 1997, Post will be treated as having met condition (vi) above if it has
complied with certain Treasury regulations for ascertaining the ownership of its
stock for such year and if it did not know (or after the exercise of reasonable
diligence would not have known) that its stock was sufficiently closely held
during such year to cause it to fail condition (vi).
The Post Charter contains restrictions regarding the transfer of Post
Common Stock that are intended to assist Post in continuing to satisfy the share
ownership requirements described in clauses (v) and (vi) above. Such transfer
restrictions are described in "Comparative Rights of Shareholders -- REIT
Qualification Provisions."
Section 856(i) of the Code provides that a corporation that is a "qualified
REIT subsidiary" shall not be treated as a separate corporation for tax
purposes, and all assets, liabilities and items of income, deduction and credit
of a "qualified REIT subsidiary" shall be treated as assets, liabilities and
items of income, deduction and credit of the REIT. For taxable years ending on
or before December 31, 1997, a "qualified REIT subsidiary" is a corporation, all
of the capital stock of which has been held by the REIT "at all times during the
period such corporation was in existence." Under the 1997 Act, for post-1997
taxable years the stock of a qualified REIT subsidiary no longer needs to have
been held by the REIT "at all times during the period such corporation was in
existence." According to an opinion of counsel, Merger Sub will constitute a
qualified REIT subsidiary following the Merger. Accordingly, in applying the
income and asset tests described below, Merger Sub and GP Sub will qualify as
qualified REIT subsidiaries, will be ignored for federal income tax purposes,
and all assets, liabilities and items of income, deduction and credit of such
subsidiaries will be treated as assets, liabilities and items of income,
deduction, and credit of Post. Such subsidiaries therefore will not be subject
to federal corporate income taxation, although they may be subject to state and
local taxation.
In the case of a REIT that is a partner in an entity that is classified for
federal tax purposes as a partnership, Treasury Regulations provide that the
REIT will be deemed to own its proportionate share of the assets of the
partnership (based on the REIT's capital interest in the partnership) and will
be deemed to be entitled to the gross income of the partnership attributable to
such share. In addition, the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income and asset tests described
below. The ownership of interests in the Operating Partnership by Merger Sub and
GP Sub will result in their proportionate share of the assets, liabilities and
items of income of the Operating Partnership being treated as assets,
liabilities and items of income of Post for purposes of the asset and income
tests described below.
Income Tests. For its taxable years ending on or before December 31, 1997,
in order for Post to maintain its qualification as a REIT, three requirements
relating to gross income must be satisfied annually. First, at least 75% of its
gross income (excluding gross income from prohibited transactions) for each
taxable year must consist of defined types of income derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or temporary investment income. Second, at least 95% of its gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property or temporary investments, and from
dividends, other types of interest and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing. Third, for each
taxable years ending on or before December 31, 1997, short-term gain from the
sale or other disposition of stock or securities, gain from prohibited
transactions, and gain on the sale or other disposition of real property held
for less than four years
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(apart from involuntary conversions and sales of foreclosure property) must
represent less than 30% of the REIT's gross income (including gross income from
prohibited transactions) for each taxable year (the "30% Gross Income Test").
Under the 30% Gross Income Test, if a REIT holds an interest in a partnership
that sells real property or if the REIT sells its interest in a partnership that
holds real property, the gross income derived from such sale, to the extent
attributable to real property, is deemed to be derived from the sale of real
property held for the shorter of the period that the partnership held the
property or the period that the REIT held its partnership interest. The 1997 Act
repeals the 30% Gross Income Test effective for Post's taxable year beginning
January 1, 1998.
The rent received by Post from its tenants will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based,
in whole or in part, on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant of Post will not qualify as "rents from real property" in
satisfying the gross income tests if Post, or a direct or indirect owner of 10%
or more of Post, directly or constructively owns 10% or more of such tenant (a
"Related Party Tenant"). Third, if rent attributable to personal property that
is leased in connection with a lease of real property is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property." Finally,
for the rent to qualify as "rents from real property," Post generally must not
operate or manage its properties or furnish or render services to the tenants of
such properties, other than through an "independent contractor" who is
adequately compensated and from whom Post derives or receives no income. The
"independent contractor" requirement, however, does not apply to the extent the
services provided by Post are "usually or customarily rendered" in connection
with the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant." In addition, for Post's taxable years beginning
after December 31, 1997, the "independent contractor" requirement will not apply
to noncustomary services provided by Post, the annual value of which does not
exceed 1% of the gross income derived from the property with respect to which
the services are provided (the "1% de minimis exception"). For this purpose,
such services may not be valued at less than 150% of Post's direct cost of
providing the services.
Post does not charge, and will not charge after the Merger, rent for any
portion of any property that is based, in whole or in part, on the income or
profits of any person. In addition, Post has not received, and does not
anticipate receiving after the Merger, any rent from a Related Party Tenant.
Finally, any noncustomary services will be provided through qualifying
independent contractors or, for post-1997 taxable years will satisfy the 1% de
minimis exception.
The Operating Partnership receives fees in consideration of the performance
of management, landscaping and administrative services with respect to
properties that are not wholly owned, directly or indirectly, by the Operating
Partnership. A portion of such fees (corresponding to that portion of any such
property owned by a third party) generally will not qualify under the 75% or 95%
gross income tests. Post will also receive certain other types of non-qualifying
income, including its allocable share of any dividends paid by Post Services to
the Operating Partnership (which will qualify under the 95% gross income test
but not under the 75% gross income test). Post believes, however, that the
aggregate amount of such fees and other non-qualifying income in any taxable
year will not cause Post to exceed the limits on non-qualifying income under the
75% and 95% gross income tests.
If Post fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it nevertheless may qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if the failure to meet such tests is due
to reasonable cause and not due to willful neglect, Post attaches a schedule of
the sources of its income to its return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances Post would be entitled to the
benefit of those relief provisions. As discussed above in "-- Qualification and
Taxation of Post as a REIT," even if those relief provisions apply, a 100% tax
would be imposed on the net income attributable to the greater of the amount by
which Post fails the
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75% and 95% gross income tests. No such relief is available for violations of
the 30% Gross Income Test (which, as noted above, has been repealed commencing
with Post's 1998 taxable year).
Asset Tests. At the close of each quarter of its taxable year, Post also
must satisfy three tests relating to the nature of its assets. First, at least
75% of the value of Post's total assets must be represented by real estate
assets, including (i) its allocable share of real estate assets held by the
Operating Partnership and any subsidiary partnerships or limited liability
companies, and (ii) stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term (at least five
years) public debt offering of Post, cash, cash items and government securities.
Second, not more than 25% of Post's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's debt and equity
securities owned by Post (including its allocable share of such securities owned
by the Operating Partnership) may not exceed 5% of the value of Post's total
assets, and Post may not own more than 10% of any one issuer's outstanding
voting securities. Debt of an issuer that is secured by real estate assets does
not constitute a "security" for purposes of the 5% asset test. The 5% asset test
generally must be met for any quarter in which a REIT acquires securities of an
issuer or other property. Thus, this requirement must be satisfied not only on
the date that Post initially acquires securities in an issuer, but also each
time Post increases its ownership of securities of an issuer (including as a
result of increasing its interest in the Operating Partnership as limited
partners exercise their rights to convert Units to Post Common Stock).
Assuming Merger Sub contributes all of Columbus' assets to the Operating
Partnership, the Operating Partnership will own 100% of the nonvoting stock of
both Armada and Addison, as well as of Post Services, Inc., but will own 1% or
less of the voting securities of each such corporation. Based upon its analysis
of the estimated value of the debt and equity securities of the subsidiaries
that will be owned by the Operating Partnership relative to the estimated value
of the other assets that will be owned by the Operating Partnership, Post
believes its pro rata share of the debt and equity securities of each subsidiary
held by the Operating Partnership will not exceed 5% of the total value of
Post's assets. However, no independent appraisals have been obtained to support
this conclusion, and King & Spalding, in rendering its opinion as to the
qualification of Post as a REIT, will rely on a representation of management
with respect to the value of the Operating Partnership's subsidiaries. Although
Post plans to take steps to ensure that it satisfies the 5% asset test for any
quarter in which it or the Operating Partnership acquires securities or other
property, there can be no assurance that such steps always will be successful or
will not require a reduction in the Operating Partnership's overall interest in
its subsidiary corporations.
If Post should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause it to lose its REIT status if (i) it
satisfied the asset tests at the close of the preceding calendar quarter and
(ii) the discrepancy between the value of its assets and the asset tests either
did not exist immediately after the acquisition of any particular asset or was
not wholly or partly caused by such an acquisition (i.e., the discrepancy arose
from changes in the market values of its assets). If the condition described in
clause (ii) of the preceding sentence were not satisfied, Post still could avoid
disqualification by eliminating any discrepancy within 30 days after the close
of the calendar quarter in which it arose.
Distribution Requirements. Post, in order to qualify as a REIT, is
required to distribute with respect to each taxable year dividends (other than
capital gain dividends) to its shareholders in an aggregate amount at least
equal to (i) the sum of (A) 95% of its "REIT taxable income" (computed without
regard to the dividends paid deduction and its net capital gain) and (B) 95% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before Post timely files its federal income tax return for such year and if paid
on or before the first regular dividend payment date after such declaration. To
the extent that Post does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its "REIT taxable income," as
adjusted, it will be subject to tax thereon at regular ordinary and capital
gains corporate tax rates. Furthermore, if Post should fail to distribute during
each calendar year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain income for such year and (iii) any
undistributed taxable income from prior periods, it would be
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subject to a 4% nondeductible excise tax on the excess of such required
distribution over the amounts actually distributed.
Post intends to make timely distributions sufficient to satisfy the annual
distribution requirements. In this regard, the Partnership Agreement authorizes
GP Sub, as general partner, to take such steps as may be necessary to cause the
Operating Partnership to distribute to its partners an amount sufficient to
permit Post to meet these distribution requirements. It is possible, however,
that Post, from time to time, may not have sufficient cash or other liquid
assets to meet the distribution requirements due to timing differences between
the actual receipt of income and actual payment of deductible expenses and the
inclusion of such income and deduction, of such expenses in arriving at Post's
taxable income, or if the amount of nondeductible expenses (such as principal
amortization or capital expenses) exceed the amount of noncash deductions.
Under certain circumstances, Post may be able to rectify a failure to meet
the distribution requirements for a year by paying "deficiency dividends" to its
shareholders in a later year, which may be included in its deduction for
dividends paid for the earlier year. Although Post may be able to avoid being
taxed on amounts distributed as deficiency dividends, it will be required to pay
to the IRS interest based upon the amount of any deduction taken for deficiency
dividends.
Recordkeeping Requirements. Pursuant to applicable Treasury Regulations,
in order to maintain qualification as a REIT, Post must maintain certain records
and request on an annual basis certain information from its shareholders
designed to disclose the actual ownership of its outstanding shares. Post
intends to comply with these requirements.
FAILURE TO QUALIFY
If Post fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, it will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which Post fails to qualify
will not be deductible nor will they be required to be made. In such event, to
the extent of current and accumulated earnings and profits, all distributions to
shareholders will be taxable as ordinary income and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, Post also will be disqualified from taxation as a REIT for the four
taxable years following the year during which it ceased to qualify as a REIT. It
is not possible to predict whether in all circumstances Post would be entitled
to such statutory relief.
OTHER TAX CONSIDERATIONS
Tax Status of Operating Partnership and Other Pass-Through Entities' Effect
on REIT Qualification. All of Post's investments have been made through the
Operating Partnership, which in turn holds an interest in a subsidiary
partnership (the "Subsidiary Partnership"). In addition, following the Merger,
Merger Sub currently intends to contribute certain of the assets held by the
former qualified REIT subsidiaries of Columbus to wholly owned limited liability
companies (the "LLCs"), all of the interests in which will be contributed to the
Operating Partnership.
In the opinion of King & Spalding, the Operating Partnership and the
Subsidiary Partnership each qualify as a partnership for federal income tax
purposes and not as an association taxable as a corporation or as a publicly
traded partnership. Further, the LLCs will be disregarded for federal income tax
purposes and their assets and liabilities and items of income, gain, loss and
deduction will be treated as those of the Operating Partnership.
A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market or the substantial equivalent of a secondary market. The Treasury
Department recently issued regulations effective for taxable years beginning
after December 31, 1995 (the "PTP Regulations") that provide limited safe
harbors, which, if satisfied, will prevent a partnership's interests from being
treated as readily tradable on a secondary market or the substantial equivalent
thereof. The "private placement" safe harbor applies if (i) all interests in the
partnership were
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issued in a transaction (or transactions) that was not required to be registered
under the Securities Act of 1933, as amended, and (ii) the partnership does not
have more than 100 partners at any time during the partnership's taxable year.
In determining the number of partners in a partnership, a person owning an
interest in a flow-through entity (i.e., a partnership, grantor trust, or S
corporation) that owns an interest in the partnership is treated as a partner in
such partnership only if (i) substantially all of the value of the person's
interest in the flowthrough entity is attributable to the flow-through entity's
interest (direct or indirect) in the partnership and (ii) a principal purpose of
the use of the tiered arrangement is to permit the partnership to satisfy the
100-partner limitation. The Operating Partnership does not currently meet the
private placement safe harbor of the PTP Regulations because it has more than
100 partners.
Under a special grandfather rule, an existing partnership may continue to
rely on safe harbors contained in IRS Notice 88-75 for a 10-year period. Post
believes that the Operating Partnership has satisfied, and will continue to
satisfy, the private placement safe harbor under such Notice because, in part,
it has fewer than 500 direct and indirect partners. Upon expiration of the
grandfather period, if the Operating Partnership does not at that time satisfy
the private placement safe harbor of the PTP Regulations, it is possible that
the Operating Partnership could be classified as a publicly traded partnership.
In that event, the Operating Partnership should satisfy a special "passive
income" exception provided in Section 7704(c) of the Code and therefore should
not be subject to federal income tax at the corporate level. However, if the
Operating Partnership were classified as a publicly traded partnership, the
partners of the Operating Partnership would nevertheless be subject to special
passive loss rules in Section 469(k) of the Code.
If the Operating Partnership were treated as an association taxable as a
corporation, Post would fail the 75% asset test. Further, if the Subsidiary
Partnership were treated as a taxable corporation, then Post would cease to
qualify as a REIT if Post's ownership interest in such partnership exceeded 10%
of the partnership's voting interests or the value of such interest exceeded 5%
of the value of Post's assets. Furthermore, in such a situation, distributions
from the Subsidiary Partnership to Post would be treated as dividends, which are
not taken into account in satisfying the 75% gross income test described above
and which could therefore make it more difficult for Post to meet such test.
Finally, Post would not be able to deduct its share of losses generated by any
of the Subsidiary Partnerships in computing its taxable income. See "-- Failure
to Qualify" above for a discussion of the effect of Post's failure to meet such
tests for a taxable year.
Taxation of Post Services and Operating Subsidiaries. Post Services, Inc.
and its existing subsidiaries file a corporate consolidated return for federal
income tax purposes. The consolidated taxable income of these companies and the
taxable income of Armada and Addison following the Merger is subject to tax at
regular corporate rates. To the extent such entities are required to pay
federal, state and local income taxes, the cash available for distribution to
shareholders will be correspondingly reduced.
State and Local Taxes. Post and its shareholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which it or they transact business or reside (although shareholders who are
individuals generally should not be required to file state income tax returns
outside of their state of residence with respect to Post's operations and
distributions). The state and local tax treatment of Post and its shareholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the Post
Common Stock or the Columbus Common Shares.
TAXATION OF TAXABLE U.S. SHAREHOLDERS
As long as Post qualifies as a REIT, distributions made to taxable U.S.
Shareholders (as hereinafter defined) out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. Shareholders (as hereinafter defined) as ordinary income
and will not be eligible for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. Shareholder" means a
holder of Post Common Stock that for United States federal income tax purposes
is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (iv) a trust if
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(A) a court within the United States is able to exercise primary supervision
over the administration of the trust, and (B) one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust. Distributions that are designated as capital gain dividends will be taxed
as gain from the sale or exchange of a capital asset held for more than one year
(to the extent they do not exceed the payor's actual net capital gain for the
taxable year) without regard to the period for which the U.S. Shareholder has
held his or her shares. However, corporate U.S. Shareholders may be required to
treat up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a U.S. Shareholder to the extent that they do not exceed the
adjusted basis of the U.S. Shareholder's shares, but will reduce the adjusted
basis of such shares. To the extent that such distributions in excess of current
and accumulated earnings and profits exceed the adjusted basis of a U.S.
Shareholder's shares, such distributions will be included in income as capital
gain, assuming that such shares are capital assets in the hands of the U.S.
Shareholder. The tax rate to which such capital gain will be subject will depend
on the U.S. Shareholder's holding period for his shares. In addition, any
distribution declared by Post in October, November or December of any year and
payable to a U.S. Shareholder of record on a specified date in any such month
shall be treated as both paid by the payor and received by the U.S. Shareholder
on December 31 of such year, provided that the distribution is actually paid by
the payor during January of the following calendar year.
For its taxable years beginning after December 31, 1997, Post may make an
election with respect to all or part of its undistributed net capital gain. If
Post should make such an election, Post Shareholders would be required to
include in their income as long-term capital gain their proportionate share of
Post's undistributed net capital gain as designated by Post. Each such
shareholder would be deemed to have paid his proportionate share of the income
tax imposed on Post with respect to such undistributed net capital gain, and
this amount would be credited or refunded to the shareholder. In addition, the
tax basis of the shareholder's stock would be increased by his proportionate
share of undistributed net capital gains included in his income less his
proportionate share of the income tax imposed on Post with respect to such
gains.
U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of Post. Instead, such losses would
be carried over by Post for potential offset against its future income (subject
to certain limitations). Taxable distributions from Post and gain from the
disposition of Post Common Stock will not be treated as passive activity income
and, therefore, U.S. Shareholders generally will not be able to apply any
"passive activity losses" (such as losses from certain types of limited
partnerships in which a shareholder is a limited partner) against such income.
In addition, taxable distributions from Post generally will be treated as
investment income for purposes of the investment interest limitations. Capital
gains from the disposition of Post Common Stock (or distributions treated as
such), however, will be treated as investment income only if the U.S.
Shareholder so elects, in which case such capital gains will be taxed at
ordinary income rates. Post will notify shareholders after the close of Post's
taxable year as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital and capital gain.
TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF COMMON STOCK
In general, any gain or loss realized upon a taxable disposition of shares
of Post Common Stock by a U.S. Shareholder who is not a dealer in securities
will be treated as a capital gain or loss. Lower marginal tax rates for
individuals may apply in the case of capital gains, depending on the holding
period of the shares of Post Common Stock that are sold. However, any loss upon
a sale or exchange by a U.S. Shareholder who has held such shares for six months
or less (after applying certain holding period rules), will be treated as a
long-term capital loss to the extent of distributions from Post required to be
treated by such U.S. Shareholder as long-term capital gain. All or a portion of
any loss realized upon a taxable disposition of shares of Post Common Stock may
be disallowed if other shares of Post Common Stock are purchased within 30 days
before or after the disposition. In addition, capital losses not offset by
capital gains may be deducted from an individual's ordinary income only up to a
maximum of $3,000 per year. Unused capital losses may be carried forward. A
corporate taxpayer may deduct capital losses only to the extent of capital
gains, but may carry unused capital losses back three years and forward five
years.
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INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Post will report to its U.S. Shareholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. Shareholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. A U.S. Shareholder who does not provide Post with his
correct taxpayer identification number also may be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
U.S. Shareholder's income tax liability. In addition, Post may be required to
withhold a portion of capital gain distributions to any U.S. Shareholders who
fail to certify their nonforeign status to Post. See "-- Taxation of Non-U.S.
Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has issued a published ruling
that dividend distributions from a REIT to an exempt employee pension trust do
not constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based on
that ruling, amounts distributed by Post to Exempt Organizations generally
should not constitute UBTI. However, if an Exempt Organization finances its
acquisition of Post Common Stock with "acquisition indebtedness," a portion of
its income from distributions on such shares will constitute UBTI pursuant to
the "debt-financed property" rules. Furthermore, social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts and
qualified group legal IRS plans that are exempt from taxation under paragraphs
(7), (9), (17) and (20), respectively, of Code section 501(c) are subject to
different UBTI rules, which generally will require them to characterize
distributions from Post as UBTI. In addition, in certain circumstances, a
pension trust that owns more than 10% of the Post Common Stock would be required
to treat a percentage of the dividends on its Post Common Stock as UBTI (the
"UBTI Percentage"). The UBTI Percentage is the gross income, less related direct
expenses, derived by Post from an unrelated trade or business (determined as if
Post were a pension trust) divided by the gross income, less related direct
expenses, of Post for the year in which the dividends are paid. The UBTI rule
applies to a pension trust holding more than 10% of the Post Common Stock only
if (i) the UBTI Percentage is at least 5%, (ii) Post qualifies as a REIT by
reason of the modification of the 5/50 Rule that allows the beneficiaries of the
pension trust to be treated as holding shares of Post, in proportion to their
actuarial interests in the pension trust and (iii) either (A) one pension trust
owns more than 25% of the value of Post's Common Stock or (B) a group of pension
trusts individually holding more than 10% of the value of Post's shares
collectively owns more than 50% of the value of Post's shares.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
holders of Post Common Stock (collectively, "Non-U.S. Shareholders") are complex
and no attempt will be made herein to provide more than a summary of such rules.
NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE IMPACT OF FEDERAL, STATE AND LOCAL INCOME TAX LAWS WITH REGARD TO AN
INVESTMENT IN POST COMMON STOCK, INCLUDING ANY REPORTING REQUIREMENTS.
Distributions to Non-U.S. Shareholders that are not attributable to gain
from sales or exchanges by Post of United States real property interests and are
not designated by Post as capital gain dividends will be treated as dividends of
ordinary income to the extent that they are made out of Post's current or
accumulated earnings and profits. Such distributions ordinarily will be subject
to a withholding tax equal to 30% of the gross amount
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of the distribution unless an applicable tax treaty reduces or eliminates that
tax. However, if income from the investment in Post Common Stock is treated as
effectively connected with the Non-U.S. Shareholder's conduct of a United States
trade or business, the Non-U.S. Shareholder generally will be subject to federal
income tax at graduated rates, in the same manner as U.S. Shareholders are taxed
with respect to such distributions (and also may be subject to the 30% branch
profits tax in the case of a Non-U.S. Shareholder that is a corporate Non-U.S.
Shareholder). Post expects to withhold United States income tax at the rate of
30% on the gross amount of any such distributions made to a Non-U.S. Shareholder
unless (i) a lower treaty rate applies and any required form evidencing
eligibility for that reduced rate is filed with Post or (ii) the Non-U.S.
Shareholder files an IRS Form 4224 with Post claiming that the distribution is
effectively connected income. The IRS issued proposed regulations in April 1996
that would modify the manner in which Post complies with the withholding
requirements.
Distributions in excess of current and accumulated earnings and profits of
Post will not be taxable to a shareholder to the extent that such distributions
do not exceed the adjusted basis of the shareholder's Post Common Stock but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a Non-U.S. Shareholder's Post Common Stock, such
distributions will give rise to tax liability if the Non-U.S. Shareholder
otherwise would be subject to tax on any gain from the sale or disposition of
his Post Common Stock as described below. Because it generally cannot be
determined at the time a distribution is made whether or not such distribution
will be in excess of current and accumulated earnings and profits, the entire
amount of any distribution normally will be subject to withholding at the same
rate as a dividend. However, amounts so withheld are refundable to the extent it
is determined subsequently that such distribution was, in fact, in excess of the
payor's current and accumulated earnings and profits.
Post is required to withhold 10% of any distribution in excess of its
current and accumulated earnings and profits to the extent such shares
constitute "U.S. real property interests" under Section 897(c) of the Code.
Consequently, although Post intends to withhold at a rate of 30% on the entire
amount of any distribution to a Non-U.S. Shareholder, to the extent that Post
does not do so, any portion of a distribution not subject to 30% withholding
will be subject to 10% withholding.
For any year in which Post qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges of U.S. real property interests
will be taxed to a Non-U.S. Shareholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of United States real property
interests are taxed to a Non-U.S. Shareholder as if such gain were effectively
connected with a United States business. Non-U.S. Shareholders thus would be
taxed at the normal capital gain rates applicable to U.S. Shareholders (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a corporate United
States Shareholder not entitled to treaty relief or exemption. Post is required
to withhold 35% of any distribution that is designated by it as a capital gains
dividend. The amount withheld is creditable against the Non-U.S. Shareholder's
U.S. tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of his Post Common
Stock generally will not be taxed under FIRPTA if Post is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. Post is currently a "domestically-controlled
REIT" and, therefore, the sale of Post Common Stock will not be subject to
taxation under FIRPTA. However, because Post's stock is publicly traded, no
assurance can be given that Post is or will continue to be a
"domestically-controlled REIT." In addition, a Non-U.S. Shareholder that owned
(actually or constructively under certain constructive ownership rules) 5% or
less of Post's outstanding stock at all times during a specified testing period
will not be subject to tax under FIRPTA if such stock is regularly traded on an
established securities market (e.g., the NYSE, on which Post Common Stock is
currently traded). Furthermore, gain not subject to FIRPTA will be taxable to a
Non-U.S. Shareholder if (i) investment in Post Common Stock is effectively
connected with the Non-U.S. Shareholder's United States trade or business, in
which case the Non-U.S. Shareholder will be subject to the same treatment as
U.S. Shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is
a nonresident
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alien individual who was present in the United States for 183 days or more
during the taxable year and certain other conditions apply, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of Post Common Stock were to be subject
to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same
treatment as U.S. Shareholders with respect to such gain (subject to applicable
alternative minimum tax, a special alternative minimum tax in the case of
nonresident alien individuals, and the possible application of the 30% branch
profits tax in the case of corporate Non-U.S. Shareholders).
OTHER TAX CONSEQUENCES
Post, the Operating Partnership, the corporate subsidiaries of Post or Post
Shareholders may be subject to state or local taxation in various state or local
jurisdictions, including those in which it or they own property, transact
business or reside. The state and local tax treatment of Post and the Post
Shareholders may not conform to the federal income tax consequences discussed
above. CONSEQUENTLY, COLUMBUS SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
REGARDING THE EFFECT OF STATE AND LOCAL TAX LAWS ON AN INVESTMENT IN POST.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH COLUMBUS SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR
HER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
POLICIES OF POST WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of investment policies, financing policies,
conflict of interest policies and policies with respect to certain activities of
Post. The policies with respect to these activities have been determined by the
Post Board and may be amended or revised from time to time at the discretion of
the Post Board without a vote of the Post Shareholders, except that (i) Post
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership without the consent of the holders of units of
the Operating Partnership as provided in the Partnership Agreement, (ii) changes
in certain policies with respect to conflicts of interest must be consistent
with legal requirements, (iii) the policies with respect to competition by Mr.
Williams and Mr. Glover are imposed pursuant to a contract that cannot be
amended or waived without the vote of a majority of the disinterested directors
of Post, and (iv) Post cannot take any action intended to terminate its
qualification as a REIT without the approval of the holders of a majority of the
shares of Post Common Stock.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. Post's investment
objective is to provide quarterly cash distributions and achieve long-term
appreciation through increases in cash flows and the value of its properties.
Post intends to pursue these objectives by continuing to develop upscale
apartment communities for long-term ownership and to manage its properties
intensively, and thereby seek to maximize current and long-term income and the
value of its assets. Post's policy is to develop or acquire assets where Post
believes that opportunities exist for acceptable investment returns. Post will
use the Post(R) name in operating acquired properties that in Post's judgment
are consistent with the market identity of Post(R) brand name communities. Post
may expand or improve existing properties or sell such properties in whole or in
part as it determines.
Post expects to pursue its investment objectives through the direct
ownership of properties and the ownership of interests in special purpose
partnerships. Post currently intends to invest in or develop primarily
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apartment communities in its primary markets. However, future development or
investment activities will not be limited to any geographic area or product type
or to a specified percentage of Post's assets.
All of the communities owned by Post are managed directly by the Operating
Partnership. The Operating Partnership, through one of its wholly owned
subsidiaries, also manages apartment communities in which it owns no equity
interests and which do not bear the Post(R) name, and through Post Asset
Management, Inc., a subsidiary of the Operating Partnership, manages the Post(R)
communities in which it owns no equity interests.
Post may also participate with other entities in property ownership,
through joint ventures or other types of co-ownership. Equity investment may be
subject to existing mortgage financing and other indebtedness which have
priority over the equity of Post.
Investments in Real Estate Mortgages. While Post has emphasized equity
real estate investments, it may, in its discretion, invest in mortgage and other
real estate interests consistent with Post's qualification as a REIT. Post has
not previously invested in mortgages or other real estate interests, and Post
does not presently intend to invest to a significant extent in mortgages or
other real estate interests. Post may invest in participating or convertible
mortgages if it concludes that it may benefit from the cash flow or any
appreciation in the value of the subject property. Such mortgages are similar to
equity participation.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership limitations
and gross income tests necessary for REIT qualification of Post, Post may invest
in securities of entities engaged in real estate activities or securities of
other issuers, including for the purpose of exercising control over such
entities, although, with the exception of its wholly-owned subsidiaries, it has
not done so in the past. Post may acquire all or substantially all of the
securities or assets of other REITs or similar entities where such investments
would be consistent with Post's investment policies.
FINANCING POLICIES
Post intends to maintain a ratio of indebtedness to total market
capitalization (i.e., the market value of issued and outstanding Units (deemed
to be equal to the market value of an equal number of shares of Post Common
Stock) plus total debt) of approximately 60% or less. This policy differs from
traditional conventional mortgage debt-to-equity ratios which are asset based
ratios. Post's ratio of debt to total market capitalization was approximately
27.5% at December 31, 1996 (calculated based on the closing price of Post Common
Stock on December 31, 1996). Post, however, may from time to time reevaluate its
borrowing policies in light of then current economic conditions, relative costs
to Post of debt and equity capital, market values of properties, general
conditions in the market for debt and equity securities, fluctuations in the
fair market prices of the Post Common Stock, growth and acquisition
opportunities and other factors. Post may modify its borrowing policy and may
increase or decrease its ratio of debt to total market capitalization. To the
extent that Post determines to seek additional capital, Post or the Operating
Partnership may raise such capital through additional equity offerings, debt
financings or retention of cash flow (subject to provisions in the Code
requiring the distribution by a REIT of a certain percentage of taxable income
and taking into account taxes that would be imposed on undistributed taxable
income), or a combination of these methods.
As long as the Operating Partnership is in existence, the proceeds of the
sale of Post Common Stock by Post is required to be contributed to the Operating
Partnership in exchange for Units in the Operating Partnership. Post presently
anticipates that any additional borrowings would be made through the Operating
Partnership, although Post might incur borrowings that would be reloaned to the
Operating Partnership. Borrowings may be in the form of bank borrowings,
publicly and privately placed debt instruments, or purchase money obligations to
the sellers of properties, any of which indebtedness may be unsecured or may be
secured by any or all of the assets of Post, the Operating Partnership, or any
existing or new property owning partnership.
On February 1, 1995, the Operating Partnership closed a 39-month unsecured
revolving line of credit (the "Revolver") in the amount of $180,000,000 with a
bank syndicate to provide funding for future construction, acquisitions and
general business obligations. On June 7, 1995, the Operating Partnership issued
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$50,000,000 of notes and, on September 29, 1995, the Operating Partnership
issued $50,000,000 of notes. On July 26, 1996, Post closed a $20,000,000
unsecured line of credit with Wachovia Bank of Georgia, N.A., which was fully
funded and used to pay down the outstanding balance on the Revolver. In
September 1996, the Operating Partnership issued $125,000,000 in senior notes.
In January 1997 and March 1997, the Operating Partnership issued $30,000,000 and
$50,000,000 in medium term notes, respectively. Post may also determine to issue
securities senior to the Post Common Stock, including preferred stock and debt
securities (either of which may be convertible into capital stock or be
accompanied by warrants to purchase capital stock). The Operating Partnership
may also determine to finance acquisitions through the exchange of properties or
issuance of additional Units in the Operating Partnership, shares of Post Common
Stock or other securities. The ability to offer Units to buyers may result in a
beneficial structure for the buyers and may be an advantage for the Operating
Partnership, since certain investors may be limited in the number of shares of
Post Common Stock that they may purchase.
The Operating Partnership has not established any limit on the number or
amount of mortgages that may be placed on any single property or on its
portfolio as a whole, but mortgage financing instruments often limit additional
indebtedness on such properties.
CONFLICT OF INTEREST POLICIES
Post has adopted certain policies and entered into certain agreements with
Messrs. Williams and Glover designed to eliminate or minimize potential
conflicts of interest. Post is subject to certain provisions of Georgia law,
which are designed to eliminate or minimize certain potential conflicts of
interest. However, there can be no assurance that these policies always will be
successful in eliminating the influence of such conflicts, and if they are not
successful, decisions could be made that might fail to reflect fully the
interests of all the Post Shareholders.
Noncompetition Agreements. Each of Messrs. Williams and Glover has entered
into a noncompetition agreement with Post. These noncompetition agreements
prohibit these individuals from engaging directly or indirectly in the
development, operation, management, leasing or landscaping of any non-Post
multifamily community for the period of his employment by Post and for two years
thereafter.
Policies Applicable to All Directors of Post. Pursuant to Georgia law (the
jurisdiction under which Post is organized), each director will be subject to
restrictions on misappropriation of corporate opportunities to himself or his
affiliates learned of solely as a result of his service as a member of the Post
Board. In addition, under Georgia law, a transaction effected by Post or any
entity controlled by Post in which a director or certain related persons and
entities of the director has a conflicting interest, as defined thereunder, of
such financial significance that it would reasonably be expected to exert an
influence on the director's judgment may not be enjoined, set aside or give rise
to damages on the grounds of such interest if (a) the transaction is approved,
after disclosure of the interest, by the affirmative vote of a majority of the
disinterested directors, or by the affirmative vote of a majority of the votes
cast by disinterested shareholders, or (b) the transaction is established to
have been fair to Post. The Post Board has adopted a policy that all such
conflicting interest transactions must be authorized by a majority of the
disinterested directors.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
Post has authority to offer shares of its capital stock or other securities
and to repurchase or otherwise reacquire its shares or any other securities and
may engage in such activities in the future, although it has no present
intention of repurchasing any of its shares of Post Common Stock. As of August
1, 1997, Post has issued shares of Post Common Stock to holders of Units in the
Operating Partnership in connection with all redemptions. As of August 1, 1997,
Post has issued shares of Post Common Stock in connection with the formation of
Post, the formation transactions, three public offerings, and Post's Employee
Stock Plan, Employee Stock Purchase Plan and Dividend Reinvestment and Stock
Purchase Plan. Post has no outstanding loans to other entities or persons,
including its officers and limited partners. Post may in the future make loans
to joint ventures in which it participates in order to meet working capital
needs. Post has not engaged in trading, underwriting or agency distribution or
sale of securities of other issuers, nor has Post
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invested in the securities of other issuers for the purpose of exercising
control. Post intends to make investments in such a way that it will not be
treated as an investment company under the Investment Company Act of 1940.
At all times, Post intends to make investments in such a manner as to be
consistent with the requirements of the Code for Post to qualify as a REIT
unless, because of changing circumstances or changes in the Code (or in Treasury
Regulations), the Post Board, with the consent of a majority of the shareholders
approving the board's determination, determines that it is no longer in the best
interests of Post to qualify as a REIT.
POLICIES OF COLUMBUS WITH RESPECT TO CERTAIN ACTIVITIES
INVESTMENT POLICIES
Columbus' investment policies have been determined by the Columbus Board
and may be amended or revised from time to time at the discretion of the
Columbus Board without a vote of the Columbus Shareholders if it determines in
the future that such a change is in the best interests of Columbus and its
shareholders.
Investments in Real Estate or Interests in Real Estate. Columbus'
investment objective is to provide quarterly cash distributions, to achieve
long-term appreciation through maximization of cash flow and the capital
appreciation of its properties from long-term ownership and to manage those
properties actively and intensively, thereby seeking to maximize current and
long-term income and value. Columbus' policy is to develop and acquire assets
consistent with its ownership criteria areas where Columbus believes
opportunities exist for attractive investment returns.
Columbus develops and acquires primarily high quality multifamily
residential properties. Columbus' existing properties and properties proposed
for acquisition or development are located in Dallas and Houston, Texas; Denver,
Colorado; Jackson, Mississippi and elsewhere in the Southwest. There is no limit
on the amount or percentage of assets which Columbus may invest in any single
property or in any type of asset. Future investments, including the activities
described below, are not limited (as to percentage of assets or otherwise) to
any geographic area or any specific type of property. Management of Columbus
believes that opportunities to develop and acquire high quality income-producing
properties in other long-term growth markets within the southwestern United
States continue to exist. Columbus may also participate with other entities in
property ownership, through joint ventures or other types of co-ownership.
Equity investment may be subject to existing or future mortgage financing and
other indebtedness which have priority over the equity of Columbus.
Columbus intends to directly manage all of its properties. However,
Columbus may employ third party property managers where circumstances warrant
such employment.
Investments in Real Estate Mortgages. While Columbus has emphasized equity
real estate investments, it may, in its discretion, invest in mortgage and other
real estate interests, including securities of other REITs. However, Columbus
does not presently intend to invest to a significant extent in mortgages or
securities of other REITs. Columbus may invest in participating or convertible
mortgages if it concludes that it may benefit from the cash flow or any
appreciation in the value of the subject property. Such mortgages are similar to
equity participations.
Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issues. Subject to the percentage of ownership limitations
and gross income tests necessary for qualification as a REIT (see "Certain
Federal Income Tax Consequences"), Columbus may invest in securities of concerns
engaged in real estate activities or securities of other issuers. Columbus may
also invest in the securities of other issuers in connection with acquisitions
of indirect interests in properties (normally general or limited partnership
interests in special purpose partnerships owning properties). Columbus does not
anticipate investing in issuers of securities (other than REITs and to acquire
interests in real property) for the purpose of exercising control of acquiring
any investments primarily for sale in the ordinary course of business or holding
any investments with a view to making short-term profits from their sale.
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Columbus may, but has no present intention to, make investments other than
as previously described. At all times, Columbus intends to make investments in a
manner consistent with the requirement of the Code to qualify as a REIT unless,
because of circumstances or changes in the applicable law, the Columbus Board
determines that it is no longer in the best interests of Columbus to qualify as
a REIT.
FINANCING POLICIES
Columbus has established a $170 million credit line (the "Credit Facility")
with several lenders as the primary source of acquisition and development
capital, with a view towards replacing that debt following acquisition or
completion, in the case of a development property, as market conditions warrant,
with either long-term fixed rate debt or permanent equity. Columbus' long-term
financing also includes a $50 million loan from Nationwide Life Insurance
Company which bears interest at a fixed rate of 7.45% and matures in December
2002, with a 25-year principal amortization schedule.
While Columbus currently intends to continue to use the Credit Facility as
its primary source of development financing prior to consummation of the Merger,
it may in the future use additional third party secured debt or equity to fund
acquisitions and development costs, or to refinance the Credit Facility before
maturity when deemed appropriate. Prior to consummation of the Merger and with
respect to any development properties, Columbus intends to fund interest
payments through additional draws on the various loan sources until such
properties are completed and begin to provide sufficient income to satisfy debt
service requirements and operating expenses.
AMENDMENT OF EMPLOYEE STOCK PLAN
If the Merger Agreement is approved by the Post Shareholders and the
Columbus Shareholders and the Merger is consummated, the employee stock options
held by employees of Columbus will be converted into employee stock options of
Post issued under Post's Employee Stock Plan. To accommodate the issuance of
such options, the Employee Stock Plan will be amended to increase the shares of
Post Common Stock that are reserved for issuance thereunder.
The proposed amendment of the Employee Stock Plan primarily would increase
the number of shares reserved for issuance thereunder from 1,200,000 shares to
shares. The additional shares reserved under the Employee Stock Plan
would be available for issuance to employees of Columbus in the Merger, and for
future issuance by Post. As of August 1, 1997, (i) 98,248 shares of Post Common
Stock were reserved for issuance pursuant to options and shares of restricted
stock not yet granted under the Employee Stock Plan and (ii) 1,030,440 shares of
Post Common Stock were issuable upon the exercise of outstanding options under
the Employee Stock Plan.
THE POST BOARD HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE EMPLOYEE STOCK
PLAN AND HAS DETERMINED THAT SUCH AMENDMENT IS IN THE BEST INTEREST OF POST AND
THE POST SHAREHOLDERS. ACCORDINGLY, THE POST BOARD UNANIMOUSLY RECOMMENDS THAT
THE POST SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK
PLAN.
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EXPERTS
The consolidated financial statements of Post Properties, Inc. incorporated
in this Joint Proxy Statement/Prospectus by reference to Post's Annual Report on
Form 10-K for the year ended December 31, 1996, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Columbus as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996
included in Columbus' 1996 Annual Report on Form 10-K, as amended by Form
10-K/A, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements have been incorporated herein
by reference in reliance upon such reports given the authority of such firm as
experts in accounting and auditing.
LEGAL OPINIONS
The legality of the shares of Post Common Stock to be issued pursuant to
the terms of the Merger Agreement will be passed upon for Post by King &
Spalding, Atlanta, Georgia. Herschel M. Bloom, a member of King & Spalding, is a
director of Post. Certain legal matters in connection with the Merger will be
passed on for Columbus by Winstead Sechrest & Minick, P.C., Dallas, Texas and/or
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
SHAREHOLDER PROPOSALS
Any proposals by Post Shareholders to be presented at Post's 1998 Annual
Meeting of Shareholders must be received by Post no later than December 12, 1997
in order to be included in Post's proxy materials relating to the meeting. Any
proposals by Columbus Shareholders to be presented at Columbus' 1998 Annual
Meeting of Shareholders, assuming that the Merger is not consummated by January
31, 1998, must be received by Columbus no later than November 25, 1997 in order
to be included in Columbus' proxy materials relating to the meeting.
OTHER MATTERS
The Post Board does not intend to bring any matter before the Post Special
Meeting other than as specifically set forth in the Notice of Special Meeting of
Shareholders, nor does it know of any matter to be brought before the Post
Special Meeting by others. If, however, any other matters properly come before
the Post Special Meeting, it is the intention of the proxy holders to vote such
proxy in accordance with the decision of a majority of the Post Board.
The Columbus Board does not intend to bring any matter before the Columbus
Special Meeting other than as specifically set forth in the Notice of Special
Meeting of Shareholders, nor does it know of any matter to be brought before the
Columbus Special Meeting by others. If, however, any other matters properly come
before the Columbus Special Meeting, it is the intention of the proxyholders to
vote such proxy in accordance with the decision of a majority of the Columbus
Board.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 1, 1997,
BY AND AMONG
POST PROPERTIES, INC.
POST LP HOLDINGS, INC.
AND
COLUMBUS REALTY TRUST
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TABLE OF CONTENTS
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ARTICLE I -- THE MERGER........................................................ A-5
SECTION 1.1 The Merger.................................................. A-5
SECTION 1.2 Closing..................................................... A-5
SECTION 1.3 Effective Time.............................................. A-6
SECTION 1.4 Effects of the Merger....................................... A-6
SECTION 1.5 Articles of Incorporation and Bylaws........................ A-6
SECTION 1.6 Board of Directors.......................................... A-6
SECTION 1.7 Officers.................................................... A-6
ARTICLE II -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES........................... A-6
SECTION 2.1 Effect on Capitalization.................................... A-6
2.1.1 Cancellation of Treasury Stock.............................. A-6
2.1.2 Conversion of Common Shares................................. A-6
2.1.3 Shares of Acquiror Common Stock............................. A-7
2.1.4 Shares of Merger Sub........................................ A-7
SECTION 2.2 Exchange of Certificates.................................... A-7
2.2.1 Exchange Agent.............................................. A-7
2.2.2 Acquiror To Provide Merger Consideration.................... A-7
2.2.3 Exchange Procedure.......................................... A-7
2.2.4 Record Dates for Final Dividends; Distributions with Respect
to Unexchanged Shares....................................... A-8
2.2.5 No Further Ownership Rights in Common Shares................ A-8
2.2.6 No Liability................................................ A-8
2.2.7 No Fractional Shares........................................ A-9
2.2.8 Withholding Rights.......................................... A-9
ARTICLE III -- REPRESENTATIONS AND WARRANTIES.................................. A-9
SECTION 3.1 Representations and Warranties of the Company............... A-9
3.1.1 Organization, Standing and Power of the Company............. A-9
3.1.2 Company Subsidiaries........................................ A-9
3.1.3 Capital Structure........................................... A-10
3.1.4 Authority; Noncontravention; Consents....................... A-10
3.1.5 SEC Documents; Financial Statements; Undisclosed
Liabilities................................................. A-11
3.1.6 Absence of Certain Changes or Events........................ A-12
3.1.7 Litigation.................................................. A-12
3.1.8 Properties.................................................. A-12
3.1.9 Environmental Matters....................................... A-14
3.1.10 Related Party Transactions.................................. A-14
3.1.11 Absence of Changes in Benefit Plans; ERISA Compliance....... A-14
3.1.12 Taxes....................................................... A-16
3.1.13 No Payments to Employees, Officers or Trust Managers........ A-16
3.1.14 Brokers; Schedule of Fees and Expenses...................... A-16
3.1.15 Compliance with Laws........................................ A-17
3.1.16 Contracts; Debt Instruments................................. A-17
3.1.17 State Takeover Statutes..................................... A-17
3.1.18 Registration Statement; Proxy Statement..................... A-17
3.1.19 Hart-Scott-Rodino Antitrust Improvements Act of 1976........ A-18
3.1.20 Vote Required............................................... A-18
3.1.21 Opinion of Financial Advisor................................ A-18
3.1.22 Investment Company Act of 1940.............................. A-18
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3.1.23 Insurance................................................... A-18
3.1.24 The Company's Rights Agreement.............................. A-18
SECTION 3.2 Representations and Warranties of Acquiror.................. A-18
3.2.1 Organization, Standing and Corporate Power of Acquiror and
Merger Sub.................................................. A-18
3.2.2 Acquiror Subsidiaries....................................... A-18
3.2.3 Capital Structure........................................... A-19
3.2.4 Authority; Noncontravention; Consents....................... A-19
3.2.5 SEC Documents; Financial Statements; Undisclosed
Liabilities................................................. A-20
3.2.6 Absence of Certain Changes or Events........................ A-21
3.2.7 Litigation.................................................. A-21
3.2.8 Properties.................................................. A-22
3.2.9 Environmental Matters....................................... A-22
3.2.10 Absence of Changes in Benefit Plans; ERISA Compliance....... A-23
3.2.11 Taxes....................................................... A-24
3.2.12 No Payments to Employees, Officers or Directors............. A-24
3.2.13 Brokers; Schedule of Fees and Expenses...................... A-24
3.2.14 Compliance with Laws........................................ A-25
3.2.15 Contracts; Debt Instruments................................. A-25
3.2.16 State Takeover Statutes..................................... A-25
3.2.17 Registration Statement; Proxy Statement..................... A-25
3.2.18 Hart-Scott-Rodino Antitrust Improvements Act of 1976........ A-25
3.2.19 Vote Required............................................... A-25
3.2.20 Opinion of Financial Advisor................................ A-25
3.2.21 Investment Company Act of 1940.............................. A-25
3.2.22 Insurance................................................... A-26
3.2.23 Interim Operations of Merger Sub............................ A-26
ARTICLE IV -- COVENANTS........................................................ A-26
SECTION 4.1 Conduct of Business by the Company.......................... A-26
SECTION 4.2 Conduct of Business by Acquiror............................. A-28
SECTION 4.3 Other Actions............................................... A-29
ARTICLE V -- ADDITIONAL COVENANTS.............................................. A-29
SECTION 5.1 Preparation of the Registration Statement and the Proxy
Statement; Company Shareholders Meeting and Acquiror
Shareholders Meeting........................................ A-29
SECTION 5.2 Access to Information: Confidentiality...................... A-31
SECTION 5.3 Commercially Reasonable Efforts; Notification............... A-31
SECTION 5.4 Affiliates.................................................. A-32
SECTION 5.5 Tax Treatment............................................... A-32
SECTION 5.6 Acquiror Board of Directors................................. A-32
SECTION 5.7 No Solicitation of Transactions by the Company.............. A-32
SECTION 5.8 No Solicitation of Transactions by Acquiror................. A-32
SECTION 5.9 Public Announcements........................................ A-33
SECTION 5.10 Listing..................................................... A-33
SECTION 5.11 Letters of Accountants...................................... A-33
SECTION 5.12 Transfer and Gains Taxes.................................... A-33
SECTION 5.13 Benefit Plans and Other Employee Arrangements............... A-34
5.13.1 Benefit Plans............................................... A-34
5.13.2 Stock Incentive Plan........................................ A-34
5.13.3 Cooperation................................................. A-34
SECTION 5.14 Indemnification; Directors' and Officers' Insurance......... A-34
SECTION 5.15 The Company Rights Plan..................................... A-36
</TABLE>
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ARTICLE VI -- CONDITIONS PRECEDENT............................................. A-36
SECTION 6.1 Conditions to Each Party's Obligation To Effect the
Merger...................................................... A-36
6.1.1 Shareholder Approvals....................................... A-36
6.1.2 Listing of Shares........................................... A-36
6.1.3 Registration Statement...................................... A-36
6.1.4 No Injunctions or Restraints................................ A-36
6.1.5 Related Transactions........................................ A-36
SECTION 6.2 Conditions to Obligations of Acquiror and Merger Sub........ A-37
6.2.1 Representations and Warranties.............................. A-37
6.2.2 Performance of Obligations of the Company................... A-37
6.2.3 Material Adverse Change..................................... A-37
6.2.4 Opinions Relating to REIT................................... A-37
6.2.5 Other Tax Opinion........................................... A-37
6.2.6 Consents.................................................... A-37
SECTION 6.3 Conditions to Obligations of the Company.................... A-37
6.3.1 Representations and Warranties.............................. A-37
6.3.2 Performance of Obligations of Acquiror...................... A-38
6.3.3 Material Adverse Change..................................... A-38
6.3.4 Opinion Relating to REIT Status............................. A-38
6.3.5 Other Tax Opinion........................................... A-38
6.3.6 Consents.................................................... A-38
ARTICLE VII -- BOARD ACTIONS................................................... A-38
SECTION 7.1 Company Board Actions....................................... A-38
SECTION 7.2 Acquiror Board Actions...................................... A-39
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER.............................. A-39
SECTION 8.1 Termination................................................. A-39
SECTION 8.2 Expenses.................................................... A-40
SECTION 8.3 Effect of Termination....................................... A-43
SECTION 8.4 Amendment................................................... A-43
SECTION 8.5 Extension; Waiver........................................... A-43
ARTICLE IX -- DEFINITIONS AND CONSTRUCTION..................................... A-43
SECTION 9.1 Certain Definitions......................................... A-43
SECTION 9.2 Rules of Construction....................................... A-47
ARTICLE X -- GENERAL PROVISIONS................................................ A-48
SECTION 10.1 Nonsurvival of Representations and Warranties............... A-48
SECTION 10.2 Notices..................................................... A-48
SECTION 10.3 Counterparts................................................ A-49
SECTION 10.4 Entire Agreement; No Third-Party Beneficiaries.............. A-49
SECTION 10.5 Governing Law............................................... A-49
SECTION 10.6 Assignment.................................................. A-49
SECTION 10.7 Enforcement................................................. A-49
SECTION 10.8 Severability................................................ A-50
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EXHIBITS:
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A Form of Affiliates Letter................................... A-52
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 1,
1997 is made and entered into by and among Post Properties, Inc., a Georgia
corporation ("Acquiror"), Post LP Holdings, Inc., a Georgia corporation and a
direct wholly owned subsidiary of Acquiror ("Merger Sub"), and Columbus Realty
Trust, a Texas real estate investment trust (the "Company").
R E C I T A L S
A. Certain capitalized terms used herein shall have the meanings assigned
to them in SECTION 9.1.
B. The respective Boards of Directors of Acquiror and Merger Sub and the
Board of Trust Managers of the Company have approved the merger of the Company
with and into Merger Sub, Acquiror's direct wholly owned subsidiary, as set
forth below (the "Merger"), upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding common share of
beneficial interest, par value $.01 per share, of the Company (the "Common
Shares") will be converted into the right to receive the Merger Consideration.
C. Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
D. For federal income tax purposes it is intended that the Merger qualify
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
E. Simultaneously with the execution of this Agreement, Armada Homes, Inc.,
a subsidiary of the Company ("Armada"), Robert L. Shaw ("Shaw"), Will Cureton
("Cureton"), John A. Williams ("Williams") and John T. Glover ("Glover") have
entered into a Stock Purchase Agreement (the "Armada Stock Purchase Agreement")
providing for the sale by Shaw and Cureton of all the issued and outstanding
voting stock of Armada owned by Shaw and Cureton to Williams and Glover.
F. Simultaneously with the execution of this Agreement, Addison Circle
Access, Inc., a subsidiary of the Company ("Addison"), Shaw, Cureton, Williams
and Glover have entered into a Stock Purchase Agreement (the "Addison Stock
Purchase Agreement") and together with the Armada Stock Purchase Agreement, the
"Stock Purchase Agreements") providing for the sale by Shaw and Cureton of all
the issued and outstanding voting stock of Addison owned by Shaw and Cureton to
Williams and Glover.
G. The transactions contemplated by this Agreement, the Stock Purchase
Agreements and the other agreements and documents contemplated hereby,
including, without limitation, the Merger, shall be referred to collectively in
this Agreement as the "Transactions."
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Texas Real Estate Investment
Trust Act and the Georgia Business Corporation Code (collectively, the
"Governing Laws"), the Company shall be merged with and into Merger Sub at the
Effective Time. Following the Merger, the separate corporate existence of the
Company shall cease and Merger Sub shall continue as the surviving entity (the
"Surviving Company") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the Governing Laws. At the
election of Acquiror, any other direct subsidiary of Acquiror acceptable to the
Company in its reasonable judgment may be substituted for Merger Sub as a
constituent corporation in the Merger. In such event, the parties agree to
execute an appropriate amendment to this Agreement in order to reflect such
substitution.
SECTION 1.2 CLOSING. The closing of the Merger will take place at 10:00
a.m., local time, on a date to be specified by the parties, which (subject to
satisfaction or waiver of the conditions set forth in SECTIONS 6.2
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and 6.3) shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in ARTICLE VI (the "Closing Date"), at the
offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303, unless
another date or place is agreed to by the parties hereto.
SECTION 1.3 EFFECTIVE TIME. As soon as practicable following the
satisfaction or waiver of the conditions set forth in ARTICLE VI, the parties
shall file the articles of merger or other appropriate documents (the "Articles
of Merger") executed in accordance with the Governing Laws and shall make all
other filings or recordings required under the Governing Laws. The Merger shall
become effective upon the filing of the Articles of Merger with the office of
the County Clerk of Dallas County, Texas and the office of the Secretary of
State of the State of Georgia (the "Applicable Bodies"), or at such later time
which Acquiror, Merger Sub and the Company have agreed upon and designated in
such filings in accordance with the Governing Laws (the time the Merger becomes
effective being the "Effective Time"), it being understood that the parties
shall cause the Effective Time to occur on the Closing Date.
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the Governing Laws.
SECTION 1.5 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Company, until
duly amended in accordance with applicable law. The Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Company, until duly amended in accordance with applicable law.
SECTION 1.6 BOARD OF DIRECTORS. The Board of Directors of Merger Sub
immediately prior to the Effective Time shall be the Board of Directors of the
Surviving Company until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
SECTION 1.7 OFFICERS. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Company until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITALIZATION. By virtue of the Merger and without
any action on the part of the holder of any shares of Common Shares or the
holder of any shares of capital stock of Acquiror:
2.1.1 CANCELLATION OF TREASURY STOCK. As of the Effective Time, any
shares of capital stock of the Company that are owned by the Company or any
Company Subsidiary shall automatically be canceled and retired and all
rights with respect thereto shall cease to exist, and no consideration
shall be delivered in exchange therefor.
2.1.2 CONVERSION OF COMMON SHARES. Upon the Effective Time, each
issued and outstanding share of Common Shares (other than any shares to be
canceled in accordance with SECTION 2.1.1) shall be converted into the
right to receive from Acquiror .615 (six hundred fifteen one-thousandths)
of a fully paid and nonassessable share of Acquiror Common Stock (the
"Exchange Ratio"). As of the Effective Time, all Common Shares shall no
longer be outstanding and shall automatically be canceled and retired and
all rights with respect thereto shall cease to exist, and each holder of a
certificate representing any such Common Shares shall cease to have any
rights with respect thereto, except the right to receive, upon surrender of
such certificate in accordance with SECTION 2.2.3, certificates
representing the shares of Acquiror Common Stock required to be delivered
under this SECTION 2.1.2 and any cash in lieu of fractional shares of
Acquiror Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate (the "Merger Consideration") as set forth in
SECTION 2.2.7, and any dividends or other distributions to which such
holder is entitled pursuant to SECTION 2.2.4, in each case without interest
and less any required withholding taxes. The Exchange Ratio shall be
adjusted to reflect fully the effect of any
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stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Acquiror Common Stock or Common
Shares), reorganization, recapitalization or other like change with respect
to Acquiror Common Stock or Common Shares occurring after the date hereof
and prior to the Effective Time.
2.1.3 SHARES OF ACQUIROR COMMON STOCK. Upon the Effective Time, each
share of Acquiror Common Stock outstanding immediately prior to the
Effective Time shall remain outstanding and shall represent one share of
validly issued, fully paid and nonassessable Acquiror Common Stock.
2.1.4 SHARES OF MERGER SUB. Upon the Effective Time, each share of
common stock, par value $.01 per share, of Merger Sub outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one share of common stock, par value $.01 per share, of the
Surviving Company.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
2.2.1 EXCHANGE AGENT. Prior to the Effective Time, Acquiror shall
appoint, or shall cause to be appointed, Wachovia Bank of North Carolina or
another bank or trust company reasonably acceptable to the Company to act
as exchange agent (the "Exchange Agent") for the exchange of the Merger
Consideration upon surrender of certificates representing issued and
outstanding Common Shares.
2.2.2 ACQUIROR TO PROVIDE MERGER CONSIDERATION. Acquiror shall
provide, or shall cause to be provided, to the Exchange Agent on or before
the Effective Time, for the benefit of the holders of Common Shares, shares
of Acquiror Common Stock issuable (the "Exchange Fund") in exchange for the
issued and outstanding shares of Common Shares pursuant to SECTION 2.1.2
and the cash payable in respect of fractional shares pursuant to SECTION
2.2.7.
2.2.3 EXCHANGE PROCEDURE. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Common Shares (the "Certificates")
whose shares were converted into the right to receive the Merger
Consideration pursuant to SECTION 2.1.2 (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in a form and have such other provisions as
Acquiror may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Acquiror, together
with such letter of transmittal, duly executed, and such other documents as
may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration into which the shares of Common Shares theretofore
represented by such Certificate shall have been converted pursuant to
SECTION 2.1.2 and any dividends or other distributions to which such holder
is entitled pursuant to SECTION 2.2.4, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of
Common Shares which is not registered in the transfer records of the
Company, payment may be made to a Person other than the Person in whose
name the Certificate so surrendered is registered if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a Person other than the
registered holder of such Certificate or establish to the satisfaction of
Acquiror that such tax or taxes have been paid or are not applicable. Until
surrendered as contemplated by this SECTION 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without interest,
into which the shares of Common Shares theretofore represented by such
Certificate shall have been converted pursuant to SECTION 2.1.2, and any
dividends or other distributions to which such holder is entitled pursuant
to SECTION 2.2.4. No interest will be paid or will accrue on the Merger
Consideration upon the surrender of any Certificate or on any cash payable
pursuant to SECTION 2.2.4 or SECTION 2.2.7.
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2.2.4 RECORD DATES FOR FINAL DIVIDENDS; DISTRIBUTIONS WITH RESPECT TO
UNEXCHANGED SHARES.
(i) To the extent necessary to satisfy the requirements of SECTION
857(A)(1) of the Code for the taxable year of the Company ending at the
Effective Time, the Company shall declare a dividend (the "Final Company
Dividend") to holders of Common Shares, the record date for which shall
be close of business on the last business day prior to the Effective
Time, in an amount equal to the minimum dividend sufficient to permit
the Company to satisfy such requirements. If the Company determines it
necessary to declare the Final Company Dividend, it shall notify
Acquiror at least ten (10) days prior to the date for the Company
Shareholders Meeting, and Acquiror shall declare a dividend per share to
holders of Acquiror Common Stock, the record date for which shall be the
close of business on the last business day prior to the Effective Time,
in an amount per share equal to the quotient obtained by dividing (x)
the Final Company Dividend per share of Common Shares paid by the
Company by (y) the Exchange Ratio. The dividends payable hereunder to
holders of Common Shares shall be paid upon presentation of the
certificates of Common Shares for exchange in accordance with this
ARTICLE II, and shall be payable solely from the separate funds of the
Company, which shall be provided to the Exchange Agent on or before the
Effective Time for this purpose.
(ii) No dividends or other distributions with respect to Acquiror
Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the
shares of Acquiror Common Stock represented thereby, and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant
to SECTION 2.2.7, in each case, until the surrender of such Certificate
in accordance with this ARTICLE II. Subject to the effect of applicable
escheat laws, following surrender of any such Certificate there shall be
paid to the holder of such Certificate, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of any
fractional share of Acquiror Common Stock to which such holder is
entitled pursuant to SECTION 2.2.7 and (ii) if such Certificate is
exchangeable for one or more whole shares of Acquiror Common Stock, (x)
at the time of such surrender the amount of dividends or other
distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Acquiror Common Stock and (y)
at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of Acquiror Common Stock.
2.2.5 NO FURTHER OWNERSHIP RIGHTS IN COMMON SHARES. All Merger
Consideration paid upon the surrender of Certificates in accordance with
the terms of this ARTICLE II (and any cash paid pursuant to SECTION 2.2.7)
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Common Shares theretofore represented by such
Certificates; provided, however, that the Company shall transfer to the
Exchange Agent cash sufficient to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such Common Shares in accordance
with the terms of this Agreement or prior to the date of this Agreement and
which remain unpaid at the Effective Time and have not been paid prior to
such surrender, and there shall be no further registration of transfers on
the stock transfer books of the Company of the Common Shares which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Company or
Acquiror for any reason, they shall be canceled and exchanged as provided
in this ARTICLE II.
2.2.6 NO LIABILITY. None of Acquiror, Merger Sub, the Company or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration or dividends delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any portion of the
Exchange Fund delivered to the Exchange Agent pursuant to this Agreement
that remains unclaimed for six months after the Effective Time shall be
redelivered by the Exchange Agent to Acquiror, upon demand, and any holders
of Certificates who have not theretofore complied with SECTION 2.2.3 shall
thereafter look only to Acquiror for delivery of the Merger Consideration
and any unpaid dividends, subject to applicable escheat and other similar
laws.
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2.2.7 NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Acquiror Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote, to receive dividends or to any
other rights of a shareholder of Acquiror. Notwithstanding any other
provision of this Agreement, each holder of shares of Common Shares
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Acquiror Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, upon
surrender of such holder's Certificates in accordance with SECTION 2.2.3, a
cash payment in lieu of such fractional shares of Acquiror Common Stock
equal to the fractional proportion of the arithmetic mean of the closing
sales price of a share of Acquiror Common Stock on the NYSE over the ten
(10) trading days immediately preceding the Closing Date.
2.2.8 WITHHOLDING RIGHTS. Acquiror or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Common Shares such
amounts as Acquiror or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that such
amounts are so withheld by Acquiror or the Exchange Agent, such withheld
amount shall be treated for all purposes of this Agreement as having been
paid to the holder of the Common Shares in respect of which such deduction
and withholding was made by Acquiror or the Exchange Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Acquiror and Merger Sub as follows:
3.1.1 ORGANIZATION, STANDING AND POWER OF THE COMPANY. The Company
is a real estate investment trust duly organized and validly existing under
the laws of Texas and has the requisite power and authority to carry on its
business as now being conducted. The Company is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have a material adverse effect on the business,
properties, assets, financial condition or results of operations of the
Company and the Company Subsidiaries, taken as a whole (a "Material Adverse
Effect"). The Company has delivered to Acquiror complete and correct copies
of its Amended and Restated Declaration of Trust, as amended (the
"Company's Charter") and Amended and Restated Bylaws, as amended to the
date of this Agreement (the "Company's Bylaws").
3.1.2 COMPANY SUBSIDIARIES. SCHEDULE 3.1.2 to the Company Disclosure
Letter sets forth each Company Subsidiary and the ownership interest
therein of the Company. Except as set forth on SCHEDULE 3.1.2 to the
Company Disclosure Letter, (A) all the outstanding shares of capital stock
of each Company Subsidiary that is a corporation have been validly issued
and are fully paid and nonassessable, are owned by the Company or by
another Company Subsidiary free and clear of all Liens, other restrictions
and limitations on voting rights and (B) all equity interests in each
Company Subsidiary that is a partnership, joint venture, limited liability
company or trust are owned by the Company, by another Company Subsidiary,
or by the Company and another Company Subsidiary, or by two or more Company
Subsidiaries free and clear of all Liens, other restrictions and
limitations on voting rights. Except for the capital stock of or other
equity or ownership interests in the Company Subsidiaries, and except as
set forth on SCHEDULE 3.1.2 to the Company Disclosure Letter, the Company
does not own, directly or indirectly, any capital stock or other equity or
ownership interest in any Person. Each Company Subsidiary that is a
corporation is duly incorporated and validly existing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted, and each Company
Subsidiary that is a partnership, limited liability company or trust is
duly organized and validly existing under the laws of its jurisdiction of
organization and has the requisite power
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and authority to carry on its business as now being conducted. Each Company
Subsidiary is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to
be so qualified or licensed, individually or in the aggregate, would not
have a Material Adverse Effect. Copies of the Articles of Incorporation,
Bylaws, organization documents and partnership and joint venture agreements
of each Company Subsidiary, as amended to the date of this Agreement, have
been previously delivered to Acquiror.
3.1.3 CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Shares and 10,000,000 shares of
Preferred Shares, of which 500,000 shares have been classified as Series A
Junior Participating Preferred Stock and the remaining 9,500,000 shares
remain unclassified. On the date hereof, (i) 13,409,642 shares of Common
Shares and no shares of Preferred Shares were issued and outstanding, (ii)
900 shares of Common Shares were held by the Company in its treasury, (iii)
260,000 shares of Common Shares were issuable under the Company's employee
benefit or incentive plans pursuant to awards granted by the Company (the
"Company Employee Stock Plans"), (iv) 1,940,000 shares of Common Shares
were issuable upon exercise of outstanding options (the "Company Options")
to purchase Common Shares, (v) 937,496 shares of Common Shares were
reserved for issuance pursuant to the Company's Amended and Restated
Dividend Reinvestment Share Purchase Plan and (vi) 83,898 shares of Common
Shares were reserved for issuance pursuant to the Company's Employee Share
Purchase Plan. On the date of this Agreement, except as set forth in this
SECTION 3.1.3 or in SCHEDULE 3.1.3 to the Company Disclosure Letter, no
shares of beneficial interest or other voting securities of the Company
were issued, reserved for issuance or outstanding. The Company has no
outstanding stock appreciation rights relating to the beneficial shares of
interest of the Company. All outstanding beneficial shares of interest of
the Company are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote.
Except (A) as set forth above in this SECTION 3.1.3, (B) as set forth in
SCHEDULE 3.1.3 to the Company Disclosure Letter or (C) as otherwise
permitted under SECTION 4.1, as of the date of this Agreement there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company
or any Company Subsidiary is a party or by which such entity is bound,
obligating the Company or any Company Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital
stock, voting securities or other ownership interests of the Company or any
Company Subsidiary or obligating the Company or any Company Subsidiary to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking (other than
to the Company or a Company Subsidiary). Except as set forth on SCHEDULE
3.1.3 to the Company Disclosure Letter, there are no outstanding
contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any beneficial shares of interest
of the Company or any capital stock, voting securities or other ownership
interests in any Company Subsidiary or make any investment (in the form of
a loan, capital contribution or otherwise) in any Person (other than a
Company Subsidiary).
3.1.4 AUTHORITY; NONCONTRAVENTION; CONSENTS. The Company has the
requisite power and authority to enter into this Agreement and, subject to
approval of this Agreement by the vote of the holders of the Common Shares
required to approve this Agreement and the Transactions (the "Company
Shareholder Approvals"), to consummate the Transactions to which the
Company is a party. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the Transactions to which
the Company is a party have been duly authorized by all necessary action on
the part of the Company and no other action or proceedings on the part of
the Company are necessary to authorize this Agreement or the consummation
of the Transactions, subject to approval of this Agreement pursuant to the
Company Shareholder Approvals. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
Except as set forth in SCHEDULE 3.1.4 to the Company Disclosure Letter, the
execution and delivery of this Agreement by the Company do not,
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and the consummation of the Transactions to which the Company is a party
and compliance by the Company with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit or alteration of rights or obligations under, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any Company Subsidiary under, (i) the Company's Charter and the Company's
Bylaws, or the comparable charter or organizational documents or
partnership or similar agreement (as the case may be) of any Company
Subsidiary, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, contract, franchise or license applicable
to the Company or any Company Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any Laws applicable to the Company
or any Company Subsidiary, or their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights or Liens that either individually or in the aggregate
would not (x) have a Material Adverse Effect or (y) materially delay or
prevent the consummation of the Transactions. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to the Company or any
Company Subsidiary in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
Transactions, except for (i) the filing with the SEC of (x) a joint proxy
statement relating to the Company Shareholder Approvals and the Acquiror
Shareholder Approvals of the Transactions (as amended or supplemented from
time to time, the "Proxy Statement") and (y) such reports under Section
13(a) of the Exchange Act, as may be required in connection with this
Agreement and the Transactions, (ii) the filing of the Articles of Merger
with the Applicable Bodies, (iii) such filings as may be required in
connection with the payment of any Transfer and Gains Taxes and (iv) such
other consents, approvals, orders, authorizations, registrations,
declarations and filings (A) as are set forth in SCHEDULE 3.1.4 to the
Company Disclosure Letter, (B) as may be required under (x) federal, state
or local environmental laws or (y) the "blue sky" laws of various states or
(C) which, if not obtained or made, would not prevent or delay in any
material respect the consummation of any of the Transactions or otherwise
prevent the Company from performing its obligations under this Agreement in
any material respect or have, individually or in the aggregate, a Material
Adverse Effect.
3.1.5 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed with the SEC (the
"Company SEC Documents"). All of the Company SEC Documents (other than
preliminary material or material which was subsequently amended), as of
their respective filing dates, complied, or will comply, as the case may
be, in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and
regulations promulgated thereunder applicable to such Company SEC
Documents. None of the Company SEC Documents at the time of filing and
effectiveness contained, or will contain, as the case may be, any untrue
statement of a material fact or omitted, or will omit, as the case may be,
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent such statements
have been amended, modified or superseded by later Company SEC Documents.
The consolidated financial statements of the Company included in the
Company SEC Documents complied, or will comply, as the case may be, as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have
been prepared, or will be prepared, as the case may be, in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q promulgated under the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly presented, or will present, as the case may be, in
accordance with the applicable requirements of GAAP, the consolidated
financial position of the Company as of the dates thereof and the
consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments which were not or are not expected to
be material in amount). The audited financial statements of the
unconsolidated
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Company Subsidiaries previously delivered to Acquiror (the "Unconsolidated
Company Financial Statements") have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of GAAP, the financial position of such Company
Subsidiaries, taken as a whole, as of the dates thereof, and the results of
their respective operations and cash flows for the periods then ended.
Except as set forth in the Company SEC Documents filed with the SEC prior
to the date hereof, in the Unconsolidated Company Financial Statements, or
in SCHEDULE 3.1.5 to the Company Disclosure Letter, and except for
liabilities and obligations incurred since the Financial Statement Date in
the ordinary course of business and consistent with past practice, neither
the Company nor any Company Subsidiary has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required
by GAAP to be set forth on a consolidated balance sheet of the Company or
of any unconsolidated Company Subsidiary or in the notes thereto and which,
individually or in the aggregate, would have a Material Adverse Effect.
3.1.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company SEC Documents filed with the SEC prior to the date hereof or in
SCHEDULE 3.1.6 to the Company Disclosure Letter, since the date of the most
recent financial statements included in the Company SEC Documents (the
"Financial Statement Date") to the date of this Agreement, the Company and
the Company Subsidiaries have conducted their business only in the ordinary
course and there has not been (i) any change that would have a Material
Adverse Effect (a "Material Adverse Change"), nor has there been any
occurrence or circumstance that with the passage of time would reasonably
be expected to result in a Material Adverse Change, (ii) except for (x)
regular quarterly dividends not in excess of $.395 per share of Common
Shares with customary record and payment dates and (y) the payment of a
preferred share purchase right dividend pursuant to the Rights Agreement
between the Company and BankBoston, N.A., dated May 23, 1997 (the "Rights
Agreement"), any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
of the Company's beneficial interests, other than any dividend required to
be paid pursuant to SECTION 2.2.4, (iii) any split, combination or
reclassification of any of the Company's capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for, or giving the right to acquire by exchange
or exercise, shares of its capital stock or any issuance of an ownership
interest in, any Company Subsidiary except as permitted by SECTION 4.1
after the date hereof, (iv) any damage, destruction or loss, whether or not
covered by insurance, that has or would have or is reasonably likely to
have a Material Adverse Effect or (v) any change in accounting methods,
principles or practices by the Company or any Company Subsidiary, except
insofar as required by a change in GAAP.
3.1.7 LITIGATION. Except as disclosed in the Company SEC Documents
filed with the SEC prior to the date hereof or in SCHEDULE 3.1.7 to the
Company Disclosure Letter, there is no suit, action or proceeding pending,
threatened in writing or to the Knowledge of the Company otherwise
threatened against or affecting the Company or any Company Subsidiary or
any of their respective properties or assets that, individually or in the
aggregate, could reasonably be expected to (A) have a Material Adverse
Effect or (B) prevent the consummation of any of the Transactions, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any Company
Subsidiary or any of their respective properties or assets having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
3.1.8 PROPERTIES.
(i) The Company or one of the Company Subsidiaries owns fee simple
title (or where indicated, leasehold estate) to each of the real
properties identified in SCHEDULE 3.1.8 to the Company Disclosure Letter
(the "Company Properties"), except as listed on SCHEDULE 3.1.8 to the
Company Disclosure Letter, which are all of the real estate properties
owned by them, in each case (except as provided below) free and clear of
Liens, mortgages or deeds of trust, claims against title, charges which
are liens, security interests or other encumbrances on title
("Encumbrances"). The Company Properties are not subject to any rights
of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy (collectively, "Property Restrictions"),
except for
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(A) Encumbrances and Property Restrictions set forth in SCHEDULE 3.1.8
to the Company Disclosure Letter, (B) Property Restrictions imposed or
promulgated by law or any governmental body or authority with respect to
real property, including zoning regulations, provided that they do not
materially adversely affect the currently intended use of any Company
Property, (C) Encumbrances and Property Restrictions disclosed on
existing title reports or existing surveys (in either case copies of
which title reports and surveys have been delivered or made available to
Acquiror and listed in the Company Disclosure Letter), and (D)
mechanics', carriers', workmens', repairmens' and materialmens' liens
and other Encumbrances, Property Restrictions and other limitations of
any kind, if any, which, individually or in the aggregate, are not
substantial in amount, do not materially detract from the value of or
materially interfere with the present use of any of the Company
Properties subject thereto or affected thereby, and do not otherwise
have a Material Adverse Effect. Except as provided in SCHEDULE 3.1.8 to
the Company Disclosure Letter, valid policies of title insurance have
been issued insuring the Company's or the applicable Company
Subsidiaries' fee simple title or leasehold estate to the Company
Properties in amounts at least equal to the value of such Company
Properties at the time of the issuance of such policy, subject only to
the matters disclosed above and on the Company Disclosure Letter, and
such policies are, at the date hereof, in full force and effect and no
material claim has been made against any such policy. Except as provided
in SCHEDULE 3.1.8 to the Company Disclosure Letter, (A) the Company has
no Knowledge that any material certificate, permit or license, from any
Governmental Entity having jurisdiction over any of the Company
Properties or any agreement, easement or other right which is necessary
to permit the lawful use and operation of the buildings and improvements
on any of the Company Properties or which is necessary to permit the
lawful access to and from any of the Company Properties has not been
obtained and is not in full force and effect, or of any pending threat
of modification or cancellation of any such certificate, permit or
license and (B) none of the Company or the Company Subsidiaries has
received written notice of any violation of any federal, state or
municipal law, ordinance, order, regulation or requirement materially
affecting any portion of any of the Company Properties issued by any
Governmental Entity. Except as provided in SCHEDULE 3.1.8 to the Company
Disclosure Letter, neither the Company nor any of the Company
Subsidiaries has received any notice to the effect that (A) any
condemnation or rezoning proceedings are pending or threatened with
respect to any of the Company Properties or (B) any zoning, building or
similar law, code, ordinance, order or regulation is or will be violated
by the continued maintenance, operation or use of any buildings or other
improvements on any of the Company Properties or by the continued
maintenance, operation or use of the parking areas. Except as provided
in SCHEDULE 3.1.8 to the Company Disclosure Letter, all work to be
performed, payments to be made and actions to be taken by the Company or
the Company Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a Governmental Entity in connection with a
site approval, zoning reclassification or other similar action relating
to the Company Properties (e.g. local improvement district, road
improvement district, environmental mitigation) has been performed, paid
or taken, as the case may be, and the Company has no Knowledge of any
planned or proposed work, payments or actions that may be required after
the date hereof pursuant to such agreements.
(ii) All properties currently under development or construction by
the Company or the Company Subsidiaries (the "Development Properties")
and all properties currently proposed for acquisition, development or
commencement of construction prior to the Effective Time by the Company
and the Company Subsidiaries (the "Future Development Properties") are
listed as such on SCHEDULE 3.1.8 to the Company Disclosure Letter. All
executory agreements entered into by the Company or any Company
Subsidiary relating to the development or construction of multifamily
residential or other real estate properties (other than agreements for
architectural, engineering, planning, accounting, legal or other
professional services, or construction agreements for material or labor)
are listed on SCHEDULE 3.1.8 to the Company Disclosure Letter. Copies of
such agreements, all of which have previously been delivered or made
available to Acquiror are listed on the Company Disclosure Letter and
are true and correct.
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3.1.9 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.1.9
to the Company Disclosure Letter or except as to matters previously
remediated in accordance with applicable Law, none of the Company, or any
Company Subsidiaries or, to the Company's Knowledge, any other Person has
caused or permitted (a) the presence of any Hazardous Materials at, in, on,
or under any of the Company Properties in any amount, form, or location
that would be unlawful, require investigation, notification of Government
Entities, or remedial action, or otherwise result in potential material
liabilities under any applicable local, state, or federal environmental
Laws, or (b) any spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the Company
Properties or at any other location as a result of any construction on or
operation and use of such properties, which presence or occurrence would,
individually or in the aggregate, have or is reasonably likely to have a
Material Adverse Effect; and in connection with the construction on or
operation and use of the Company Properties, the Company and the Company
Subsidiaries have not failed to comply in any material respect with all
applicable local, state and federal environmental Laws, regulations,
ordinances and administrative and judicial orders relating to the
generation, use, recycling, reuse, sale, storage, handling, transport and
disposal of any Hazardous Materials.
3.1.10 RELATED PARTY TRANSACTIONS. Set forth in SCHEDULE 3.1.10 to
the Company Disclosure Letter or in the Company's definitive proxy
statements for the Annual Meeting of Shareholders held May 23, 1997, May
20, 1996, and May 18, 1995, is a list of all arrangements, agreements and
contracts entered into by the Company or any of the Company Subsidiaries
with any Person who (i) is an executive officer, director or Affiliate of
the Company or any of the Company Subsidiaries, or any entity of which any
of the foregoing is an Affiliate which would be required to be disclosed
under Item 404 of Regulation S-K or (ii) acquired Common Shares in a
private placement. Such documents, copies of all of which have been
previously delivered or made available to Acquiror, are listed in SCHEDULE
3.1.10 to the Company Disclosure Letter or in the Company's definitive
proxy statements for the Annual Meeting of Shareholders held May 23, 1997,
May 20, 1996, and May 18, 1995.
3.1.11 ABSENCE OF CHANGES IN BENEFIT PLANS; ERISA COMPLIANCE.
(i) Except as disclosed in the Company SEC Documents filed with the
SEC prior to the date hereof or in SCHEDULE 3.1.11(I) to the Company
Disclosure Letter, since the date of the most recent audited financial
statements included in the Company SEC Documents filed with the SEC
prior to the date hereof, there has not been any adoption or amendment
by the Company, any Company Subsidiary or any Person affiliated with the
Company under Section 414(b), (c), (m) or (o) of the Code (each, an
"ERISA Affiliate of the Company") of any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other employee
benefit plan, arrangement or understanding (whether or not legally
binding, or oral or in writing) providing benefits to any current or
former employee, officer or director of the Company, any Company
Subsidiary, or any ERISA Affiliate of the Company (collectively,
"Company Benefit Plans"). No Company Benefit Plan is, or has been
subject to Title IV of ERISA or to Section 412 of the Code or Section
302 of ERISA or provides post-retirement health benefits other than the
health benefits required under Section 4980B of the Code or Part 6 of
Title I of ERISA.
Each Company Benefit Plan is listed in SCHEDULE 3.1.11(I) to the
Company Disclosure Letter, including, with respect to terminated Company
Benefit Plans, the date of termination. True and correct copies of each
of the following have been made available to Acquiror: (i) the most
recent annual report (Form 5500), if any, relating to each such Company
Benefit Plan filed with the IRS, (ii) each such Company Benefit Plan,
(iii) the trust agreement, if any, relating to each such Company Benefit
Plan, (iv) the most recent summary plan description for each such
Company Benefit Plan for which a summary plan description is required by
ERISA, and (v) the most recent determination letter, if any, issued by
the IRS with respect to any such Company Benefit Plan qualified under
Section 401 of the Code.
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Except as set forth in SCHEDULE 3.1.11(I) to the Company Disclosure
Letter, as to any such Company Benefit Plan intended to be qualified
under Section 401 of the Code, such Company Benefit Plan satisfies in
form the requirements of such Section and there has been no termination
or partial termination of such Company Benefit Plan within the meaning
of Section 411(d)(3) of the Code.
As to any such terminated Company Benefit Plan intended to have
been qualified under Section 401 of the Code, such terminated Company
Benefit Plan received a favorable determination letter from the IRS with
respect to its termination.
Except as set forth in SCHEDULE 3.1.11(I) to the Company Disclosure
Letter either the Company, a Company Subsidiary or an ERISA Affiliate of
the Company has the right, either individually or in the aggregate,
unilaterally to terminate any, and each, of the Company Benefit Plans
without incurring any additional expense to fund or pay any benefits
upon such termination.
There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of the Company, threatened
against, or with respect to, any of such Company Benefit Plans or their
assets that could reasonably be expected to have a Material Adverse
Effect.
To the Knowledge of the Company, there is no matter pending before
the IRS, the United States Department of Labor or the PBGC with respect
to any of such Company Benefit Plans.
All contributions required to be made to such Company Benefit Plans
pursuant to their terms and provisions have been timely made.
Except as set forth in SCHEDULE 3.1.11(I) to the Company Disclosure
Letter, neither the Company nor any Company Subsidiary is a party to or
is bound by any severance agreement, program or policy. True and correct
copies of all employment agreements with officers of the Company and the
Company Subsidiaries, and all vacation, overtime and other compensation
policies of the Company and the Company Subsidiaries relating to their
employees have been made available to Acquiror.
(ii) Except as described in the Company SEC Documents or in
SCHEDULE 3.1.11(II) to the Company Disclosure Letter or as would not
have a Material Adverse Effect, (A) all Company Benefit Plans, including
any such plan that is an "employee benefit plan" as defined in Section
3(3) of ERISA, are in compliance with all applicable requirements of
law, including ERISA and the Code, and (B) other than claims for
benefits and contributions in the normal course of business, neither the
Company, any Company Subsidiary nor any ERISA Affiliate of the Company
has any liabilities or obligations with respect to any such Company
Benefit Plan, whether accrued, contingent or otherwise, nor to the
Knowledge of the Company are any such liabilities or obligations
expected to be incurred. Except as set forth in SCHEDULE 3.1.11(II) to
the Company Disclosure Letter, or as permitted by SECTION 5.13.2 the
execution of, and performance of the Transactions will not (either alone
or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Benefit Plan, policy, arrangement
or agreement or any trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any employee or director of the
Company, any Company Subsidiary, or any ERISA Affiliate of the Company.
(iii) Except as set forth in SCHEDULE 3.1.11(III) to the Company
Disclosure Letter, neither the Company nor any Company Subsidiary has
any plans, programs or agreements to which they are parties, or to which
they are subject, pursuant to which payments (or acceleration of
benefits) may be required upon, or may become payable directly or
indirectly as a result of, a change of control of the Company.
(iv) No agreements have been made with any Person by, or on behalf
of, the Company or any Company Subsidiary with respect to any
interpretation of, or the amount or calculation of any benefits payable
under, any plans, programs or agreements described in SECTION
3.1.11(III) or in
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SCHEDULE 3.1.11(III) to the Company Disclosure Letter, which agreement
is binding on the Company or any Company Subsidiary or would be binding
on Acquiror.
3.1.12 TAXES.
(i) Except as set forth in SCHEDULE 3.1.12 to the Company
Disclosure Letter, each of the Company and each Company Subsidiary has
(A) filed all Tax returns and reports required to be filed by it (after
giving effect to any filing extension properly granted by a Governmental
Entity having authority to do so) and all such returns and reports are
accurate and complete in all material respects; and (B) paid (or the
Company has paid on its behalf) all Taxes shown on such returns and
reports as required to be paid by it, and the most recent financial
statements contained in the Company SEC Documents reflect an adequate
reserve for all material Taxes payable by the Company (and by those
Company Subsidiaries whose financial statements are contained therein)
for all taxable periods and portions thereof through the date of such
financial statements. True, correct and complete copies of all federal,
state and local Tax returns and reports for the Company and each Company
Subsidiary, and all written communications relating thereto, have been
delivered or made available to representatives of Acquiror. Except as
set forth on SCHEDULE 3.1.12 to the Company Disclosure Letter, to the
Knowledge of the Company, no deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of the Company
Subsidiaries, and no requests for waivers of the time to assess any such
Taxes are pending.
(ii) The Company (A) for all taxable years commencing with the
taxable year ended December 31, 1993 through the most recent December
31, has been organized in conformity with the requirements for
qualification as a real estate investment trust (a "REIT") (within the
meaning of the Code) under the Code and has been subject to taxation as
a REIT and has satisfied all requirements to qualify as a REIT for such
years, (B) has operated, and intends to continue to operate, in such a
manner as to qualify as a REIT for the taxable year ending on the
Closing Date, and (C) has not taken or omitted to take any action which
would reasonably be expected to result in a challenge to its status as a
REIT, and to the Company's Knowledge, no such challenge is pending or
threatened. Each Company Subsidiary which is a partnership, joint
venture or limited liability company has been treated during and since
its formation and continues to be treated for federal income tax
purposes as a partnership and not as a corporation or an association
taxable as a corporation. Each Company Subsidiary which is a corporation
for federal income tax purposes and with respect to which all of the
outstanding capital stock is owned solely by the Company (or solely by a
Company Subsidiary that is a corporation wholly owned by the Company) is
a "qualified REIT subsidiary," as defined in Section 856(i) of the Code.
Except as provided in SCHEDULE 3.1.12 to the Company Disclosure Letter,
neither the Company nor any Company Subsidiary holds any asset (x) the
disposition of which would be subject to rules similar to Section 1374
of the Code as a result of an election under IRS Notice 88-19 or (y)
that is subject to a consent filed pursuant to Section 341(f) of the
Code and the regulations thereunder.
3.1.13 NO PAYMENTS TO EMPLOYEES, OFFICERS OR TRUST MANAGERS. Except
as set forth on SCHEDULE 3.1.13 to the Company Disclosure Letter, there is
no employment or severance contract, or other agreement requiring payments
to be made or increasing any amounts payable thereunder on a change of
control or otherwise as a result of the consummation of any of the
Transactions, with respect to any employee, officer, trust manager or
director of the Company or any Company Subsidiary.
3.1.14 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other Person, other than Prudential Securities
Incorporated ("Prudential"), the fees and expenses of which have previously
been disclosed to Acquiror and will be paid by the Company, is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company or any Company Subsidiary. The Company has
provided to Acquiror a good faith estimate and description of the expenses
of the Company and the Company Subsidiaries which the Company and the
Company Subsidiaries expect to incur, or have incurred, in connection with
the Transactions.
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3.1.15 COMPLIANCE WITH LAWS. Except as disclosed in the Company SEC
Documents filed with the SEC prior to the date hereof or as set forth in
SCHEDULE 3.1.15 to the Company Disclosure Letter, neither the Company nor
any Company Subsidiary has violated or failed to comply with any statute,
law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except for violations and failures to comply that would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
3.1.16 CONTRACTS; DEBT INSTRUMENTS.
(i) To the Knowledge of the Company, neither the Company nor any
Company Subsidiary is in violation of or in default under (nor does
there exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default under) any
loan or credit agreement, note, bond, mortgage, indenture, lease,
permit, concession, franchise, license or any other material contract,
agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, except as set
forth in SCHEDULE 3.1.16(I) to the Company Disclosure Letter and except
for violations or defaults that would not, individually or in the
aggregate, result in a Material Adverse Effect.
(ii) Except for any of the following expressly identified in the
Company SEC Documents filed with the SEC prior to the date hereof and
except as permitted by SECTION 4.1 after the date hereof, SCHEDULE
3.1.16(II) to the Company Disclosure Letter sets forth (x) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the
Company or any of the Company Subsidiaries, other than indebtedness
payable to the Company or a Company Subsidiary or to any third-party
partner or joint venturer in any Company Subsidiary, in an aggregate
principal amount in excess of $100,000 per item is outstanding or may be
incurred and (y) the respective principal amounts outstanding thereunder
on June 30, 1997, For purposes of this SECTION 3.1.16(II),
"Indebtedness" shall mean, with respect to any Person, without
duplication, (A) all indebtedness of such Person for borrowed money,
whether secured or unsecured, (B) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person, (C) all capitalized lease obligations
of such Person, (D) all obligations of such Person under interest rate
or currency hedging transactions (valued at the termination value
thereof) and (E) all guarantees of such Person of any such indebtedness
of any other Person.
3.1.17 STATE TAKEOVER STATUTES. The Company has taken all action
necessary, if any, to exempt transactions between Acquiror and the Company
and its Affiliates from the operation of any "fair price," "moratorium,"
"control share acquisition" or any other anti-takeover statute or similar
statute enacted under any state laws or the federal laws of the United
States, or any similar statute or regulation (a "Takeover Statute").
3.1.18 REGISTRATION STATEMENT; PROXY STATEMENT. The information
supplied by the Company for inclusion or incorporation by reference in the
Registration Statement shall not at the time the Registration Statement
(including any amendments and supplements thereto) is declared effective by
the SEC contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The information supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement
will not, on the date the Proxy Statement is first mailed to the
shareholders, at the time of the Shareholders Meetings, or at the Effective
Time, contain any untrue statement of any material fact, or omit to state
any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not false or
misleading. If at any time prior to the Effective Time any event relating
to the Company or any of its respective Affiliates, officers or Trust
Managers should be discovered by the Company which should be set forth in
an amendment to the Registration Statement or a supplement to the Proxy
Statement, the Company shall promptly inform Acquiror. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to
any information supplied
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by Acquiror or Merger Sub which is contained or incorporated by reference
in any of the foregoing documents.
3.1.19 HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976. For
purposes of determining compliance with the HSR, the Company confirms that
the conduct of its business consists solely of investing in, owning and
operating real estate for the benefit of its shareholders.
3.1.20 VOTE REQUIRED. The affirmative vote of at least two-thirds of
the outstanding shares of Common Shares is the only vote of the holders of
any class or series of the Company's shares of beneficial interest
necessary (under applicable law or otherwise) to approve this Agreement and
the Transactions.
3.1.21 OPINION OF FINANCIAL ADVISOR. The Board of Trust Managers of
the Company has received the opinion of Prudential, satisfactory to the
Company, a copy of which has been provided to Acquiror, to the effect that,
as of the date of such opinion, consideration to be received in the Merger
is fair to the shareholders of the Company from a financial point of view.
3.1.22 INVESTMENT COMPANY ACT OF 1940. Neither the Company nor any
Company Subsidiary is, or at the Effective Time will be, required to be
registered under the 1940 Act.
3.1.23 INSURANCE. The Company maintains fire and casualty, general
liability, business interruption, product liability, professional liability
and sprinkler and water damage insurance policies with reputable insurance
carriers, which the Company reasonably believes provide full and adequate
coverage for all normal risks incident to the business of the Company and
the Company Subsidiaries and their respective properties and assets.
3.1.24 THE COMPANY'S RIGHTS AGREEMENT. Neither the execution or
delivery of this Agreement nor the consummation of the Transactions will
cause Acquiror or any of its Affiliates to be within the definition of
"Acquiring Person" as defined in the Rights Agreement. Neither the
"Distribution Date" (as defined in the Rights Agreement) nor a "Shares
Acquisition Date" (as defined in the Rights Agreement) has occurred under
the Rights Agreement, and, to the Knowledge of the Company, neither
Acquiror nor Merger Sub nor any Affiliate or Associate of Acquiror or
Merger Sub has taken any action which would cause such Person to be deemed
an Acquiring Person or which would cause a Distribution Date or a Shares
Acquisition Date to occur under the Rights Agreement.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror
represents and warrants to the Company as follows:
3.2.1 ORGANIZATION, STANDING AND CORPORATE POWER OF ACQUIROR AND
MERGER SUB. Each of Acquiror and Merger Sub is a Georgia corporation and
each is duly organized and validly existing under the laws of Georgia and
has the requisite power and authority to carry on its business as now being
conducted. Each of Acquiror and Merger Sub is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have a material adverse effect on the business,
properties, assets, financial condition or results of operations of
Acquiror and the Acquiror Subsidiaries, taken as a whole (an "Acquiror
Material Adverse Effect"). Each of Acquiror and Merger Sub has delivered to
the Company complete and correct copies of its Articles of Incorporation
and Bylaws, as amended or supplemented to the date of this Agreement.
3.2.2 ACQUIROR SUBSIDIARIES. SCHEDULE 3.2.2 to the Acquiror
Disclosure Letter sets forth each Acquiror Subsidiary and the ownership
interest therein of Acquiror. Except as set forth in SCHEDULE 3.2.2 to the
Acquiror Disclosure Letter, (A) all the outstanding shares of capital stock
of each Acquiror Subsidiary that is a corporation have been validly issued
and are fully paid and nonassessable and are owned by Acquiror, by another
Acquiror Subsidiary or by Acquiror and another Acquiror Subsidiary, free
and clear of all Liens, other restrictions and limitations on voting rights
and (B) all equity interests in each Acquiror Subsidiary that is a
partnership, joint venture, limited liability company or trust are owned by
Acquiror, by another Acquiror Subsidiary or by Acquiror and another
Acquiror Subsidiary free and
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clear of all Liens, other restrictions and limitations on voting rights.
Except for the capital stock of or other equity or ownership interests in
the Acquiror Subsidiaries, and except as set forth in SCHEDULE 3.2.2 to the
Acquiror Disclosure Letter, Acquiror does not own, directly or indirectly,
any capital stock or other equity or ownership interest in any Person. Each
Acquiror Subsidiary (other than Merger Sub) that is a corporation is duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry
on its business as now being conducted, and each Acquiror Subsidiary that
is a partnership, limited liability company or trust is duly organized and
validly existing under the laws of its jurisdiction of organization and has
the requisite power and authority to carry on its business as now being
conducted. Each Acquiror Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not have an Acquiror Material Adverse Effect. Copies of
the Articles of Incorporation, Bylaws, organization documents and
partnership and joint venture agreements of each Acquiror Subsidiary, as
amended to the date of this Agreement, have been previously delivered to
the Company.
3.2.3 CAPITAL STRUCTURE. The authorized capital stock of Acquiror
consists of 100,000,000 shares of Acquiror Common Stock and 20,000,000
shares of Acquiror Preferred Stock, of which 1,000,000 shares have been
classified as 8 1/2% Series A Cumulative Redeemable Preferred Stock and the
remaining 19,000,000 shares remain unclassified. On the date hereof, (i)
22,124,410 shares of Acquiror Common Stock and 1,000,000 shares of Acquiror
Preferred Stock were issued and outstanding, (ii) no shares of Acquiror
Stock or Acquiror Preferred Stock were held by Acquiror in its treasury,
(iii) 98,248 shares of Acquiror Common Stock were reserved for issuance
pursuant to options and shares of restricted stock not yet granted under
Acquiror's employee benefit or incentive plans ("Acquiror Employee Stock
Plans"), (iv) 1,030,440 shares of Acquiror Common Stock were issuable upon
exercise of outstanding options under the Acquiror Employee Stock Plans
(the "Acquiror Options") to purchase shares of Acquiror Common Stock; (v)
145,972 shares were reserved for issuance pursuant to Acquiror's Dividend
Reinvestment and Stock Purchase Plan, (vi) 26,308 shares were reserved for
issuance pursuant to Acquiror's Employee Stock Purchase Plan and (vii)
27,260,770 shares were reserved for issuance upon the exchange of
outstanding limited partnership interests ("Units") in the Operating
Partnership. On the date of this Agreement, except as set forth in this
SECTION 3.2.3, no shares of capital stock or other voting securities of
Acquiror were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights relating to the capital stock of
Acquiror. All outstanding shares of capital stock of Acquiror are, and all
shares which may be issued pursuant to this Agreement will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth on SCHEDULE 3.2.3 to the
Acquiror Disclosure Letter, there are no bonds, debentures, notes or other
indebtedness of Acquiror having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which shareholders of Acquiror may vote. Except (A) as set above in this
SECTION 3.2.3, (B) as set forth in SCHEDULE 3.2.3 to the Acquiror
Disclosure Letter or (C) as otherwise permitted under SECTION 4.2, as of
the date of this Agreement there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Acquiror or any Acquiror Subsidiary is a
party or by which such entity is bound, obligating Acquiror or any Acquiror
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, voting securities or other
ownership interests of Acquiror or of any Acquiror Subsidiary or obligating
Acquiror or any Acquiror Subsidiary to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking (other than to Acquiror or an Acquiror
Subsidiary). Except as set forth on SCHEDULE 3.2.3 to the Acquiror
Disclosure Letter, there are no outstanding contractual obligations of
Acquiror or any Acquiror Subsidiary to repurchase, redeem or otherwise
acquire any shares of capital stock or other ownership interests in any
Acquiror Subsidiary or make any investment (in the form of a loan, capital
contribution or otherwise) in any Person (other than an Acquiror
Subsidiary).
3.2.4 AUTHORITY; NONCONTRAVENTION; CONSENTS. Each of Acquiror and
Merger Sub has the requisite corporate power and authority to enter into
this Agreement and, subject to approval of this Agreement by
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the vote of the holders of the Acquiror Common Stock required to approve
this Agreement and the Transactions (including, without limitation, the
issuance of Acquiror Common Stock in connection with the Merger) (the
"Acquiror Shareholder Approvals" and, together with the Company Shareholder
Approvals, the "Shareholder Approvals"), to consummate the Transactions to
which Acquiror or Merger Sub (as the case may be) is a party. The execution
and delivery of this Agreement by each of Acquiror and Merger Sub and the
consummation by each of Acquiror and Merger Sub of the Transactions to
which Acquiror or Merger Sub (as the case may be) is a party have been duly
authorized by all necessary corporate action on the part of each of
Acquiror and Merger Sub and no other action or proceedings on the part of
Acquiror or Merger Sub are necessary to authorize this Agreement or the
consummation of the Transactions, subject to approval of this Agreement and
the issuance of Acquiror Common Stock in connection with the Merger
pursuant to the Acquiror Shareholder Approvals. This Agreement has been
duly executed and delivered by each of Acquiror and Merger Sub and
constitutes a valid and binding obligation of each of Acquiror and Merger
Sub, enforceable against each of Acquiror and Merger Sub in accordance with
its terms. Except as set forth in SCHEDULE 3.2.4 to the Acquiror Disclosure
Letter, the execution and delivery of this Agreement by each of Acquiror
and Merger Sub do not, and the consummation of the Transactions to which
Acquiror or Merger Sub (as the case may be) is a party and compliance by
each of Acquiror and Merger Sub with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit or alteration of rights or obligations under, or result in the
creation of any Lien upon any of the properties or assets of Acquiror,
Merger Sub, or any other Acquiror Subsidiary under, (i) the Articles of
Incorporation or Bylaws of Acquiror and Merger Sub or the comparable
charter or organizational documents or partnership or similar agreement (as
the case may be) of any other Acquiror Subsidiary each as amended or
supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or
license applicable to Acquiror, Merger Sub or any other Acquiror Subsidiary
or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any Laws applicable to Acquiror, Merger Sub or any other Acquiror
Subsidiary or their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that either individually or in the aggregate would not (x)
have an Acquiror Material Adverse Effect or (y) materially delay or prevent
the consummation of the Transactions. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Acquiror, Merger Sub
or any Acquiror Subsidiary in connection with the execution and delivery of
this Agreement or the consummation by Acquiror or Merger Sub, as the case
may be, of any of the Transactions, except for (i) the filing with the SEC
of (x) the Proxy Statement and a registration statement on Form S-4 (or
other appropriate form) in connection with the registration of the Acquiror
Common Stock constituting the Merger Consideration (the "Registration
Statement") and (y) such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement and the Transactions,
(ii) the filing of the Listing Application with the NYSE with respect to
the shares of Acquiror Common Stock to be issued as part of the Merger
consideration, (iii) the filing of the Articles of Merger with the
Applicable Bodies, (iv) such filings as may be required in connection with
the payment of any Transfer and Gains Taxes and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
(A) as are set forth in SCHEDULE 3.2.4 to the Acquiror Disclosure Letter,
(B) as may be required under (x) federal, state or local environmental laws
or (y) the "blue sky" laws of various states or (C) which, if not obtained
or made, would not prevent or delay in any material respect the
consummation of any of the Transactions or otherwise prevent Acquiror or
Merger Sub from performing their respective obligations under this
Agreement in any material respect or have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
3.2.5 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES. Acquiror has filed all reports, schedules, forms, statements
and other documents required to be filed with the SEC (the "Acquiror SEC
Documents"). All of the Acquiror SEC Documents (other than preliminary
material or
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material which was subsequently amended), as of their respective filing
dates, complied, or will comply, as the case may be, in all material
respects with all applicable requirements of the Securities Act and the
Exchange Act and, in each case, the rules and regulations promulgated
thereunder applicable to such Acquiror SEC Documents. None of the Acquiror
SEC Documents at the time of filing and effectiveness contained, or will
contain, as the case may be, any untrue statement of a material fact or
omitted, or will omit, as the case may be, to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been amended,
modified or superseded by later Acquiror SEC Documents. The consolidated
financial statements of Acquiror included in the Acquiror SEC Documents
complied, or will comply, as the case may be, as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared, or
will be prepared, as the case may be, in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form 10-Q promulgated
under the Exchange Act) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
presented, or will present, as the case may be, in accordance with the
applicable requirements of GAAP, the consolidated financial position of
Acquiror and the Acquiror Subsidiaries, taken as a whole, as of the dates
thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
and recurring year-end audit adjustments which were not or are not expected
to be material in amount). Except as set forth in the Acquiror SEC
Documents filed with the SEC prior to the date hereof, or in SCHEDULE 3.2.5
to the Acquiror Disclosure Letter, and except for liabilities and
obligations incurred since the Acquiror Financial Statement Date in the
ordinary course of business and consistent with past practice, neither
Acquiror nor any Acquiror Subsidiary has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) required by
GAAP to be set forth on a consolidated balance sheet of Acquiror or of any
unconsolidated Acquiror Subsidiary or in the notes thereto and which,
individually or in the aggregate, would have an Acquiror Material Adverse
Effect.
3.2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Acquiror SEC Documents filed with the SEC prior to the date hereof or
in SCHEDULE 3.2.6 to the Acquiror Disclosure Letter, since the date of the
most recent financial statements included in the Acquiror SEC Documents
(the "Acquiror Financial Statement Date") to the date of this Agreement,
Acquiror and the Acquiror Subsidiaries have conducted their business only
in the ordinary course and there has not been (i) any change that would
have an Acquiror Material Adverse Effect (a "Acquiror Material Adverse
Change"), nor has there been any occurrence or circumstance that with the
passage of time would reasonably be expected to result in an Acquiror
Material Adverse Change, (ii) except for regular quarterly dividends not in
excess of $.595 per share of Acquiror Common Stock any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to any of Acquiror's capital stock, other than any
dividend required to be paid pursuant to SECTION 2.2.4, (iii) any split,
combination or reclassification of any of Acquiror's capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, or giving the right to
acquire by exchange or exercise, shares of its capital stock or any
issuance of an ownership interest in any Acquiror Subsidiary except as
permitted by SECTION 4.2 after the date hereof (iv) any damage, destruction
or loss, whether or not covered by insurance, that has or would have or is
reasonably likely to have an Acquiror Material Adverse Effect or (v) any
change in accounting methods, principles or practices by Acquiror or any
Acquiror Subsidiary, except insofar as required by a change in GAAP.
3.2.7 LITIGATION. Except as disclosed in the Acquiror SEC Documents
filed with the SEC prior to the date hereof or in SCHEDULE 3.2.7 to the
Acquiror Disclosure Letter, there is no suit, action or proceeding pending,
threatened in writing or to the Knowledge of Acquiror otherwise threatened
against or affecting Acquiror or any Acquiror Subsidiary or any of their
respective properties or assets that, individually or in the aggregate,
could reasonably be expected to (A) have an Acquiror Material Adverse
Effect or (B) prevent the consummation of any of the Transactions, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Acquiror or any
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Acquiror Subsidiary or any of their respective properties or assets having,
or which, insofar as reasonably can be foreseen, in the future would have
any such effect.
3.2.8 PROPERTIES.
(i) Acquiror or one of the Acquiror Subsidiaries owns fee simple
title (or where indicated leasehold estates) to each of the real
properties identified in the Acquiror SEC Documents (the "Acquiror
Properties"), in each case (except as provided below) free and clear of
Encumbrances, except for (A) Encumbrances and Property Restrictions set
forth in the Acquiror SEC Documents, (B) Property Restrictions imposed
or promulgated by law or any governmental body or authority with respect
to real property, including zoning regulations, (C) Encumbrances and
Property Restrictions disclosed on existing title reports or existing
surveys (in either case copies of which title reports and surveys have
been delivered or made available to the Company), and (D) mechanics',
carriers', workmens', repairmens' and materialmens' liens and other
Encumbrances, Property Restrictions and other limitations of any kind,
if any, which, individually or in the aggregate, do not otherwise have
an Acquiror Material Adverse Effect (such matters described in clauses
(A) through (D) being hereinafter collectively referred to as the
"Permitted Acquiror Liens"). Except as provided in SCHEDULE 3.2.8 to the
Acquiror Disclosure Letter, policies of title insurance have been
obtained insuring Acquiror's or the applicable Acquiror Subsidiaries'
fee simple title or leasehold estate to the Acquiror Properties in
amounts at least equal to the value of such Acquiror Properties at the
time of issuance of such policy, subject only to the Permitted Acquiror
Liens, and, to the Knowledge of Acquiror, such policies are, at the date
hereof, in full force and effect and no material claim has been made
against any such policy. Acquiror has not received written notice of any
violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any of the Acquiror
Properties issued by any Governmental Entity, which remains uncured and
which if not cured would be expected to have an Acquiror Material
Adverse Effect. Neither Acquiror nor any of the Acquiror Subsidiaries
has received any notice to the effect that (A) any condemnation or
rezoning proceedings are pending or threatened with respect to any of
the Acquiror Properties or (B) any zoning, building or similar law,
code, ordinance, order or regulation is or will be violated by the
continued maintenance, operation or use of any buildings or other
improvements on any of the Acquiror Properties or by the continued
maintenance, operation or use of the parking areas, in either case which
remains uncured and which if not cured would be expected to have an
Acquiror Material Adverse Effect.
(ii) Acquiror has made available to the Company for review all
executory agreements entered into by Acquiror or any Acquiror Subsidiary
relating to the development or construction of residential or other real
estate properties other than the Acquiror Properties (other than
agreements for architectural, engineering, planning, accounting, legal
or other professional services or construction agreements for material
or labor) and which would be expected to have, individually or in the
aggregate, an Acquiror Material Adverse Effect.
3.2.9 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 3.2.9 to
the Acquiror Disclosure Letter or except as to matters previously
remediated in accordance with applicable Law, none of Acquiror, or any
Acquiror Subsidiary or, to Acquiror's Knowledge any other Person has caused
or permitted (a) the presence of any Hazardous Materials at, in, on or
under any of the Acquiror Properties in any amount, form, or location that
would be unlawful, require investigation, notification of Governmental
Entities, or remedial action, or otherwise result in potential material
liabilities under any applicable local, state, or federal environmental
Laws, or (b) any spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the
Acquiror Properties or at any other location as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have or is reasonably
likely to have an Acquiror Material Adverse Effect; and in connection with
the construction on or operation and use of the Acquiror Properties,
Acquiror and the Acquiror Subsidiaries have not failed to comply in any
material respect with all applicable local, state and federal environmental
Laws, regulations, ordinances and
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administrative and judicial orders relating to the generation, use,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
3.2.10 ABSENCE OF CHANGES IN BENEFIT PLANS; ERISA COMPLIANCE.
(i) Except as disclosed in the Acquiror SEC Documents filed with
the SEC prior to the date hereof or in SCHEDULE 3.2.10(I) to the
Acquiror Disclosure Letter and except as permitted by Section 4.2 (for
the purpose of this sentence, as if SECTION 4.2 had been in effect since
December 31, 1996), since the date of the most recent audited financial
statements included in the Acquiror SEC Documents filed with the SEC
prior to the date hereof, there has not been any adoption or amendment
by Acquiror or any Acquiror Subsidiary, or any Person affiliated with
Acquiror under Section 414 (b), (c), (m) or (o) of the Code (each, an
"ERISA Affiliate of the Acquiror") of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other
employee benefit plan, arrangement or understanding (whether or not
legally binding or oral or in writing) providing benefits to any current
or former employee, officer or director of Acquiror, any Acquiror
Subsidiary, or any ERISA Affiliate of the Acquiror (collectively,
"Acquiror Benefit Plans"). No Acquiror Benefit Plan is subject to Title
IV of ERISA or to Section 412 of the Code or Section 302 of ERISA.
True and correct copies of each of the following have been made
available to the Company: (i) the most recent annual report (Form 5500),
if any, relating to each Acquiror Benefit Plan filed with the IRS, (ii)
each Acquiror Benefit Plan, (iii) the trust agreement, if any, relating
to each Acquiror Benefit Plan, (iv) the most recent summary plan
description for each Acquiror Benefit Plan for which a summary plan
description is required by ERISA and (v) the most recent determination
letter, if any, issued by the IRS with respect to any Acquiror Benefit
Plan qualified under Section 401 of the Code.
As to any Acquiror Benefit Plan intended to be qualified under
Section 401 of the Code, such Acquiror Benefit Plan satisfies in form
the requirements of such Section and there has been no termination or
partial termination of such Acquiror Benefit Plan within the meaning of
Section 411(d)(3) of the Code.
As to any such terminated Acquiror Benefit Plan intended to have
been qualified under Section 401 of the Code, such terminated Acquiror
Benefit Plan received a favorable determination letter from the IRS with
respect to its termination.
There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the Knowledge of Acquiror, threatened
against, or with respect to, any of the Acquiror Benefit Plans or their
assets that could reasonably be expected to have a Material Adverse
Effect.
To the Knowledge of Acquiror, there is no matter pending before the
IRS, the United States Department of Labor or the PBGC with respect to
any of the Acquiror Benefit Plans.
All contributions required to be made to such Acquiror Benefit
Plans pursuant to their terms and provisions have been timely made.
Except as set forth in SCHEDULE 3.2.10(I) to the Acquiror
Disclosure Letter, neither Acquiror nor any Acquiror Subsidiary is a
party to or is bound by any severance agreement, program or policy. True
and correct copies of all employment agreements with officers of
Acquiror and the Acquiror Subsidiaries, and all vacation, overtime and
other compensation policies of Acquiror and the Acquiror Subsidiaries
relating to their employees have been made available to the Company.
(ii) Except as described in the Acquiror SEC Documents or in
SCHEDULE 3.2.10(II) to the Acquiror Disclosure Letter or as would not
have an Acquiror Material Adverse Effect, (A) all Acquiror Benefit
Plans, including any such plan that is an "employee benefit plan" as
defined in Section 3(3) of ERISA, are in compliance with all applicable
requirements of law, including ERISA and the Code, and (B) other than
claims for benefits in the normal course of business,
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neither Acquiror, any Acquiror Subsidiary nor any ERISA Affiliate of the
Acquiror has any liabilities or obligations with respect to any Acquiror
Benefit Plans, whether accrued, contingent or otherwise, nor to the
Knowledge of Acquiror are any such liabilities or obligations expected
to be incurred. Except as set forth in SCHEDULE 3.2.10(II) to the
Acquiror Disclosure Letter, the execution of, and performance of the
Transactions will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Acquiror
Benefit Plan, policy, arrangement or agreement or any trust or loan that
will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee or director of Acquiror, any Acquiror
Subsidiary, or any ERISA Affiliate of the Acquiror.
3.2.11 TAXES.
(i) Each of Acquiror and each Acquiror Subsidiary has (A) filed all
Tax returns and reports required to be filed by it (after giving effect
to any filing extension properly granted by a Governmental Entity having
authority to do so) and all such returns and reports are accurate and
complete in all material respects; and (B) paid (or Acquiror has paid on
its behalf) all Taxes shown on such returns and reports as required to
be paid by it, and the most recent financial statements contained in the
Acquiror SEC Documents reflect an adequate reserve for all material
Taxes payable by Acquiror (and by those Acquiror Subsidiaries whose
financial statements are contained therein) for all taxable periods and
portions thereof through the date of such financial statements. True,
correct and complete copies of all federal, state and local Tax returns
and reports for Acquiror and each Acquiror Subsidiary, and all written
communications relating thereto, have been delivered or made available
to representatives of the Company. Except as set forth on SCHEDULE
3.2.11 to the Acquiror Disclosure Letter, to the Knowledge of Acquiror,
no deficiencies for any Taxes have been proposed, asserted or assessed
against Acquiror or any of the Acquiror Subsidiaries, and no requests
for waivers of the time to assess any such Taxes are pending.
(ii) Acquiror (A) for all taxable years commencing with the taxable
year ended December 31, 1993 through the most recent December 31, has
been organized in conformity with the qualifications as a REIT (within
the meaning of the Code) under the Code and has been subject to taxation
as a REIT and has satisfied all requirements to qualify as a REIT for
such years, (B) has operated, and intends to continue to operate, in
such a manner as to qualify as a REIT for the tax year ending December
31, 1997, and (C) has not taken or omitted to take any action which
would reasonably be expected to result in a challenge to its status as a
REIT, and to Acquiror's Knowledge, no such challenge is pending or
threatened. Each Acquiror Subsidiary which is a partnership, joint
venture or limited liability company has been treated during and since
its formation and continues to be treated for federal income tax
purposes as a partnership and not as a corporation or as an association
taxable as a corporation. Each Acquiror Subsidiary which is a
corporation for federal income tax purposes and with respect to which
all of the outstanding capital stock is owned solely by Acquiror (or
solely by an Acquiror Subsidiary that is a corporation wholly owned by
Acquiror) is a "qualified REIT subsidiary" as defined in Section 856(i)
of the Code. Neither Acquiror nor any Acquiror Subsidiary holds any
asset (x) the disposition of which would be subject to rules similar to
Section 1374 of the Code as a result of an election under IRS Notice
88-19 or (y) that is subject to a consent filed pursuant to Section
341(f) of the Code and the regulations thereunder.
3.2.12 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Except as
set forth in SCHEDULE 3.2.12 to the Acquiror Disclosure Letter, there is no
employment or severance contract, or other agreement requiring payments to
be made or increasing any amounts payable thereunder on a change of control
or otherwise as a result of the consummation of any of the Transactions,
with respect to any employee, officer, trust manager or director of
Acquiror or any Acquiror Subsidiary.
3.2.13 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other Person, other than Merrill, Lynch & Co.
("Acquiror Financial Advisor"), the fees and expenses of which have
previously been disclosed to the Company and will be paid by Acquiror, is
entitled to any
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broker's, finder's, financial advisor's or other similar fee or commission
in connection with the Transactions based upon arrangements made by or on
behalf of Acquiror or any Acquiror Subsidiary.
3.2.14 COMPLIANCE WITH LAWS. Except as disclosed in the Acquiror SEC
Documents filed with the SEC prior to the date hereof, neither Acquiror nor
any Acquiror Subsidiary has violated or failed to comply with any statute,
law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except for violations and failures to comply that would not, individually
or in the aggregate, reasonably be expected to result in an Acquiror
Material Adverse Effect.
3.2.15 CONTRACTS; DEBT INSTRUMENTS. To the Knowledge of Acquiror,
neither Acquiror nor any Acquiror Subsidiary is in violation of or in
default under (nor does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other
material contract, agreement, arrangement or understanding, to which it is
a party or by which it or any of its properties or assets is bound, except
as set forth in SCHEDULE 3.2.15 to the Acquiror Disclosure Letter and
except for violations or defaults that would not, individually or in the
aggregate, result in an Acquiror Material Adverse Effect.
3.2.16 STATE TAKEOVER STATUTES. Acquiror has taken all action
necessary, if any, to exempt transactions between the Company and its
Affiliates and Acquiror from the operation of any Takeover Statute.
3.2.17 REGISTRATION STATEMENT; PROXY STATEMENT. The Registration
Statement will conform in all material respects to the requirements of the
Securities Act and the rules and regulations of the SEC thereunder and
shall not at any time the Registration Statement (including any amendments
and supplements thereto) is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by Acquiror for inclusion
or incorporation by reference in the Proxy Statement will not, on the date
of the Proxy Statement is first mailed to the shareholders, at the time of
the Shareholders Meetings, or at the Effective Time, contain any untrue
statement of any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not false or misleading. If at
any time prior to the Effective Time any event relating to the Acquiror or
any of its respective Affiliates, officers or directors should be
discovered by the Acquiror which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, the Acquiror
shall promptly inform the Company. Notwithstanding the foregoing, Acquiror
makes no representation or warranty with respect to any information
supplied by the Company which is contained or incorporated by reference in
any of the foregoing documents.
3.2.18 HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976. For
purposes of determining compliance with the HSR, the Acquiror confirms that
the conduct of its business consists solely of investing in, owning and
operating real estate for the benefit of its shareholders.
3.2.19 VOTE REQUIRED. The affirmative vote of a majority of the
shares of Acquiror Common Stock present in Person or by proxy at the
Acquiror Shareholders Meeting is the only vote of the holders of any class
or series of Acquiror's capital stock necessary (under applicable law or
otherwise) to approve this Agreement and the Transactions.
3.2.20 OPINION OF FINANCIAL ADVISOR. The Directors of Acquiror have
received the opinion of Acquiror Financial Advisor, satisfactory to
Acquiror, a copy of which has been provided to the Company, to the effect
that, as of the date of such opinion, the Exchange Ratio is fair to
Acquiror from a financial point of view.
3.2.21 INVESTMENT COMPANY ACT OF 1940. Neither Acquiror nor any
Acquiror Subsidiary is, or at the Effective Time will be, required to be
registered under the 1940 Act.
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3.2.22 INSURANCE. Acquiror maintains fire and casualty and general
liability policies with reputable insurance carriers, which Acquiror
reasonably believes provide full and adequate coverage for all normal risks
incident to the business of Acquiror and Acquiror Subsidiaries and their
respective properties and assets.
3.2.23 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed
solely for the purpose of engaging in the Transactions and has not engaged
in any business activities or conducted any operations other than in
connection with the Transactions.
ARTICLE IV
COVENANTS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from
the date of this Agreement to the Effective Time, the Company shall, and shall
cause the Company Subsidiaries each to, carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use commercially reasonable efforts to preserve intact its current
business organization, goodwill and ongoing businesses, to keep available the
services of the present officers, employees and consultants of the Company and
the Company Subsidiaries and to preserve the present relationships of the
Company and the Company Subsidiaries with tenants, landlords, customers,
suppliers and other persons with which the Company or any of the Company
Subsidiaries has significant business relationships. Without limiting the
generality of the foregoing, the following additional restrictions shall apply:
during the period from the date of this Agreement to the earlier of the (i)
termination of this Agreement or (ii) Effective Time, except as set forth in
SCHEDULE 4.1 to the Company Disclosure Letter, the Company shall not and shall
cause the Company Subsidiaries not to (and not to authorize or commit or agree
to) without the prior written consent of Acquiror (which such consent shall not
be unreasonably delayed):
4.1.1 (i) except for its regular quarterly dividends not in excess of
$.395 per share of Common Shares per quarter, with customary record and
payment dates, declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property or any combination
thereof) in respect of any of the Company's shares of beneficial interest
or other than the dividend required to be paid pursuant to SECTION
2.2.4(I), (ii) split, combine or reclassify any shares of beneficial
interest or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of such shares of
beneficial interest or (iii) except in connection with the use of Common
Shares to pay the exercise price or tax withholding in connection with the
Company's Employee Stock Plans or as otherwise contemplated by or required
by this Agreement, purchase, redeem or otherwise acquire any shares of
beneficial interests of the Company or any options, warrants or rights to
acquire, or security convertible into, shares of such beneficial interests;
4.1.2 except as contemplated under or required pursuant to SECTIONS
4.1.5 and 5.13.2, the Company's Amended and Restated Dividend Reinvestment
Share Purchase Plan and Employee Share Purchase Plan and the exercise of
share options or issuance of shares pursuant to stock rights, restricted
share or performance share awards or warrants outstanding on the date of
this Agreement, issue, deliver or sell, or grant any option or other right
in respect of, any shares of beneficial interest, any other voting
securities of the Company or any Company Subsidiary or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities; provided, however,
that with respect to such Dividend Reinvestment Share Purchase Plan, such
shares may only be issued, with respect to any dividend payment date after
the date of this Agreement, in an amount equal to the dividend payments and
not with respect to any optional cash payments;
4.1.3 amend the charter, articles or certificate of incorporation,
declaration of trust, bylaws, partnership agreement or other comparable
charter or organizational documents of the Company or any Company
Subsidiary or enter into, assume or amend any material contract, agreement
or commitment, except in the ordinary course of business and consistent
with past practice;
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4.1.4 in the case of the Company or any other Company Subsidiary,
merge or consolidate with any Person;
4.1.5 in any transaction or series of related transactions involving
capital, securities or other assets (including cash) or indebtedness of the
Company, a Company Subsidiary, or any combination thereof in excess of
$100,000 individually or $500,000 in the aggregate: (i) acquire or agree to
acquire by merging or consolidating with, or by purchasing all or a
substantial portion of the equity securities or all or substantially all of
the assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association, real
estate investment trust, business trust or other business organization or
division thereof or interest therein; (ii) sell, lease or otherwise dispose
of any of the Company Properties or any assets (other than sales of the
Company's or any Company Subsidiary's "for sale" housing units and
condominiums sold or developed for sale in the ordinary course of business)
or, except for any Development Properties or Future Development Properties,
assign or encumber the right to receive income, dividends, distributions
and the like, or otherwise subject any of the Company's properties or
assets to any Encumbrance or Lien; (iii) make or agree to make any
development or capital expenditures, except (A) in accordance with capital
expenditure budgets previously delivered to and approved in writing by
Acquiror or in accordance with construction and development budgets
pertaining to the Development Properties (the "Development Budgets"), that
have been previously delivered to and approved in writing by Acquiror,
provided that within any Development Budget for a Development Property, the
Company may allocate and reallocate the development and capital
expenditures as it determines, or (B) in connection with pre-development,
investigation and due diligence activities related to the Future
Development Properties, which amounts shall not exceed $100,000 with
respect to any Future Development Properties or $500,000 in the aggregate
for all Future Development Properties; or (C) in connection with
acquisition, development, pre-development, investigation and due diligence
activities related to the Future Development Properties, which are
disclosed in SCHEDULE 4.1 to the Company Disclosure Letter or (iv) incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another Person (except as contemplated by subparagraph (iii) above), issue
or sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or any Company Subsidiary, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another Person or enter
into any arrangement having the economic effect of any of the foregoing,
prepay or refinance any indebtedness or make any loans, advances or capital
contributions to, or investments in, any other Person;
4.1.6 INTENTIONALLY OMITTED
4.1.7 make any tax election (unless required by law or necessary to
preserve the Company's status as a REIT or of any Company Subsidiary as a
partnership for federal income tax purposes);
4.1.8 (i) change in any manner any of its methods, principles or
practices of accounting in effect at the Financial Statement Date, or (ii)
make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, except in the case
of settlements or compromises relating to taxes on real property or sales
taxes in an amount not to exceed, individually or in the aggregate,
$100,000, or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of
its federal income tax return for the most recently completed taxable year
except, in the case of clause (i), as may be required by the SEC,
applicable law or GAAP;
4.1.9 except as specifically agreed to by Acquiror in connection with
the execution of this Agreement, increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees of the Company or the Company Subsidiaries who are
not officers of the Company in the ordinary course of business in
accordance with past practice; grant any severance or termination pay to,
or enter into any employment or severance agreement with any director,
trust manager, officer or other employee of the Company or any of the
Company Subsidiaries, or amend or modify in any respect any existing
employment or severance agreement; adopt any new employee
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benefit plan, incentive plan, severance plan, stock option or similar plan,
grant new stock appreciation rights or amend any existing plan or rights,
except such changes as are required by law;
4.1.10 pay, discharge, settle or satisfy any claims, liabilities or
objections (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Company SEC Documents filed
prior to the date of this Agreement or incurred in the ordinary course of
business consistent with past practice; settle any shareholder derivative
or class action claims arising out of or in connection with any of the
Transactions; and
4.1.11 enter into or amend or otherwise modify any agreement or
arrangement with Persons that are Affiliates or, as of the date hereof, are
executive officers, trust managers or directors of the Company or any
Company Subsidiary.
SECTION 4.2 CONDUCT OF BUSINESS BY ACQUIROR. During the period from the
date of this Agreement to the Effective Time, Acquiror shall, and shall cause
(or, in the case of Acquiror Subsidiaries that Acquiror does not control, shall
use commercially reasonable efforts to cause) the Acquiror Subsidiaries each to
carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use commercially
reasonable efforts to preserve intact its current business organization,
goodwill and ongoing businesses, to keep available the services of the present
officers, employees and consultants of Acquiror and the Acquiror Subsidiaries
and to preserve the present relationships of Acquiror and the Acquiror
Subsidiaries with tenants, landlords, customers, suppliers and other persons
with which Acquiror or any of the Acquiror Subsidiaries has significant business
relationships. Without limiting the generality of the foregoing, the following
additional restrictions shall apply: during the period from the date of this
Agreement to the Effective Time, except as set forth in SCHEDULE 4.2 to the
Acquiror Disclosure Letter, Acquiror shall not and shall cause (or, in the case
of Acquiror Subsidiaries which Acquiror does not control, shall use commercially
reasonable efforts to cause) the Acquiror Subsidiaries not to (and not to
authorize or commit or agree to) without the prior written consent of the
Company (which such consent shall not be unreasonably delayed):
4.2.1 (i) except for regular quarterly dividends not in excess of
$.595 per share of Acquiror Common Stock, with customary record and payment
dates, declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property or any combination
thereof) in respect of, any of Acquiror capital stock or partnership
interests or stock in any Acquiror Subsidiary that is not directly or
indirectly wholly owned by Acquiror, other than the dividend required to be
paid pursuant to SECTION 2.2.4(I), (ii) except in connection with the
Transactions, split, combine or reclassify any capital stock or partnership
interests or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of such capital stock
or partnership interests or (iii) except in connection with the use of
Acquiror Common Stock to pay the exercise price or tax withholding in
connection with the Acquiror's Employee Stock Plans purchase, redeem or
otherwise acquire any shares of capital stock of Acquiror or any options,
warrants or rights to acquire, or security convertible into, shares of
capital stock of Acquiror;
4.2.2 except as contemplated under or required pursuant to this
Agreement (including without limitation SECTION 4.2.5), Acquiror's dividend
reinvestment and stock purchase plan, Acquiror's employee stock purchase
plan and Acquiror Employee Stock Plans, and the exercise of stock options
or warrants outstanding on the date hereof, issue, deliver or sell, or
grant any option or other right in respect of, any shares of capital stock,
any other voting securities of Acquiror or any Acquiror Subsidiary or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities except to
Acquiror or an Acquiror Subsidiary;
4.2.3 except as otherwise contemplated by this Agreement, amend the
charter, articles or certificate of incorporation, bylaws, code of
regulations, partnership agreement or other comparable charter or
organizational documents of Acquiror or any Acquiror Subsidiary;
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4.2.4 in the case of Acquiror or the Operating Partnership merge or
consolidate with any Person;
4.2.5 in any transaction or series of related transactions involving
capital, securities, other assets (including cash) or indebtedness of
Acquiror or an Acquiror Subsidiary or any combination thereof acquire or
agree to acquire by merging or consolidating with, or by purchasing all or
a substantial portion of the equity securities or all or substantially all
assets of, or by any other manner, any business or any corporation,
partnership, limited liability company, joint venture, association, real
estate investment trust, business trust or other business organization or
division thereof or interest therein if such acquisition would result in
such acquired entity being a "Significant Subsidiary" within the meaning of
Rule 1-02(w) of Regulation S-X, substituting 20% for 10% in the tests used
therein to determine a Significant Subsidiary (or, in connection with an
asset acquisition, would have resulted in the entity acquiring such assets
being a "Significant Subsidiary" (substituting 20% for 10% in the tests
used therein to determine a Significant Subsidiary) if such acquisition
would have been made by a newly created subsidiary with no other assets);
4.2.6 make or rescind any tax election (unless required by law or
necessary to preserve Acquiror's status as a REIT or the status of any
Acquiror Subsidiary as a partnership for federal income tax purposes);
4.2.7 change in any material manner any of its methods, principles or
practices of accounting in effect at the Acquiror Financial Statement Date,
except as may be required by the SEC, applicable law or GAAP;
SECTION 4.3 OTHER ACTIONS. Each of Company, on the one hand, and Acquiror
and Merger Sub, on the other hand, shall not and shall use commercially
reasonable efforts to cause its respective subsidiaries and joint ventures not
to take any action that would result in (i) any of the representations and
warranties of such party (without giving effect to any "Knowledge"
qualification) set forth in this Agreement becoming untrue, or (ii) except as
contemplated by SECTIONS 7.1 and 7.2, any of the conditions to the Merger set
forth in ARTICLE VI not being satisfied.
ARTICLE V
ADDITIONAL COVENANTS
SECTION 5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT; COMPANY SHAREHOLDERS MEETING AND ACQUIROR SHAREHOLDERS MEETING.
5.1.1 As soon as practicable following the date of this Agreement,
the Company and Acquiror shall prepare and file with the SEC a preliminary
Proxy Statement in form and substance satisfactory to each of Acquiror and
the Company, and Acquiror shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of the Company and Acquiror shall use commercially
reasonable efforts to (i) respond to any comments of the SEC and (ii) have
the Registration Statement declared effective under the Securities Act and
the rules and regulations promulgated thereunder as promptly as practicable
after such filing and to keep the Registration Statement effective as long
as is reasonably necessary to consummate the Merger. Each of the Company
and Acquiror will use commercially reasonable efforts to cause the Proxy
Statement to be mailed to the Company's shareholders or Acquiror's
shareholders, respectively, as promptly as practicable after the
Registration Statement is declared effective under the Securities Act. It
shall be a condition precedent to the Company's obligation to mail the
Proxy Statement that the opinion of Prudential referred to in SECTION
3.1.21 not have been withdrawn. It shall be a condition precedent to
Acquiror's obligation to mail the Proxy Statement that the opinion of
Acquiror Financial Advisor referred to in SECTION 3.2.20 not have been
withdrawn. Each party will notify the other promptly of the receipt of any
comments from the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement or the Proxy Statement or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the
SEC, with respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy
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Statement shall comply in all material respects with all applicable
requirements of law. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Registration Statement or the
Proxy Statement, Acquiror or the Company, as the case may be, shall
promptly inform the other of such occurrences and cooperate in filing with
the SEC and/or mailing to the shareholders of Acquiror and the shareholders
of the Company such amendment or supplement. The Proxy Statement shall
include the recommendations of the Board of Directors of Acquiror in favor
of the issuance of Acquiror Common Stock and of the Board of Trust Managers
of the Company in favor of the Merger, provided that (i) the recommendation
of the Board of Trust Managers of the Company may not be included or may be
withdrawn if the Board of Trust Managers of the Company has accepted a
proposal for a Superior Competing Transaction in accordance with the terms
of SECTION 7.1; and (ii) the recommendation of the Board of Directors of
Acquiror may not be included or may be withdrawn if the Board of Directors
of the Acquiror has accepted a proposal for an Alternative Transaction in
accordance with the terms of SECTION 7.2. Acquiror also shall take any
action required to be taken under any applicable state securities or "blue
sky" laws in connection with the issuance of Acquiror Stock pursuant to the
Merger and will pay or cause an Acquiror Subsidiary to pay all expenses
incident thereto. In connection with the preparation of the Proxy Statement
and the Registration Statement, Acquiror shall use reasonable efforts to
cause to be delivered to the Company prior to the mailing of the Proxy
Statement to Acquiror's shareholders and the Company's shareholders, the
opinion of King & Spalding, dated the date of the Proxy Statement, that (i)
for its taxable year ended December 31, 1993 and for all subsequent taxable
years ending on or before the Closing Date, Acquiror was organized and has
operated in conformity with the requirements for qualification as a REIT
under the Code and (ii) each Acquiror Subsidiary that is a partnership,
joint venture or limited liability company has been during and since
formation, and continues to be, treated as of such date, for federal income
tax purposes, as a partnership and not as a corporation or an association
taxable as a corporation. In connection with the preparation of the Proxy
Statement and the Registration Statement, the Company shall use reasonable
efforts to cause to be delivered to Acquiror and Merger Sub prior to the
mailing of the Proxy Statement to the Company's shareholders and Acquiror's
shareholders, the opinion of Winstead Sechrest & Minick P.C., dated the
date of the Proxy Statement, that (i) for its taxable year ended December
31, 1993 and for all subsequent taxable years ending on or before the
Closing Date, the Company was organized and has operated in conformity with
the requirements for qualification as a REIT under the Code and (ii) each
Company Subsidiary that is a partnership, joint venture or limited
liability company has been during and since formation, and continues to be,
treated as of such date, for federal income tax purposes, as a partnership
and not as a corporation or an association taxable as a corporation.
5.1.2 The Company will, as soon as practicable following the date of
this Agreement (but in no event sooner than 20 business days following the
date the Proxy Statement is mailed to the shareholders of the Company),
convene and hold a meeting of its shareholders (the "Company Shareholders
Meeting") for the purpose of obtaining the Company Shareholder Approvals.
The Company will, through its Board of Trust Managers, recommend to its
shareholders approval of this Agreement and the Transactions and use all
reasonable efforts to solicit from its shareholders proxies in favor of
approval of this Agreement and the Transactions and take all other action
necessary or advisable to secure the vote of shareholders to obtain such
approvals; provided that the recommendation of the Board of Trust Managers
of the Company may be withdrawn if the Board of Trust Managers of the
Company has accepted a proposal for a Superior Competing Transaction in
accordance with the terms of SECTION 7.1.4.
5.1.3 Acquiror will, as soon as practicable following the date of
this Agreement (but in no event sooner than 20 business days following the
date the Proxy Statement is mailed to the shareholders of Acquiror),
convene and hold a meeting of its shareholders (the "Acquiror Shareholders
Meeting") for the purpose of obtaining the Acquiror Shareholder Approvals.
Acquiror will, through its Board of Directors, recommend to its
shareholders approval of this Agreement and the Transactions and use all
reasonable efforts to solicit from its shareholders proxies in favor of the
Acquiror Shareholder Approvals and take all other action necessary or
advisable to secure the vote of shareholders to obtain such approvals;
provided that the recommendation of the Board of Directors of Acquiror may
be withdrawn if
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the Board of Directors of Acquiror has accepted a proposal for an
Alternative Transaction in accordance with the terms of SECTION 7.2.4.
SECTION 5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. Each of the Company
and Acquiror shall, and shall cause each of its respective subsidiaries
(including all Company Subsidiaries and all Acquiror Subsidiaries) and joint
ventures to, afford to the other party and to the officers, employees,
accountants, counsel, financial advisors and other representatives of such other
party, reasonable access during normal business hours during the period prior to
the Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of the Company
and Acquiror shall, and shall cause each of its respective subsidiaries
(including all Company Subsidiaries and all Acquiror Subsidiaries) to, furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each of the Company and Acquiror will hold, and will use
commercially reasonable efforts to cause its and its respective subsidiaries
(including all Company Subsidiaries and all Acquiror Subsidiaries) and joint
ventures' officers, employees, accountants, counsel, financial advisors and
other representatives and Affiliates to hold, any nonpublic information in
confidence to the extent required by, and in accordance with, and will comply
with the provisions of the letter agreement dated as of June 4, 1997 between the
Company and Acquiror (the "Confidentiality Agreement").
SECTION 5.3 COMMERCIALLY REASONABLE EFFORTS; NOTIFICATION.
5.3.1 Subject to the terms and conditions herein provided, the
Company and Acquiror shall: (a) use commercially reasonable efforts to
cooperate with one another in (i) determining which filings are required to
be made prior to the Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions and any third parties
in connection with the execution and delivery of this Agreement, and the
consummation of the Transactions and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits and
authorizations, (b) use commercially reasonable efforts to obtain in
writing any consents required from third parties to effectuate the Merger,
such consents to be in reasonably satisfactory form to the Company and
Acquiror; and (c) use commercially reasonable efforts to take, or cause to
be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
Transactions. If, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors of the Company and Acquiror shall take all
such necessary action. From the date hereof through the Effective Time, the
Company shall timely file with the SEC all Company SEC Documents required
to be so filed. From the date hereof through the Effective Time, the
Acquiror shall timely file with the SEC all Acquiror SEC Documents required
to be so filed.
5.3.2 The Company shall give prompt notice to Acquiror, and Acquiror
or Merger Sub shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming
untrue or inaccurate in any material respect or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.3.3 COORDINATION OF DIVIDENDS. Each of Acquiror and the Company
shall coordinate with the other regarding the declaration and payment of
dividends in respect of the Acquiror Common Stock and the Common Shares and
the record dates and payment dates relating thereto, it being the intention
of Acquiror and the Company that any holder of Common Shares shall not
receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to its shares of Common Shares and/or
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any shares of Acquiror Common Stock any such holder receives in exchange
therefor pursuant to the Merger.
SECTION 5.4 AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Acquiror a letter identifying all Persons who are, at the time this
Agreement is submitted for approval to the shareholders of the Company,
"Affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use commercially reasonable efforts to cause each such Person
to deliver to Acquiror on or prior to the Closing Date a written agreement
substantially in the form attached as EXHIBIT A to this Agreement.
SECTION 5.5 TAX TREATMENT. Each of Acquiror and the Company shall use
commercially reasonable efforts to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code and to obtain
the opinions of counsel referred to in SECTIONS 6.2.4, 6.2.5, 6.3.4 and 6.3.5.
SECTION 5.6 ACQUIROR BOARD OF DIRECTORS. Acquiror shall take all steps
necessary to cause the appointment as of the Effective Time of Robert L. Shaw to
the Board of Directors of Acquiror, or such other person as shall be selected
prior to the Effective Time by the Company Board of Trust Managers and as shall
be acceptable to Acquiror.
SECTION 5.7 NO SOLICITATION OF TRANSACTIONS BY THE COMPANY. (a) Subject
to SECTION 7.1, the Company shall not directly or indirectly, through any
officer, trust manager, employee, agent, investment banker, financial advisor,
attorney, accountant, broker, finder or other representative retained by the
Company, initiate, solicit or encourage (including by way of furnishing
non-public information or assistance) any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any Person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of the officers, trust managers, employees or agents of
the Company or any investment banker, financial advisor, attorney, accountant,
broker, finder or other representative retained by the Company to take any such
action, (b) the Company shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Competing Transaction and will take the steps
necessary to inform such parties of the obligations undertaken in this SECTION
5.7 and (c) the Company shall notify Acquiror in writing (as promptly as
practicable) if it receives any inquiries, proposals or requests for information
relating to such matters. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following with respect to the Company or any
Company Subsidiary (other than the Transactions or a transaction with Acquiror
or an Acquiror Subsidiary): (i) with respect only to the Company or any group of
Company Subsidiaries (acting in a single transaction or series of related
transactions) holding 20% or more of the assets of the Company and the Company
Subsidiaries taken as a whole, any merger, consolidation, share exchange,
business combination, or similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets or
equity securities of the Company and the Company Subsidiaries taken as a whole,
in a single transaction or series of related transactions, excluding any bona
fide financing transactions which do not, individually or in the aggregate, have
as a purpose or effect the sale or transfer of control of such assets; (iii) any
tender offer or exchange offer for 20% or more of the outstanding shares of
beneficial interest of the Company; (iv) any transaction resulting in the
issuance of shares representing 20% or more of the outstanding shares of
beneficial interest of the Company, or the filing of a registration statement
under the Securities Act in connection therewith; or (v) any public
announcements of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
SECTION 5.8 NO SOLICITATION OF TRANSACTIONS BY ACQUIROR. (a) Subject to
SECTION 7.2, Acquiror shall not directly or indirectly, through any officer,
director, employee, agent, investment banker, financial advisor, attorney,
accountant, broker, finder or other representative retained by Acquiror,
initiate, solicit or encourage (including by way of furnishing non-public
information or assistance) any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Alternative
Transaction, or enter into or maintain or continue discussions or negotiate with
any Person in furtherance of such inquiries or to obtain an Alternative
Transaction, or agree to or endorse any Alternative Transaction, or authorize or
permit any of the officers, directors, employees or agents of Acquiror or any
investment banker, financial
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advisor, attorney, accountant, broker, finder or other representative retained
by Acquiror to take any such action, (b) Acquiror shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Alternative Transaction and
will take the steps necessary to inform such parties of the obligations
undertaken in this SECTION 5.8 and (c) Acquiror shall notify the Company in
writing (as promptly as practicable) if it receives any inquiries, proposals or
requests for information relating to such matters. For purposes of this
Agreement, "Alternative Transaction" shall mean any of the following with
respect to Acquiror or any Acquiror Subsidiary (other than the Transactions or a
transaction with the Company or a Company Subsidiary): (i) with respect only to
Acquiror or any group of Acquiror Subsidiaries (acting in a single transaction
or series of related transactions) holding 20% or more of the assets of Acquiror
and the Acquiror Subsidiaries taken as a whole, any merger, consolidation, share
exchange, business combination, or similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets or equity securities of Acquiror and the Acquiror Subsidiaries taken as a
whole, in a single transaction or series of related transactions, excluding any
bona fide financing transactions which do not, individually or in the aggregate,
have as a purpose or effect the sale or transfer of control of such assets;
(iii) any tender offer or exchange offer for 20% or more of the outstanding
shares of capital stock of Acquiror; (iv) any transaction resulting in the
issuance of shares representing 20% or more of the outstanding shares of capital
stock of Acquiror, or the filing of a registration statement under the
Securities Act in connection therewith; or (v) any public announcements of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
SECTION 5.9 PUBLIC ANNOUNCEMENTS. Acquiror and Merger Sub, on the one
hand, and the Company, on the other hand, will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Transactions,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties agree that the
initial press release to be issued with respect to the Transactions will be in
the form agreed to by the parties hereto prior to the execution of this
Agreement.
SECTION 5.10 LISTING. Acquiror will promptly prepare and submit to the
NYSE a supplemental listing application covering Acquiror Common Stock issuable
in the Merger. Prior to the Effective Time, Acquiror shall use commercially
reasonable efforts to have the NYSE approve for listing, upon official notice of
issuance, the Acquiror Common Stock to be issued in the Merger.
SECTION 5.11 LETTERS OF ACCOUNTANTS.
5.11.1 The Company shall use commercially reasonable efforts to cause
to be delivered to Acquiror "comfort" letters of Ernst & Young L.L.P., the
Company's independent public accountants, dated and delivered on the date
on which the Registration Statement shall become effective and as of the
Effective Time, and addressed to Acquiror, in form and substance reasonably
satisfactory to Acquiror and reasonably customary in scope and substance
for letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
5.11.2 Acquiror shall use commercially reasonable efforts to cause to
be delivered to the Company "comfort" letters of Price Waterhouse LLP,
Acquiror's independent public accountants, dated and delivered on the date
on which the Registration Statement shall become effective and as of the
Effective Time, and addressed to the Company, in form and substance
reasonably satisfactory to the Company and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 5.12 TRANSFER AND GAINS TAXES. Acquiror and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the Transactions (together with
any related interests, penalties or additions to tax, "Transfer and Gains
Taxes"). From and after the Effective Time, Acquiror shall cause the Surviving
Company to pay, without deduction or
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withholding from any amounts payable to the holders of the Common Shares, all
Transfer and Gains Taxes (other than any such taxes that are solely the
liability of the holders of the Common Shares under applicable state law).
SECTION 5.13 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS.
5.13.1 BENEFIT PLANS. After the Effective Time, Acquiror shall
provide benefits to employees of the Company and the Company Subsidiaries
that are not less favorable to such employees than those provided to
similarly situated employees of Acquiror and the Acquiror Subsidiaries.
With respect to any Acquiror Benefit Plan which is an "employee benefit
plan" as defined in Section 3(3) of ERISA, solely for purposes of
satisfying the service requirements, if any, to participate in such plans
and to vest in benefits payable under such plans (but not for purposes of
computing the amount of the benefits, or the existence of a benefit, under
such plans), service with the Company or any Company Subsidiary shall be
treated as service with Acquiror or the Acquiror Subsidiaries (as
applicable); provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of
benefits (or is not otherwise recognized for such purposes under the
Acquiror Benefit Plans).
5.13.2 STOCK INCENTIVE PLAN. Prior to or as of the Effective Time
(a) in accordance with the terms of the restricted stock awards, 161,300
Common Shares held by certain senior executive officers and independent
Trust Managers shall become fully vested and no longer subject to
forfeiture and (b) in accordance with the terms of the performance based
stock and dividend equivalent awards, 260,000 Common Shares shall be issued
to certain senior executive officers. Prior to or as of the Effective Time
and solely with respect to individuals employed by the Company or a Company
Subsidiary immediately prior to that date, the 1,940,000 shares of Common
Shares subject to Stock Options granted under the Company's Share Option
Plan, Long-Term Management Incentive Plan and Long-Term Employee Incentive
Plan (collectively, the "Stock Incentive Plans") shall be converted and
exchanged, without any action on the part of the holder thereof, into (i)
an option to acquire, upon payment of the exercise price (which shall equal
the exercise price per share for the option immediately prior to the
Merger, divided by the Exchange Ratio multiplied by the number of shares to
which the option relates), the number of shares of Acquiror Common Stock
the option holder would have received pursuant to the Merger if the holder
had exercised his or her option immediately prior thereto, rounded to the
next lowest whole number and (ii) cash in lieu of the portion of any option
that would have related to any fractional shares of Acquiror Common Stock
absent the rounding required by the previous clause; provided, however,
that in respect of any stock option which is an "incentive stock option"
within the meaning of Section 422 of the Code, the conversion hereinabove
provided for shall comply with the requirements of Section 424(a) of the
Code, including the requirement that such converted options shall not give
to the holder thereof any benefits additional to those which such holder
had prior to such conversion under the option as originally granted.
5.13.3 COOPERATION. The Company and Acquiror shall cooperate in good
faith with respect to the effectuation of the covenants described in
SECTION 5.13.2.
SECTION 5.14 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
5.14.1 The Company shall, and from and after the Effective Time,
Acquiror shall (collectively, the "Indemnifying Parties"), indemnify,
defend and hold harmless each Person who is now or has been at any time
prior to the date hereof or who becomes prior to the Effective Time, an
officer, trust manager or director of the Company or any Company Subsidiary
(the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments
or amounts that are paid in settlement of, with the approval of the
Indemnifying Party (which approval shall not be unreasonably withheld or
delayed), or otherwise in connection with any threatened or actual claim,
action, suit, proceeding or investigation based on or arising out of the
fact that such Person is or was an officer, trust manager or director of
the Company or any Company Subsidiary at or prior to the Effective Time,
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including all Indemnified Liabilities based
on, or arising out of, or pertaining to this Agreement or the Transactions,
in each case to the full extent a corporation or Texas real estate
investment trust is
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permitted under the applicable Governing Laws to indemnify its own
directors or officers as the case may be (and Acquiror shall pay expenses
in advance of the final disposition of any such action or proceeding to
each Indemnified Party to the full extent permitted by law subject to the
limitations set forth in the fourth sentence of this SECTION 5.14.1). Any
Indemnified Parties proposing to assert the right to be indemnified under
this SECTION 5.14 shall, promptly after receipt of notice of commencement
of any action against such Indemnified Parties in respect of which a claim
is to be made under this SECTION 5.14 against the Company, and from and
after the Effective Time, Acquiror notify the Indemnifying Parties of the
commencement of such action, enclosing a copy of all papers served. If any
such action is brought against any of the Indemnified Parties and such
Indemnified Parties notify the Indemnifying Parties of its commencement,
the Indemnifying Parties will be entitled to participate in and, to the
extent that they elect by delivering written notice to such Indemnified
Parties promptly after receiving notice of the commencement of the action
from the Indemnified Parties, to assume the defense of the action and after
notice from the Indemnifying Parties to the Indemnified Parties of their
election to assume the defense, the Indemnifying Parties will not be liable
to the Indemnified Parties for any legal or other expenses except as
provided below. If the Indemnifying Parties assume the defense, the
Indemnifying Parties shall have the right to settle such action without the
consent of the Indemnified Parties; provided, however, that the
Indemnifying Parties shall be required to obtain such consent (which
consent shall not be unreasonably withheld) if the settlement includes any
admission or wrongdoing on the part of the Indemnified Parties or any
decree or restriction on the Indemnified Parties or their officers or
directors; provided, further, that no Indemnifying Parties, in the defense
of any such action shall, except with the consent of the Indemnified
Parties (which consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Parties of a release from all liability with respect to
such action. The Indemnified Parties will have the right to employ their
own counsel in any such action, and the fees, expenses and other charges of
such counsel will be at the expense of the Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) the Indemnified Parties have
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to the Indemnifying Parties (iii) a conflict or potential
conflict exists (based on advice of counsel to the Indemnified Parties)
between the Indemnified Parties and the Indemnifying Parties) (in which
case the Indemnifying Parties will not have the right to direct the defense
of such action on behalf of the Indemnified Parties) or (iv) the
Indemnifying Parties have not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of
the commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
Indemnifying Parties. It is understood that the Indemnifying Parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm admitted to practice in such
jurisdiction at any one time from all such Indemnified Parties unless (a)
the employment of more than one counsel has been authorized in writing by
the Indemnifying Parties, (b) any of the Indemnified Parties have
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to other Indemnified Parties or (c) a conflict or potential
conflict exists (based on advice of counsel to the Indemnified Parties)
between any of the Indemnified Parties and the other Indemnified Parties,
in each case of which the Indemnifying Parties shall be obligated to pay
the reasonable and appropriate fees and expenses of such additional counsel
or counsels. The Indemnifying Parties will not be liable for any settlement
of any action or claim effected without their written consent (which
consent shall not be unreasonably withheld).
5.14.2 The provisions of this SECTION 5.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Acquiror and the Company.
5.14.3 Acquiror shall either (i) extend the Company's existing
directors and officers liability insurance policy as of the date hereof (or
a policy providing coverage on the same or better terms and conditions) for
acts or omissions occurring prior to the Effective Time by Persons who are
currently
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covered by such insurance policy maintained by the Company for a period of
six (6) years following the Effective Time, or (ii) add such Persons to the
existing directors and officers liability insurance policy of Acquiror,
provided, however, that for purposes of this subparagraph (ii), such
insurance shall provide officers and trust managers of the Company the same
coverage as similarly situated officers and directors of Acquiror and such
insurance shall be maintained by Acquiror for a period of six years
following the Effective Time. Notwithstanding the preceding sentence, in no
event shall Acquiror or the Surviving Company be required to expend on
average over such six year period in excess of 125% of the annual premium
currently paid by the Company for such coverage and if the premium for such
coverage on average over such six year period exceeds such amount, Acquiror
or the Surviving Company shall purchase a policy with the greatest coverage
available for such 125% of the annual premium.
5.14.4 In the event that Acquiror or any of its respective successors
or assigns (i) consolidates with or merges into any other Person and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the
successors and assigns of such entity shall assume the obligations set
forth in this SECTION 5.14, which obligations are expressly intended to be
for the irreversible benefit of, and shall be enforceable by, each trust
manager and officer covered hereby.
SECTION 5.15 THE COMPANY RIGHTS PLAN. The Company shall either (i)
redeem, effective immediately prior to the Effective Time, all the then
outstanding Rights (as defined in the Rights Agreement) for cash pursuant to and
in compliance with SECTION 23 of the Rights Agreement or (ii) take such other
action to terminate the Rights Agreement as of that time, as the Company and
Acquiror may mutually agree. The Company shall not redeem the Rights issued
under the Rights Agreement, or terminate the Rights Agreement, prior to the
Effective Time (other than in accordance with the preceding sentence) unless
required to do so by a court of competent jurisdiction; provided, however, that
the Company may take any of the foregoing actions if the Board of Trust Managers
of the Company shall have accepted a proposal for a Superior Competing
Transaction in accordance with the terms of SECTION 7.1.4.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger and to
consummate the other Transactions contemplated to occur on the Closing Date is
subject to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
6.1.1 SHAREHOLDER APPROVALS. This Agreement shall have been approved
and adopted by the Shareholder Approvals.
6.1.2 LISTING OF SHARES. The NYSE shall have approved for listing
the Acquiror Common Stock to be issued in the Merger.
6.1.3 REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings by the SEC seeking a stop order.
6.1.4 NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other Transactions shall be in
effect.
6.1.5 RELATED TRANSACTIONS. The transactions contemplated by the
Stock Purchase Agreements shall have been consummated in accordance with
the terms of such agreements.
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SECTION 6.2 CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB. The
obligations of Acquiror and Merger Sub to effect the Merger and to consummate
the other Transactions contemplated to occur on the Closing Date are further
subject to the following conditions, any one or more of which may be waived by
both Acquiror and Merger Sub:
6.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly
limited by its terms to another date, and Acquiror shall have received a
certificate (which certificate may be qualified by Knowledge to the same
extent as such representations and warranties are so qualified) signed on
behalf of the Company by the chief executive officer or the chief financial
officer of the Company to such effect. This condition shall be deemed
satisfied unless all breaches of the Company's representations and
warranties in this Agreement (without giving effect to any materiality
qualification or limitation) are in the aggregate reasonably expected to
have a Material Adverse Effect.
6.2.2 PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
Acquiror shall have received a certificate signed on behalf of the Company
by the chief executive officer or the chief financial officer of the
Company to such effect.
6.2.3 MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Material Adverse Change and Acquiror shall have
received a certificate of the chief executive officer or chief financial
officer of the Company certifying to such effect.
6.2.4 OPINIONS RELATING TO REIT. Acquiror shall have received an
opinion of Counsel to the Company, dated as of the Closing Date, reasonably
satisfactory to Acquiror that, for its taxable year ended December 31, 1993
and all subsequent taxable years ending on or before the Closing Date, the
Company was organized and has operated in conformity with the requirements
for qualification as a REIT under the Code.
6.2.5 OTHER TAX OPINION. Acquiror shall have received either (i) a
ruling from the IRS or (ii) an opinion dated as of the Closing Date from
Counsel to Acquiror to the effect that the Merger should qualify as a
reorganization under the provisions of Section 368(a) of the Code and that
the Surviving Company will constitute a "qualified REIT subsidiary" under
Section 856(i) of the Code.
6.2.6 CONSENTS. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties
necessary in connection with the consummation of the Transactions shall
have been obtained, other than such consents and waivers from third
parties, which, if not obtained, would not result, individually or in the
aggregate, in an Acquiror Material Adverse Effect or a Material Adverse
Effect.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to effect the Merger and to consummate the
other Transactions contemplated to occur on the Closing Date is further subject
to the following conditions, any one or more of which may be waived by the
Company:
6.3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Acquiror set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date, as
though made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another
date, and the Company shall have received a certificate (which certificate
may be qualified by Knowledge to the same extent as the representations and
warranties of Acquiror contained herein are so qualified) signed on behalf
of Acquiror by the chief executive officer or the chief financial officer
of Acquiror to such effect. This condition shall be deemed satisfied unless
all breaches of Acquiror's representations and warranties in this Agreement
(without giving effect to any materiality qualification or limitation) are
in the aggregate reasonably expected to have an Acquiror Material Adverse
Effect.
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6.3.2 PERFORMANCE OF OBLIGATIONS OF ACQUIROR. Acquiror shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and the
Company shall have received a certificate of Acquiror signed on behalf of
Acquiror by the chief executive officer or the chief financial officer of
Acquiror to such effect.
6.3.3 MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Acquiror Material Adverse Change and the Company
shall have received a certificate of the chief executive officer or chief
financial officer of Acquiror certifying to such effect.
6.3.4 OPINION RELATING TO REIT STATUS. The Company shall have
received an opinion of Counsel to Acquiror dated as of the Closing Date,
reasonably satisfactory to the Company that, for its taxable year ended
December 31, 1993 and all subsequent taxable years ending on or before the
Closing Date, Acquiror was organized and has operated in conformity with
the requirements for qualification as a REIT under the Code and that, after
giving effect to the Merger, Acquiror's proposed method of operation will
enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code (with customary exceptions, assumptions
and qualifications and based upon customary representations).
6.3.5 OTHER TAX OPINION. The Company shall have received either (i)
a ruling from the IRS or (ii) an opinion dated as of the Closing Date from
Counsel to the Company, to the effect that the Merger should qualify as a
reorganization under the provisions of Section 368(a) of the Code and that
the Surviving Company will constitute a "qualified REIT subsidiary" under
Section 856(i).
6.3.6 CONSENTS. All consents and waivers (including, without
limitation, waivers or rights of first refusal) from third parties
necessary in connection with the consummation of the Transactions shall
have been obtained, other than such consents and waivers from third
parties, which, if not obtained, would not result, individually or in the
aggregate, in an Acquiror Material Adverse Effect or a Material Adverse
Effect.
ARTICLE VII
BOARD ACTIONS
SECTION 7.1 COMPANY BOARD ACTIONS. Notwithstanding SECTION 5.7 or any
other provision of this Agreement to the contrary, to the extent, and only to
the extent, that the Board of Trust Managers of the Company, after consultation
with outside legal counsel, determines in good faith that such action is
required for the Board of Trust Managers of the Company to comply with its
fiduciary duties to shareholders imposed by applicable law, the Company may:
7.1.1 disclose to the shareholders of the Company any information
that, in the opinion of the Board of Trust Managers of the Company after
consultation with outside legal counsel, is required to be disclosed under
applicable law;
7.1.2 to the extent applicable, comply with Rule 14e-2(a) promulgated
under the Exchange Act with respect to a Competing Transaction;
7.1.3 in response to an unsolicited request therefor, participate in
discussions or negotiations with or furnish information with respect to the
Company pursuant to a confidentiality agreement not materially less
favorable to the Company than the Confidentiality Agreement (as determined
by the Company's outside counsel), or otherwise respond to or deal with any
Person in connection with a bona fide Competing Transaction proposed by
such Person in writing, provided that the Company shall have notified
Acquiror of such unsolicited requests or its participation in discussions
or negotiations in accordance with SECTION 5.7.(C); and
7.1.4 approve or recommend (and in connection therewith withdraw or
modify its approval or recommendation of this Agreement or the Merger) a
Superior Competing Transaction and enter into an agreement with respect to
such Superior Competing Transaction (for purposes of this Agreement,
"Superior Competing Transaction" means a bona fide proposal of a Competing
Transaction made by a
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third party which has not been solicited or initiated by the Company in
violation of SECTION 5.7 and which a majority of the members of Board of
Trust Managers of the Company determines in good faith (A) to be more
favorable to the Company's shareholders than the Merger and (B) is
reasonably capable of being consummated.
SECTION 7.2 ACQUIROR BOARD ACTIONS. Notwithstanding SECTION 5.8 or any
other provision of this Agreement to the contrary, to the extent, and only to
the extent, that the Board of Directors of Acquiror, after consultation with
outside legal counsel, determines in good faith that such action is required for
the Board of Directors of Acquiror to comply with its fiduciary duties to
shareholders imposed by applicable law, Acquiror may:
7.2.1 disclose to the shareholders of Acquiror any information that,
in the opinion of the Board of Directors of Acquiror after consultation
with outside legal counsel, is required to be disclosed under applicable
law;
7.2.2 to the extent applicable, comply with Rule 14e-2(a) promulgated
under the Exchange Act with respect to an Alternative Transaction;
7.2.3 in response to an unsolicited request therefor, participate in
discussions or negotiations with or furnish information with respect to
Acquiror pursuant to a confidentiality agreement not materially less
favorable to Acquiror than the Company's obligations under the
Confidentiality Agreement (as determined by Acquiror's outside counsel), or
otherwise respond to or deal with any Person in connection with a bona fide
Alternative Transaction proposed by such Person in writing, provided that
Acquiror shall have notified the Company of such unsolicited requests or
its participation in discussions or negotiations in accordance with SECTION
5.8(C); and
7.2.4 approve or recommend (and in connection therewith withdraw or
modify its approval or recommendation of this Agreement or the Merger) an
Alternative Transaction and enter into an agreement with respect to such an
Alternative Transaction.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after either of the Shareholder
Approvals are obtained:
8.1.1 by mutual written consent duly authorized by the Board of
Directors of Acquiror and the Board of Trust Managers of the Company;
8.1.2 by Acquiror, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in SECTION
6.2.1 or SECTION 6.2.2, as the case may be, would be incapable of being
satisfied by January 31, 1998 (or as otherwise extended);
8.1.3 by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Acquiror set forth in this Agreement,
or if any representation or warranty of Acquiror shall have become untrue,
in either case such that the conditions set forth in SECTION 6.3.1 or
SECTION 6.3.2, as the case may be, would be incapable of being satisfied by
January 31, 1998 (or as otherwise extended);
8.1.4 by either Acquiror or the Company, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger or requiring actions as a
condition precedent to the Merger which would result in a Material Adverse
Change shall have become final and nonappealable;
8.1.5 by either Acquiror or the Company, if the Merger shall not have
been consummated before January 31, 1998; provided, however, that the right
to terminate this Agreement under this SECTION 8.1.5 shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or has resulted in the failure of the Merger to occur
on or before such date;
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8.1.6 by either Acquiror or the Company (unless the Company is in
breach of its obligations under SECTION 5.1.2) if, upon a vote at a duly
held Company Shareholders Meeting or any adjournment thereof, the Company
Shareholder Approvals shall not have been obtained as contemplated by
SECTION 5.1;
8.1.7 by either Acquiror (unless Acquiror is in breach of its
obligations under SECTION 5.1.3) or the Company if, upon a vote at a duly
held Acquiror Shareholders Meeting or any adjournment thereof, the Acquiror
Shareholder Approvals shall not have been obtained as contemplated by
SECTION 5.1;
8.1.8 by the Company, if prior to the Company Shareholders Meeting,
the Board of Trust Managers of the Company shall have withdrawn or modified
in any manner adverse to Acquiror its approval or recommendation of the
Merger or this Agreement in connection with, or approved or recommended, a
Superior Competing Transaction; provided, however, that such termination
shall not be effective prior to the payment of the Break-Up Fee to the
extent required by SECTION 8.2.2 hereof;
8.1.9 by the Acquiror, if prior to the Acquiror Shareholders Meeting,
the Board of Directors of Acquiror shall have withdrawn or modified in any
manner adverse to the Company its approval or recommendation of the Merger
or this Agreement in connection with, or approved or recommended, an
Alternative Transaction; provided, however, that such termination shall not
be effective prior to the payment of the Termination Fee to the extent
required by SECTION 8.2.3 hereof;
8.1.10 by Acquiror, if (i) prior to the Company Shareholders Meeting,
the Board of Trust Managers of the Company shall have withdrawn or modified
in any manner adverse to Acquiror its approval or recommendation of the
Merger or this Agreement in connection with, or approved or recommended,
any Superior Competing Transaction or (ii) the Company shall have entered
into a definitive agreement with respect to any Competing Transaction;
provided, however, that such termination shall not be effective prior to
the payment of the Break-Up Fee to the extent required by SECTION 8.2.2
hereof; and
8.1.11 by the Company, if (i) prior to the Acquiror Shareholders
Meeting, the Board of Directors of Acquiror shall have withdrawn or
modified in any manner adverse to the Company its approval or
recommendation of the Merger or this Agreement in connection with, or
approved or recommended, any Alternative Transaction or (ii) Acquiror shall
have entered into a definitive agreement with respect to any Alternative
Transaction; provided, however, that such termination shall not be
effective prior to the payment of the Termination Fee to the extent
required by SECTION 8.2.3 hereof.
SECTION 8.2 EXPENSES.
8.2.1 Except as otherwise specified in this SECTION 8.2 or agreed in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.
8.2.2 The Company agrees that if this Agreement shall be terminated
(i) pursuant to SECTION 8.1.2, 8.1.6, 8.1.8 or 8.1.10 and, in the case of
SECTION 8.1.2 or 8.1.6, following the date of this Agreement and prior to
termination, the Company shall have received a proposal constituting a
Competing Transaction and within 12 months following termination the
Company shall enter into a definitive agreement providing for a Competing
Transaction, then the Company will pay as directed by Acquiror a fee in an
amount equal to the Break-Up Fee (provided that Acquiror was not in
material breach of any of its representations, warranties, covenants or
agreements hereunder at the time of termination); and (ii) pursuant to
SECTION 8.1.2 or 8.1.6, then the Company will pay an amount equal to the
Break-Up Expenses. Payment of any of such amounts shall be made, as
directed by Acquiror, by wire transfer of immediately available funds
promptly, but in no event later than two business days after such
termination. The payment of the Break-Up Fee shall be compensation and
liquidated damages for the loss suffered by Acquiror as the result of the
failure of the Merger to be consummated and to avoid the difficulty of
determining damages under the circumstances and neither party shall have
any other liability to the other, other than the payment of the Break-Up
Fee. The "Break-Up Fee" shall be an amount equal to the lesser of (i)
$10,000,000 (the "Base Amount") and (ii) the sum of (A) the maximum amount
that can be paid to Acquiror in the year in which this Agreement is
terminated (the "Termination Year")
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and in all relevant taxable years thereafter without causing it to fail to
meet the requirements of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") for such year, determined as if the payment of such amount
did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by
independent accountants to Acquiror, and (B) in the event Acquiror receives
a ruling from the IRS (a "Break-Up Fee Ruling") holding that Acquiror's
receipt of the Base Amount would either constitute Qualifying Income or
would be excluded from gross income within the meaning of the REIT
Requirements, the Base Amount less the amount payable under clause (A)
above. If the amount payable for the Termination Year under the preceding
sentence is less than the Base Amount, the Company shall place the
remaining portion of the Base Amount in escrow and shall not release any
portion thereof to Acquiror unless and until the Company receives either of
the following: (i) a letter from Acquiror independent accountants
indicating the maximum amount that can be paid at that time to Acquiror
without causing Acquiror to fail to meet the REIT Requirements for any
relevant taxable year, together with either an IRS ruling issued to
Acquiror or an opinion of Acquiror's tax counsel to the effect that such
payment would not be treated as includable in the income of Acquiror for
any prior taxable year, in which event Company shall pay to Acquiror such
maximum amount, or (ii) a Break-Up Fee Ruling, in which event the Company
shall pay to Acquiror the unpaid Base Amount. The Break-Up Fee shall be
reduced by any amounts previously paid in respect of Break-Up Expenses. The
Company's obligation to pay any unpaid portion of the Break-Up Fee shall
terminate five years from the date of this Agreement and the Company shall
have no obligation to make any further payments notwithstanding that the
entire Base Amount has not been paid as of such date. The "Break-Up
Expenses" shall be an amount equal to the lesser of (i) Acquiror's out-
of-pocket expenses incurred in connection with this Agreement and the
Transactions (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses) but in no event in an amount
greater than $1,500,000 (the "Expense Fee Base Amount") and (ii) the sum of
(A) the maximum amount that can be paid to Acquiror in the Termination Year
and in all relevant taxable years thereafter without causing it to fail to
meet the REIT Requirements for such year, determined as if the payment of
such amount did not constitute Qualifying Income, as determined by
independent accountants to Acquiror and (B) in the event Acquiror receives
a ruling from the IRS (an "Expense Fee Ruling") holding that Acquiror's
receipt of the Expense Fee Base Amount would either constitute Qualifying
Income or would be excluded from gross income within the meaning of the
REIT Requirements, the Expense Fee Base Amount less the amount payable
under clause (A) above. The Company's obligation to pay any unpaid portion
of the Break-Up Expenses shall terminate five years from the date of this
Agreement and the Company shall have no obligation to make any further
payments notwithstanding that the entire amount of Break-Up Expenses has
not been paid as of such date. If the amount payable for the Termination
Year (as determined above) is less than the Expense Fee Base Amount, the
Company shall place the remaining portion of the Expense Fee Base Amount in
escrow and shall not release any portion thereof to Acquiror unless and
until the Company receives either of the following: (i) a letter from
Acquiror's independent accountants indicating the maximum amount that can
be paid at that time to Acquiror without causing Acquiror to fail to meet
the REIT Requirements for any relevant taxable year, together with either
an IRS ruling issued to Acquiror or an opinion of Acquiror's tax counsel to
the effect that such payment would not be treated as includable in the
income of Acquiror for any prior taxable year, in which event Company shall
pay to Acquiror such maximum amount or (ii) an Expense Fee Ruling, in which
event the Company shall pay to Acquiror the unpaid Expense Fee Base Amount.
8.2.3 Acquiror agrees that if this Agreement shall be terminated (i)
pursuant to SECTION 8.1.3, 8.1.7, 8.1.9 or 8.1.11 and, in the case of
SECTION 8.1.3 or 8.1.7, following the date of this Agreement and prior to
termination, Acquiror shall have received a proposal constituting an
Alternative Transaction and within 12 months following termination Acquiror
shall enter into a definitive agreement providing for an Alternative
Transaction, then Acquiror will pay as directed by the Company a fee in an
amount equal to the Termination Fee (provided that the Company was not in
material breach of any of its representations, warranties, covenants or
agreements hereunder at the time of termination); and (ii) pursuant to
SECTION 8.1.3 or 8.1.7, then Acquiror will pay an amount equal to the
Termination Expenses. Payment of
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any of such amounts shall be made, as directed by the Company, by wire
transfer of immediately available funds promptly, but in no event later
than two business days after such termination. The payment of the
Termination Fee shall be compensation and liquidated damages for the loss
suffered by the Company as the result of the failure of the Merger to be
consummated and to avoid the difficulty of determining damages under the
circumstances and neither party shall have any other liability to the
other, other than the payment of the Termination Fee. The "Termination Fee"
shall be an amount equal to the lesser of (i) $10,000,000 (the "Termination
Base Amount") and (ii) the sum of (A) the maximum amount that can be paid
to the Company in the Termination Year and in all relevant taxable years
thereafter without causing it to fail to meet the REIT Requirements for
such year, determined as if the payment of such amount did not constitute
Qualifying Income, as determined by independent accountants to the Company,
and (B) in the event the Company receives a ruling from the IRS (a
"Termination Fee Ruling") holding that the Company's receipt of the
Termination Base Amount would either constitute Qualifying Income or would
be excluded from gross income within the meaning of the REIT Requirements,
the Termination Base Amount less the amount payable under clause (A) above.
If the amount payable for the Termination Year under the preceding sentence
is less than the Termination Base Amount, Acquiror shall place the
remaining portion of the Termination Base Amount in escrow and shall not
release any portion thereof to the Company unless and until Acquiror
receives any one or combination of the following: (i) a letter from the
Company's independent accountants indicating the maximum amount that can be
paid at that time to the Company without causing the Company to fail to
meet the REIT Requirements for any relevant taxable year, together with
either an IRS ruling issued to the Company or an opinion of the Company's
tax counsel to the effect that such payment would not be treated as
includable in the income of the Company for any prior taxable year, in
which event Acquiror shall pay to the Company such maximum amount, or (ii)
a Termination Fee Ruling, in which event Acquiror shall pay to the Company
the unpaid Termination Base Amount. The Termination Fee shall be reduced by
any amounts previously paid in respect of Termination Expenses. Acquiror's
obligation to pay any unpaid portion of the Termination Fee shall terminate
five years from the date of this Agreement and Acquiror shall have no
obligation to make any further payments notwithstanding that the entire
Termination Base Amount has not been paid as of such date. The "Termination
Expenses" shall be an amount equal to the lesser of (i) the Company's
out-of-pocket expenses incurred in connection with this Agreement and the
Transactions (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses) but in no event in an amount
greater than $1,500,000 (the "Termination Expense Base Amount") and (ii)
the sum of (A) the maximum amount that can be paid to the Company in the
Termination Year and in all relevant taxable years thereafter without
causing the Company to fail to meet the REIT Requirements for such year,
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the Company and (B) in
the event the Company receives a ruling from the IRS (a "Termination
Expense Ruling") holding that the Company's receipt of the Termination
Expense Base Amount would either constitute Qualifying Income or would be
excluded from gross income within the meaning of the REIT Requirements, the
Termination Expense Base Amount less the amount payable under clause (A)
above. Acquiror's obligation to pay any unpaid portion of the Termination
Expenses shall terminate five years from the date of this Agreement and
Acquiror shall have no obligation to make any further payments
notwithstanding that the entire amount of Termination Expense Base Amount
has not been paid as of such date. If the amount payable for the
Termination Year (as determined above) is less than the Termination Expense
Base Amount, Acquiror shall place the remaining portion of the Termination
Expense Base Amount in escrow and shall not release any portion thereof to
the Company unless and until Acquiror receives either of the following: (i)
a letter from the Company's independent accountants indicating the maximum
amount that can be paid at that time to the Company without causing the
Company to fail to meet the REIT Requirements for any relevant taxable
year, together with either an IRS ruling issued to the Company or an
opinion of the Company's tax counsel to the effect that such payment would
not be treated as includable in the income of the Company for any prior
taxable year, in which event Acquiror shall pay to the Company such maximum
amount, or (ii) a Termination Expense Ruling, in which event Acquiror shall
pay to the Company the unpaid Termination Expense Base Amount.
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SECTION 8.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Acquiror as provided in SECTION 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Acquiror, or the Company, other than the last
sentence of SECTION 5.2, SECTION 8.2, this SECTION 8.3, ARTICLE IX and ARTICLE X
and except to the extent that such termination results from a material breach by
a party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 8.4 AMENDMENT. This Agreement may be amended by the parties in
writing by action of their respective Boards of Directors or Board of Trust
Managers, as the case may be, at any time before or after any Shareholder
Approvals are obtained and prior to the filing of the Articles of Merger with
the office of the County Clerk of Dallas County, Texas and the office of the
Secretary of State of the State of Georgia, provided, however, that, after the
Shareholder Approvals are obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the consideration to be
delivered to the Company's shareholders or alter or change any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the Company's shareholders or Acquiror's shareholders.
SECTION 8.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of SECTION 8.4, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. Any waivers pursuant
to clause (c) of the second preceding sentence (i) of the provisions of SECTION
4.1.5 may be given in writing on behalf of Acquiror by a duly authorized officer
of Acquiror and (ii) of the provisions of SECTION 4.2.5 may be given in writing
by or on behalf of the Company by a duly authorized officer of the Company. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
DEFINITIONS AND CONSTRUCTION
SECTION 9.1 CERTAIN DEFINITIONS. For purposes of this Agreement:
"1940 Act" means the Investment Company Act of 1940, as amended.
"Acquiror" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Acquiror Benefit Plans" has the meaning ascribed to it in SECTION
3.2.10(I).
"Acquiror Common Stock" means common stock, par value $.01 per share,
of Acquiror.
"Acquiror Disclosure Letter" means the letter previously delivered to
the Company by Acquiror disclosing certain information in connection with
this Agreement.
"Acquiror Employee Stock Plans" has the meaning ascribed to it in
SECTION 3.2.3.
"Acquiror Financial Advisor" has the meaning ascribed to it in SECTION
3.2.13.
"Acquiror Financial Statement Date" has the meaning ascribed to it in
SECTION 3.2.6.
"Acquiror Material Adverse Change" has the meaning ascribed to it in
SECTION 3.2.6.
"Acquiror Material Adverse Effect" has the meaning ascribed to it in
SECTION 3.2.1.
"Acquiror Options" has the meaning ascribed to it in SECTION 3.2.3.
"Acquiror Preferred Stock" means preferred stock, par value $.01 per
share, of Acquiror.
"Acquiror Properties" has the meaning ascribed to it in SECTION 3.2.8.
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"Acquiror SEC Documents" has the meaning ascribed to it in SECTION
3.2.5.
"Acquiror Shareholder Approvals" has the meaning ascribed to it in
SECTION 3.2.4.
"Acquiror Shareholders Meeting" has the meaning ascribed to it in
SECTION 5.1.3.
"Acquiror Subsidiary" means Merger Sub, any Subsidiary of the
aforementioned entities and any other entity of which Acquiror is the
direct or indirect general partner or as to which the Company has the right
or power to elect a majority of the board of directors or other governing
body.
"Addison" has the meaning ascribed to it in the Recitals of the
Agreement.
"Addison Stock Purchase Agreement" has the meaning ascribed to it in
the Recitals of the Agreement.
An "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person.
"Agreement" means this instrument as originally executed, including
the Annexes, Exhibits and Schedules to the Acquiror Disclosure Letter and
the Company Disclosure Letter, or as it may be from time to time
supplemented or amended by one or more supplements or amendments hereto
entered pursuant to the applicable provisions hereof.
"Alternative Transaction" has the meaning ascribed to it in SECTION
5.8.
"Armada" has the meaning ascribed to it in the Recitals of the
Agreement.
"Armada Stock Purchase Agreement" has the meaning ascribed to it in
the Recitals of the Agreement.
"Applicable Bodies" has the meaning ascribed to it in SECTION 1.3.
"Articles of Merger" has the meaning ascribed to it in SECTION 1.3.
"Base Amount" has the meaning ascribed to it in SECTION 8.2.2.
"Break-Up Expenses" has the meaning ascribed to it in SECTION 8.2.2.
"Break-Up Fee" has the meaning ascribed to it in SECTION 8.2.2.
"Break-Up Fee Ruling" has the meaning ascribed to it in SECTION 8.2.2.
"Certificates" has the meaning ascribed to it in SECTION 2.2.3.
"Closing Date" has the meaning ascribed to it in SECTION 1.2.
"Code" has the meaning ascribed to it in the Recitals of the
Agreement.
"Common Shares" has the meaning ascribed to it in the Recitals of the
Agreement.
"Company" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Company Benefit Plans" has the meaning ascribed to it in SECTION
3.1.11(I).
"Company's Bylaws" has the meaning ascribed to it in SECTION 3.1.1.
"Company's Charter" has the meaning ascribed to it in SECTION 3.1.1.
"Company Disclosure Letter" means the letter previously delivered to
Acquiror by the Company disclosing certain information in connection with
this Agreement.
"Company Employee Stock Plans" has the meaning ascribed to it in
SECTION 3.1.3.
"Company Interests" means, collectively, the Company Subsidiaries and
all direct or indirect interests of the Company or any Company Subsidiary.
"Company Options" has the meaning ascribed to it in SECTION 3.1.3.
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"Company Properties" has the meaning ascribed to it in SECTION 3.1.8.
"Company SEC Documents" has the meaning ascribed to it in SECTION
3.1.5.
"Company Shareholder Approvals" has the meaning ascribed to it in
SECTION 3.1.4.
"Company Shareholders Meeting" has the meaning ascribed to it in
SECTION 5.1.2.
"Company Subsidiaries" means, collectively, those companies set forth
in Section A of SCHEDULE 3.1.2 to the Company Disclosure Letter, any
subsidiary of any of the aforementioned entities and any other entity of
which the Company is the direct or indirect general partner or as to which
the Company has the right or power to elect a majority of the board of
directors or other governing body.
"Competing Transaction" has the meaning ascribed to it in SECTION 5.7.
"Confidentiality Agreement" has the meaning ascribed to it in SECTION
5.2.
"Cureton" has the meaning ascribed to it in the Recitals of this
Agreement.
"Development Budgets" has the meaning ascribed to it in SECTION 4.1.5.
"Development Properties" has the meaning ascribed to it in SECTION
3.1.8.
"Effective Time" has the meaning ascribed to it in SECTION 1.3.
"Encumbrances" has the meaning ascribed to it in SECTION 3.1.8.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate of the Acquiror" has the meaning ascribed to it in
SECTION 3.2.10(I).
"ERISA Affiliate of the Company" has the meaning ascribed to it in
SECTION 3.1.11(I).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" has the meaning ascribed to it in SECTION 2.2.1.
"Exchange Fund" has the meaning ascribed to it in SECTION 2.2.2.
"Exchange Ratio" has the meaning ascribed to it in SECTION 2.1.2.
"Expense Fee Base Amount" has the meaning ascribed to it in SECTION
8.2.2.
"Expense Fee Ruling" has the meaning ascribed to it in SECTION 8.2.2.
"Final Company Dividend" has the meaning ascribed to it in SECTION
2.2.4(I).
"Financial Statement Date" has the meaning ascribed to it in SECTION
3.1.6.
"Future Development Properties" has the meaning ascribed to it in
SECTION 3.1.8.
"GAAP" means generally accepted accounting principles.
"Glover" has the meaning ascribed to it in the Recitals of this
Agreement.
"Governing Laws" has the meaning ascribed to it in SECTION 1.1.
"Governmental Entity" means any federal, state or local government or
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign.
"Hazardous Materials" means those substances, materials, and items, in
any form, whether solid, liquid, gaseous, semisolid, or any combination
thereof, whether waste materials, raw materials, chemicals, finished
products, byproducts, or any other material or article, which are regulated
by or form the basis of liability under federal, state or local
environmental, health, and safety statutes or regulations including,
without limitation, hazardous wastes, hazardous substances, pollutants,
contaminants, asbestos, polychlorinated biphenyls, petroleum (including,
but not limited to, crude oil, petroleum-derived
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substances, waste, or breakdown or decomposition products thereof or any
fraction thereof), and radioactive substances.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" has the meaning ascribed to it in SECTION 3.1.16(II).
"Indemnified Liabilities" has the meaning ascribed to it in SECTION
5.14.1.
"Indemnified Parties" has the meaning ascribed to it in SECTION
5.14.1.
"Indemnifying Parties" has the meaning ascribed to it in SECTION
5.14.1.
"IRS" means the United States Internal Revenue Service.
"Knowledge" where used herein with respect to the Company shall mean
the actual knowledge of the Persons named in SCHEDULE 9.1 to the Company
Disclosure Letter and where used with respect to Acquiror shall mean the
actual knowledge of the Persons named in SCHEDULE 9.1 to the Acquiror
Disclosure Letter.
"Laws" mean any judgment, order, decree, statute, law, ordinance, rule
or regulation.
"Liens" mean any pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
"Material Adverse Change" has the meaning ascribed to it in SECTION
3.1.6.
"Material Adverse Effect" has the meaning ascribed to it in SECTION
3.1.1.
"Merger" has the meaning ascribed to it in the Recitals of this
Agreement.
"Merger Consideration" has the meaning ascribed to it in SECTION
2.1.2.
"Merger Sub" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"NYSE" means the New York Stock Exchange.
"Operating Partnership" means Post Apartment Homes, L.P., a Georgia
limited partnership.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquiror Liens" has the meaning ascribed to it in SECTION
3.2.8.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Preferred Shares" means the preferred shares of beneficial interest,
par value $.01 per share, of the Company.
"Property Restrictions" has the meaning ascribed to it in SECTION
3.1.8.
"Proxy Statement" has the meaning ascribed to it in SECTION 3.1.4.
"Prudential" has the meaning ascribed to it in SECTION 3.1.14.
"Qualifying Income" has the meaning ascribed to it in SECTION 8.2.2.
"Registration Statement" has the meaning ascribed to it in SECTION
3.2.4.
"Regulation S-K" means Regulation S-K promulgated under the Securities
Act the and Exchange Act.
"Regulation S-X" means Regulator S-X promulgated under the Securities
Act the and Exchange Act.
"REIT" has the meaning ascribed to it in SECTION 3.1.12(II).
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"REIT Requirements" has the meaning ascribed to it in SECTION 8.2.2.
"Rights Agreement" has the meaning ascribed to it in SECTION 3.1.6.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Approvals" has the meaning ascribed to it in SECTION
3.2.4.
"Shareholders Meetings" means collectively the Acquiror Shareholders
Meeting and the Company Shareholders Meeting.
"Shaw" has the meaning ascribed to it in the Recitals of this
Agreement.
"Stock Incentive Plans" has the meaning ascribed to it in SECTION
5.13.2.
"Stock Purchase Agreements" has the meaning ascribed to it in the
Recitals of this Agreement.
"Subsidiary" of any Person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such Person
(either directly or through or together with another Subsidiary of such
Person) owns 20% or more of the capital stock or other equity interests of
such corporation, partnership, limited liability company, joint venture or
other legal entity.
"Superior Competing Transaction" has the meaning ascribed to it in
SECTION 7.1.4.
"Surviving Company" has the meaning ascribed to it in SECTION 1.1.
"Takeover Statute" has the meaning ascribed to it in SECTION 3.1.17.
"Taxes" mean and shall include all federal, state, local and foreign
income, property, sales, excise and other taxes, tariffs or governmental
charges of any nature whatsoever, together with penalties, interest or
additions to Tax with respect thereto.
"Termination Base Amount" has the meaning ascribed to it in SECTION
8.2.3.
"Termination Expense Base Amount" has the meaning ascribed to it in
SECTION 8.2.3.
"Termination Expense Ruling" has the meaning ascribed to it in SECTION
8.2.3.
"Termination Expenses" has the meaning ascribed to it in SECTION
8.2.3.
"Termination Fee" has the meaning ascribed to it in SECTION 8.2.3.
"Termination Fee Ruling" has the meaning ascribed to it in SECTION
8.2.3.
"Termination Year" has the meaning ascribed to it in SECTION 8.2.2.
"Transactions" has the meaning ascribed to it in the Recitals of this
Agreement.
"Transfer and Gains Tax" has the meaning ascribed to it in SECTION
5.12.
"Unconsolidated Company Financial Statements" has the meaning ascribed
to it in SECTION 3.1.5.
"Units" has the meaning ascribed to it in SECTION 3.2.3.
"Williams" has the meaning ascribed to it in the Recitals of this
Agreement.
SECTION 9.2 RULES OF CONSTRUCTION.
(i) "This Agreement" means this instrument as originally executed,
including the Annexes, Exhibits and Schedules hereto, or as it may be from
time to time supplemented or amended by one or more supplements or
amendments hereto entered pursuant to the applicable provisions hereof;
(ii) "includes" and "including" are not limiting, and, in each case,
shall be construed as if followed by the words "without limitation," "but
not limited to" or words of similar import;
A-47
<PAGE> 145
(iii) "may not" is prohibitive, and not permissive;
(iv) "shall" is mandatory, and not permissive;
(v) "or" is not exclusive (i.e., if a party "may do (a), (b) or (c),"
then the party may do all of, any one of, or any combination of, (a), (b)
or (c)) unless the context expressly provides otherwise;
(vi) all references in this instrument to designated Articles,
Sections, Exhibits, and Schedules are to the designated Articles, Sections,
Annexes, Exhibits, and Schedules of this instrument as originally executed;
(vii) all references herein to constitutions, treaties, statutes,
laws, rules, regulations, ordinances, codes or orders include any successor
thereto or replacement thereof, and mean references to any of them as
amended, modified or supplemented from time to time;
(viii) the words "herein," "hereof," "hereto" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(ix) all terms used herein which are defined in the Securities Act,
the Exchange Act or the rules and regulations promulgated thereunder have
the meanings assigned to them therein unless otherwise defined herein; and
(x) all accounting terms not otherwise defined herein have the meaning
assigned to them in accordance with GAAP.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This SECTION 10.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 10.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
10.2.1 if to Acquiror, to:
Post Properties, Inc.
3350 Cumberland Circle
Suite 2200
Atlanta, Georgia 30339
Attention: John T. Glover
Telecopy: (770) 850-4400
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley III
Telecopy: (404) 572-5100
A-48
<PAGE> 146
10.2.2 if to the Company, to:
Columbus Realty Trust
15851 Dallas Parkway
Suite 855
Dallas, Texas 75248
Attention: Robert L. Shaw
Telecopy: (972) 770-5109
with a copy to:
Winstead Sechrest & Minick, P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Michelle P. Goolsby
Telecopy: (214) 745-5390
and:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Gregory Milmoe
Telecopy: (212) 735-3594
SECTION 10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 10.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Confidentiality Agreement and the other agreements entered into
in connection with the Transactions (a) constitute the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement and,
(b) except for the provisions of ARTICLE II, SECTION 5.13.2 and SECTION 5.14,
are not intended to confer upon any Person other than the parties hereto any
rights or remedies.
SECTION 10.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF, EXCEPT TO THE EXTENT THAT THE MERGER OR OTHER TRANSACTIONS
CONTEMPLATED HEREBY ARE REQUIRED TO BE GOVERNED BY THE GOVERNING LAW.
SECTION 10.6 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 10.7 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself (without making such submission exclusive) to the
personal jurisdiction of any federal court located in the
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<PAGE> 147
State of Georgia in the event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court.
SECTION 10.8 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any current or future law, and if the
rights or obligations of the parties under this Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance therefrom. In lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement, a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the parties hereto
request the court or any arbitrator to whom disputes relating to this Agreement
are submitted to reform the otherwise illegal, invalid or unenforceable
provision in accordance with this SECTION 10.8.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
A-50
<PAGE> 148
SIGNATURE PAGE TO
AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, Acquiror, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ACQUIROR:
POST PROPERTIES, INC.
By: /s/ JOHN T. GLOVER
------------------------------------
John T. Glover
President
MERGER SUB:
POST LP HOLDINGS, INC.
By: /s/ JOHN T. GLOVER
------------------------------------
John T. Glover
President
COMPANY:
COLUMBUS REALTY TRUST
By: /s/ ROBERT L. SHAW
------------------------------------
Robert L. Shaw
Chief Executive Officer
A-51
<PAGE> 149
EXHIBIT A
FORM OF COMPANY AFFILIATE LETTER
, 1997
Post Properties, Inc.
3350 Cumberland Circle
Suite 2200
Atlanta, Georgia 30339
Ladies and Gentlemen:
I have been advised that as of the date of this letter, I may be deemed to
be an "affiliate" of Columbus Realty Trust, a Texas real estate investment trust
(the "Company"), as the term affiliate is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). Pursuant to the terms
of the Agreement and Plan of Merger, dated as of August , 1997 (the "Merger
Agreement"), by and among Post Properties, Inc., a Georgia corporation ("Post"),
Post LP Holdings, Inc., a Georgia corporation ("Merger Sub"), and the Company,
the Company will be merged with and into Merger Sub (the "Merger").
As a result of the Merger, I may receive shares of common stock, par value
$.01 per share, of Post (the "Post Securities"). I would receive such shares in
exchange for shares owned by me of beneficial interest, par value $.01 per
share, of the Company.
I represent, warrant and covenant to Post that in the event I receive any
Post Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Post Securities in violation of the Securities Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Post Securities to
the extent I felt necessary with my counsel or counsel for the Company.
C. I have been advised that the issuance of the Post Securities to me
pursuant to the Merger will be registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. However, I have
also been advised that, since at the time the Merger is to be submitted for
a vote of the shareholders of the Company, I may be deemed to have been an
affiliate of the Company and the distribution by me of the Post Securities
has not been registered under the Securities Act, I may not sell, transfer
or otherwise dispose of the Post Securities issued to me pursuant to the
Merger unless (i) such sale, transfer or other disposition is registered
under the Securities Act, (ii) such sale, transfer or other disposition is
made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Securities Act or (iii) such sale,
transfer or other disposition is otherwise exempt from registration under
the Securities Act.
D. I understand that Post is under no obligation to register the sale,
transfer or other disposition of the Post Securities by me or on my behalf
under the Securities Act. By its execution hereof, Post agrees that it
will, as long as I own any Post Securities, take all reasonable efforts to
make timely filings with the Commission of all reports required to be filed
by it pursuant to the Securities Exchange Act of 1934, as
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<PAGE> 150
amended, and will promptly furnish upon my written request a written
statement confirming that such reports have been so timely filed.
E. I also understand and agree that stop transfer instructions will be
given to Post's transfer agent with respect to the Post Securities and that
there will be placed on the certificates for the Post Securities issued to
me, or any substitutions therefor, a legend to the effect of the above
restrictions. It is understood and agreed that such legend shall be removed
upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if (i) one year shall have
elapsed from the date I acquired the Post Securities and the provisions of
Rule 145(d)(2) are then available to me, (ii) two years shall have elapsed
from the date the undersigned acquired the Post Securities and the
provisions of Rule 145(d)(3) are then applicable to me or (iii) Post has
received either an opinion of counsel, in form and substance reasonably
satisfactory to Post, or a "no action" letter obtained by me from the staff
of the Commission, to the effect that the restrictions imposed by Rule 145
under the Securities Act no longer apply to me.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Merger Agreement.
Very truly yours,
--------------------------------------
Name:
Accepted this day of
, 1997 by
POST PROPERTIES, INC.
By:
--------------------------------------------------------
Name:
Title:
A-53
<PAGE> 151
ANNEX B
August 1, 1997
Board of Directors
Post Properties, Inc.
3350 Cumberland Circle
Suite 2200
Atlanta, Georgia 30339
Members of the Board of Directors:
Post Properties, Inc. (the "Acquiror"), Post LP Holdings, Inc. ("Peach"), a
wholly owned subsidiary of the Acquiror, and Columbus Realty Trust (the
"Company") propose to enter into an Agreement and Plan of Merger, dated August
1, 1997 (the "Agreement") pursuant to which the Company will be merged with and
into Peach (a qualified Real Estate Investment Trust ("REIT") subsidiary) in a
transaction (the "Transaction") in which each issued and outstanding share of
Company common stock, par value $.01 per share (the "Company Shares") will be
converted into the right to receive .615 shares (the "Exchange Ratio") of
Acquiror common stock, par value $.01 per share (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the Acquiror.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Acquiror and the Company which we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, funds from operations, adjusted funds
from operations, cash flow, assets, liabilities and prospects of the
Acquiror and the Company furnished to us by the Acquiror and the Company,
as well as the amount and timing of the cost savings and related expenses
and synergies expected to result from the Transaction (the "Expected
Synergies") furnished to us by the Acquiror and the Company;
(3) Conducted discussions with members of senior management of the
Acquiror and the Company concerning the matters described in clauses (1)
and (2) above, as well as their respective businesses and prospects before
and after giving effect to the Transaction and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the
Acquiror Shares and the Company Shares and compared them with those of
certain publicly traded companies that we deemed relevant;
(5) Reviewed the results of operations of the Acquiror and the
Company and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Acquiror and the Company and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Transaction;
(9) Reviewed a draft dated July 29, 1997 of the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
<PAGE> 152
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Acquiror or the Company or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Acquiror
or the Company. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Acquiror or the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Acquiror's or Company's
management as to the expected future financial performance of the Acquiror or
the Company, as the case may be, and the Expected Synergies. We have further
assumed that the Transaction will qualify as a tax-free reorganization for
United States federal income tax purpose. We have also assumed that the final
form of the Agreement will be substantially similar to the last draft thereof
reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction. We have also assumed
that the Transaction will not change the REIT status of the pro forma entity.
We are acting as financial advisor to the Acquiror in connection with the
Transaction and will receive a fee from the Acquiror for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Acquiror has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past, provided
financial advisory services to the Acquiror and may continue to do so and have
received, and may receive, fees for the rendering of such services. In addition,
in the ordinary course of our business, we may actively trade the securities of
the Acquiror or the Company, for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Acquiror. Our opinion does not address the merits of the underlying decision by
the Acquiror to engage in the Transaction and does not constitute a
recommendation to any shareholder of the Acquiror as to how such shareholder
should vote on the proposed merger.
In connection with the preparation of this opinion, we have not been
authorized by the Acquiror or the Board of Directors of the Acquiror to solicit,
nor have we solicited or taken into account any prospect of, third-party
indications of interest for the acquisition of all or any part of the Company.
We are not expressing any opinion herein as to the prices at which the shares of
the Acquiror's common stock will trade following the announcement or
consummation of the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to the Acquiror.
Very Truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-2
<PAGE> 153
ANNEX C
August 1, 1997
The Board of Trust Managers
Columbus Realty Trust
15851 Dallas Parkway
Suite 855
Dallas, Texas 75248
Members of the Board:
We understand that Columbus Realty Trust, a Texas real estate investment
trust ("Columbus" or the "Company"), Post Properties, Inc., a Georgia
corporation ("Post"), and Post LP Holdings, Inc., a Georgia corporation, and a
wholly-owned subsidiary of Post (the "Merger Sub"), propose to enter into an
Agreement and Plan of Merger (the "Agreement"). Pursuant to the Agreement, the
Company shall merge with and into the Merger Sub and the Merger Sub shall be the
surviving corporation (the "Merger"). In the Merger each outstanding share of
Common Stock, par value $0.01 per share, of the Company (the "Columbus Common
Stock") will be converted into the right to receive 0.615 of a share of common
stock, $0.01 par value, of Post (the "Post Common Stock") and together with any
cash in lieu of fractional shares of Columbus Common Stock (the "Merger
Consideration").
You have requested our opinion as to the fairness from a financial point of
view of the Merger Consideration to the stockholders of the Company. In
conducting our analysis and arriving at the opinion expressed herein, we have
reviewed such materials and considered such financial and other factors as we
deemed relevant under the circumstances, including:
(i) a draft dated July 27, 1997 of the Agreement;
(ii) certain publicly-available historical financial and operating
data of the Company including, but not limited to, (a) the Annual Report to
Stockholders and Annual Report on Form 10-K of the Company for the three
fiscal years ended December 31, 1996, 1995 and 1994, (b) the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 and internal
reports for the quarter ended June 30, 1997, (c) the Proxy Statement for
the Annual Meeting of Stockholders held on May 23, 1997, (d) the Prospectus
dated December 21, 1993 relating to the sale of 6,898,566 shares of
Columbus Common Stock and (e) the Prospectus dated July 22, 1994 relating
to the sale of 2,700,000 shares of Columbus Common Stock;
(iii) certain publicly-available historical financial and operating
data for Post including, but not limited to, (a) the Annual Report on Form
10-K for the three fiscal years ended December 31, 1996, 1995 and 1994, (b)
the Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
internal reports for the quarter ended June 30, 1997 and (c) a press
release dated July 22, 1997 announcing financial results for the quarter
ended June 30, 1997;
(iv) certain information relating to the Company, including projected
income statements for the fiscal years ending December 1997, 1998 and 1999,
prepared by the management of the Company;
(v) certain information relating to Post, including financial
forecasts for the fiscal years ending December 31, 1997, 1998, 1999 and
2000 prepared by the management of Post;
(vi) operating and unaudited financial information of certain Post
properties and certain Company properties for the six months ending June
30, 1997;
(vii) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
the Company and Post, respectively, or otherwise relevant to our inquiry;
(viii) the financial terms of certain recent transactions we deemed
relevant to our inquiry;
<PAGE> 154
(ix) the historical stock prices and trading volumes of the Company
Common Stock and Post Common Stock; and
(x) such other financial studies, analyses and investigations that we
deemed appropriate.
We have assumed, with your consent, that the draft of the Agreement which
we reviewed (as referred to above) will conform in all material respects to that
document when in final form.
We have met with the senior management of the Company and Post to discuss
(i) the prospects for their respective businesses, (ii) their estimates of such
businesses' future financial performance, (iii) the financial impact of the
Merger on the respective companies and (iv) such other matters that we deemed
relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and Post and have not undertaken any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or Post. With
respect to certain financial forecasts, provided to us by the Company for the
Company and Post for Post, we have assumed that such information (and the
assumptions and bases therefor) represents each respective management's best
currently available estimate as to the future financial performance of the
Company and of Post. Our opinion is predicated on the Merger qualifying (i) as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (ii) for "purchase" accounting treatment.
Further, our opinion is necessarily based on economic, financial and market
conditions as they exist and can only be evaluated as of the date hereof.
In connection with our advisory assignment, we were authorized to discuss
with Post and one other party the acquisition of all or any part of the Company.
We have not been authorized by the Company or its Board of Trust Managers to
solicit, other than the aforementioned, nor have we solicited, indications of
interest from third parties for the acquisition of all or any part of the
Company. Our opinion does not address nor should it be construed to address the
relative merits of the Merger and alternative business strategies. In addition,
this opinion does not in any manner address the prices at which Post Common
Stock will actually trade following consummation of the Merger.
As you know, we have been retained by the Company to render this opinion
and provide other financial advisory services in connection with the Merger and
will receive a fee for such services, which fee is contingent upon the
consummation of the Merger. In addition to having underwritten the Company's
initial public offering and secondary Common Stock offering, in the ordinary
course of business we may actively trade the shares of the Company Common Stock
and the Post Common Stock for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This letter and the opinion expressed herein are for the use of the Board
of Trust Managers of the Company. This opinion does not constitute a
recommendation to the stockholders of the Company as to how such stockholders
should vote or as to any other action such stockholders should take regarding
the Merger. This opinion may not be reproduced, summarized, excerpted from or
otherwise publicly referred to or disclosed in any manner, without our prior
written consent; except that the Company may include this opinion in its
entirety in any proxy statement or information statement relating to the Merger
sent to the Company's stockholders.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration is fair to the stockholders of the
Company from a financial point of view.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
C-2
<PAGE> 155
PROXY POST PROPERTIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
ON NOVEMBER , 1997
The undersigned hereby appoints John A. Williams and John T. Glover and each of
them, proxies, with full power of substitution and resubstitution, for and in
the name of the undersigned, to vote all shares of common stock of Post
Properties, Inc. ("Post") which the undersigned would be entitled to vote if
personally present at the Special Meeting of Shareholders to be held on
, November , 1997, at , local time, at the offices of
King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303, or at any
adjournment thereof, upon the matters described in the accompanying Notice of
Special Meeting of Shareholders and Joint Proxy Statement/Prospectus, receipt of
which is hereby acknowledged, and upon any other business that may properly come
before the Special Meeting of Shareholders or any adjournment thereof. Said
proxies are directed to vote on the matters described in the Notice of Special
Meeting of Shareholders and Joint Proxy Statement/Prospectus as follows, and
otherwise in their discretion upon such other business as may properly come
before the Special Meeting of Shareholders or any adjournment thereof.
1. To approve and adopt (a) the Agreement and Plan of Merger dated as of August
1, 1997 by and among Post, Columbus Realty Trust and Post LP Holdings, Inc.
pursuant to which Post will issue shares of Common Stock (the "Stock
Issuance") and (b) the Stock Issuance.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
2. To approve an amendment to the Post Properties, Inc. Employee Stock Plan (the
"Employee Stock Plan Amendment") to increase the number of shares of Common
Stock of Post reserved for issuance thereunder from 1,200,000 to .
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(continued and to be signed on reverse side)
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSALS.
Date: , 1997
--------------------
-------------------------------
-------------------------------
Please sign exactly as your
name or names appear hereon.
For more than one owner as
shown above, each should sign.
When signing in a fiduciary or
representative capacity, please
give full title. If this proxy
is submitted by a corporation,
it should be executed in the
full corporate name by a duly
authorized officer, if a
partnership, please sign in the
partnership name by an
authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING ON NOVEMBER ,
1997. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
<PAGE> 156
PROXY COLUMBUS REALTY TRUST
PROXY SOLICITED BY THE BOARD OF TRUST MANAGERS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
ON NOVEMBER , 1997
The undersigned, revoking any proxy heretofore given, hereby appoints Robert
L. Shaw and Will Cureton and each of them, proxies, with full power of
substitution and resubstitution, for and in the name of the undersigned, to vote
all shares of common shares of Columbus Realty Trust ("Columbus") which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders to be held on , November , 1997, at
, local time, at or at any adjournment thereof, upon the matters
described in the accompanying Notice of Special Meeting of Shareholders and
Joint Proxy Statement/Prospectus, receipt of which is hereby acknowledged, and
upon any other business that may properly come before the Special Meeting of
Shareholders or any adjournment thereof. Said proxies are directed to vote on
the matters described in the Notice of Special Meeting of Shareholders and Joint
Proxy Statement/Prospectus as follows, and otherwise in their discretion upon
such other business as may properly come before the Special Meeting of
Shareholders or any adjournment thereof.
1. To approve and adopt the Agreement and Plan of Merger dated as of August 1,
1997 by and among Post Properties, Inc., Columbus Realty Trust and Post LP
Holdings, Inc.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(continued and to be signed on reverse side)
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE ABOVE-STATED PROPOSAL.
Date: , 1997
--------------------
-------------------------------
-------------------------------
Please sign exactly as your
name or names appear hereon.
For more than one owner as
shown above, each should sign.
When signing in a fiduciary or
representative capacity, please
give full title. If this proxy
is submitted by a corporation,
it should be executed in the
full corporate name by a duly
authorized officer, if a
partnership, please sign in the
partnership name by an
authorized person.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING ON NOVEMBER ,
1997. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
<PAGE> 157
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Part 5 of Article 8 of the Georgia Business Corporation Code states:
14-2-850. PART DEFINITIONS.
As used in this part, the term:
(1) "Corporation" includes any domestic or foreign predecessor entity
of a corporation in a merger or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. A director is considered to be serving an employee benefit plan
at the corporation's request if his duties to the corporation also impose
duties on, or otherwise involve services by, him to the plan or to
participants in or beneficiaries of the plan. Director includes, unless the
context requires otherwise, the estate or personal representative of a
director.
(3) "Expenses" include attorneys' fees.
(4) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a
proceeding.
(5) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
14-2-851. AUTHORITY TO INDEMNIFY.
(a) Except as provided in subsections (d) and (e) of this Code section, a
corporation may indemnify or obligate itself to indemnify an individual made a
party to a proceeding because he is or was a director against liability incurred
in the proceeding if he acted in a manner he believed in good faith to be in or
not opposed to the best interests of the corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a) of this Code section.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct set
forth in subsection (a) of this Code section.
(d) A corporation may not indemnify a director under this Code section:
(1) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation;
or
(2) In connection with any other proceeding in which he was adjudged
liable on the basis that personal benefit was improperly received by him.
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<PAGE> 158
(e) Indemnification permitted under this Code section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
14-2-852. MANDATORY INDEMNIFICATION.
Unless limited by its articles of incorporation, to the extent that a
director has been successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party, or in defense of any claim, issue, or matter
therein, because he is or was a director of the corporation, the corporation
shall indemnify the director against reasonable expenses incurred by him in
connection therewith.
14-2-853. ADVANCE FOR EXPENSES.
(a) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition of
the proceeding if:
(1) The director furnishes the corporation a written affirmation of
his good faith belief that he has met the standard of conduct set forth in
subsection (a) of Code Section 14-2-851; and
(2) The director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification under this
part.
(b) The undertaking required by paragraph (2) of subsection (a) of this
Code section must be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make repayment.
14-2-854. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES.
Unless a corporation's articles of incorporation provide otherwise, a
director of the corporation who is a party to a proceeding may apply for
indemnification or advances for expenses to the court conducting the proceeding
or to another court of competent jurisdiction. On receipt of an application, the
court after giving any notice the court considers necessary may order
indemnification or advances for expenses if it determines:
(1) The director is entitled to mandatory indemnification under Code
Section 14-2-852, in which case the court also orders the corporation to
pay the director's reasonable expenses incurred to obtain court ordered
indemnification;
(2) The director is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the
standard of conduct set forth in subsection (a) of Code Section 14-2-851 or
was adjudged liable as described in subsection (d) of Code Section
14-2-851, but if he was adjudged so liable his indemnification is limited
to reasonable expenses incurred unless the articles of incorporation or a
bylaw, contract, or resolution approved or ratified by the shareholders
pursuant to Code Section 14-2-856 provides otherwise; or
(3) In the case of advances for expenses, the director is entitled,
pursuant to the articles of incorporation, bylaws, or any applicable
resolution or agreement, to payment or reimbursement of his reasonable
expenses incurred as a party to a proceeding in advance of final
disposition of the proceeding.
14-2-855. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(a) A corporation may not indemnify a director under Code Section 14-2-851
unless authorized thereunder and a determination has been made in the specific
case that indemnification of the director is permissible in the circumstances
because he has met the standard of conduct set forth in subsection (a) of Code
Section 14-2-851.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
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<PAGE> 159
(2) If a quorum cannot be obtained under paragraph (1) of this
subsection, by majority vote of a committee duly designated by the board of
directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding;
(3) By special legal counsel:
(A) Selected by the board of directors or its committee in the
manner prescribed in paragraph (1) or (2) of this subsection; or
(B) If a quorum of the board of directors cannot be obtained under
paragraph (1) of this subsection and a committee cannot be designated
under paragraph (2) of this subsection, selected by majority vote of the
full board of directors (in which selection directors who are parties
may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled
under paragraph (3) of subsection (b) of this Code section to select counsel.
14-2-856. SHAREHOLDER APPROVED INDEMNIFICATION.
(a) If authorized by the articles of incorporation or a bylaw, contract, or
resolution approved or ratified by the shareholders by a majority of the votes
entitled to be cast, a corporation may indemnify or obligate itself to indemnify
a director made a party to a proceeding including a proceeding brought by or in
the right of the corporation, without regard to the limitations in other Code
sections of this part.
(b) The corporation shall not indemnify a director under this Code section
for any liability incurred in a proceeding in which the director is adjudged
liable to the corporation or is subjected to injunctive relief in favor of the
corporation:
(1) For any appropriation, in violation of his duties, of any business
opportunity of the corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) For the types of liability set forth in Code Section 14-2-832; or
(4) For any transaction from which he received an improper personal
benefit.
(c) Where approved or authorized in the manner described in subsection (a)
of this Code section, a corporation may advance or reimburse expenses incurred
in advance of final disposition of the proceeding only if:
(1) the director furnishes the corporation a written affirmation of
his good faith belief that his conduct does not constitute behavior of the
kind described in subsection (b) of this Code section; and
(2) The director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification under this
Code section.
14-2-857. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.
Unless a corporation's articles of incorporation provide otherwise:
(1) An officer of the corporation who is not a director is entitled to
mandatory indemnification under Code Section 14-2-852 and is entitled to
apply for court ordered indemnification under Code Section 14-2-854, in
each case to the same extent as a director, and
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<PAGE> 160
(2) A corporation may also indemnify and advance expenses to an
officer, employee, or agent who is not a director to the extent, consistent
with public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.
14-2-858. INSURANCE.
A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee, or agent,
whether or not the corporation would have power to indemnify him against the
same liability under Code Section 14-2-851 or Code Section 14-2-852.
14-2-859. APPLICATION OF PART.
(a) A provision treating a corporation's indemnification of or advance for
expenses to directors that is contained in its articles of incorporation,
bylaws, a resolution of its shareholders or board of directors, or in a contract
or otherwise, is valid only if and to the extent the provision is consistent
with this part. If articles of incorporation limit indemnification or advance
for expenses, indemnification and advance for expenses are valid only to the
extent consistent with the articles.
(b) This part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with his appearance as a witness
in a proceeding at a time when he has not been made a named defendant or
respondent to the proceeding.
ARTICLES OF INCORPORATION
As permitted by the Georgia Business Corporation Code, the Post Charter
provides that a director shall not be personally liable to Post or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, except that such provision shall not eliminate or limit the liability
of a director (a) for any appropriation, in violation of his duties, of any
business opportunity of Post, (b) for acts or omissions that involve intentional
misconduct or a knowing violation of law, (c) for unlawful corporate
distributions or (d) for any transaction from which the director derived an
improper personal benefit. The Post Charter further provides that if the Georgia
Business Corporation Code is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of Post shall be eliminated or limited to the fullest extent
permitted by the Georgia Business Corporation Code, as amended.
Under Article IV of Post's Bylaws and certain agreements entered into by
Post, Post is required to indemnify to the fullest extent permitted by the
Georgia Business Corporation Code, any individual made a party to a proceeding
(as defined in the Georgia Business Corporation Code) because he is or was a
director or officer against liability (as defined in the Georgia Business
Corporation Code), incurred in the proceeding, if he acted in a manner he
believed in good faith to be in or not opposed to the best interests of Post
and, in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Post is required to pay for or reimburse the
reasonable expenses incurred by a director or officer who is a party to a
proceeding in advance of final disposition of the proceeding if:
(a) Such person furnishes Post a written affirmation of his good faith
belief that he has met the standard of conduct set forth above; and
(b) Such person furnishes Post a written undertaking, executed
personally on his behalf to repay any advances if it is ultimately
determined that he is not entitled to indemnification.
The written undertaking required by paragraph (b) above must be an unlimited
general obligation of such person but need not be secured and may be accepted
without reference to financial ability to make repayment.
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<PAGE> 161
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in Article
VI of Post's Bylaws are not exclusive of any other right which any person may
have under any statute, provision of the Company's Articles of Incorporation,
provision of Post's Bylaws, agreement, vote of shareholders or disinterested
directors or otherwise.
The Partnership Agreement of the Operating Partnership also provides for
indemnification of Post and its officers and directors to the same extent
indemnification is provided to officers and directors of Post in the Post
Charter, and limits the liability of Post and its officers and directors to the
Operating Partnership and its partners to the same extent liability of officers
and directors of Post to Post and its shareholders is limited under the Post
Charter.
In connection with the formation transactions, Post agreed to indemnify
Messrs. Williams and Glover from any exposure to personal liability for or under
personal guarantees of certain indebtedness of partnerships of Post aggregating
$107,900,000 in principal amount as to which Messrs. Williams and Glover
currently have personal liability either directly or as a guarantor of such
indebtedness.
Post's directors and officers are insured against damages from actions and
claims incurred in the course of their duties, and Post is insured against
expenses incurred in defending lawsuits arising from certain alleged acts of its
directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger, dated as of August 1, 1997, by
and among Post Properties, Inc., Post LP Holdings, Inc. and
Columbus Realty Trust (attached as Annex A to the Joint
Proxy Statement/Prospectus forming a part of this
Registration Statement).
3.1 -- Articles of Incorporation of Post Properties, Inc.
(incorporated by reference to Exhibit 3.1 of Post
Properties, Inc.'s Registration Statement on Form S-11 (File
No. 33-61936).
3.2 -- Bylaws of Post Properties, Inc. (incorporated by reference
to Exhibit 3.2 to Post Properties, Inc. Registration
Statement on Form S-11 (File No. 33-61936)).
5.1* -- Opinion of King & Spalding regarding the validity of the
securities being registered.
8.1* -- Opinion of King & Spalding regarding certain tax aspects of
the Merger.
8.2* -- Opinion of King & Spalding regarding REIT qualification of
Post Properties, Inc. and the surviving company in the
Merger.
8.3* -- Opinion of Winstead Sechrest & Minick P.C. regarding certain
tax aspects of the Merger.
8.4* -- Opinion of Winstead Sechrest & Minick P.C. regarding REIT
qualification of Columbus Realty Trust and the surviving
company in the Merger.
23.1* -- Consent of King & Spalding (included as part of its opinions
filed as Exhibits 5.1, 8.1 and 8.2).
23.2 -- Consent of Price Waterhouse LLP, independent accountants.
23.3 -- Consent of Ernst & Young LLP, independent auditors.
23.4* -- Consent of Winstead Sechrest & Minick P.C. (included in as
part of its opinions filed as Exhibits 8.3 and 8.4).
23.5 -- Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
</TABLE>
II-5
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
23.6 -- Consent of Prudential Securities Incorporated.
99.1 -- Opinion of Merrill, Lynch Pierce, Fenner & Smith
Incorporated (included as Annex B to the Proxy Statement).
99.2 -- Opinion of Prudential Securities Incorporated (included as
Annex C to the Proxy Statement).
</TABLE>
- ---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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<PAGE> 163
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia on the 2nd day of
September, 1997.
POST PROPERTIES, INC.
By: /s/ JOHN A. WILLIAMS
------------------------------------
John A. Williams
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Post Properties, Inc., do
hereby constitute and appoint John T. Glover, Timothy A. Peterson and Sherry W.
Cohen, and each and any of them, our true and lawful attorneys-in-fact and
agents, to do any and all acts and things in our names and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorneys and
agents, or any of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this registration statement, or any registration statement for this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on September 2, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JOHN A. WILLIAMS Chairman of the Board of Directors, Chief
- ----------------------------------------------------- Executive Officer and Director (Principal
John A. Williams Executive Officer)
/s/ JOHN T. GLOVER President, Chief Operating Officer, Treasurer
- ----------------------------------------------------- and Director (Principal Financial Officer)
John T. Glover
/s/ R. GREGORY FOX Senior Vice President (Principal Accounting
- ----------------------------------------------------- Officer)
R. Gregory Fox
/s/ ARTHUR M. BLANK Director
- -----------------------------------------------------
Arthur M. Blank
/s/ HERSCHEL M. BLOOM Director
- -----------------------------------------------------
Herschel M. Bloom
</TABLE>
II-8
<PAGE> 165
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
Director
/s/ RUSSELL R. FRENCH
- -----------------------------------------------------
Russell R. French
/s/ WILLIAM A. PARKER, JR. Director
- -----------------------------------------------------
William A. Parker, Jr.
/s/ J. C. SHAW Director
- -----------------------------------------------------
J. C. Shaw
</TABLE>
II-9
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Post Properties, Inc. of our report dated February 11, 1997 appearing on
page 34 of Post Properties, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Joint Proxy
Statement/Prospectus. However, it should be noted that Price Waterhouse LLP
has not prepared or certified such "Selected Financial Data."
Price Waterhouse LLP
Atlanta, Georgia
August 28, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Registration Statement on Form S-4 and the
related Joint Proxy Statement/Prospectus of Post Properties, Inc. and Columbus
Realty Trust of our report dated January 28, 1997, except for Note 15, as
to which the date is March 7, 1997, with respect to the consolidated financial
statements and schedule of Columbus Realty Trust as of December 31, 1996 and
1995 and for the three years ended December 31, 1996, included in its Annual
Report on Form 10-K/A for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Dallas, Texas
September 2, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use of our opinion letter dated August 1, 1997 to the
Board of Directors of Post Properties, Inc. included as "Annex B" to the Joint
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of Post LP Holdings, Inc., a wholly
owned subsidiary of Post Properties, Inc. with Columbus Realty Trust and to the
references to such opinion in such Joint Proxy Statement/Prospectus under the
captions "Summary--Opinions of Financial Advisors," "The Merger--Opinions of
Financial Advisors," "The Merger--Background of and Reasons for the Merger" and
"The Merger--Post's Reasons for the Merger" and to the inclusion of the
foregoing opinion as "Annex B" to the Joint Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended (the "Securities Act") or the rules and regulations of the
Securities and Exchange Commission ("SEC") thereunder, nor do we thereby admit
that we are experts with respect to any part of such Registration Statement
within the meaning of the term "experts" as used in the Securities Act or the
rules and regulations of the SEC thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH, INCORPORATED
New York, New York
September 3, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
Reference is made to our opinion letter addressed to you dated August 1, 1997
(the "Opinion") with respect to the fairness of the Merger Consideration to the
holders of outstanding shares of common stock of Columbus Realty Trust (the
"Company"). The capitalized terms not otherwise defined herein have the
meaning assigned to such terms in the Registration Statement Form S-4
(the "S-4").
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the Merger and is not to be used, circulated, quoted or otherwise referred
to for any other purpose, nor is it to be filed with, included in or referred to
in whole or in part in any registration statement, proxy statement or any other
document except in accordance with our prior written consent. We understand
that the Company is required to include the Opinion in the Joint Proxy
Statement/Prospectus related to the Merger.
In that regard, we hereby consent to the references to the Prudential
Securities fairness opinion in the Joint Proxy Statement/Prospectus which forms
part of the S-4 to be filed with the Securities and Exchange Commission (the
"SEC") on September 3, 1997 in connection with the Merger under the captions
"Summary - Opinions of Financial Advisors," "The Merger - Opinions of Financial
Advisors, "The Merger - Background of and Reasons for the Merger" and "The
Merger - Columbus' Reasons for the Merger," and to the inclusion of the
foregoing opinion as "Annex C" to the above mentioned Joint Proxy
Statement/Prospectus. In giving such consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the rules and regulations of the SEC
thereunder, nor do we admit that we are experts with respect to any part of
such Registration Statement within the meaning of "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the SEC
thereunder.
Prudential Securities Incorporated
New York, New York
September 3, 1997
