<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file numbers 1-12080 and 0-28226
------------------------
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1550675
GEORGIA 58-2053632
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4401 NORTHSIDE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30327
(Address of principal executive offices -- zip code)
(404) 846-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Post Properties, Inc. Yes [X] No [ ]
Post Apartment Homes, L.P. Yes [X] No [ ]
------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
38,775,629 shares of common stock outstanding as of November 10, 1999.
43,969,054 common units outstanding as of November 10, 1999.
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<PAGE> 2
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
ITEM 1 FINANCIAL STATEMENTS
POST PROPERTIES, INC.
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998....................1
Consolidated Statements of Operations for the three and nine months ended
September 30, 1999 and 1998................................................................2
Consolidated Statement of Shareholders' Equity and Accumulated Earnings for the
nine months ended September 30, 1999.......................................................3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998................................................................4
Notes to Consolidated Financial Statements....................................................5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998....................9
Consolidated Statements of Operations for the three and nine months ended
September 30, 1999 and 1998...............................................................10
Consolidated Statement of Partners' Equity for the nine months ended
September 30, 1999........................................................................11
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998...............................................................12
Notes to Consolidated Financial Statements ..................................................13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................................17
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................31
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS......................................................................32
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDER
ITEM 5 OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.......................................................33
SIGNATURES.......................................................................................34
</TABLE>
<PAGE> 3
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land .................................................................. $ 278,035 $ 252,922
Building and improvements ............................................. 1,573,988 1,379,847
Furniture, fixtures and equipment ..................................... 135,568 108,233
Construction in progress .............................................. 477,872 480,267
Land held for future development ...................................... 16,780 33,805
----------- -----------
2,482,243 2,255,074
Less: accumulated depreciation ........................................ (287,841) (247,148)
----------- -----------
Real estate assets .................................................... 2,194,402 2,007,926
Cash and cash equivalents ............................................... 6,365 21,154
Restricted cash ......................................................... 1,775 1,348
Deferred charges, net ................................................... 21,348 18,686
Other assets ............................................................ 33,508 17,599
----------- -----------
Total assets .......................................................... $ 2,257,398 $ 2,066,713
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable ........................................................... $ 893,400 $ 800,008
Accrued interest payable ................................................ 10,971 7,609
Dividends and distributions payable ..................................... 31,097 25,115
Accounts payable and accrued expenses ................................... 65,183 48,214
Security deposits and prepaid rents ..................................... 8,888 8,716
----------- -----------
Total liabilities ..................................................... 1,009,539 889,662
----------- -----------
Minority interest of preferred unitholders in Operating Partnership ..... 70,000 --
Minority interest of common unitholders in Operating Partnership ........ 122,786 125,365
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value, 20,000,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation
preference $50 per share, 1,000,000 shares issued and outstanding ... 10 10
7 5/8% Series B Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ......................................................... 20 20
7 5/8% Series C Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ......................................................... 20 20
Common stock, $.01 par value, 100,000,000 authorized,
38,604,557 and 38,051,734 shares issued and outstanding at
September 30, 1999 and December 31, 1998, respectively .............. 386 380
Additional paid-in capital .............................................. 1,054,637 1,051,256
Accumulated earnings .................................................... -- --
----------- -----------
Total shareholders' equity ............................................ 1,055,073 1,051,686
----------- -----------
Total liabilities and shareholders' equity ............................ $ 2,257,398 $ 2,066,713
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-1-
<PAGE> 4
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUE:
Rental ................................................... $ 81,162 $ 71,310 $ 234,845 $ 202,162
Property management - third-party ........................ 795 792 2,434 2,309
Landscape services - third-party ......................... 2,244 1,765 6,479 4,945
Interest ................................................. 194 83 564 387
Other .................................................... 3,763 3,019 10,120 9,606
------------ ------------ ------------ ------------
Total revenue ........................................ 88,158 76,969 254,442 219,409
------------ ------------ ------------ ------------
EXPENSES:
Property operating and maintenance expense
(exclusive of depreciation and amortization) ......... 29,126 25,814 83,949 73,946
Depreciation expense ..................................... 15,126 11,965 42,121 34,246
Property management expenses - third-party ............... 755 659 2,179 1,857
Landscape services expenses - third-party ................ 1,859 1,571 5,614 4,372
Interest expense ......................................... 8,707 7,795 24,075 23,488
Amortization of deferred loan costs ...................... 407 318 1,113 876
General and administrative ............................... 1,343 1,869 5,251 5,701
Minority interest in consolidated property partnerships .. 209 153 485 351
------------ ------------ ------------ ------------
Total expense ....................................... 57,532 50,144 164,787 144,837
------------ ------------ ------------ ------------
Income before net loss on sale of assets, loss on unused
treasury locks, minority interest of unitholders in
Operating Partnership and extraordinary item ............. 30,626 26,825 89,655 74,572
Net loss on sale of assets ................................. (246) -- (1,337) --
Loss on unused treasury locks .............................. -- -- -- (1,944)
Minority interest of preferred unitholders in
Operating Partnership .................................... (435) -- (435) --
Minority interest of common unitholders in
Operating Partnership .................................... (3,206) (3,022) (9,435) (8,434)
------------ ------------ ------------ ------------
Income before extraordinary item ........................... 26,739 23,803 78,448 64,194
Extraordinary item, net of minority interest of
unitholders in Operating Partnership ..................... -- -- (458) --
------------ ------------ ------------ ------------
Net income ................................................. 26,739 23,803 77,990 64,194
Dividends to preferred shareholders ........................ (2,969) (2,969) (8,907) (8,504)
------------ ------------ ------------ ------------
Net income available to common shareholders ................ $ 23,770 $ 20,834 $ 69,083 $ 55,690
============ ============ ============ ============
EARNINGS PER COMMON SHARE - BASIC
Income before extraordinary item (net of preferred
dividend) .............................................. $ 0.62 $ 0.58 $ 1.81 $ 1.62
Extraordinary item ....................................... -- -- (0.01) --
------------ ------------ ------------ ------------
Net income available to common shareholders .............. $ 0.62 $ 0.58 $ 1.80 $ 1.62
============ ============ ============ ============
Weighted average common shares outstanding ................. 38,574,434 36,007,167 38,361,877 34,351,747
============ ============ ============ ============
EARNINGS PER COMMON SHARE - DILUTED
Income before extraordinary item (net of preferred
dividend) .............................................. $ 0.61 $ 0.57 $ 1.79 $ 1.60
Extraordinary item ....................................... -- -- (0.01) --
------------ ------------ ------------ ------------
Net income available to common shareholders .............. 0.61 0.57 $ 1.78 $ 1.60
============ ============ ============ ============
Weighted average common shares outstanding ............... 39,122,421 36,433,862 38,827,381 34,823,164
============ ============ ============ ============
Dividends declared ....................................... $ 0.70 $ 0.65 $ 2.10 $ 1.95
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-2-
<PAGE> 5
POST PROPERTIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED COMMON PAID-IN ACCUMULATED
SHARES SHARES CAPITAL EARNINGS TOTAL
-------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 1998............................ $ 50 $ 380 $1,051,256 $ -- $1,051,686
Proceeds from Dividend Reinvestment and
Employee Stock Purchase Plans............... -- 6 15,667 -- 15,673
Selling costs of redeemable preferred units.. -- -- (1,750) -- (1,750)
Adjustment for minority interest of common
unitholders in Operating Partnership at
dates of capital transactions............... -- -- 1,023 -- 1,023
Net income................................... -- -- -- 77,990 77,990
Dividends to preferred shareholders.......... -- -- -- (8,907) (8,907)
Dividends to common shareholders............. -- -- (11,559) (69,083) (80,642)
-------- ---------- ---------- ---------- ---------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
SEPTEMBER 30, 1999........................... $ 50 $ 386 $1,054,637 $ -- $1,055,073
======== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE> 6
POST PROPERTIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................................... $ 77,990 $ 64,194
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss on sale of assets ............................................................. 1,337 --
Loss on unused treasury locks .......................................................... -- 1,944
Minority interest of preferred unitholders in Operating Partnership .................... 435 --
Minority interest of common unitholders in Operating Partnership ....................... 9,435 8,434
Extraordinary item, net of minority interest of unitholders in Operating Partnership ... 458 --
Depreciation ........................................................................... 42,121 34,246
Amortization of deferred loan costs .................................................... 1,113 876
Other .................................................................................. -- 168
Changes in assets, (increase) decrease in:
Restricted cash ........................................................................ (427) 453
Other assets ........................................................................... (15,909) 1,830
Deferred charges ....................................................................... (3,657) (5,325)
Changes in liabilities, increase (decrease) in:
Accrued interest payable ............................................................... 3,362 3,430
Accounts payable and accrued expenses .................................................. 5,583 (9,271)
Security deposits and prepaid rents .................................................... 172 722
--------- ---------
Net cash provided by operating activities ................................................ 122,013 101,701
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables ...................... (194,459) (193,062)
Net proceeds from sale of assets ......................................................... 10,731 --
Capitalized interest ..................................................................... (14,710) (11,123)
Payment for unused treasury locks ........................................................ -- (1,944)
Recurring capital expenditures ........................................................... (7,283) (4,952)
Corporate additions and improvements ..................................................... (6,240) (7,772)
Non-recurring capital expenditures ....................................................... (1,553) (1,098)
Revenue generating capital expenditures .................................................. (4,178) (11,842)
--------- ---------
Net cash used in investing activities .................................................... (217,692) (231,793)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs ............................................................... (1,495) --
Debt proceeds ............................................................................ 169,000 111,227
Proceeds from sale of notes .............................................................. -- 150,000
Proceeds from issuance of preferred units ................................................ 68,250 --
Proceeds from issuance of preferred shares ............................................... -- 48,284
Proceeds from issuance of common shares .................................................. -- 186,893
Debt payments ............................................................................ (75,608) (295,108)
Distributions to common unitholders ...................................................... (10,679) (9,886)
Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans .................... 15,673 14,341
Dividends paid to preferred shareholders ................................................. (8,907) (8,504)
Dividends paid to common shareholders .................................................... (75,344) (63,801)
--------- ---------
Net cash provided by financing activities ................................................ 80,890 133,446
--------- ---------
Net (decrease) increase in cash and cash equivalents ..................................... (14,789) 3,354
Cash and cash equivalents, beginning of period ........................................... 21,154 10,879
--------- ---------
Cash and cash equivalents, end of period ................................................. $ 6,365 $ 14,233
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE> 7
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Properties, Inc. (the "Company"), which was incorporated on January 25,
1984, is the successor by merger to the original Post Properties, Inc., a
Georgia corporation which was formed in 1971. The Company was formed to
develop, lease and manage upscale multi-family apartment communities.
The Company elected to be taxed as a real estate investment trust ("REIT")
for Federal income tax purposes beginning with the taxable year ended
December 31, 1993. A REIT is a legal entity which holds real estate
interests and, through payments of dividends to shareholders, in practical
effect is not subject to Federal income taxes at the corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information and applicable rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normally
recurring adjustments) considered necessary for a fair presentation have
been included. The results of operations for the nine-month period ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's audited financial statements and notes
thereto included in the Post Properties, Inc. Annual Report on Form 10-K for
the year ended December 31, 1998. Certain 1998 amounts have been
reclassified to conform to the current year's financial statement
presentation.
2. NOTES PAYABLE
Post Apartment Homes, L.P. (the "Operating Partnership") has established a
program for the sale of up to $344,000 aggregate principal amount of
Medium-Term Notes due three months or more from date of issue (the "MTN
Program"). As of September 30, 1999, the Operating Partnership had $231,000
aggregate principal amount of notes outstanding under the MTN Program.
On July 23, 1999, the Operating Partnership issued $104 million of secured
notes to the Federal National Mortgage Association ("FNMA"). These notes
bear interest at 30-day LIBOR (capped at 7% for one year) plus credit
enhancement, liquidity and service fees of .935%, mature on July 23, 2029
and are secured by five apartment communities. The Operating Partnership has
an option to call these notes after 10 years from the issuance date. Net
proceeds of $101,998 were used to repay outstanding indebtedness.
On May 7, 1999, the Operating Partnership amended its syndicated unsecured
line of credit (the "Revolver") to increase its maximum capacity to $350
million. Currently, $340 million of the Revolver is subscribed and available
to the Operating Partnership. Borrowing under the Revolver bears interest at
LIBOR plus .825% or prime minus .25%. The Revolver matures on April 30,
2002.
On March 30, 1999, the Operating Partnership issued $50 million of secured
notes to an insurance company. These notes bear interest at 6.5% (with an
effective rate of 7.3% after consideration of a terminated swap agreement),
mature on March 1, 2009 and are secured by two apartment communities. Net
proceeds of $49,933 were used to repay outstanding indebtedness.
-5-
<PAGE> 8
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
3. PREFERRED UNITS
On September 3, 1999, the Operating Partnership issued $70 million of Series
D Cumulative Redeemable Preferred Units of limited partnership interest (the
"Series D Preferred Units") to an institutional investor in a private
placement meeting the requirements of Regulation D promulgated under the
Securities Act of 1933, as amended. Net proceeds to the Operating
Partnership of approximately $68 million were used to repay outstanding
indebtedness.
4. EARNINGS PER SHARE
For the three and nine months ended September 30, 1999 and 1998, a
reconciliation of the numerator and denominator used in the computation of
basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic and diluted income available to common
Shareholders (numerator):
Income before extraordinary item ............... $ 26,739 $ 23,803 $ 78,448 $ 64,194
Less: Preferred stock dividends .............. (2,969) (2,969) (8,907) (8,504)
------------ ------------ ------------ ------------
Income available to common shareholders
Before extraordinary item .................... $ 23,770 $ 20,834 $ 69,541 $ 55,690
============ ============ ============ ============
Common shares (denominator):
Weighted average shares outstanding - basic ...... 38,574,434 36,007,167 38,361,877 34,351,747
Incremental shares from assumed conversion
of options ................................... 547,987 426,695 465,504 471,417
------------ ------------ ------------ ------------
Weighted average shares outstanding - diluted .. 39,122,421 36,433,862 38,827,381 34,823,164
============ ============ ============ ============
</TABLE>
5. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the nine months ended
September 30, 1999 and 1998 were as follows:
During the nine months ended September 30, 1999 and 1998, holders of 17,299
and 750 units, respectively, in the Operating Partnership exercised their
option to convert their units to shares of Common Stock of the Company on a
one-for-one basis. These conversions resulted in adjustments to minority
interest for the dilutive impact of the Dividend Reinvestment and Employee
Stock Purchase Plans and capital transactions. The net effect of the
conversions and adjustments was a reclassification decreasing minority
interest and increasing shareholder's equity in the amount of $1,023 for the
nine months ended September 30, 1999 and increasing minority interest and
decreasing shareholders' equity in the amount of $10,518 for the nine months
ended September 30, 1998.
6. NEW ACCOUNTING PRONOUNCEMENT
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133, as
amended by FAS 137, "Deferral of the Effective Date of FAS 133," is
effective for all fiscal quarters of all fiscal years beginning after June
15, 2000 (January 1, 2001 for the Company). FAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. Management of the Company anticipates
-6-
<PAGE> 9
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
that, due to its limited use of derivative instruments, the adoption of FAS
133 will not have a significant effect on the Company's results of
operations or its financial position.
7. SEGMENT INFORMATION
SEGMENT DESCRIPTION
The Company adopted SFAS No. 131, "Disclosure About the Segments of an
Enterprise and Related Information" in the fourth quarter of 1998. SFAS No.
131 requires companies to present segment information based on the way that
management organizes the segments within the enterprise for making operating
decisions and assessing performance. The segment information is prepared on
substantially the same basis as the internally reported information used by
the Company's chief operating decision makers to manage the business.
The Company's chief operating decision makers focus on the Company's primary
sources of income, which are property rental operations and third party
services. Property rental operations are broken down into four segments
based on the various stages in the property ownership lifecycle. Third party
services are designated as one segment. The Company's five segments are
further described as follows:
Property Rental Operations
- Fully stabilized communities - those apartment communities which have
been stabilized (the point at which a property reaches 95% occupancy or
one year after completion of construction) for both the current and
prior year.
- Communities stabilized during 1998 - communities which reached
stabilized occupancy in the prior year.
- Development and lease up communities - those communities which are in
lease-up but were not stabilized by the beginning of the current year,
including communities which stabilized during the current year.
- Sold communities - communities which were sold in the current or prior
year.
Third Party Services - fee income and related expenses from the Company's
apartment community management, landscaping and corporate apartment rental
services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the
performance measure for its segments. FFO is defined by the National
Association of Real Estate Investment Trusts as net income available to
common shareholders determined in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the Company's
needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to FFO together
with a reconciliation of segment contribution to FFO, total FFO and income
before extraordinary item and preferred dividends. Additionally,
substantially all of the Company's assets relate to the Company's property
rental operations. Asset cost, depreciation and amortization by segment are
not presented because such information is not reported internally at the
segment level.
-7-
<PAGE> 10
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
Summarized financial information concerning the Company's reportable segments is
shown in the following tables:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Fully stabilized communities............... $ 59,945 $ 58,081 $ 177,231 $ 171,488
Communities stabilized during 1998......... 5,601 5,166 16,620 13,709
Development and lease-up communities....... 15,704 6,851 40,077 14,114
Sold communities........................... -- 877 318 3,493
Third party services....................... 3,039 2,557 8,913 7,254
Other...................................... 3,869 3,437 11,283 9,351
-------------- -------------- -------------- ------------
Consolidated revenues...................... $ 88,158 $ 76,969 $ 254,442 $ 219,409
============== ============== ============== ============
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities............... $ 41,225 $ 39,559 $ 122,298 $ 116,942
Communities stabilized during 1998......... 3,753 3,590 11,297 9,295
Development and lease-up communities....... 9,915 3,503 24,474 6,526
Sold communities........................... -- 720 190 3,024
Third party services....................... 425 327 1,120 1,025
-------------- -------------- -------------- ------------
Contribution to FFO........................ 55,318 47,699 159,379 136,812
-------------- -------------- -------------- ------------
Other operating income, net of expense..... 268 1,226 2,489 2,422
Depreciation on non-real estate assets..... (511) (467) (1,409) (939)
Minority interest in consolidated property
Partnerships............................ (209) (153) (485) (351)
Interest expense........................... (8,707) (7,795) (24,075) (23,488)
Amortization of deferred loan costs........ (407) (318) (1,113) (876)
General and administrative................. (1,343) (1,869) (5,251) (5,701)
Dividends to preferred shareholders........ (2,969) (2,969) (8,907) (8,504)
-------------- -------------- -------------- ------------
Total FFO.................................. 41,440 35,354 120,628 99,375
-------------- -------------- -------------- ------------
Depreciation on real estate assets......... (14,218) (11,498) (40,315) (33,307)
Net loss on sale of assets................. (246) -- (1,337) --
Loss on unused treasury locks.............. -- -- -- (1,944)
Minority interest of unitholders in
Operating Partnership................... (3,206) (3,022) (9,435) (8,434)
Dividends to preferred shareholders........ 2,969 2,969 8,907 8,504
-------------- -------------- ----------- ------------
Income before extraordinary item
and preferred dividends................. $ 26,739 $ 23,803 $ 78,448 $ 64,194
============== ============== ============== ============
</TABLE>
-8-
<PAGE> 11
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land ...................................... $ 278,035 $ 252,922
Building and improvements ................. 1,573,988 1,379,847
Furniture, fixtures and equipment ......... 135,568 108,233
Construction in progress .................. 477,872 480,267
Land held for future development .......... 16,780 33,805
----------- -----------
2,482,243 2,255,074
Less: accumulated depreciation ............ (287,841) (247,148)
----------- -----------
Operating real estate assets .............. 2,194,402 2,007,926
Cash and cash equivalents ................... 6,365 21,154
Restricted cash ............................. 1,775 1,348
Deferred charges, net ....................... 21,348 18,686
Other assets ................................ 33,508 17,599
----------- -----------
Total assets ................................... $ 2,257,398 $ 2,066,713
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Notes payable ............................... $ 893,400 $ 800,008
Accrued interest payable .................... 10,971 7,609
Distributions payable ....................... 31,097 25,115
Accounts payable and accrued expenses ....... 65,183 48,214
Security deposits and prepaid rents ......... 8,888 8,716
----------- -----------
Total liabilities ......................... 1,009,539 889,662
----------- -----------
Commitments and contingencies
Partners' equity ............................ 1,247,859 1,177,051
----------- -----------
Total liabilities and partners' equity .... $ 2,257,398 $ 2,066,713
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-9-
<PAGE> 12
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Rental ..................................................... $ 81,162 $ 71,310 $ 234,845 $ 202,162
Property management - third party .......................... 795 792 2,434 2,309
Landscape services - third party ........................... 2,244 1,765 6,479 4,945
Interest ................................................... 194 83 564 387
Other ...................................................... 3,763 3,019 10,120 9,606
------------ ------------ ------------ ------------
Total revenue .......................................... 88,158 76,969 254,442 219,409
------------ ------------ ------------ ------------
EXPENSES
Property operating and maintenance expense (exclusive
of items shown separately below) ......................... 29,126 25,814 83,949 73,946
Depreciation expense ....................................... 15,126 11,965 42,121 34,246
Property management - third party .......................... 755 659 2,179 1,857
Landscape services expense - third party ................... 1,859 1,571 5,614 4,372
Interest expense ........................................... 8,707 7,795 24,075 23,488
Amortization of deferred loan costs ........................ 407 318 1,113 876
General and administrative ................................. 1,343 1,869 5,251 5,701
Minority interest in consolidated property partnerships .... 209 153 485 351
------------ ------------ ------------ ------------
Total expenses ............................................ 57,532 50,144 164,787 144,837
------------ ------------ ------------ ------------
Income before net loss on sale of assets, loss on
unused treasury locks and extraordinary item .............. 30,626 26,825 89,655 74,572
Net loss on sale of assets ................................. (246) -- (1,337) --
Loss on unused treasury locks .............................. -- -- -- (1,944)
------------ ------------ ------------ ------------
Income before extraordinary item ........................... 30,380 26,825 88,318 72,628
Extraordinary item ......................................... -- -- (521) --
------------ ------------ ------------ ------------
Net income ................................................. 30,380 26,825 87,797 72,628
Distributions to preferred unitholders ..................... (3,404) (2,969) (9,342) (8,504)
------------ ------------ ------------ ------------
Net income available to common unitholders ................. $ 26,976 $ 23,856 $ 78,455 $ 64,124
============ ============ ============ ============
EARNINGS PER COMMON UNIT - BASIC
Income before extraordinary item (net of preferred
distributions) ............................................ $ 0.62 $ 0.58 $ 1.81 $ 1.62
Extraordinary item ......................................... -- -- (0.01) --
------------ ------------ ------------ ------------
Net income available to common unitholders ................. $ 0.62 $ 0.58 1.80 $ 1.62
============ ============ ============ ============
Weighted average common units outstanding .................. 43,772,859 41,222,891 43,567,297 39,567,512
============ ============ ============ ============
EARNINGS PER COMMON UNIT- DILUTED
Income before extraordinary item (net of preferred
distributions) ............................................ $ 0.61 $ 0.57 $ 1.79 $ 1.60
Extraordinary item ......................................... -- -- (0.01) --
------------ ------------ ------------ ------------
Net income available to common unitholders ................. $ 0.61 $ 0.57 $ 1.78 $ 1.60
============ ============ ============ ============
Weighted average common units outstanding .................. 44,320,846 41,649,586 44,032,801 40,038,929
============ ============ ============ ============
Distributions declared .................................... $ 0.70 $ 0.65 $ 2.10 $ 1.95
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-10-
<PAGE> 13
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ----------- -----------
<S> <C> <C> <C>
PARTNERS' EQUITY, DECEMBER 31, 1998 ................... $ 11,795 $ 1,165,256 $ 1,177,051
Contributions from the Company related to Dividend
Reinvestment and Employee Stock Purchase Plans ........ 157 15,516 15,673
Proceeds from the sale of preferred units ............. -- 68,250 68,250
Distributions to preferred unitholders ................ -- (9,342) (9,342)
Distributions to common unitholders ................... (916) (90,654) (91,570)
Net income ............................................ 878 86,919 87,797
--------- ----------- -----------
PARTNERS' EQUITY, SEPTEMBER 30, 1999 .................. $ 11,914 $ 1,235,945 $ 1,247,859
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-11-
<PAGE> 14
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................. $ 87,797 $ 72,628
Adjustments to reconcile net income to net cash provided
by operating activities:
Net loss on sale of assets .............................................. 1,337 --
Loss on unused treasury locks ........................................... -- 1,944
Extraordinary item ..................................................... 521 --
Depreciation ........................................................... 42,121 34,246
Amortization of deferred loan costs .................................... 1,113 876
Other .................................................................. -- 168
Changes in assets, (increase) decrease in:
Restricted cash ...................................................... (427) 453
Other assets ......................................................... (15,909) 1,830
Deferred charges ..................................................... (3,657) (5,325)
Changes in liabilities, increase (decrease) in:
Accrued interest payable ............................................. 3,362 3,430
Accounts payable and accrued expenses ................................ 5,583 (9,271)
Security deposits and prepaid rents .................................. 172 722
--------- ---------
Net cash provided by operating activities .............................. 122,013 101,701
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets,
net of payables ...................................................... (194,459) (193,062)
Net proceeds from sale of assets ....................................... 10,731 --
Capitalized interest ................................................... (14,710) (11,123)
Payment for unused treasury locks ...................................... -- (1,944)
Recurring capital expenditures ......................................... (7,283) (4,952)
Corporate additions and improvements ................................... (6,240) (7,772)
Non-recurring capital expenditures ..................................... (1,553) (1,098)
Revenue generating capital expenditures ................................ (4,178) (11,842)
--------- ---------
Net cash used in investing activities .................................. (217,692) (231,793)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs ............................................. (1,495) --
Debt proceeds .......................................................... 169,000 111,227
Proceeds from the sale of notes ........................................ -- 150,000
Proceeds from issuance of preferred units .............................. 68,250 48,284
Proceeds from issuance of common units ................................. -- 186,893
Debt payments .......................................................... (75,608) (295,108)
Proceeds from contributions from the Company related to Dividend
Reinvestment and Employee Stock Purchase Plans .......................... 15,673 14,341
Dividends paid to preferred unitholders ................................ (8,907) (8,504)
Dividends paid to common unitholders ................................... (86,023) (73,687)
--------- ---------
Net cash provided by financing activities .............................. 80,890 133,446
--------- ---------
Net (decrease) increase in cash and cash equivalents ................... (14,789) 3,354
Cash and cash equivalents, beginning of period ......................... 21,154 10,879
--------- ---------
Cash and cash equivalents, end of period ............................... $ 6,365 $ 14,233
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-12-
<PAGE> 15
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Apartment Homes, L.P. (the "Operating Partnership"), a Georgia limited
partnership, was formed on January 22, 1993, to conduct the business of
developing, leasing and managing upscale multi-family apartment communities
for Post Properties, Inc. (the "Company").
The Company elected to be taxed as a real estate investment trust ("REIT")
for Federal income tax purposes beginning with the taxable year ended
December 31, 1993. A REIT is a legal entity which holds real estate
interests and, through payments of dividends to shareholders, in practical
effect is not subject to Federal income taxes at the corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Operating Partnership's management in accordance with generally accepted
accounting principles for interim financial information and applicable
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normally recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the
nine-month period ended September 30, 1999 are not necessarily indicative
of the results that may be expected for the full year. These financial
statements should be read in conjunction with the Operating Partnership's
audited financial statements and notes thereto included in the Post
Apartment Homes, L.P. Annual Report on Form 10-K for the year ended
December 31, 1998. Certain 1998 amounts have been reclassified to conform
to the current year's financial statement presentation.
2. NOTES PAYABLE
The Operating Partnership has established a program for the sale of up to
$344,000 aggregate principal amount of Medium-Term Notes due three months
or more from date of issue (the "MTN Program"). As of September 30, 1999,
the Operating Partnership had $231,000 aggregate principal amount of notes
outstanding under the MTN Program.
On July 23, 1999, the Operating Partnership issued $104 million of secured
notes to FNMA. These notes bear interest at 30-day LIBOR (capped at 7% for
one year) plus credit enhancement, liquidity and service fees of .935%,
mature on July 23, 2029 and are secured by five apartment communities. The
Operating Partnership has an option to call these notes after 10 years from
the issuance date. Net proceeds of $101,998 were used to repay outstanding
indebtedness.
On May 7, 1999, the Operating Partnership amended its syndicated unsecured
line of credit (the "Revolver") to increase its maximum capacity to $350
million. Currently, $340 million of the Revolver is subscribed and
available to the Operating Partnership. Borrowing under the Revolver bears
interest at LIBOR plus .825% or prime minus .25%. The Revolver matures on
April 30, 2002.
On March 30, 1999, the Operating Partnership issued $50 million of secured
notes to an insurance company. These notes bear interest at 6.5% (with an
effective rate of 7.3% after consideration of a terminated interest rate
swap agreement) mature on March 1, 2009 and are secured by two apartment
communities. Net proceeds of $49,933 were used to repay outstanding
indebtedness.
-13-
<PAGE> 16
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
3. PREFERRED UNITS
On September 3, 1999, the Operating Partnership issued $70 million of
Series D Preferred Units to an institutional investor in a private
placement meeting the requirements of Regulation D promulgated under the
Securities Act of 1933, as amended. Net proceeds to the Operating
Partnership of approximately $68 million were used to repay outstanding
indebtedness.
4. EARNINGS PER UNIT
For the three and nine months ended September 30, 1999 and 1998, a
reconciliation of the numerator and denominator used in the computation of
basic and diluted earnings per unit is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Basic and diluted income available to common
Unitholders (numerator):
Income before extraordinary item ............... $ 30,380 $ 26,825 $ 88,318 $ 72,628
Less: Preferred unit distributions ........... (3,404) (2,969) (9,342) (8,504)
------------ ------------ ------------ ------------
Income available to common unitholders
Before extraordinary item .................... $ 26,976 $ 23,856 $ 78,976 $ 64,124
============ ============ ============ ============
Common units (denominator):
Weighted average units outstanding - basic ..... 43,772,859 41,222,891 43,567,297 39,567,512
Incremental units from assumed conversion
of options ................................... 547,987 426,695 465,504 471,417
------------ ------------ ------------ ------------
Weighted average units outstanding - diluted ... 44,320,846 41,649,586 44,032,801 40,038,929
============ ============ ============ ============
</TABLE>
5. NEW ACCOUNTING PRONOUNCEMENT
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133, as
amended by FAS 137, "Deferral of the Effective Date of FAS 133," is
effective for all fiscal quarters of all fiscal years beginning after June
15, 2000 (January 1, 2001 for the Operating Partnership). FAS 133 requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. Management of the Operating
Partnership anticipates that, due to its limited use of derivative
instruments, the adoption of FAS 133 will not have a significant effect on
the Operating Partnership's results of operations or its financial
position.
6. SEGMENT INFORMATION
SEGMENT DESCRIPTION
The Operating Partnership adopted SFAS No. 131, "Disclosure About the
Segments of an Enterprise and Related Information" in the fourth quarter of
1998. SFAS No. 131 requires companies to present segment information based
on the way that management organizes the segments within the enterprise for
making operating decisions and assessing performance. The segment
information is prepared on substantially the same basis as the internally
-14-
<PAGE> 17
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
reported information used by the Operating Partnership's chief operating
decision-makers to manage the business.
The Operating Partnership's chief operating decision-makers focus on the
Operating Partnership's primary sources of income, which are property
rental operations and third party services. Property rental operations are
broken down into four segments based on the various stages in the property
ownership lifecycle. Third party services are designated as one segment.
The Operating Partnership's five segments are further described as follows:
Property Rental Operations
- Fully stabilized communities - those apartment communities which have
been stabilized (the point in time which a property reached 95%
occupancy or one year after completion of construction) for both the
current and prior year.
- Communities stabilized during 1998 - communities which reached
stabilized occupancy in the prior year.
- Development and Lease up Communities - those communities which are in
lease-up but were not stabilized by the beginning of the current year
including communities which stabilized during the current year.
- Sold communities - communities which were sold in the current or prior
year.
Third Party Services - fee income and related expenses from the Operating
Partnership's apartment community management, landscaping and corporate
apartment rental services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the
performance measure for its segments. FFO is defined by the National
Association of Real Estate Investment Trusts as net income available to
common unitholders determined in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Operating
Partnership's financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the
Operating Partnership's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Operating Partnership's needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to FFO together
with a reconciliation of segment contribution to FFO, total FFO and income
before extraordinary item. Additionally, substantially all of the Operating
Partnership's assets relate to the Operating Partnership's property rental
operations. Asset cost, depreciation and amortization by segment are not
presented because such information is not reported internally at the
segment level.
-15-
<PAGE> 18
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
- --------------------------------------------------------------------------------
Summarized financial information concerning the Operating Partnership's
reportable segments is shown in the following tables.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
1999 1998 1999 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Fully stabilized communities ................. $ 59,945 $ 58,081 $ 177,231 $ 171,488
Communities stabilized during 1998 ........... 5,601 5,166 16,620 13,709
Development and lease-up communities ......... 15,704 6,851 40,077 14,114
Sold communities ............................. -- 877 318 3,493
Third party services ......................... 3,039 2,557 8,913 7,254
Other ........................................ 3,869 3,437 11,283 9,351
-------- -------- --------- ---------
Consolidated revenues ........................ $ 88,158 $ 76,969 $ 254,442 $ 219,409
======== ======== ========= =========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities ................. $ 41,225 $ 39,559 $ 122,298 $ 116,942
Communities stabilized during 1998 ........... 3,753 3,590 11,297 9,295
Development and lease-up communities ......... 9,915 3,503 24,474 6,526
Sold communities ............................. -- 720 190 3,024
Third party services ......................... 425 327 1,120 1,025
-------- -------- --------- ---------
Contribution to FFO .......................... 55,318 47,699 159,379 136,812
-------- -------- --------- ---------
Other operating income, net of expense ....... 703 1,226 2,924 2,422
Depreciation on non-real estate assets ....... (511) (467) (1,409) (939)
Minority interest in consolidated property
partnership .................................. (209) (153) (485) (351)
Interest expense ............................. (8,707) (7,795) (24,075) (23,488)
Amortization of deferred loan costs .......... (407) (318) (1,113) (876)
General and administrative ................... (1,343) (1,869) (5,251) (5,701)
Distributions to preferred unitholders ....... (3,404) (2,969) (9,342) (8,504)
-------- -------- --------- ---------
Total FFO .................................... 41,440 35,354 120,628 99,375
-------- -------- --------- ---------
Depreciation on real estate assets ........... (14,218) (11,498) (40,315) (33,307)
Net loss on sale of assets ................... (246) -- (1,337) --
Loss on unused treasury locks ................ -- -- -- (1,944)
Distributions to preferred unitholders ....... 3,404 2,969 9,342 8,504
-------- -------- --------- ---------
Income before extraordinary item and
preferred distributions ...................... $ 30,380 $ 26,825 $ 88,318 $ 72,628
======== ======== ========= =========
</TABLE>
-16-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with all of the financial
statements appearing elsewhere in this report. The following discussion is based
primarily on the Consolidated Financial Statements of Post Properties, Inc. (the
"Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except
for the effect of minority interest in the Operating Partnership, the following
discussion with respect to the Company is the same for the Operating
Partnership.
As of September 30, 1999, there were 43,802,982 common units in the Operating
Partnership outstanding, of which 38,604,557, or 88.1%, were owned by the
Company and 5,198,425, or 11.9%, were owned by other limited partners (including
certain officers and directors of the Company). As of September 30, 1999, there
were 7,800,000 preferred units outstanding, of which 5,000,000 were owned by the
Company.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
1998
The Company recorded net income available to common shareholders of $23,770 and
$69,083 for the three and nine months ended September 30, 1999, respectively.
These earnings represent increases of 14.1% and 24.0% over the corresponding
periods in 1998 primarily as a result of additional units placed in service
through the development of new communities and increases in rental rates on
existing units.
COMMUNITY OPERATIONS
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
As of September 30, 1999, the Company's portfolio of apartment communities
consisted of the following: (i) 68 communities which were completed and
stabilized for all of the current and prior year, (ii) seven communities which
achieved full stabilization during the prior year and (iii) 29 communities
either stabilized in the current year or presently in the development or
lease-up stages.
For communities with respect to which construction is completed and the
community has become fully operational, all property operating and maintenance
expenses are expensed as incurred and those recurring and non-recurring
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset are capitalized. (See "Capitalization of Fixed Assets and Community
Improvements").
Since its inception, the Company has applied an accounting policy related to
communities in the development and lease-up stage whereby substantially all
operating expenses (including pre-opening marketing expenses) are expensed as
incurred. The Company treats each unit in an apartment community separately for
cost accumulation, capitalization and expense recognition purposes. Prior to the
commencement of leasing activities, interest and other construction costs are
capitalized and reflected on the balance sheet as construction in progress. Once
a unit is placed in service, all operating expenses allocated to that unit,
including interest, are expensed as incurred. During the lease-up phase, the sum
of interest expense on completed units and other operating expenses (including
pre-opening marketing expenses)
-17-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
will typically exceed rental revenues, resulting in a "lease-up deficit," which
continues until such time as rental revenues exceed such expenses. Lease up
deficits for the three and nine months ended September 30, 1999 were $805 and
$1,901, respectively. Lease up deficits for the three and nine months ended
September 30, 1998 were $127 and $1,497, respectively.
In order to evaluate the operating performance of its communities, the Company
has presented financial information, which summarizes the operating income on a
comparative basis, for all of its operating communities combined and for
communities which have reached stabilization prior to January 1, 1998.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the three and nine months ended September 30, 1999 and 1998 is
summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1999 1998 %CHANGE 1999 1998 %CHANGE
--------- ---------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue:
Mature communities (1)...................... $ 59,945 $ 58,081 3.2% $177,231 $ 171,488 3.3%
Communities stabilized during 1998.......... 5,601 5,166 8.4% 16,620 13,709 21.2%
Development and lease-up communities (2).... 15,704 6,851 129.2% 40,077 14,114 184.0%
Sold communities (3)........................ -- 877 (100.0)% 318 3,493 (90.9)%
Other revenue (4)........................... 3,675 3,354 9.6% 10,719 8,964 19.6%
-------- --------- -------- ---------
84,925 74,329 14.3% 244,965 211,768 15.7%
-------- --------- -------- ---------
Property operating and maintenance expense
(exclusive of depreciation and amortization):
Mature communities (1)...................... 18,720 18,522 1.1% 54,933 54,546 0.7%
Communities stabilized during 1998.......... 1,848 1,576 17.3% 5,323 4,414 20.6%
Development and lease-up communities (2).... 5,789 3,348 72.9% 15,603 7,588 105.6%
Sold communities (3) ....................... -- 157 (100.0)% 128 469 (72.7)%
Other expenses (5).......................... 2,769 2,211 25.2% 7,962 6,929 14.9%
-------- --------- -------- ---------
29,126 25,814 12.8% 83,949 73,946 13.5%
-------- --------- -------- ---------
Revenue in excess of specified expense...... $ 55,799 $ 48,515 15.0% $161,016 $ 137,822 16.8%
======== ========= ======== =========
Recurring capital expenditures: (6)
Carpet.................................... $ 763 $ 645 18.3% $ 2,170 $ 1,849 17.4%
Other..................................... 1,841 1,266 45.4% 5,113 3,103 64.7%
-------- --------- ------- ---------
Total..................................... $ 2,604 $ 1,911 36.3% $ 7,283 $ 4,952 47.1%
======== ========= ======= =========
Average apartment units in service.......... 29,763 27,779 7.1% 29,291 27,127 8.0%
======== ========= ======= =========
Recurring capital expenditures per
apartment unit............................ $ 87 $ 69 26.1% $ 249 $ 183 36.1%
======== ========= ======= =========
</TABLE>
(1) Communities which reached stabilization prior to January 1, 1998.
(2) Communities in the "construction", "development" or "lease-up" stage during
1998 and, therefore, not considered fully stabilized for all of the periods
presented.
(3) Includes one community, containing 198 units, which was sold on March 19,
1999.
(4) Includes revenue from furnished apartment rentals above the unfurnished
rental rates, revenue from commercial properties and other revenue not
directly related to property operations.
-18-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
(5) Includes certain indirect central office operating expenses related to
management, grounds maintenance, costs associated with furnished apartment
rentals and operating expenses from commercial properties.
(6) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
For the three and nine months ended September 30, 1999, rental and other revenue
increased $10,596, or 14.3%, and $33,197, or 15.7%, respectively, compared to
the same periods in the prior year primarily as a result of the completion of
new communities and increased rental rates for existing communities. For the
three and nine months ended September 30, 1999, property operating and
maintenance expenses increased $3,312, or 12.8%, and $10,003, or 13.5%,
respectively, compared to the same periods in the prior year, primarily as a
result of the completion of new communities.
For the three and nine months ended September 30, 1999, recurring capital
expenditures increased $693, or 36.3% ($18, or 26.1%, on a per unit apartment
basis), and $2,331, or 47.1% ($66, or 36.1%, on a per unit apartment basis),
respectively, compared to the same periods in the prior year, primarily due to
the completion of new communities and the timing of capital expenditures.
-19-
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
MATURE COMMUNITIES
The Company defines mature communities as those that have reached stabilization
prior to the beginning of the previous calendar year.
The operating performance of the 68 communities containing an aggregate of
23,462 units that were fully stabilized as of January 1, 1998, is summarized as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- ----------------------------------
% %
1999 1998 CHANGE 1999 1998 CHANGE
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue (1) ................. $59,945 $58,081 3.2% $177,231 $171,488 3.3%
Property operating and maintenance
expense (exclusive of depreciation and
amortization) (1) ......................... 18,720 18,522 1.1% 54,933 54,546 0.7%
------- ------- -------- --------
Revenue in excess of specified expense ....... $41,225 $39,559 4.2% $122,298 $116,942 4.6%
------- ------- -------- --------
Recurring capital expenditures: (2)
Carpet .................................... $ 763 $ 634 20.3% $ 2,159 $ 1,786 20.9%
Other ..................................... 1,758 1,593 10.4% 4,831 3,371 43.3%
------- ------- -------- --------
Total ..................................... $ 2,521 $ 2,227 13.2% $ 6,990 $ 5,157 35.5%
======= ======= -------- --------
Recurring capital expenditures per
apartment unit (3) ........................ $ 107 $ 95 12.6% $ 298 $ 220 35.5%
======= ======= ======== ========
Average economic occupancy (4) ............... 96.8% 97.2% (0.4)% 96.5% 96.8% (0.3)%
======= ======= ======== ========
Average monthly rental rate per
apartment unit (5) ........................ $ 856 $ 830 3.1% $ 846 $ 823 2.8%
======= ======= ======== ========
Apartment units in service ................... 23,462 23,462 $ 23,462 $ 23,462
======= ======= ======== ========
</TABLE>
(1) Communities which reached stabilization prior to January 1, 1998.
(2) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
(3) In addition to such capitalized expenditures, the Company expensed $170 and
$180 per unit on building maintenance (inclusive of direct salaries) and
$49 and $52 per unit on landscaping (inclusive of direct salaries) for the
three months ended September 30, 1999 and 1998, respectively.
(4) 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, including these amounts would have
been 95.4% and 95.7% for the three months ended September 30, 1999 and
1998, respectively. For the three months ended September 30, 1999 and 1998,
concessions were $667 and $729, respectively, and employee discounts were
$150 and $130, respectively.
(5) Average monthly rental rate is defined as the average of the gross actual
rates for occupied units and the anticipated rental rates for unoccupied
units.
For the three and nine months ended September 30, 1999, rental and other revenue
increased $1,864, or 3.2%, and $5,743, or 3.3%, respectively, compared to the
same periods in the prior year, primarily due to increased rental rates. For the
three and nine months ended September 30, 1999, property operating and
maintenance expenses (exclusive of depreciation and amortization) increased
$198, or 1.1%, and $387, or 0.7%, respectively, compared to the same periods in
the prior year, primarily as a result of increased personnel and property tax
expenses partially offset by a decline in utilities expense as a result of water
submetering.
For the three and nine months ended September 30, 1999, recurring capital
expenditures per unit increased $12, or 12.6%, and $78, or 35.5%, respectively,
as a result of the timing of expenditures.
-20-
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
THIRD PARTY SERVICES
THIRD PARTY MANAGEMENT SERVICES
The Company provides asset management, leasing and other consulting services to
non-related owners of apartment communities through its subsidiary, RAM
Partners, Inc. ("RAM"). The operating performance of RAM for the three and nine
months ended September 30, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ----------------------------------
1999 1998 %CHANGE 1999 1998 %CHANGE
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Property management and other revenue .... $ 795 $ 792 0.4% $ 2,434 $ 2,309 5.4%
Property management expense .............. 755 659 14.6% 2,179 1,857 17.3%
Depreciation expense ..................... 7 9 (22.2)% 20 27 (25.9)%
------- ------- ------- -------
Revenue in excess of specified expense ... $ 33 $ 124 (73.4)% $ 235 $ 425 (44.7)%
======= ======= ======= =======
Average apartment units managed .......... 12,169 11,621 4.7% 12,327 11,107 11.0%
======= ======= ======= =======
</TABLE>
The decrease in revenue in excess of specified expense for the three and nine
months ended September 30, 1999 compared to the same period in the prior year is
primarily attributable to the management of more communities in lease-up phases
as a result of turnover in management contracts.
THIRD PARTY LANDSCAPE SERVICES
The Company provides landscape maintenance, design and installation services to
non-related parties through a subsidiary, Post Landscape Group, Inc. ("Post
Landscape Group"), formerly called Post Landscape Services, Inc.
The operating performance of Post Landscape Group for the three and nine months
ended September 30, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- --------------------------------
1999 1998 % CHANGE 1999 1998 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Landscape services and other revenue ..... $2,244 $1,765 27.1% $6,479 $4,945 31.0%
Landscape services expense ............... 1,859 1,571 18.3% 5,614 4,372 28.4%
Depreciation expense ..................... 78 53 47.2% 212 118 79.7%
------ ------ ------ ------
Revenue in excess of specified expense ... $ 307 $ 141 117.7% $ 653 $ 455 43.5%
====== ====== ====== ======
</TABLE>
The increase in landscape services and other revenue and landscape services
expense for the three and nine months ended September 30, 1999 compared to the
same periods in 1998 is primarily due to increases in landscape contracts. The
increase in depreciation expense is primarily due to leasehold improvements
acquired in 1998.
-21-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
OTHER EXPENSES
Depreciation expense increased $3,161, or 26.4%, and $7,875, or 23.0%,
respectively, for the three and nine months ended September 30, 1999 compared to
the same period in the prior year, primarily as a result of an increase in units
in service, additional leasehold improvements and technology expenditures.
General and administrative expense decreased $526, or 28.1%, and $450, or 7.9%,
respectively, for the three and nine months ended September 30, 1999 compared to
the same period in the prior year, primarily as a result of timing differences
in certain expense accruals and allocations.
The loss on unused treasury locks of $1,944 for the nine months ended September
30, 1998 resulted from the termination of treasury locks intended for debt
securities that were not issued by the Operating Partnership.
The extraordinary item of $458 for the nine months ended September 30, 1999, net
of minority interest portion, was due to the write off of loan costs resulting
from the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities increased from $101,701
for the nine months ended September 30, 1998 to $122,013 for the nine months
ended September 30, 1999, principally due to increases in net income and changes
in working capital. Net cash used in investing activities decreased from
$231,793 in the nine months ended September 30, 1998 to $217,692 for the nine
months ended September 30, 1999, principally due to proceeds from the sale of
one community in March 1999 and reduced capital expenditures. The Company's net
cash provided by financing activities decreased from $133,446 for the nine
months ended September 30, 1998 to $80,890 for the nine months ended September
30, 1999, primarily due to reduced proceeds from debt and equity offerings
partially offset by reduced debt payments.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
commencing with its taxable year ended December 31, 1993. REITs are subject to a
number of organizational and operational requirements, including a requirement
that they currently distribute 95% of their ordinary taxable income. The Company
generally will not be subject to Federal income tax on net income.
At September 30, 1999, the Company had total indebtedness of $893,400, an
increase of $93,392 from its total indebtedness at December 31, 1998, and cash
and cash equivalents of $6,365. At September 30, 1999, the Company's
indebtedness included approximately $179,582 in conventional mortgages payable
secured by individual communities, tax-exempt bond indebtedness of $235,880,
senior unsecured notes of $406,000, borrowings under the Revolver of $50,000 and
other unsecured lines of credit and unsecured debt of $21,938.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under credit
arrangements and expects to meet certain of its long-term liquidity
requirements, such as scheduled debt maturities, repayment of financing of
construction and development activities, and possible property acquisitions,
through long-term secured and unsecured borrowings and the issuance of debt
securities or additional equity securities of the Company, sales of communities,
or, possibly in connection with acquisitions of land or improved properties,
units of the Operating Partnership. The Company believes that its net cash
provided by operations will be adequate and anticipates that it will continue to
be adequate to meet both operating requirements and payment of dividends by the
Company in accordance with REIT requirements in both the short and the long
term. The budgeted expenditures for improvements and renovations to certain of
the communities are expected to be funded from property operations.
-22-
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
Lines Of Credit
On May 7, 1999, the Operating Partnership amended its syndicated unsecured line
of credit (the "Revolver") increasing its maximum capacity to $350 million. At
September 30, 1999, $340 million of the Revolver was subscribed and available to
the Operating Partnership. Borrowing under the Revolver bears interest at LIBOR
plus .825% or prime minus .25%. The Revolver matures on April 30, 2002. At
September 30, 1999, there was $50,000 outstanding under its Revolver and $19,938
under its other lines of credit.
Medium Term Notes
The Operating Partnership has established a program for the sale of up to
$344,000 aggregate principal amount of Medium-Term Notes due three months or
more from date of issue (the "MTN Program"). As of September 30, 1999, the
Operating Partnership had $231,000 aggregate principle amount of notes
outstanding under the MTN Program. The Remarketed Reset Notes under this program
were repaid on April 7, 1999.
Tax Exempt Bonds
On June 29, 1995, the Company replaced the bank letters of credit providing
credit enhancement for its outstanding tax-exempt bonds. Under an agreement with
FNMA, FNMA now provides, directly or indirectly through other bank letters of
credit, credit enhancement with respect to such bonds. Under the terms of such
agreement, FNMA has provided replacement credit enhancement through 2025 for the
bond issues, aggregating $235,880, which were reissued. The agreement with FNMA
contains representations, covenants, and events of default customary to such
secured loans.
Secured Debt
On March 30, 1999, the Operating Partnership issued $50 million of secured notes
to an insurance company. These notes bear interest at 6.5% with an effective
rate of 7.3% after consideration of a terminated swap agreement, mature on March
1, 2009 and are secured by two apartment communities. Net proceeds of $49,933
were used to repay outstanding indebtedness.
On July 23, 1999, the Operating Partnership issued $104 million of secured notes
to FNMA. These notes bear interest at 30-day LIBOR (capped at 7% for one year)
plus credit enhancement, liquidity and service fees of .935%, mature on July 23,
2029 and are secured by five apartment communities. The Operating Partnership
has an option to call these notes after 10 years from the issuance date. Net
proceeds of $101,998 were used to repay outstanding indebtedness.
Conventional Floating Rate Debt
The indebtedness of $20 million relating to The Rice was repaid on August 26,
1999 using proceeds from the Revolver.
-23-
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
Schedule of Indebtedness
The following table reflects the Company's indebtedness at September 30, 1999:
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
DESCRIPTION LOCATION INTEREST RATE DATE(1) BALANCE
----------- -------- ------------- -------- ---------
CONVENTIONAL FIXED RATE (SECURED)
<S> <C> <C> <C> <C>
Post Hillsboro Village & The Lee Apartments .. Nashville, TN 9.20% 10/01/01 $ 2,928
Parkwood Townhomes(TM) ....................... Dallas, TX 7.375% 04/01/14 841
Northwestern Mutual Life ..................... Atlanta, GA 6.50% 03/01/09 49,671
--------
53,440
--------
CONVENTIONAL FLOATING RATE (SECURED)
Addison Circle Apartment Homes
by Post(TM)- Phase I ...................... Dallas, TX LIBOR + .75% 06/15/00 22,142
FNMA ......................................... Atlanta, GA LIBOR + .935% 07/23/29 104,000
--------
126,142
--------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford(R)Series 1995 ................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 9,895
Post Valley(R)Series 1995 .................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,600
Post Brook(R)Series 1995 ..................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 4,300
Post Village(R)(Atlanta) Hills Series 1995 ... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 7,000
Post Mill(R)Series 1995 ...................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,880
Post Canyon(R)Series 1996 .................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 16,845
Post Corners(R)Series 1996 ................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,760
Post Bridge(R) ............................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,450
Post Village(R)(Atlanta) Gardens ............. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,500
Post Chase(R) ................................ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000
Post Walk(R) ................................. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000
Post Lake(R) ................................. Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 28,500
Post Fountains at Lee Vista(R) ............... Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 21,500
Post Village(R) (Atlanta) Fountains
and Meadows ............................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 26,000
Post Court(R) ................................ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,650
--------
235,880
--------
SENIOR NOTES (UNSECURED)
Medium Term Notes ............................ N/A 6.22% 12/31/99 16,000
Medium Term Notes ............................ N/A LIBOR + .25% 03/03/00 30,000
Northwestern Mutual Life ..................... N/A 8.21% 06/07/00 30,000
Medium Term Notes ............................ N/A 7.02% 04/02/01 37,000
Northwestern Mutual Life ..................... N/A 8.37% 06/07/02 20,000
Senior Notes ................................. N/A 7.25% 10/01/03 100,000
Medium Term Notes ............................ N/A 7.30% 04/01/04 13,000
Medium Term Notes ............................ N/A 6.69% 09/22/04 10,000
Medium Term Notes ............................ N/A 6.78% 09/22/05 25,000
Senior Notes ................................. N/A 7.50% 10/01/06 25,000
Mandatory Par Put Remarketed Securities ...... N/A 6.85% (4) 03/16/15 100,000
--------
406,000
--------
LINES OF CREDIT & OTHER UNSECURED DEBT
City of Phoenix .............................. N/A 5.00% (6) 03/01/21 2,000
Revolver - Syndicated ........................ N/A LIBOR + .825% or prime minus .25% (5) 04/30/02 50,000
</TABLE>
- 24 -
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Revolver - Swing ............................... N/A LIBOR + .825% or prime minus .25% 04/21/01 5,000
Cash Management Line ........................... N/A LIBOR + .675% or prime minus .25% 03/31/00 14,938
----------
71,938
----------
TOTAL........................................... $ 893,400
==========
</TABLE>
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties.
(2) Bond financed (interest rate on bonds + credit enhancement fees
effective October 1, 1998).
(3) These bonds are cross-collateralized. The Company has purchased an
interest rate cap that limits the Company's exposure to increases in
the base rate to 5%.
(4) The annual interest rate on these securities to March 16, 2005 (the
"Remarketing Date") is 6.85%. On the Remarketing Date, they are
subject to mandatory tender for remarketing.
(5) Represents stated rate. The Company may also make "money market" loans
of up to $175,000 at rates below the stated rate. At September 30,
1999, the outstanding balance of the Revolver consisted of "money
market" loans with an average interest rate of 5.95%.
(6) This loan is interest-free for the first three years, with interest at
5.00% thereafter. Repayment is to commence on March 1, 2001 subject to
the conditions set forth in the Agreement.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the
Company. Under the DRIP, shareholders may elect for their dividends to be used
to acquire additional shares of the Company's Common Stock directly from the
Company for 95% of the market price on the date of purchase.
- 25 -
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
Current Development Activity
The Company's apartment communities under development or in initial lease-up
are summarized in the following table:
<TABLE>
<CAPTION>
QUARTER OF ACTUAL OR ESTIMATED ACTUAL OR ESTIMATED
# OF CONSTRUCTION QUARTER FIRST UNITS QUARTER OF STABILIZED
METROPOLITAN AREA UNITS COMMENCEMENT AVAILABLE OCCUPANCY
- ----------------- --------- ------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
Atlanta, GA
Post Spring(TM)........................................ 452 3Q'99 2Q'00 2Q'01
Riverside by Post(TM)- Phase II ....................... 328 3Q'96 1Q'99 1Q'00
Parkside by Post(TM)................................... 188 1Q'99 4Q'99 2Q'00
Post Stratford(TM)..................................... 250 2Q'99 2Q'00 1Q'01
--------
1,218
--------
Charlotte, NC
Post Uptown Place(TM).................................. 227 3Q'98 4Q'99 3Q'00
Post Gateway Place(TM)................................. 232 3Q'99 3Q'00 2Q'01
--------
459
Tampa, FL
Post Harbour Place (TM)................................ 319 4Q'98 1Q'00 1Q'01
Dallas, TX
Post Addison Circle(TM) (II) .......................... 610 1Q'98 1Q'99 2Q'00
Post Block 588(TM) .................................... 127 4Q'98 4Q'99 2Q'00
Post Addison Circle(TM)(III) .......................... 264 3Q'99 3Q'00 2Q'01
Legacy Town Center City Apartment Homes by Post ....... 384 3Q'99 4Q'00 3Q'01
Post Uptown Village(TM)(II) ........................... 196 3Q'99 2Q'00 4Q'00
--------
1,581
--------
Houston, TX
Post Midtown Square(TM) ............................... 479 1Q'98 2Q'99 4Q'00
Denver, CO
Post Uptown Square(TM) ................................ 449 1Q'98 3Q'99 4Q'00
Phoenix, AZ
Post Roosevelt Square(TM) ............................. 410 4Q'98 1Q'00 1Q'01
Nashville, TN
The Bennie Dillon by Post(TM) ......................... 86 2Q'98 2Q'99 4Q'99
Orlando, FL
Parkside by Post(TM) .................................. 244 1Q'99 2Q'99 3Q'00
Washington, D.C.
Pentagon Row by Post .................................. 504 2Q'99 4Q'00 1Q'02
Austin, TX
Post West Avenue Lofts(TM) ............................ 243 3Q'99 4Q'00 3Q'01
--------
5,992
========
</TABLE>
- 26 -
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
The Company is also currently conducting feasibility and other pre-development
studies for possible new Post(R) communities in its primary market areas.
Capitalization of Fixed Assets and Community Improvements
The Company has established a policy of capitalizing those expenditures
relating to acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset. All
expenditures necessary to maintain a community in ordinary operating condition
are expensed as incurred. During the first five years of a community (which
corresponds to the estimated depreciable life), carpet replacements are
expensed as incurred. Thereafter, carpet replacements are capitalized.
Acquisition of assets and community improvement expenditures for the three and
nine months ended September 30, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
New community development and acquisition activity ............. $ 66,266 $ 49,096 $ 220,555 $ 205,960
Non-recurring capital expenditures:
Revenue generating additions and improvements ................ 2,064 4,052 4,178 11,842
Other community additions and improvements ................... 540 210 1,553 1,098
Recurring capital expenditures:
Carpet replacements .......................................... 763 645 2,170 1,849
Community additions and improvements ......................... 1,841 1,266 5,113 3,103
Corporate additions and improvements ......................... 3,880 3,645 6,240 7,772
--------- --------- --------- ---------
$ 75,354 $ 58,914 $ 239,809 $ 231,624
========= ========= ========= =========
</TABLE>
INFLATION
Substantially all of the leases at the communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable
the Company to seek increases in rents. The substantial majority of these
leases are for one year or less and the remaining leases are for up to two
years. At the expiration of a lease term, the Company's lease agreements
provide that the term will be extended unless either the Company or the lessee
gives at least sixty (60) days written notice of termination; in addition, the
Company's policy permits the earlier termination of a lease by a lessee upon
thirty (30) days written notice to the Company and the payment of one month's
additional rent as compensation for early termination. The short-term nature of
these leases generally serves to reduce the risk to the Company of the adverse
effect of inflation.
NEW ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). FAS 133, as amended by FAS 137,
"Deferral of the Effective Date of FAS 133," is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 for
the Company). FAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the
adoption of FAS 133 will not have a significant effect on the Company's results
of operations or its financial position.
- 27 -
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to engage in normal business activities.
The Company has created a specially formed Year 2000 project team to evaluate
and coordinate the Company's Year 2000 initiatives, which are intended to
ensure that its computer equipment and software will function properly with
respect to dates in the Year 2000 and thereafter. In addition, the Company
engaged an independent expert to review its project plan. For this purpose, the
term "computer equipment and software" includes systems that are commonly
thought of as IT systems, including property management and accounting
software, data processing, and telephone/PBX systems and other miscellaneous
systems, as well as systems that are not commonly thought of as IT systems,
such as elevators, alarm systems, or other miscellaneous systems. Both IT and
non-IT systems may contain embedded technology, which complicates the Company's
Year 2000 identification, assessment, remediation, and testing efforts. Based
upon its identification and assessment efforts, the Company has replaced or
modified, or is in the process of doing so, certain computer equipment and
software it currently uses. In addition, in the ordinary course of replacing
computer equipment and software, the Company attempts to obtain replacements
that are Year 2000 compliant. Utilizing both internal and external resources to
identify and assess needed Year 2000 remediation, the Company has completed its
Year 2000 identification, assessment, and testing efforts and anticipates that
its remediation efforts will be completed by November 30, 1999, prior to any
currently anticipated impact on its computer equipment and software. The
Company estimates that as of September 30, 1999, it had completed approximately
95% of the initiatives that it believes will be necessary to fully address
potential Year 2000 issues relating to its computer equipment and software. The
projects comprising the remaining 5% of the initiatives are in process and are
expected to be completed on or about November 30, 1999.
The Company has mailed letters to, or in some instances, made direct contact
with, its significant suppliers, contractors and third party service providers
to determine the extent to which interfaces with such entities are vulnerable
to Year 2000 issues and whether the products and services purchased from or by
such entities are Year 2000 compliant. The Company has also established
procurement policies requiring representation from significant vendors as to
whether products and services are Year 2000 compliant. Substantially all of the
responses received indicate Year 2000 compliance plans are being implemented by
these companies.
At this time, the Company estimates the aggregate cost of its Year 2000
identification, assessment, remediation and testing efforts, or costs expected
to be incurred by the Company with respect to Year 2000 issues of third parties
to be approximately $3.2 million. Expenditures related to the Company's Year
2000 initiatives will be funded from operating cash flows. As of September 30,
1999, the Company had incurred costs of approximately $2.7 million related to
its Year 2000 identification, assessment, remediation and testing efforts, all
of which relates to analysis, repair or replacement of existing software,
upgrades of existing software, or evaluation of information received from
significant suppliers, contractors and other third party service providers.
Other non-Year 2000 IT efforts have not been materially delayed or impacted by
Year 2000 initiatives. The Company presently believes that the Year 2000 issue
will not pose significant operational problems for the Company. However, if all
Year 2000 issues are not properly identified, or assessment, remediation and
testing are not effected timely with respect to Year 2000 problems that are
identified, there can be no assurance that the Year 2000 issue will not
materially adversely impact the Company's results of operations or adversely
affect the Company's relationships with suppliers, contractors or others.
Additionally, there can be no assurance that the Year 2000 issues of other
entities will not have a material adverse impact on the Company's business or
results of operations.
- 28 -
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
The Company has completed a comprehensive analysis of the operational problems
and costs (including loss of revenues) that would be reasonably likely to
result from the failure by the Company and certain third parties to complete
efforts necessary to achieve Year 2000 compliance on a timely basis. The
Company has prioritized its efforts on its IT and non-IT systems and the
readiness of third parties with which the Company transacts business
electronically. Based on this analysis, the Company has not identified any
material operational problems or costs that it believes it is reasonably likely
to incur with respect to its IT or non-IT Systems or as a result of the failure
of third parties to complete efforts to achieve Year 2000 readiness. Although
the Company does not currently anticipate the failure of such systems, the
Company has established contingency plans which it will implement in the event
of the failure of certain of its IT and non-IT systems. The Company expects to
address other unforeseen operational problems associated with the Year 2000
issue on an as needed basis. The risks involved with not solving the Year 2000
issue and which are beyond the Company's ability to control include, but are
not limited to, the following: loss of local or regional electric power, loss
of telecommunications services, delays or cancellations of shipping or
transportation to major building suppliers, general deterioration of economic
conditions resulting from Year 2000 issues, and inability of banks, vendors and
other third parties with whom the Company does business to resolve Year 2000
problems.
The costs of the Company's Year 2000 identification, assessment, remediation
and testing efforts and the dates on which the Company believes it will
complete such efforts are based upon management's best estimates, which were
derived using numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans, and
other factors. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of relevant computer
codes and embedded technology, and similar uncertainties. In addition,
variability of definitions of "compliance with Year 2000" and the myriad of
different products and services, and combinations thereof, sold by the Company
may lead to claims whose impact on the Company is not currently estimable.
There can be no assurance that the aggregate cost of defending and resolving
such claims, if any, will not materially adversely affect the Company's results
of operations. Although some of the Company's agreements with suppliers and
contractors contain provisions requiring such parties to indemnify the Company
under some circumstances, there can be no assurance that such indemnification
arrangements will cover all of the Company's liabilities and costs related to
claims by third parties related to the Year 2000 issue.
- 29 -
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") an appropriate measure of
performance of an equity REIT. Funds from operations is defined to mean net
income (loss) available to common shareholders determined in accordance with
GAAP, excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation of real estate assets, and after adjustment for
unconsolidated partnerships and joint ventures. FFO should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indicator of the Company's financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund all
of the Company's needs. Cash available for distribution ("CAD") is defined as
FFO less capital expenditures funded by operations and loan amortization
payments. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the Company,
FFO and CAD should be examined in conjunction with net income as presented in
the consolidated financial statements and data included elsewhere in this
report.
FFO and CAD for the three and nine months ended September 30, 1999 and 1998
presented on a historical basis are summarized in the following table:
Calculations of Funds from Operations and Cash Available for Distribution
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income available to common shareholders .............. $ 23,770 $ 20,834 $ 69,083 $ 55,690
Extraordinary item, net of minority interest .......... -- -- 458 --
Net loss on sale of assets ............................ 246 -- 1,337 --
Minority interest of common unitholders in the
Operating Partnership ............................... 3,206 3,022 9,435 8,434
Loss on unused treasury locks ......................... -- -- -- 1,944
---------- ---------- ---------- ----------
Adjusted net income ...................................... 27,222 23,856 80,313 66,068
Depreciation of real estate assets (1)................. 14,218 11,498 40,315 33,307
---------- ---------- ---------- ----------
Funds from Operations (2) ................................ 41,440 35,354 120,628 99,375
Recurring capital expenditures (3) .................... (2,604) (1,911) (7,283) (4,952)
Non-recurring capital expenditures (4) ................ (540) (210) (1,553) (1,098)
Loan amortization payments ............................ (20) (19) (60) (55)
---------- ---------- ---------- ----------
Cash Available for Distribution .......................... $ 38,276 $ 33,214 $ 111,732 $ 93,270
========== ========== ========== ==========
Revenue generating capital expenditures (5) .............. $ 2,064 $ 4,052 $ 4,178 $ 11,842
========== ========== ========== ==========
Cash Flow Provided By (Used In):
Operating activities ..................................... $ 43,299 $ 56,062 $ 122,013 $ 101,701
Investing activities ..................................... $ (73,110) $ (74,079) $ (217,692) $ (231,793)
Financing activities ..................................... $ 33,251 $ 28,333 $ 80,890 $ 133,446
</TABLE>
- 30 -
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding - basic.... 38,574,434 36,007,167 38,361,877 34,351,747
============ ============ ============ ============
Weighted average common shares and units
outstanding - basic................................ 43,772,859 41,222,891 43,567,297 39,567,512
============ ============ ============ ============
Weighted average common shares outstanding - diluted.. 39,122,421 36,433,862 38,827,381 34,823,164
============ ============ ============ ============
Weighted average common shares and units
outstanding - diluted.............................. 44,320,846 41,649,586 44,032,801 40,038,929
============ ============ ============ ============
</TABLE>
(1) Depreciation on real estate assets is net of the minority interest portion
of depreciation in consolidated partnerships.
(2) The Company uses the National Association of Real Estate Investment Trusts
("NAREIT") definition of FFO. FFO for any period means the Consolidated
Net Income of the Company and its subsidiaries for such period excluding
gains or losses from debt restructuring and sales of property plus
depreciation of real estate assets, and after adjustment for
unconsolidated partnerships and joint ventures, all determined on a
consistent basis in accordance with generally accepted accounting
principles. FFO presented herein is not necessarily comparable to FFO
presented by other real estate companies due to the fact that not all real
estate companies use the same definition. However, the Company's FFO is
comparable to the FFO of real estate companies that use the current NAREIT
definition.
(3) Recurring capital expenditures consisted primarily of $763 and $645 of
carpet replacement and $1,841 and $1,266 of other additions and
improvements to existing communities for the three months ended September
30, 1999 and 1998, respectively and $2,170 and $1,849 of carpet
replacement and $5,113 and $3,103 of other additions and improvements to
existing communities for the nine months ended September 30, 1999 and
1998, respectively. Since the Company does not add back the depreciation
of non-real estate assets in its calculation of FFO, capital expenditures
of $3,880 and $3,645 for the three months ended September 30, 1999 and
1998, respectively, and $6,240 and $7,772 for the nine months ended
September 30, 1999 and 1998, respectively, are excluded from the
calculation of CAD.
(4) Non-recurring capital expenditures consisted of community additions and
improvements of $540 and $210 for the three months ended September 30,
1999 and 1998, respectively, and $1,553 and $1,098 for the nine months
ended September 30, 1999 and 1998, respectively.
(5) Revenue generating capital expenditures is primarily comprised of major
renovations of communities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since December 31, 1998.
- 31 -
<PAGE> 34
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On September 3, 1999, the Operating Partnership issued $70
million of Series D Cumulative Redeemable Preferred Units of
limited partnership interest (the "Series D Preferred Units")
to an institutional investor in a private placement meeting the
requirements of Regulation D promulgated under the Securities
Act of 1933, as amended. Net proceeds to the Operating
Partnership of approximately $68 million were used to repay
outstanding indebtedness.
The Series D Preferred Units are exchangeable under certain
circumstances, in whole but not in part, at the option of
holders of 50% or more of the Series D Preferred Units, for 8%
Series D Cumulative Redeemable Preferred Shares of the Company
(the "Series D Preferred Shares), at an exchange ratio of one
Series D Preferred Share for each Series D Preferred Unit.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None
ITEM 5. OTHER INFORMATION
None
- 32 -
<PAGE> 35
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Articles of Amendment to the Company's Restated Articles of Incorporation
10.1 Fifth Amendment to Second Amended and Restated Partnership Agreement
of Post Apartment Homes, L.P.
10.2 Registration Rights Agreement, dated September 3,
1999, between the Company, the Operating Partnership
and TMCT II, LLC
27.1 Financial Data Schedule for the Company - Third Quarter 1999
(for SEC filing purposes only)
27.2 Financial Data Schedule for the Operating Partnership - Third Quarter 1999
(for SEC filing purposes only)
</TABLE>
The registrants agree to furnish a copy of all agreements
relating to long-term debt upon request of the Commission.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by either registrant
during the three month period ended September 30, 1999.
- 33 -
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POST PROPERTIES, INC.
November 11, 1999 /s/ John T. Glover
----------------------- --------------------------------
(Date) John T. Glover, President
(Principal Financial Officer)
November 11, 1999 /s/ R. Gregory Fox
----------------------- --------------------------------
(Date) R. Gregory Fox
Executive Vice President, Chief
Accounting Officer
- 34 -
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POST APARTMENT HOMES, L.P.
By: Post GP Holdings, Inc.,
as General Partner
November 11, 1999 /s/ John T. Glover
----------------------- --------------------------------
(Date) John T. Glover, President
(Principal Financial Officer)
November 11, 1999 /s/ R. Gregory Fox
----------------------- --------------------------------
(Date) R. Gregory Fox
Executive Vice President, Chief
Accounting Officer
- 35 -
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
POST PROPERTIES, INC.
I.
The name of the corporation is Post Properties, Inc. (the
"Corporation").
II.
The amendment (the "Amendment") is to add the following as a new
Article 2(f) of the Corporation's Restated Articles of Incorporation, as
amended (the "Articles of Incorporation") to determine the terms of a series of
the Preferred Stock:
"(f) 8% Series D Cumulative Redeemable Preferred Shares.
(i) TITLE. The series of Preferred Stock is hereby designated as
the "8% Series D Cumulative Redeemable Preferred Shares" (the "Series D
Preferred Shares").
(ii) NUMBER. The maximum number of authorized shares of the Series
D Preferred Shares shall be 2,800,000.
(iii) RELATIVE SENIORITY. In respect of rights to receive
distributions and to participate in distributions of payments in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the Series D Preferred Shares shall rank (a) senior to the Common
Stock and any other class or series of capital stock of the Corporation
ranking, as to the payment distributions and upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, junior to the Series
D Preferred Shares (collectively, "Junior Shares") and (b) on a parity with any
class or series of capital stock of the Corporation ranking, as to the payment
of distributions or upon voluntary or involuntary liquidation, dissolution or
winding-up, whether or not the distribution rates, distribution payment dates
or redemption or liquidation prices per share thereof are different from those
of the Series D Preferred Shares, if the holders of such class or series of
capital stock and the Series D Preferred Shares shall be entitled to the
receipt of distributions or of amounts distributable upon voluntary or
involuntary liquidation, dissolution or winding-up in proportion to their
respective amounts of accrued and
<PAGE> 2
unpaid distributions per share or liquidation preferences, without preference
or priority one over the other (collectively, "Parity Preferred Shares"). The
Corporation's Series A Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares are Parity Preferred Shares.
(iv) DISTRIBUTIONS.
(A) Holders of Series D Preferred Shares will be
entitled to receive, when, as and if declared by the Corporation cumulative
preferential cash distributions at the rate of $2.00 per share, per annum,
payable (1) quarterly (such quarterly periods for purposes of payment and
accrual will be the quarterly periods ending on the last day of the quarterly
periods set forth in this clause (1) and not calendar quarters) in arrears on
the first day of of each of March, June, September and December of each year,
commencing on December 1, 1999, and (2) in the event of a redemption of Series
D Preferred Shares, on the redemption date (each a "Distribution Payment
Date"). Such distributions shall accrue from the original date of issuance of
Series D Preferred Shares. In addition to the foregoing, holders of Series D
Preferred Shares will be entitled to receive, when, as and if declared by the
Corporation a preferential cash distribution in an amount equal to all accrued
and unpaid distributions, whether or not declared, attributable to the Series D
Preferred Units of Post Apartment Homes, L.P. up to the date such Series D
Preferred Units were exchanged into the Series D Preferred Shares held by such
holder, such preferential distribution to be payable to holders on the first
Distribution Payment Date following the issuance of such Series D Preferred
Shares. The amount of the distribution payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months and for any period
shorter than a full quarterly period for which distributions are computed, the
amount of the distribution payable will be computed based on the ratio of the
actual number of days elapsed in such period to ninety (90) days. If any date
on which distributions are to be made on the Series D Preferred Shares is not a
Business Day, then payment of the distribution to be made on such date will be
made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. Distributions on the Series D
Preferred Shares will be made to the holders of record of the Series D
Preferred Shares on the relevant record dates, which will be fifteen (15) days
prior to the relevant Distribution Payment Date (the "Series D Record Date").
"Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
in New York City are authorized or required by law, regulation or executive
order to close.
(B) The amount of any distribution accrued on any Series
D Preferred Shares at any Distribution Payment Date shall be the amount of any
unpaid distribution accumulated thereon, to and including such Distribution
Payment Date, whether or not earned or declared, and the amount of
distributions accrued on any Series D Preferred Shares at any date other than a
Distribution Payment Date shall be equal to the sum of the amount of any unpaid
distributions accumulated thereon, to and including the last preceding
Distribution Payment Date, whether or
2
<PAGE> 3
not earned or declared, plus an amount calculated on the basis of the annual
dividend rate of $2.00 per share for the period after such last preceding
Distribution Payment Date to and including the date as of which the calculation
is made based on a 360-day year of twelve 30-day months.
(C) Except as provided in this paragraph (f), the Series
D Preferred Shares will not be entitled to any distributions in excess of full
cumulative distributions as described above and shall not be entitled to
participate in the earnings or assets of the Corporation, and no interest, or
sum of money in lieu of interest shall be payable in respect of any dividend
payment or payments on the Series D Preferred Shares which may be in arrears.
(D) Any dividend payment made on the Series D Preferred
Shares shall be first credited against the earliest accrued but unpaid dividend
due with respect to such shares which remains payable.
(E) If, for any taxable year, the Corporation elects to
designate as "capital gain dividends" (as defined in Section 857 of the Code),
any portion (the "Capital Gains Amount") of the dividends paid or made
available for the year to holders of all classes of shares (the "Total
Dividends"), then the portion of the Capital Gains Amount that shall be
allocated to the holders of the Series D Preferred Shares shall equal (i) the
Capital Gains Amount multiplied by (ii) a fraction that is equal to (a) the
total dividends paid or made available to the holders of the Series D Preferred
Shares for the year over (b) the Total Dividends.
(F) No distributions on the Series D Preferred Shares
shall be authorized by the Board of Directors or be paid or set apart for
payment by the Corporation at such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to its
indebtedness, prohibit such authorization, payment or setting apart for payment
or provides that such authorization, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such authorization
or payment shall be restricted or prohibited by law. Notwithstanding the
foregoing, distributions on the Series D Preferred Shares will accrue whether
or not declared, whether or not the terms and provisions of any agreement of
the Corporation at any time prohibit the authorization, payment or setting
apart for payment of such distributions, whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such distributions and whether or not such distributions are authorized.
(G) So long as any Series D Preferred Shares are
outstanding, no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to Junior Shares,
nor shall any cash or other property be set aside for or applied to the
purchase, redemption or other acquisition for consideration of any Series D
Preferred Shares, any Parity Preferred Shares or any Junior Shares, unless, in
each case, all distributions accumulated on all Series D Preferred Shares and
all classes and series of outstanding Parity Preferred Shares have been paid in
full. The foregoing sentence will not prohibit (i) distributions payable solely
in Junior Shares, (ii) the exchange or conversion of Junior Shares or Parity
Preferred Shares into
3
<PAGE> 4
capital stock of the Corporation ranking junior to the Series D Preferred
Shares as to distributions and rights upon involuntary or voluntary
liquidation, dissolution or winding-up of the Corporation, or (ii) the
redemption of capital stock by the Corporation to preserve the Corporation's
status as a REIT.
(H) So long as distributions have not been paid in full
(or a sum sufficient for such full payment is not irrevocably deposited in
trust for payment) upon the Series D Preferred Shares, all distributions
authorized and declared on the Series D Preferred Shares and all classes or
series of outstanding Parity Preferred Shares shall be authorized and declared
so that the amount of distributions authorized and declared per Series D
Preferred Share and such other classes or series of Parity Preferred Shares
shall in all cases bear to each other the same ratio that accrued and unpaid
distributions per Series D Preferred Share and such other classes or series of
Parity Preferred Shares (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such classes or series
of Parity Preferred Shares do not have cumulative distribution rights) bear to
each other.
(v) LIQUIDATION RIGHTS.
(A) Upon the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation, the holders of the Series D
Preferred Shares then outstanding, shall be entitled to receive and to be paid
out of the assets of the Corporation available for distribution to its
shareholders, before any payment or distribution shall be made on any Junior
Shares, a liquidation preference of $25.00 per share, plus accrued and unpaid
quarterly distributions thereon.
(B) Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by first class mail,
postage prepaid, not less than 30 days and not more that 60 days prior to the
payment date stated therein, to each record holder of the Series D Preferred
Shares at the respective addresses of such holders as the same shall appear on
the transfer records of the Corporation.
(C) After the payment to the holders of the Series D
Preferred Shares of the full preferential amounts provided for in this
paragraph (f), the holders of the Series D Preferred Shares shall have no right
or claim to any of the remaining assets of the Corporation.
(D) If, upon any voluntary or involuntary dissolution,
liquidation, or winding-up of the Corporation, the amounts payable with respect
to the preference value of the Series D Preferred Shares and any other shares
of the Corporation ranking as to any such distribution on a parity with the
Series D Preferred Shares are not paid in full, the holders of the Series D
Preferred Shares and of such other shares will share ratably in any such
distribution of assets of the Corporation in proportion to the full respective
preference amounts to which they are entitled.
4
<PAGE> 5
(E) Neither the sale, lease or conveyance of all or
substantially all of the property or business of the Corporation, nor the
merger or consolidation of the Corporation into or with any other entity or the
merger or consolidation of any other entity into or with the Corporation, shall
be deemed to be a dissolution, liquidation or winding-up, voluntary or
involuntary, for the purposes hereof.
(vi) REDEMPTION.
(A) OPTIONAL REDEMPTION. The Series D Preferred Shares
may not be redeemed prior to September 3, 2004. On or after such date, the
Corporation shall have the right to redeem the Series D Preferred Shares of any
holder thereof, in whole or in part, at any time or from time to time, upon not
less than 30 days nor more than 60 days written notice, at a redemption price,
payable in cash, of $25.00, together with all accrued and unpaid distributions
to and including the date fixed for redemption (the "Series D Redemption
Price"), without interest. If fewer than all of the outstanding Series D
Preferred Shares are to be redeemed, the Series D Preferred Shares to be
redeemed shall be selected pro rata among all holders (as nearly as practicable
without creating fractional shares). The Series D Preferred Shares have no
stated maturity and will not be subject to any sinking fund or mandatory
redemption provisions.
(B) PROCEDURES OF REDEMPTION.
(1) Notice of redemption will be given by
publication in a newspaper of general circulation in the City of New
York, such publication to be made once a week for two successive weeks
commencing not less than 30 nor more than 60 days prior to the
Redemption Date. Notice of any redemption will also be mailed by the
registrar, by first class mail, postage prepaid, not less than 30 days
nor more than 60 days prior to the redemption date, addressed to the
respective holders of record of the Series D Preferred Shares at their
respective addresses as they appear on the records of the Corporation.
No failure to give or defect in such notice shall affect the validity
of the proceedings for the redemption of any Series D Preferred Shares
except as to the holder to whom such notice was defective or not
given. In addition to any information required by law or by the
applicable rules of any exchange upon which the Series D Preferred
Shares may be listed or admitted to trading, each such notice shall
state: (a) the redemption date, (b) the Series D Redemption Price, (c)
the aggregate number of Series D Preferred Shares to be redeemed and
if fewer than all of the outstanding Series D Preferred Shares are to
be redeemed, the number of Series D Preferred Shares to be redeemed
held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding
Series D Preferred Shares that the total number of Series D Preferred
Shares held by such holder represents) of the aggregate number of
Series D Preferred Shares to be redeemed, (d) the place or places
where such Series D Preferred Shares are to be surrendered for payment
of the Series D Redemption Price, (e) that distributions on the Series
D Preferred Shares to be redeemed will cease to
5
<PAGE> 6
accumulate on such redemption date, and (f) that payment of the Series
D Redemption Shares will be made upon presentation and surrender of
such Series D Preferred Shares.
(2) If the Corporation gives a notice of
redemption in respect of Series D Preferred Shares then, by 12:00
noon, New York City time, on the redemption date, the Corporation will
deposit irrevocably in trust for the benefit of the holders of the
Series D Preferred Shares being redeemed funds sufficient to pay the
applicable Series D Redemption Price and will give irrevocable
instructions and authority to pay such Series D Redemption Price to
the holders of the Series D Preferred Shares upon surrender of the
Series D Preferred Shares by such holders at the place designated in
the notice of redemption. On and after the date of redemption,
distributions will cease to accumulate on the Series D Preferred
Shares or portions thereof called for redemption, unless the
Corporation defaults in the payment thereof. If any date fixed for
redemption of Series D Preferred Shares is not a Business Day, then
payment of the Series D Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed
for redemption. If payment of the Series D Redemption Price is
improperly withheld or refused and not paid by the Corporation,
distributions on such Series D Preferred Shares will continue to
accumulate from the original redemption date to the date of payment,
in which case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the applicable Series
D Redemption Price. In case fewer than all the Series D Preferred
Shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued presenting the unredeemed
Series D Preferred Shares without cost to the holder thereof.
(3) Any funds deposited with a bank or trust
company for the purpose of redeeming Series D Preferred Shares shall
be irrevocably deposited except that:
(a) the Corporation shall be entitled to
receive from such bank or trust company the interest or other
earnings, if any, earned on any money so deposited in trust,
and the holders of any shares redeemed shall have no claim to
such interest or other earnings; and
(b) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series D
Preferred Shares entitled thereto at the expiration of two
years from the applicable redemption date shall be repaid,
together with any interest or other earnings earned thereon,
to the Corporation, and after any such repayment, the holders
of the shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for payment
without interest or other earnings.
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<PAGE> 7
(4) No Series D Preferred Shares may be
redeemed except from proceeds from the sale of other capital stock of
the Corporation, including but not limited to common stock, preferred
stock, depositary shares, interests, participations or other ownership
interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or
options to purchase any of the foregoing.
(5) The Corporation may not redeem fewer than
all of the outstanding Series D Preferred Units unless all accumulated
and unpaid distributions have been paid on all quarterly distribution
periods terminating on or prior to the date of the redemption;
provided, however, that the foregoing shall not prevent the redemption
of Series D Preferred Shares to preserve the Corporation's REIT
status.
(6) If a redemption date is after a Series D
Record Date and before the related Distribution Payment Date, the
distribution payable on such Distribution Payment Date shall be paid
to the holder in whose name the Series D Preferred Shares to be
redeemed are registered at the close of business on such Series D
Record Date notwithstanding the redemption thereof between such Series
D Record Date and the related Distribution Payment Date or the
Corporation's default in the payment of the distribution due. Except
as provided above, the Corporation will make no payment or allowance
for unpaid distributions, whether or not in arrears, on Series D
Preferred Shares to be redeemed.
(C) The Corporation shall have no voting rights with
respect to any Series D Preferred Shares following the redemption of such
shares pursuant to this paragraph (f).
(vii) VOTING RIGHTS. Except as required by law, and as set forth
below, the holders of the Series D Preferred Shares shall not be entitled to
vote at any meeting of the shareholders for election of Directors or for any
other purpose or otherwise to participate in any action taken by the
Corporation or the shareholders thereof, or to receive notice of any meeting of
shareholders.
(A) Whenever distributions on any Series D Preferred
Shares shall be in arrears for six or more quarterly periods, whether or not
such quarterly periods are consecutive, the holders of such Series D Preferred
Shares (voting separately as a class with all other series of preferred shares
upon which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional Directors of the
Corporation at a special meeting called by the holders of record of at least
ten percent (10%) of any series of preferred shares so in arrears (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of the shareholders) or at the next annual meeting of
shareholders, and at each subsequent annual meeting until all distributions
accumulated on such Series D Preferred Shares for the past distributions
periods and the then current distributions period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for
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<PAGE> 8
payment. In such case, the entire Board of Directors of the Corporation will be
increased by two Directors.
(B) So long as any Series D Preferred Shares remain
outstanding, the Corporation shall not, without the affirmative vote of the
holders of at least two-thirds of the Series D Preferred Shares outstanding at
the time (i) authorize or create, or increase the authorized or issued amount
of, any class or series of capital stock of the Corporation ranking senior to
the Series D Preferred Shares with respect to payment of distributions or
rights upon liquidation, dissolution or winding-up or reclassify any capital
stock of the Corporation into any such senior security, or create, authorize or
issue any obligations or securities convertible into or evidencing the right to
purchase any such senior security, (ii) issue any Parity Preferred Shares or
any obligations or securities convertible into or evidencing the right to
purchase Parity Preferred Shares to an affiliate of the Corporation unless such
issuance of Parity Preferred Shares is approved by a majority of the
disinterested directors of the Corporation, or (iii) either consolidate, merge
into or with, or convey, transfer or lease its assets substantially as an
entirety to, any corporation or other entity or amend, alter or repeal the
provisions of the Corporation's Articles of Incorporation (including, without
limitation, this provision), whether by merger, consolidation or otherwise, in
each case in a manner that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series D
Preferred Shares or the holders thereof; provided, however, that with respect
to the occurrence of any event set forth in (iii) above, so long as (a) the
Corporation is the surviving entity and the Series D Preferred Shares remain
outstanding with the terms thereof unchanged, or (b) if the Corporation is not
the surviving entity, other interests in the surviving entity having
substantially the same terms and rights as the Series D Preferred Shares,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series D Preferred Shares; and provided
further that any increase in the amount of capital stock of the Corporation or
the creation or issuance of any other class or series of capital stock of the
Corporation, in each case ranking either (a) junior to the Series D Preferred
Shares with respect to payment of distributions and the distribution of assets
upon liquidation, dissolution or winding-up or (b) on a parity with the Series
D Preferred Shares with respect to payment of distributions and the
distribution of assets upon liquidation, dissolution or winding-up, shall not
be deemed to materially and adversely affect such powers, special rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding Series D Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
(C) On each matter submitted to a vote of the holders of
Series D Preferred Shares in accordance with this paragraph (f), or as
otherwise required by law, each Series D Preferred Share shall be entitled to
one vote. With respect to each Series D Preferred Share, the
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<PAGE> 9
holder thereof may designate a proxy, with each such proxy having the right to
vote on behalf of the holder.
(viii) CONVERSION. The Series D Preferred Shares are not convertible
into or exchangeable for any other property or securities of the Corporation.
(ix) RESTRICTIONS ON OWNERSHIP.
(A) Definitions. The following terms shall have the
following meanings:
(1) "Acquire" shall mean the acquisition of
Beneficial Ownership of Series D Preferred Shares by any means
whatsoever including, without limitation, (A) the acquisition of
direct ownership of shares by any Person, including through the
exercise of any option, warrant, pledge, security interest or similar
right to acquire shares, and (B) the acquisition of indirect ownership
of shares (taking into account the constructive ownership rules of
Section 544 of the Code, as modified by Section 856(h)(l)(B) of the
Code, and also applying the look-thru rule contained in Section
856(h)(3)(A) of the Code to pension trusts described in Section 401(a)
of the Code) by a Person who is an "individual" within the meaning of
Section 542(a) (2) of the Code, including through the acquisition by
any Person of any option, warrant, pledge, security interest or
similar right to acquire shares.
(2) "Beneficial Ownership" shall mean, with
respect to any Person that is an "individual" as defined in Section
542(a) (2) of the Code, the Series D Preferred Shares owned by such
Person after taking into account the constructive ownership rules of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the
Code, and after applying the pension trust look-thru rule contained in
Section 856(h)(3)(A) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
(3) "Code" shall mean the Internal Revenue Code
of 1986, as amended. Any reference herein to any current provision of
the Code shall be deemed to refer to any future successor provision of
federal income statutory law.
(4) "Ownership Limit" shall initially mean 6%
of the outstanding Series D Preferred Shares of the Corporation, and
after any adjustment as set forth in subparagraph (ix)(H) below, shall
mean such greater percentage (but not greater than 9.8%) of the
outstanding Series D Preferred Shares as so adjusted.
(5) "Person" shall mean an individual,
corporation, partnership, estate, trust (including a trust qualified
under Section 401(a) or 501(c) (17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint
stock company or other entity and also
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<PAGE> 10
includes a group as that term is used for purposes of Section 13(d)
(3) of the Securities Exchange Act of 1934, as amended; but does not
include an underwriter that participates in a public offering of the
Series D Preferred Shares for a period of 90 days following the
purchase by such underwriter of the Series D Preferred Shares.
(6) "REIT" shall mean a Real Estate Investment
Trust under Section 856 of the Code.
(7) "Restricted Transfer Redemption Price"
shall mean the lower of (A) the price paid by the transferee from whom
shares are being redeemed and (B) the average of the last reported
sales prices on the New York Stock Exchange of Series D Preferred
Shares on the ten trading days immediately preceding the date fixed
for redemption by the Board of Directors, or if the Series D Preferred
Shares are not then traded on the New York Stock Exchange, the average
of the last reported sales prices of the Series D Preferred Shares on
the ten trading days immediately preceding the relevant date as
reported on any exchange or quotation system over which the Series D
Preferred Shares may be traded, or if the Series D Preferred Shares
are not then traded over any exchange or quotation system, then the
price determined in good faith by the Board of Directors of the
Corporation as the fair market value of Series D Preferred Shares on
the relevant date.
(8) "Restriction Termination Date" shall mean
the first day after Series D Preferred Shares on which the Corporation
determines pursuant to subparagraph (ix)(K) below that it is no longer
in the best interests of the Corporation to attempt to, or continue
to, qualify as a REIT.
(9) "Transfer" shall mean any sale, transfer,
gift, assignment, devise or other disposition that results in a change
in the record or Beneficial Ownership of Series D Preferred Shares or
the right to vote or receive dividends on Series D Preferred Shares
(including (A) the granting of any option or entering into any
agreement for the sale, transfer or other disposition of Series D
Preferred Shares or the right to vote or receive dividends on Series D
Preferred Shares or (B) the sale, transfer, assignment or other
disposition or grant of any securities or rights convertible into or
exchangeable for Series D Preferred Shares, or the right to vote or
receive dividends on Series D Preferred Shares), whether voluntary or
involuntary and whether by operation of law or otherwise.
(B) Restrictions.
(1) During the period commencing on the date
Series D Preferred Shares are first issued and prior to the
Restriction Termination Date: (a) no Person shall acquire any Series D
Preferred Shares if, as a result of such acquisition, any
"individual," as defined in Section 542(a)(2) of the Code (other than
a pension trust which is described in Section 401(a) of the Code)
shall Beneficially Own an amount of Series D Preferred Shares in
excess of the Ownership Limit; (b) no Person shall acquire any shares
of Series
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<PAGE> 11
D Preferred Shares if, as a result of such acquisition, the Series D
Preferred Shares and Common Stock of the Corporation would be owned by
less than 100 Persons (determined without reference to the rules of
attribution under Section 544 of the Code); and (c) no Person shall
Acquire any shares if, as a result of such acquisition, the
Corporation would be "closely held" within the meaning of Section
856(h) of the Code.
(2) Any Transfer that (x) would result in a
violation of the restrictions in subparagraph (ix)(B)(1)(b) or (c) or
(y) a transferring shareholder has actual knowledge will result in a
violation of any of the restrictions in subparagraph (ix)(B)(1)(a)
shall be void ab initio as to the Transfer of such Series D Preferred
Shares that would cause the violation of the applicable restriction in
subparagraph (ix)(B)(1), and the intended transferee shall acquire no
rights in such Series D Preferred Shares.
(C) Remedies for Breach.
(1) If the Board of Directors or a committee
thereof shall at any time determine in good faith that a Transfer has
taken place that falls within the scope of subparagraph (ix)(B)(2) or
that a Person intends to Acquire Beneficial Ownership of any shares of
the Corporation that will result in violation of subparagraph
(ix)(B)(1) or (2) (whether or not such violation is intended), the
Board of Directors or a committee thereof shall take such action as it
or they deem advisable to refuse to give effect to or to prevent such
Transfer, including, but not limited to, refusing to give effect to
such Transfer on the books of the Corporation or instituting
proceedings to enjoin such Transfer.
(2) Without limitation to subparagraph
(ix)(B)(2) or (C)(1), any purported transferee of Beneficial Ownership
of Series D Preferred Shares acquired in violation of subparagraph
(ix)(B) shall, if it shall be deemed to have received any such
Beneficial Ownership, be deemed to have acted as agent on behalf of
the Corporation in acquiring such of the interests as result in a
violation of subparagraph (ix)(B) and shall be deemed to hold such
interests in trust on behalf and for the benefit of the Corporation.
The transferee shall have no right to receive dividends or other
distributions with respect to such interests, and shall have no right
to vote such interests. Such transferee shall have no claim, cause of
action, or any other recourse whatsoever against a transferor of
interests acquired in violation of subparagraph (ix)(B). The
transferee's sole right with respect to such interests shall be to
receive at the Corporation's sole and absolute discretion, either (A)
consideration for such interests upon the resale of the interests as
directed by the Corporation pursuant to subparagraph (ix)(C)(3) or (B)
the Restricted Transfer Redemption Price pursuant to subparagraph
(ix)(C)(3).
(3) The Board of Directors shall, within 6
months after receiving notice of a Transfer that violates subparagraph
(ix)(C)(2), either (in its sole and absolute discretion) (A) direct
the transferee of such interests to sell all interests held in trust
for the Corporation pursuant to subparagraph (ix)(C)(2) for cash in
such manner as the Board of Directors directs or (B) redeem such
interests for the Restricted Transfer Redemption
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<PAGE> 12
Price on such date within such 6 month period as the Board of
Directors may determine. If the Board of Directors directs the
transferee to sell the interests, the transferee shall receive such
proceeds as trustee for the Corporation and pay the Corporation out of
the proceeds of such sale all expenses incurred by the Corporation in
connection with such sale plus any remaining amount of such proceeds
that exceeds the amount paid by the transferee for the interests, and
the transferee shall be entitled to retain only the proceeds in excess
of such amounts required to be paid to the Corporation.
(D) Notice of Restricted Transfer. Any Person who
Acquires or attempts or intends to Acquire shares in violation of subparagraph
(ix)(B) shall immediately give written notice to the Corporation of such event
and shall provide to the Corporation such other information as the Corporation
may request in order to determine the effect, if any, of such Transfer or
attempted or intended Transfer on the Corporation's status as a REIT.
(E) Owners Required To Provide Information. During the
period commencing on the date Series D Preferred Shares are first issued and
prior to the Restriction Termination Date each person who is a Beneficial Owner
of Series D Preferred Shares and each Person (including the shareholder of
record) who is holding Series D Preferred Shares for a Beneficial Owner shall
provide to the Corporation such information as the Corporation may request, in
good faith, in order to determine the Corporation's status as a REIT.
(F) Remedies Not Limited. Except as provided in
subparagraph (ix)(M), nothing contained in this subparagraph (ix) shall limit
the authority of the Board of Directors to take such other action as it deems
necessary or advisable to protect the Corporation and the interests of its
shareholder in preserving the Corporation's status as a REIT.
(G) Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this subparagraph (ix), including any
definition contained in subparagraph (ix)(A), the Board of Directors shall have
the power to determine the application of the provisions of this subparagraph
(ix) with respect to any situation based on the facts known to it.
(H) Modification of Ownership Limit. Subject to the
limitations provided in subparagraph (ix)(I), the Board of Directors may from
time to time increase the Ownership Limit.
(I) Limitations on Modifications.
(1) The Ownership Limit may not be increased
if, after giving effect to such increase, five Persons who are
considered "individuals" pursuant to Section 542(a) (2) of the Code
could Beneficially Own (including ownership of Common Stock for
purposes of this subparagraph (ix)(I)(1)), in the aggregate, more than
49.0% in value of the outstanding shares of stock of the Corporation.
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(2) Prior to the modification of the Ownership
Limit pursuant to subparagraph (ix)(H), the Board of Directors of the
Corporation may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in
order to determine or ensure the Corporation's status as a REIT.
(J) Legend. Each certificate for Series D Preferred
Shares shall bear a legend referring to the restrictions described above.
(K) Termination of REIT Status. The Board of Directors
shall take no action to terminate the Corporation's status as a REIT or to
amend the provisions of this subparagraph (ix) until such time as (A) the Board
of Directors adopts a resolution recommending that the Corporation terminate
its status as a REIT or amend this subparagraph (ix), as the case may be, (B)
the Board of Directors presents the resolution at an annual or special meeting
of the shareholders and (C) such resolution is approved by holders of a
majority of the issued and outstanding shares of Common Stock.
(L) Severability. If any provision of this subparagraph
or any application of any such provision is determined to be invalid by any
Federal or state court having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply with the
determination of such court.
(M) NYSE Settlement. Nothing in this Amendment shall
preclude the settlement of any transaction with respect to the Series D
Preferred Shares of the Corporation entered into through the facilities of the
New York Stock Exchange."
III.
This Amendment was adopted on August 31, 1999.
IV.
This Amendment was duly adopted by the Board of Directors without
shareholder approval, as such approval was not required.
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IN WITNESS WHEREOF, Post Properties, Inc. has caused these Articles of
Amendment to be executed and sealed by its duly authorized officers this 3rd
day of September, 1999.
POST PROPERTIES, INC.
By: R. Byron Carlock, Jr.
--------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
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EXHIBIT 10.1
FIFTH AMENDMENT TO
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
POST APARTMENT HOMES, L.P.
This Fifth Amendment to Second Amended and Restated Agreement of
Limited Partnership of Post Apartment Homes, L.P. (this "Amendment") is entered
into as of September 3, 1999, by and among Post GP Holdings, Inc. (the "General
Partner"), the Limited Partners of Post Apartment Homes, L.P., Post Properties,
Inc., a Georgia corporation ("PPI"), The Times Mirror Company, a Delaware
corporation ("Contributor"), and TMCT II, LLC, a Delaware limited liability
company ("LLC"). All capitalized terms used herein, and not otherwise defined
herein, shall have the meanings given to them in the Second Amended and
Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., dated
October 24, 1997 as amended to date (the "Partnership Agreement").
WHEREAS, pursuant to that certain Contribution Agreement dated the
date hereof by and among the Contributor, LLC, the General Partner, and PPI
(the "Contribution Agreement"), the Contributor desires to contribute $70
million to the Partnership in exchange for which the Operating Partnership will
issue preferred partnership interests in the Partnership to LLC as set forth
herein; and
WHEREAS, as provided in Section 12.2 of the Partnership Agreement, the
General Partner is authorized to cause the Partnership to issue additional
interests in the Partnership in exchange for such contribution.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Contribution.
Contributor hereby contributes to the Partnership $70 million as a
contribution to the capital of the Partnership.
Section 2. Issuance of Series D Preferred Partnership Units.
In consideration of the contribution to the Partnership pursuant to
Section 1 hereof, the Partnership hereby issues to LLC 2,800,000 Series D
Preferred Partnership Units (as defined herein). Exhibit I to the Partnership
Agreement, attached hereto, is hereby inserted into the
<PAGE> 2
Partnership Agreement. LLC hereby agrees that it shall have the rights provided
for in Exhibit I and Section 8.6.F to the Partnership Agreement and that it
shall not have any rights with respect to the "Redemption Rights" provided for
in Section 8.6.A through 8.6.E and Exhibit E to the Partnership Agreement.
Section 3. Definitions.
In addition to those terms defined in the Partnership Agreement, the
following definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in the Partnership
Agreement and in this Amendment:
"Series D Preferred Partnership Unit" means a Partnership
Unit issued by the Partnership to LLC in consideration of the
contribution by the Contributor to the Partnership of $70 million. The
Series D Preferred Partnership Units shall constitute Preferred
Partnership Units. The Series D Preferred Partnership Units shall have
the voting powers, designation, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions as are set forth in Exhibit I attached
hereto.
"Series D Preferred Stock" means the 8% Series D Cumulative
Redeemable Preferred Stock, par value $.01 per share, having a
liquidation preference equal to $25.00 per share issued by PPI.
Section 4. Allocations
Article 6 of the Partnership Agreement is hereby deleted in its
entirety and the following is substituted therefor:
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall
be allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Income shall be allocated in
the following manner and order of priority:
(1) To the General Partner until the cumulative
allocations of Net Income under this Section 6.1.A.(1) equal
the cumulative Net Losses allocated to the General Partner
under Section 6.1.B.(5) hereof.
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(2) To those Partners who have received allocations of
Net Loss under Section 6.1.B.(4) hereof until the cumulative
allocations of Net Income under this Section 6.1.A.(2) equal
such cumulative allocations of Net Loss (such allocation of
Net Income to be in proportion to the cumulative allocations
of Net Loss under such section to each such Partner).
(3) To the Partners holding Preferred Partnership Units
until the cumulative allocations of Net Income under this
Section 6.1.A.(3) equal the cumulative allocations of Net
Loss to such Partners under Section 6.1.B.(3) hereof (such
allocation of Net Income to be in proportion to the
cumulative allocations of Net Loss under such section to each
such Partner).
(4) To those Partners who have received allocations of
Net Loss under Section 6.1.B.(2) hereof until the cumulative
allocations of Net Income under this Section 6.1.A.(4) equal
such cumulative allocations of Net Loss (such allocation of
Net Income to be in proportion to the cumulative allocations
of Net Loss under such section to each such Partner).
(5) To the Partners until the cumulative allocations of
Net Income under this Section 6.1.A.(5) equal the cumulative
allocations of Net Loss to such Partners under Section
6.1.B.(1) hereof (such allocation of Net Income to be in
proportion to the cumulative allocations of Net Loss under
such section to each such Partner).
(6) Any remaining Net Income shall be allocated to the
Partners who hold Common Partnership Units in proportion to
their respective Percentage Interests with respect to Common
Partnership Units.
B. Net Losses. After giving effect to the special
allocations set forth in Section 1 of Exhibit C, Net Losses shall be
allocated to the Partners as follows:
(1) To the Partners who hold Common Partnership
Units in accordance with their respective Percentage
Interests held with respect to Common Partnership
Units, except as otherwise provided in this Section
6.1.B.
(2) To the extent that an allocation of Net
Loss under Section 6.1.B.(1) would cause a Partner
to have an Adjusted Capital Account Deficit at the
end of such taxable year (or increase any existing
Adjusted Capital Account Deficit of such Partner),
such Net Loss shall instead be allocated to those
Partners, if any, for whom such allocation of Net
Loss would not cause or increase an Adjusted Capital
Account Deficit. Solely for purposes of this Section
6.1.B.(2), the Adjusted Capital Account Deficit
shall be determined (i) in the case of Partners
holding Preferred Partnership Units, without regard
to the amount credited to such Partners' respective
Capital Accounts for the aggregate Liquidation
Preference
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<PAGE> 4
Amount attributable to Preferred Partnership Units
and without regard to any deemed deficit restoration
obligation of the General Partner recognized under
Regulations Section 1.704-1(b)(2)(ii)(c)(2), and
(ii) in the case of an Electing Partner, Principal
or a Principal-Controlled Partnership, without
regard to such Partner's deficit Capital Account
restoration obligation under Section 13.3 hereof.
The Net Loss allocated under this Section 6.1.B.(2)
shall be allocated among the Limited Partners who
may receive such allocation in proportion to their
respective Percentage Interests in Common
Partnership Units, but for any particular Limited
Partner not in excess of the maximum amount of Net
Loss that could be allocated to such Partner without
causing such Partner to have an Adjusted Capital
Account Deficit.
(3) Any remaining Net Loss that cannot be
allocated under Sections 6.1.B.(1) and (2) hereof
shall be allocated to the Partners holding Preferred
Partnership Units in proportion to their respective
Percentage Interests with respect to Preferred
Partnership Units, to the extent that such
allocation of Net Loss would not cause or increase
an Adjusted Capital Account Deficit of such Partners
determined, in the case of the General Partner,
without regard to any deemed deficit restoration
obligation of the General Partner recognized under
Regulations Section 1.704-1(b)(2)(ii)(c)(2).
(4) Any remaining Net Loss shall be allocated
to the Electing Partners, Principals and the
Principal-Controlled Partnerships who may receive
such allocation without causing an Adjusted Capital
Account Deficit as to such Partner, in proportion to
their respective Percentage Interests in Common
Partnership Units; provided that if, after the death
of a Control Person (as defined in Section 13.3.F
hereof) or Principal, an election is made on behalf
of the applicable Electing Partner, Principal or
Principal-Controlled Partnership under Section 13.3
hereof to eliminate or reduce its deficit Capital
Account restoration obligation under Section 13.3
hereof, Net Losses shall not be allocated to such
Partner to the extent that such allocation would
cause such Partner to have an Adjusted Capital
Account Deficit (or would increase any existing
Adjusted Capital Account Deficit of such Partner) as
of the end of such taxable year, and instead shall
be allocated to those Electing Partners, Principals
and Principal-Controlled Partnerships as to whom the
foregoing limitation does not apply, in proportion
to their respective Percentage Interests in Common
Partnership Units.
(5) Any remaining Net Loss shall be allocated
to the General Partner.
C. For purposes of Regulations Section
1.752-3(a), the Partners agree that Nonrecourse Liabilities
of the Partnership in excess of the sum of (i) the amount of
Partnership Minimum Gain, and (ii) the total amount of
Nonrecourse Built-in Gains shall be allocated among the
Partners in accordance with their respective Percentage
Interests in Common Partnership Units.
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D. Any gain allocated to the Partners upon the
sale or other taxable disposition of any Partnership asset
shall to the extent possible, after taking into account other
required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and
to the same extent as such Partners have been allocated any
deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
Section 5. Exhibits to Partnership Agreement.
(a) Exhibit C to the Partnership is hereby
deleted in its entirety and the attached
Exhibit C is substituted therefor.
(b) The Partnership Agreement is hereby amended
by attaching thereto as Exhibit I the
Exhibit I attached hereto.
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IN WITNESS WHEREOF, the parties hereto have executed the Amendment
under seal as of the date first written above.
GENERAL PARTNER:
POST GP HOLDINGS, INC.,
a Georgia corporation
By: /s/ R. Byron Carlock, Jr.
---------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
Attest: /s/ Sherry W. Cohen
-----------------------------
Name: Sherry W. Cohen
Title: Executive Vice President
LIMITED PARTNERS:
POST LP HOLDINGS, INC.,
a Georgia corporation,
as attorney-in-fact for the
Limited Partners
By: /s/ R. Byron Carlock, Jr.
---------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
Attest: /s/ Sherry W. Cohen
-----------------------------
Name: Sherry W. Cohen
Title: Executive Vice President
CONTRIBUTOR:
THE TIMES MIRROR COMPANY
By: /s/ Roger H. Molvar
---------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
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LLC:
TMCT II, LLC
By: The Times Mirror Company,
its Managing Member
By: /s/ Roger H. Molvar
---------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
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PPI:
POST PROPERTIES, INC.
By: /S/ R. Byron Carlock, Jr.
---------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
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EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit
C, the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if
there is a net decrease in Partnership Minimum Gain during any Partnership
Year, each Partner shall be specially allocated items of Partnership gross
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain
chargeback requirements in Regulations Section 1.704-2(f) and for purposes of
this Section 1.A only, each Partner's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to Section 6.1 of this
Agreement with respect to such Partnership Year and without regard to any
decrease in Partner Minimum Gain during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of the Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Partnership gross
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such
Partnership Year, other than allocations pursuant to Section 1.A hereof.
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C. Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions described
in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital Account
Deficit, items of Partnership gross income and gain shall be specifically
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, its Adjusted Capital Account Deficit
created by such adjustments, allocations or distributions as quickly as
possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership Year shall be allocated to the Partners in accordance with their
respective Percentage Interests in Common Partnership Units. If the General
Partner determines in its good faith discretion that Nonrecourse Deductions for
any Partnership Year must be allocated in a different ratio to satisfy the safe
harbor requirements of the Regulations promulgated under Section 704(b) of the
Code, the General Partner is authorized, upon notice to the Limited Partners,
to revise the prescribed ratio for such Partnership Year to the numerically
closest ratio which does satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i)(2).
F. Priority Allocation With Respect To Preferred Partnership
Units. All or a portion of the remaining items of Partnership gross income or
gain for the Partnership Year, if any, shall be specially allocated to the
Partners holding Preferred Partnership Units in an amount equal to the excess,
if any, of the cumulative distributions received by each such Partner pursuant
to Section 5.1(i) hereof for the current Partnership Year and all prior
Partnership Years (other than any distributions that are treated as being in
satisfaction of the Liquidation Preference Amount for any Preferred Partnership
Units) over the cumulative allocations of Partnership gross income and gain to
such Partner under this Section 1.F for all prior Partnership Years (such
allocations being made in proportion to the respective excess amounts for each
such Partner). For purposes of making the priority allocation required by this
Section 1.F., all Partnership distributions payable in respect of any series of
Preferred Partnership Units which are declared by the General Partner on or
before the end of a Partnership Year but which are paid after the end of such
Partnership Year shall be deemed to have been paid on the last day of such
Partnership Year.
G. Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Regulations.
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2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1 of
the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable
to a Contributed Property or Adjusted Property, items of income, gain, loss,
and deduction shall be allocated for federal income tax purposes among the
Partners as follows:
1. In the case of a Contributed Property, such items
attributable thereto shall be allocated
a. among the Partners in a manner consistent
with the principles of Section 704(c) of
the Code that takes into account the
variation between the 704(c) Value of such
property and its adjusted basis at the time
of contribution; and
b. any item of Residual Gain or Residual Loss
attributable to a Contributed Property
shall be allocated among the Partners in
the same manner as its correlative item of
"book" gain or loss is allocated pursuant
to Section 6.1 of the Agreement and Section
1 of this Exhibit C.
2. In the case of an Adjusted Property, such items
attributable thereto shall be allocated,
a. first, among the Partners in a manner
consistent with the principles of Section
704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss
attributable to such property and the
allocations thereof pursuant to Exhibit B;
b. second, in the event such property was
originally a Contributed Property, among
the Partners in a manner consistent with
Section 2.B.(1) of this Exhibit C; and
c. any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Partners in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
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3. All other items of income, gain, loss and deduction
shall be allocated among the Partners in the same
manner as their correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the
Agreement and Section 1 of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section
704(c) of the Code permit a partnership to utilize alternative methods to
eliminate the disparities between the agreed value of property and its adjusted
basis (including, without limitation, the implementation of curative
allocations), the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
Without limiting the foregoing, the General Partner shall take all
steps (including, without limitation, implementing curative allocations) that
it determines are necessary or appropriate to ensure that the amount of taxable
gain required to be recognized by the General Partner upon a disposition by the
Partnership of any Contributed Property or Adjusted Property does not exceed
the sum of (i) the gain that would be recognized by the General Partner if such
Property had an adjusted tax basis at the time of disposition equal to the
704(c) Value of such property; plus (ii) the deductions for depreciation,
amortization or other cost recovery actually allowed to the General Partner
with respect to such property for federal income tax purposes (after giving
effect to the "ceiling rule").
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EXHIBIT I
DESIGNATION OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND
QUALIFICATIONS , LIMITATIONS AND RESTRICTIONS
OF THE
SERIES D PREFERRED PARTNERSHIP UNITS
Section 1.1 Designation and Number. A series of Partnership Units in the
Partnership designated as 8% Series D Cumulative Redeemable Preferred Units
(the "Series D Preferred Units") is hereby established. The number of Series D
Preferred Units shall be 2,800,000.
Section 1.2 Distributions.
A. Payment of Distributions. Subject to the rights of holders of Parity
Preferred Units as to the payment of distributions, pursuant to Section 1.2.C.
of Exhibit I, holders of Series D Preferred Units will be entitled to receive,
when, as and if declared by the Partnership acting through the General Partner,
out of Available Cash, cumulative preferential cash distributions at the rate
per annum of 8% of the original Capital Contribution per Series D Preferred
Unit. Such distributions shall be cumulative, shall accrue from the original
date of issuance and will be payable (A) quarterly (such quarterly periods for
purposes of payment and accrual will be the quarterly periods ending on the
last day of the quarterly periods set forth in this clause (A) and not calendar
quarters) in arrears on the 1st day of each of March, June, September and
December of each year, commencing on December 1, 1999, and (B) in the event of
(i) an exchange of Series D Preferred Units into REIT Series D Preferred
Shares, or (ii) a redemption of Series D Preferred Units, on the exchange date
or redemption date, as applicable (each a "Series D Preferred Unit Distribution
Payment Date"). The amount of the distribution payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed based on the
ratio of the actual number of days elapsed in such period to ninety (90) days.
If any date on which distributions are to be made on the Series D Preferred
Units is not a Business Day, then payment of the distribution to be made on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. Distributions on the
Series D Preferred Units will be made to the holders of record of the Series D
Preferred Units on the relevant record dates, which will be fifteen (15) days
prior to the relevant Preferred Unit Distribution Payment Date (the "Series D
Preferred Unit Partnership Record Date").
B. Distributions Cumulative. Distributions on the Series D Preferred
Units will accrue whether or not declared, whether or not the terms and
provisions of any agreement of the Partnership at any time prohibit the current
payment of distributions, whether or not the Partnership has earnings, whether
or not there are funds legally available for the payment of such distributions
and whether or not such distributions are authorized. Accrued but unpaid
<PAGE> 14
distributions on the Series D Preferred Units will accumulate as of the
Preferred Unit Distribution Payment Date on which they first become payable.
Accumulated and unpaid distributions will not bear interest.
C. Priority as to Distributions.
(i) So long as any Series D Preferred Units are
outstanding, no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to Junior Units, nor
shall any cash or other property (other than capital stock of PPI which
corresponds in ranking to the Partnership Interests being acquired) be set
aside for or applied to the purchase, redemption or other acquisition for
consideration of any Series D Preferred Units, any Parity Preferred Units or
any Junior Units, unless, in each case, all distributions accumulated on all
Series D Preferred Units and all classes and series of outstanding Parity
Preferred Units have been paid in full. The foregoing sentence will not
prohibit (a) distributions payable solely in Junior Units, (b) the exchange or
conversion of Junior Units or Parity Preferred Units into Partnership Interests
of the Partnership ranking junior to the Series D Preferred Units as to
distributions and rights upon involuntary or voluntary liquidation, dissolution
or winding up of the Partnership, or (c) the redemption of Partnership
Interests corresponding to capital stock to be purchased by the General Partner
or PPI to preserve PPI's status as a real estate investment trust, provided
that such redemption shall be upon the same terms as the corresponding
purchase.
(ii) So long as distributions have not been paid in full
(or a sum sufficient for such full payment is not irrevocably deposited in
trust for payment) upon the Series D Preferred Units, all distributions
authorized and declared on the Series D Preferred Units and all classes or
series of outstanding Parity Preferred Units shall be authorized and declared
so that the amount of distributions authorized and declared per Series D
Preferred Unit and such other classes or series of Parity Preferred Units shall
in all cases bear to each other the same ratio that accrued and unpaid
distributions per Series D Preferred Unit and such other classes or series of
Parity Preferred Units (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such classes or series
of Parity Preferred Units do not have cumulative distribution rights) bear to
each other.
D. No Further Rights. Holders of the Series D Preferred Units shall not
be entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the full cumulative distributions described herein.
Section 1.3 Liquidation Proceeds.
A. Dissolution, Liquidation, Winding-Up. Upon the voluntary or
involuntary dissolution, liquidation or winding-up of the Partnership, the
holders of the Series D Preferred Units then outstanding, shall be entitled to
receive and to be paid out of the assets of the Partnership available for
distribution to its partners, before any payment or distribution shall be
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made on any Junior Units, the amount of $25.00 per Series D Preferred Unit,
plus accrued and unpaid quarterly distributions thereon.
B. Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by (i) fax and (ii) by
first class mail, postage prepaid, not less than 30 days and not more that 60
days prior to the payment date stated therein, to each record holder of the
Series D Preferred Units at the respective addresses of such holders as the
same shall appear on the transfer records of the Partnership.
C. No Further Rights. After the payment to the holders of the Series D
Preferred Units of the full preferential amounts provided for herein, the
holders of the Series D Preferred Units shall have no right or claim to any of
the remaining assets of the Partnership.
D. Ratable Distribution. If, upon any voluntary or involuntary
dissolution, liquidation, or winding-up of the Partnership, the amounts payable
with respect to the preference value of the Series D Preferred Units and any
other Preferred Units of the Partnership ranking as to any such distribution on
a parity with the Series D Preferred Units are not paid in full, the holders of
the Series D Preferred Units and of such other Preferred Units will share
ratably in any such distribution of assets of the Partnership in proportion to
the full respective preference amounts to which they are entitled.
E. Consolidation, Merger or other Transactions. Neither the sale, lease
or conveyance of all or substantially all of the property or business of the
Partnership, nor the merger or consolidation of the Partnership into or with
any other entity or the merger or consolidation of any other entity into or
with the Partnership, shall be deemed to be a dissolution, liquidation or
winding-up, voluntary or involuntary, for the purposes hereof.
Section 1.4 Optional Redemption.
A. Right of Optional Redemption. The Series D Preferred Units may not be
redeemed prior to September 3, 2004. On or after such date, the Partnership
shall have the right to redeem the Series D Preferred Units of any holder
thereof, in whole or in part, at any time or from time to time, upon not less
than 30 days nor more than 60 days written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of such holder of Series
D Preferred Units (the "Series D Redemption Price"); provided, however, that no
redemption pursuant to this Section 1.4 of Exhibit I will be permitted if the
Series D Redemption Price does not equal or exceed the original Capital
Contribution of such holder plus the cumulative Series D Priority Return to the
redemption date to the extent not previously distributed. If fewer than all of
the outstanding Series D Preferred Units are to be redeemed, the Series D
Preferred Units to be redeemed shall be selected pro rata (as nearly as
practicable without creating fractional units).
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B. Limitation on Redemption.
(i) The Series D Redemption Price of the Series D
Preferred Units (other than the portion thereof consisting of accumulated but
unpaid distributions) will be payable solely out of the sale proceeds of
capital stock of PPI, which will be contributed by PPI to the Partnership as an
additional capital contribution, or out of the sale of limited partner
interests in the Partnership and from no other source. For purposes of the
preceding sentence, "capital stock" means any equity securities (including
Common Stock and Preferred Stock (as such terms are defined in the Articles of
Incorporation)), shares, participation or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the
foregoing.
(ii) The Partnership may not redeem fewer than all of the
outstanding Series D Preferred Units unless all accumulated and unpaid
distributions have been paid on all Series D Preferred Units for all quarterly
distribution periods terminating on or prior to the date of redemption;
provided, however, that the foregoing shall not prevent the redemption of
Series D Preferred Units to preserve the Corporation's REIT status.
C. Procedures for Redemption.
(i) Notice of redemption will be (i) faxed, and (ii)
mailed by the Partnership, by first class mail, postage prepaid, not less than
30 days nor more than 60 days prior to the redemption date, addressed to the
respective holders of record of the Series D Preferred Units at their
respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series D Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Series D Redemption Price, (c) the aggregate number of Series D
Preferred Units to be redeemed and if fewer than all of the outstanding Series
D Preferred Units are to be redeemed, the number of Series D Preferred Units to
be redeemed held by such holder, which number shall equal such holder's pro
rata share (based on the percentage of the aggregate number of outstanding
Series D Preferred Units that the total number of Series D Preferred Units held
by such holder represents) of the aggregate number of Series D Preferred Units
to be redeemed, (d) the place or places where such Series D Preferred Units are
to be surrendered for payment of the Series D Redemption Price, (e) that
distributions on the Series D Preferred Units to be redeemed will cease to
accumulate on such redemption date, and (f) that payment of the Series D
Redemption Price will be made upon presentation and surrender of such Series D
Preferred Units.
(ii) If the Partnership gives a notice of redemption in
respect of Series D Preferred Units then, by 12:00 noon, New York City time, on
the redemption date, the Partnership will deposit irrevocably in trust for the
benefit of the holders of the Series D Preferred Units being redeemed funds
sufficient to pay the applicable Series D Redemption Price
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and will give irrevocable instructions and authority to pay such Series D
Redemption Price to the holders of the Series D Preferred Units upon surrender
of the Series D Preferred Units by such holders at the place designated in the
notice of redemption. On and after the date of redemption, distributions will
cease to accumulate on the Series D Preferred Units or portions thereof called
for redemption, unless the Partnership defaults in the payment thereof. If any
date fixed for redemption of Series D Preferred Units is not a Business Day,
then payment of the Series D Redemption Price payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. If payment of the Series D Redemption Price
is improperly withheld or refused and not paid by the Partnership,
distributions on such Series D Preferred Units will continue to accumulate from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the applicable Series D Redemption Price.
Section 1.5 Voting Rights.
A. General. Holders of the Series D Preferred Units will not have any
voting rights or right to consent to any matter requiring the consent or
approval of the Limited Partners, except as set forth below and in Section 14.1
of this Agreement.
B. Certain Voting Rights. So long as any Series D Preferred Units remain
outstanding, the Partnership shall not, without the affirmative vote of the
holders of at least two-thirds of the Series D Preferred Units outstanding at
the time (i) authorize or create, or increase the authorized or issued amount
of, any class or series of Partnership Interests ranking senior to the Series D
Preferred Units with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any Partnership Interests
of the Partnership into any such senior Partnership Interest, or create,
authorize or issue any obligations or securities convertible into or evidencing
the right to purchase any such senior Partnership Interests, (ii) issue any
Parity Preferred Interests or any obligations or securities convertible into or
evidencing the right to purchase any such Partnership Interests to an Affiliate
of the Partnership, provided that the limitation in this subparagraph (ii)
shall not apply to (a) a transaction approved by a majority of the
disinterested directors of PPI upon terms no more favorable to such Affiliate
than the Partnership would be willing to offer an unrelated party in an arm's
length transaction or (b) an issuance to PPI, to the extent the issuance of
such interests was to allow PPI to issue corresponding preferred stock to
persons who are not Affiliates of the Partnership, (iii) either consolidate,
merge into or with, or convey, transfer or lease its assets substantially as an
entirety to, any corporation or other entity or amend, alter or repeal the
provisions of this Agreement (including, without limitation, this Exhibit I),
whether by merger, consolidation or otherwise, in each case in a manner that
would materially and adversely affect the powers, special rights, preferences,
privileges or voting power of the Series D Preferred Units or the holders
thereof; provided, however, that with respect to the occurrence of any event
set forth in (iii) above, so long as (a) the Partnership is the surviving
entity and the Series D Preferred Units remain
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outstanding with the terms thereof unchanged, or (b) the resulting, surviving
or transferee entity is a partnership, limited liability company or other
pass-through entity organized under the laws of any state and substitutes, for
the Series D Preferred Units, other interests in such entity having
substantially the same terms and rights as the Series D Preferred Units,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series D Preferred Units; and provided
further that any increase in the amount of Partnership Interests or the
creation or issuance of any other class or series of Partnership Interests, in
each case ranking either (a) junior to the Series D Preferred Units with
respect to payment of distributions and the distribution of assets upon
liquidation, dissolution or winding-up or (b) on a parity with the Series D
Preferred Units with respect to payment of distributions and the distribution
of assets upon liquidation, dissolution or winding-up (provided that such event
shall also be approved in accordance with, or meet the requirements of,
subparagraph (ii) above, if necessary) shall not be deemed to materially and
adversely affect such powers, special rights, preferences, privileges or voting
powers.
In addition to the foregoing, the Partnership will not (x)
enter into any contract, mortgage, loan or other agreement that prohibits or
restricts, or has the effect of prohibiting or materially restricting, the
ability of a Series D Limited Partner to exercise its rights set forth herein
to effect in full an exchange or redemption pursuant to Section 1.7 of Exhibit
I, except with the written consent of such Series D Limited Partner.
C. No General Partner Voting Rights. Notwithstanding anything to the
contrary in this Exhibit I, in no event shall the General Partner or any of its
Affiliates have any voting, consent or approval rights in respect of any Series
D Preferred Units it or they may hold, and any percentage or portion of
outstanding Series D Preferred Units that may be required hereunder for any
vote, consent or approval of holders thereof shall be determined as if all
Series D Preferred Units then held by the General Partner or any of its
Affiliates were not outstanding.
Section 1.6 Transfer Restrictions.
The Series D Preferred Units shall not be subject to the provisions of
Section 11.3.A of this Agreement; provided, however, that the Series D
Preferred Units shall be subject to the transfer restrictions described in
Sections 11.3.C, 11.3.D and 11.3.E of this Agreement. No transfer of the Series
D Preferred Units is permitted without the consent of the General Partner,
which consent may be given or withheld in its sole and absolute discretion, if
such transfer would result in more than 70 partners holding all outstanding
Series D Preferred Units within the meaning of Section II.A. of Internal
Revenue Service Notice 88-75 (1988-2 C.B. 386). In addition, no transfer may be
made to any person if such transfer would cause the exchange of the Series D
Preferred Units for REIT Series D Preferred Shares, as provided herein, to be
required to be registered under the Securities Act, or any state securities
laws. Notwithstanding anything in this Agreement to the contrary, the Series D
Preferred Units shall be freely transferable to LLC, which shall upon such
transfer be admitted as a Limited Partner hereunder.
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Section 1.7 Exchange Rights.
A. Right to Exchange.
(i) The Series D Preferred Units will be exchangeable in
whole but not in part unless expressly otherwise provided herein, at any time
on or after the September 3, 2009 at the option of holders of more than 50% of
all outstanding Series D Preferred Units, for authorized but previously
unissued REIT Series D Preferred Shares at an exchange rate of one REIT Series
D Preferred Share from PPI for one Series D Preferred Unit, subject to
adjustment as described below (the "Series D Exchange Price"), provided that
the Series D Preferred Units will become exchangeable at any time, in whole but
not in part, unless expressly otherwise provided herein, at the option of
holders of more than 50% of all outstanding Series D Preferred Units for REIT
Series D Preferred Shares, if:
(y) at any time full distributions shall not have been timely made on
any Series D Preferred Unit with respect to six (6) prior quarterly
distribution periods, whether or not consecutive, provided, however,
that a distribution in respect of Series D Preferred Units shall be
considered timely made if made within two (2) Business Days after the
Series D Preferred Unit Distribution Payment Date if at the time of
such late payment there shall not be any prior quarterly distribution
periods in respect of which full distributions were not timely made
(giving effect to the operation of this Section 1.7.A(i)(y) of Exhibit
I), or
(z) upon receipt by a holder or holders of Series D Preferred Units of
(A) notice from the General Partner that the General Partner or a
Subsidiary of the General Partner has become aware of facts that will
or likely will cause the Partnership to become a PTP and (B) an
opinion rendered by an outside nationally recognized independent
counsel familiar with such matters addressed to a holder or holders of
Series D Preferred Units, that the Partnership is or likely is, or
upon the occurrence of a defined event in the immediate future will be
or likely will be, a PTP.
In addition, the Series D Preferred Units may be exchanged for REIT Series D
Preferred Shares, in whole but not in part unless expressly otherwise provided
herein, at the option of holders of more than 50% of all outstanding Series D
Preferred Units prior to September 3, 2009 and on and after September 3, 2002
if such holders of Series D Preferred Units shall deliver to the General
Partner either (i) a private ruling letter addressed to such holder of Series D
Preferred Units or (ii) an opinion of independent counsel reasonably acceptable
to the General Partner based on the enactment of temporary or final Treasury
Regulations since the date of Closing or the publication of a Revenue Ruling
since the date of Closing, in either case to the effect that an exchange of the
Series D Preferred Units at such earlier time would not cause the Series D
Preferred Units to be considered "stock and securities" within the meaning of
Section 351(e) of the Code for purposes of determining whether the holder of
such Series D Preferred Units is an "investment company" under Section 721(b)
of the Code if an exchange is permitted at such earlier date.
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<PAGE> 20
Furthermore, the Series D Preferred Units, if LLC so determines, may be
exchanged in whole but not in part (regardless of whether held by LLC) for REIT
Series D Preferred Shares (but only if the exchange in whole may be
accomplished consistently with the ownership limitations set forth under the
Articles of Incorporation (taking into account exceptions thereto)), if (1) LLC
concludes based on results or projected results that there exists (in the
reasonable judgment of LLC) an imminent and substantial risk that LLC's
interest in the Partnership represents or will represent more than 18.0% of the
total profits of or capital interests in the Partnership for a taxable year,
(2) LLC delivers to the General Partner an opinion of nationally recognized
independent counsel, reasonably acceptable to the General Partner to the effect
that there is a substantial risk that its interest in the Partnership does not
or will not satisfy the 18.0% limit and (3) the General Partner agrees with the
conclusions referred to in clauses (1) and (2) of this sentence, such agreement
not to be unreasonably withheld.
(ii) Notwithstanding anything to the contrary set forth
in Section 1.7.A(i) of Exhibit I, if a Series D Exchange Notice (as defined
herein) has been delivered to the General Partner, then the General Partner
may, at its option, within ten (10) Business Days after receipt of the Series D
Exchange Notice, elect to cause the Partnership to redeem all or a portion of
the outstanding Series D Preferred Units for cash in an amount equal to the
original Capital Contribution per Series D Preferred Unit and all accrued and
unpaid distributions thereon to the date of redemption. If the General Partner
elects to redeem fewer than all of the outstanding Series D Preferred Units,
the number of Series D Preferred Units held by each holder to be redeemed shall
equal such holder's pro rata share (based on the percentage of the aggregate
number of outstanding Series D Preferred Units that the total number of Series
D Preferred Units held by such holder represents) of the aggregate number of
Series D Preferred Units being redeemed.
(iii) In the event an exchange of all Series D Preferred
Units pursuant to Section 1.7.A of Exhibit I would violate the provisions on
ownership limitation of PPI set forth in the Articles of Incorporation with
respect to REIT Series D Preferred Shares, each holder of Series D Preferred
Units shall be entitled to exchange, pursuant to the provisions of Section
1.7.B of Exhibit I, a number of Series D Preferred Units which would comply
with the provisions on the ownership limitation of PPI set forth in the
Articles of Incorporation, with respect to such holder, and any Series D
Preferred Units not so exchanged (the "Series D Excess Units") shall be
redeemed by the Partnership for cash in an amount equal to the original Capital
Contribution per Series D Excess Unit, plus any accrued and unpaid
distributions thereon to the date of redemption subject to any restriction
thereon contained in any debt instrument or agreement of the Partnership.
In the event an exchange would result in Series D Excess Units, as a condition
to such exchange, each holder of such units agrees to provide such
representations and covenants reasonably requested by PPI relating to (i) the
widely held nature of the interests in such holder, sufficient to assure PPI
that the holder's ownership of stock of PPI (without regard to the limits
described
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<PAGE> 21
above) will not cause any individual to own in excess of 6% of the stock of PPI
to the extent the holder can reasonably make such representation; and (ii) to
the extent such holder can so represent and covenant without obtaining
information from its owners (other than its direct or indirect parent
corporation, partnership or limited liability company and not the holders of
any interests in such parent), the holder's ownership of tenants of the
Partnership and its affiliates.
To the extent the General Partner would not be able to pay the cash set forth
above in exchange for the Series D Excess Units, and to the extent consistent
with the Articles of Incorporation, PPI agrees that it will grant to the
holders of the Series D Preferred Units exceptions to the Ownership Limit set
forth in the Articles of Incorporation sufficient to allow such holders to
exchange all of their Series D Preferred Units for REIT Series D Preferred
Shares, provided such holders furnish to PPI representations acceptable to PPI
in its sole and absolute discretion which assure PPI that such exceptions will
not jeopardize PPI's tax status as a REIT for purposes of federal and
applicable state law.
Notwithstanding any provision of this Agreement to the contrary, no Series D
Limited Partner shall be entitled to effect an exchange of Series D Preferred
Units for REIT Series D Preferred Shares to the extent that ownership or right
to acquire such shares would cause the Partner or any other Person or, in the
opinion of counsel selected by PPI, may cause PPI to become "closely held"
within the meaning of Section 856(h) of the Code. To the extent any such
attempted exchange for REIT Series D Preferred Shares would be in violation of
the previous sentence, it shall be void ab initio and such Series D Limited
Partner shall not acquire any rights or economic interest in the REIT Series D
Preferred Shares otherwise issuable upon such exchange.
(iv) The redemption of Series D Preferred Units described in
Section 1.7.A(ii) of Exhibit I and (iii) shall be subject to the provisions of
Section 1.4.B(i) of Exhibit I and Section 1.4.C(ii) of Exhibit I; provided,
however, that the term "Series D Redemption Price" in such Sections 1.4.B(i)
and 1.4.C(ii) shall be read to mean the original Capital Contribution per
Series D Preferred Unit being redeemed plus all accrued and unpaid
distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series D Preferred Units.
(i) Any exchange shall be exercised pursuant to a notice
of exchange (the "Series D Exchange Notice") delivered to the General Partner
by holders of more than 50% of the outstanding Series D Preferred Units (a) by
fax and (b) by certified mail, postage prepaid. The General Partner may effect
any exchange of Series D Preferred Units, or exercise its option to redeem any
portion of the Series D Preferred Units for cash pursuant to Section 1.7.A(ii)
of Exhibit I or redeem Series D Excess Units pursuant to Section 1.7.A(iii) of
Exhibit I, by delivering to each holder of record of Series D Preferred Units,
within ten (10) Business Days following receipt of the Series D Exchange
Notice,
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<PAGE> 22
(a) if the General Partner elects to exchange
any of the Series D Preferred Units then outstanding, (1) certificates
representing the REIT Series D Preferred Shares being issued in exchange for
the Series D Preferred Units of such holder being exchanged and (2) a written
notice (a "Series D Redemption Notice") stating (A) the redemption date, which
may be the date of such Redemption Notice, (B) the redemption price, (C) the
place or places where the Series D Preferred Units are to be surrendered and
(D) that distributions on the Series D Preferred Units will cease to accrue on
such redemption date, or
(b) if the General Partner elects to cause the
Partnership to redeem all of the Series D Preferred Units then outstanding in
exchange for cash, a Series D Redemption Notice. Series D Preferred Units shall
be deemed canceled (and any corresponding Partnership Interest represented
thereby deemed terminated) simultaneously with the delivery of shares of REIT
Series D Preferred Shares (with respect to Series D Preferred Units exchanged)
or simultaneously with the redemption date (with respect to Series D Preferred
Units redeemed).
Notwithstanding anything to the contrary contained herein, any and all Series D
Preferred Units to be exchanged for REIT Series D Preferred Stock pursuant to
this Section 1.7 of Exhibit I shall be so exchanged in a single transaction at
one time. As a condition to exchange, PPI may require the holders of Series D
Preferred Units to make such representations as may be reasonably necessary for
PPI to establish that the issuance of REIT Series D Preferred Shares pursuant
to the exchange shall not be required to be registered under the Securities Act
or any state securities laws. Any REIT Series D Preferred Shares issued
pursuant to this Section 1.7 of Exhibit I shall be delivered as shares which
are duly authorized, validly issued, fully paid and nonassessable, free of any
pledge, lien, encumbrance or restriction other than those provided in the
Articles of Incorporation, the Bylaws of PPI, the Securities Act and relevant
state securities or blue sky laws.
The certificates representing the REIT Series D Preferred
Shares issued upon exchange of the Series D Preferred Units shall contain the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND ANY APPLICABLE STATE SECURITIES LAWS
OR (B) IF THE CORPORATION HAS BEEN FURNISHED WITH A
SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER OF THE SHARES
REPRESENTED HEREBY, OR OTHER EVIDENCE SATISFACTORY TO THE
CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND
REGULATIONS THEREUNDER AND ANY APPLICABLE STATE SECURITIES
LAWS.
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<PAGE> 23
(ii) In the event of an exchange of Series D Preferred
Units for REIT Series D Preferred Shares, on and after the date of exchange,
distributions on any Series D Preferred Units tendered for exchange shall
continue to accrue on such Series D Preferred Units, which shall remain
outstanding following such exchange, with the General Partner as the holder of
such Series D Preferred Units. Notwithstanding anything to the contrary set
forth herein, in no event shall a holder of a Series D Preferred Unit that was
validly exchanged for REIT Series D Preferred Shares pursuant to this section
(other than the General Partner then holding such Series D Preferred Unit),
receive a distribution out of Available Cash of the Partnership, if such
holder, after exchange, is entitled to receive a distribution out of Available
Cash with respect to the REIT Series D Preferred Shares for which such Series D
Preferred Unit was exchanged or redeemed.
(iii) Fractional REIT Series D Preferred Shares are not to
be issued upon exchange but, in lieu thereof, the General Partner will pay a
cash adjustment based upon the fair market value of the REIT Series D Preferred
Shares on the day prior to the exchange date as determined in good faith by the
Board of Directors of the General Partner.
C. Adjustment of Series D Exchange Price. In case PPI shall be a party to
any transaction (including, without limitation, a merger, consolidation,
statutory share exchange, tender offer for all or substantially all of PPI's
capital stock or sale of all or substantially all of PPI's assets), in each
case as a result of which the REIT Series D Preferred Shares will be converted
into the right to receive shares of capital stock, other securities or other
property (including cash or any combination thereof), each Series D Preferred
Unit will thereafter be exchangeable into the kind and amount of shares of
capital stock and other securities and property receivable (including cash or
any combination thereof) upon the consummation of such transaction by a holder
of that number of REIT Series D Preferred Shares or fraction thereof into which
one Series D Preferred Unit was exchangeable immediately prior to such
transaction. PPI may not become a party to any such transaction, whether or not
any REIT Series D Preferred Shares are then outstanding: (i) which does not
preserve the existence of the REIT Series D Preferred Shares or substitute, for
the REIT Series D Preferred Shares, securities having substantially the same
terms and rights as the REIT Series D Preferred Shares, including with respect
to distributions, voting rights and rights upon liquidation, dissolution and
winding-up or (ii) if the terms thereof are inconsistent with the foregoing. In
addition, so long as a Series D Limited Partner or any of its permitted
successors or assigns hold any Series D Preferred Units, as the case may be,
PPI shall not, without the affirmative vote of the holders of at least
two-thirds of the Series D Preferred Units outstanding at the time: (a)
designate or create, or increase the authorized or issued amount of, any class
or series of shares ranking senior to the REIT Series D Preferred Shares with
respect to the payment of distributions or rights upon liquidation, dissolution
or winding-up or reclassify any authorized shares of PPI into any such shares,
or create, authorize or issue any obligations or securities convertible into or
evidencing the right to purchase any such shares; (b) issue any Parity
Preferred Shares or any obligations or securities convertible into or
evidencing the right to purchase any such Preferred Shares, but only to the
extent that such Parity Preferred Shares are issued to an Affiliate of the
Corporation and such issuance of Parity Preferred Shares is not
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<PAGE> 24
approved by a majority of the disinterested directors of PPI upon terms no more
favorable to such Affiliate than the Corporation would be willing to offer an
unrelated party in an arm's length transaction; (c) amend, alter or repeal the
provisions of the Articles of Incorporation or bylaws of PPI, whether by
merger, consolidation or otherwise, that would materially and adversely affect
the powers, special rights, preferences, privileges or voting power of the REIT
Series D Preferred Shares or the holders thereof; provided, however, that any
increase in the amount of authorized Preferred Shares or the creation or
issuance of any other series or class of Preferred Shares, or any increase in
the amount of authorized shares of each class or series, in each case ranking
either (1) junior to the REIT Series D Preferred Shares with respect to the
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up, or (2) on a parity with the REIT Series D Preferred
Shares with respect to the payment of distributions and the distribution of
assets upon liquidation, dissolution or winding-up (provided that such event
shall also be approved in accordance with, or meet the requirements of,
subparagraph (ii) above, if necessary) shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
Section 1.8 No Conversion Rights. The holders of the Series D Preferred
Units shall not have any rights to convert such Partnership Units into any
other class of Partnership Interests or any interest in the Partnership.
Section 1.9 No Sinking Fund. No sinking fund shall be established for
the retirement or redemption of the Series D Preferred Units.
Section 1.10 Reports. In addition to the reports required pursuant to
Section 9.3 of this Agreement, so long as any Series D Preferred Units are
outstanding, the General Partner shall cause to be mailed to each Series D
Limited Partner:
A. As soon as available, but in no event later than five Business Days
following the date on which PPI files its annual report in respect of a fiscal
year on Form 10-K, with the Commission (or, in the event that the Partnership
is required under rules and regulations promulgated by the Commission to file
with the Commission a Form 10-K separate from PPI's Form 10-K, five Business
Days after the filing of such report by the Partnership with the Commission), a
complete copy of the Partnership's financial statements for such fiscal year
including a balance sheet, income statement and cash flow statement for such
fiscal year prepared in accordance with GAAP (except with respect to
footnotes); and
B. As soon as available, but in no event later than five Business Days
following the date on which PPI files its quarterly report in respect of a
fiscal quarter on Form 10-Q, with the Commission (or, in the event the
Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-Q separate from PPI's Form
10-Q, five Business Days after the filing of such report by the Partnership
with the Commission), a complete copy of the Partnership's unaudited quarterly
financial statements for such fiscal
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<PAGE> 25
quarter including a balance sheet, income statement and cash flow statement for
such fiscal quarter prepared in accordance with GAAP (except with respect to
footnotes).
C. Within 90 days of the close of each taxable year, a final Form K-1 for
the prior taxable year.
Section 1.11 Definitions. For purposes of this Exhibit I, The following
terms shall have the meanings set forth below:
"Closing" shall have the same meaning as ascribed to that
term in that certain Contribution Agreement, dated September 3, 1999, by and
among The Times Mirror Company, LLC, the Partnership and PPI.
"Junior Units" means any class or series of Partnership
Interest of the Partnership ranking junior as to the payment of distributions
and rights upon voluntary or involuntary liquidation, winding up or dissolution
of the Partnership to the Series D Preferred Units.
"LLC" means TMCT II, LLC, a Delaware limited liability
company.
"Parity Preferred Unit" means any class or series of
Partnership Interests of the Partnership now or hereafter authorized, issued or
outstanding expressly designated by the Partnership to rank on a parity with
Series D Preferred Units with respect to distributions or rights upon voluntary
or involuntary liquidation, winding up and dissolution of the Partnership.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. The Partnership Interests represented by the Common Units,
Series A Preferred Units, Series B Preferred Units and Series C Preferred Units
are the only Partnership Interests, are separate classes of Partnership
Interest for all purposes of this Agreement, and are Parity Preferred Units
with respect to distributions or rights upon voluntary or involuntary
liquidation, winding up and dissolution of the Partnership with each other and
with the Series D Preferred Units.
"Preferred Share" means a share of PPI's preferred stock with
such rights, priorities and preferences as shall be designated by the Board of
Directors in accordance with the Articles of Incorporation.
"Preferred Unit" means a Series D Preferred Unit, and any
other Partnership Unit representing a Limited Partnership Interest, with such
rights, priorities and preferences as shall be designated by the General
Partner pursuant to Section 4.2 other than Common Units.
"REIT" means a real estate investment trust under Sections
856 through 860 of the Code.
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<PAGE> 26
"REIT Series D Preferred Share" means a share of 8% Series D
Cumulative Redeemable Preferred Stock, par value $.01 per share, liquidation
preference $25 per share, of PPI.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
"Series D Limited Partner" means any Person holding Series D
Preferred Units and named as a Series A Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner, in such Person's capacity as a Series D Limited Partner in the
Partnership.
"Series D Preferred Units" means the Partnership's 8% Series
D Cumulative Redeemable Limited Partnership Units, with the rights, priorities
and preferences set forth herein.
"Series D Priority Return" shall mean, an amount equal to 8%
per annum, determined on the basis of a 360 day year of twelve 30 day months,
and for any period shorter than a full quarterly period for which distributions
are computed, the amount of the distributions payable will be based on the
ratio of the actual number of days elapsed in such period to ninety (90) days
cumulative to the extent not distributed for any given distribution period
pursuant to Section 1.2 of this Exhibit I, on the stated value of $25.00 per
Series D Preferred Unit, commencing on the date of the issuance of such Series
D Preferred Unit.
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<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 3, 1999
(this "Agreement"), is entered into by and among Post Properties, Inc., a
Georgia corporation (the "Company" or the "REIT"), Post Apartment Homes, L.P.,
a Georgia limited partnership (the "Operating Partnership"), and TMCT II, LLC,
a Delaware limited liability company ("TMCT").
RECITALS
WHEREAS, in connection with the offering of 2,800,000 8% Series D
Cumulative Redeemable Preferred Units of the Operating Partnership (the
"Units"), The Times Mirror Company, a Delaware corporation (the "Contributor"),
will contribute to the Operating Partnership cash, in return for which the
Operating Partnership will issue the Units to TMCT on terms and conditions set
forth in the Contribution Agreement, dated as of September 3, 1999 (the
"Contribution Agreement"), by and among the Company, the Operating Partnership,
the Contributor and TMCT;
WHEREAS, each of the parties hereto agree that the rights, benefits
and obligations under this Agreement shall be fully assignable to any Person
(as defined below) to whom TMCT transfers its Units pursuant to the terms and
conditions of the Partnership Agreement (as defined below);
WHEREAS, pursuant to the Partnership Agreement, the Units owned by
TMCT will be redeemable for cash or exchangeable for shares of the Company's 8%
Series D Cumulative Redeemable Preferred Stock (the "Preferred Stock") upon the
terms and subject to the conditions contained therein; and
WHEREAS, in order to induce the Contributor and TMCT to enter into the
Contribution Agreement, the Company and the Operating Partnership have agreed
to provide the registration rights set forth herein to TMCT and any subsequent
holder or holders of the Units.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. In addition to the definitions set forth
above, the following terms, as used herein, shall have the following meanings:
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE> 2
"Agreement" has the meaning given to such term in the initial
paragraph hereto.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York or Los Angeles, California are
authorized by law to close.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor statute thereto, as interpreted by the applicable
regulations thereunder.
"Commission" means the Securities and Exchange Commission.
"Company" means Post Properties, Inc., a Georgia corporation.
"Contribution Agreement" shall have the meaning given to such term in
the recitals hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"General Partner" means Post GP Holdings, Inc., a Georgia corporation
and a wholly owned subsidiary of the Company, or its successors as general
partner of the Operating Partnership.
"Holder" means (i) TMCT and (ii) any other Person who is the record or
beneficial owner of any Registrable Security or any assignee or transferee of
such Registrable Security (including assignments or transfers of Registrable
Securities to such assignees or transferees as a result of the foreclosure on
any loans secured by such Registrable Securities) unless such Registrable
Security is acquired in a public distribution pursuant to a registration
statement under the Securities Act or pursuant to transactions exempt from
registration under the Securities Act, in each such case where securities sold
in such transaction may be resold without subsequent registration under the
Securities Act.
"Incapacitated" shall have the meaning set forth in the Partnership
Agreement.
"Indemnified Party" shall have the meaning set forth in Section 2.6
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 2.6
hereof.
"Inspectors" shall have the meaning set forth in Section 2.2(g).
"NASD" shall have the meaning set forth in Section 2.2(d) hereof.
"Operating Partnership" shall have the meaning given to such term in
the initial paragraph hereto.
"Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership, dated as of
October 24, 1997, as the same may be amended, modified or restated from time to
time.
2
<PAGE> 3
"Person" means an individual or a corporation, partnership, limited
liability company, association, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" shall have the meaning given to such term in the
recitals hereof.
"REIT" means a real estate investment trust under Section 856 through
Section 860 of the Code.
"Records" shall have the meaning set forth in Section 2.2(g) hereof.
"Registrable Securities" means shares of Preferred Stock at any time
owned, either of record or beneficially, by any Holder and no matter how
acquired (including, without limitation, shares of Preferred Stock issued or
issuable upon exchange of Units or issued or issuable by way of stock dividend
or stock split, or in connection with a merger, consolidation, combination of
shares, recapitalization or other reorganization and any other securities
issued pursuant to any other distribution with respect to the Preferred Stock
or in exchange for or replacement of such Preferred Stock) until (i) a
registration statement covering such securities has been declared effective by
the Commission and such shares have been sold or transferred pursuant to such
effective registration statement, (ii) such shares are sold under circumstances
in which all of the applicable conditions of Rule 144 under the Securities Act
(or any similar provisions then in force) are met or under which such shares
may be sold pursuant to Rule 144(k) under the Securities Act or (iii) such
shares have been otherwise transferred in a transaction that would constitute a
sale thereof under the Securities Act, the Company has delivered a new
certificate or other evidence of ownership for such shares not bearing the
Securities Act restricted stock legend and such shares may be resold without
subsequent registration under the Securities Act.
"Registration Expenses" shall have the meaning set forth in Section
2.3 hereof.
"Rule 144" means Rule 144 promulgated under the Securities Act, as
such rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the Commission providing for
offers and sales of securities made in compliance therewith resulting in offers
and sales by subsequent holders that are not affiliates of the Company of such
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as
such rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the Commission.
"Rule 415" means Rule 415 promulgated under the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
3
<PAGE> 4
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement under the Securities Act pursuant to this
Agreement.
"Shelf Registration" shall have the meaning set forth in Section 2.1
hereof.
"Shelf Registration Statement" means any registration statement
relating to a Shelf Registration that covers any of the Preferred Stock of the
Company filed with the Commission under the Securities Act, including the
prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
"Units" shall have the meaning given to such term in the recitals
hereof.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. SHELF REGISTRATION.
The Company shall prepare and file a "shelf" registration statement
(the "Shelf Registration Statement") with respect to the Registrable Securities
covering the resale thereof by the Holders on an appropriate form for an
offering to be made on a continuous or delayed basis pursuant to Rule 415 (the
"Shelf Registration") within 60 days after each date on which all or any
portion of the Units are exchanged for shares of Preferred Stock and shall use
its reasonable best efforts to cause the Shelf Registration Statement to be
declared effective within 120 days after the date of such exchange. The Company
shall use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective until the earliest of (A) such time as all of the
Registrable Securities have been sold pursuant to the Shelf Registration
Statement or Rule 144 and (B) the date on which all of the Registrable
Securities may be sold without volume restrictions in accordance with Rule 144.
SECTION 2.2. REGISTRATION PROCEDURES; FILINGS; INFORMATION. In
connection with any Shelf Registration Statement under Section 2.1 hereof, the
Company will use its reasonable best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) As provided in Section 2.1 hereof, the Company will
as expeditiously as reasonably possible prepare and file with the Commission a
registration statement on any form for which the Company then qualifies or
which counsel for the Company shall deem appropriate and which form shall be
available for the sale by the Selling Holders to be registered thereunder in
accordance with the intended method of distribution thereof and which
4
<PAGE> 5
shall comply as to form in all material respects with the requirements of the
applicable form and include or incorporate by reference all financial
statements required by the Commission to be filed therewith, and use its
reasonable best efforts to cause such filed registration statement to become
and remain effective.
(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
notify each Holder of Registrable Securities that a Shelf Registration
Statement is being filed and advise such Holder that an offering of Registrable
Securities will be made in accordance with the method elected (which method may
also include an underwritten offering) by the Holders of a majority of the
Registrable Securities, furnish to each Selling Holder and each Underwriter, if
any, of the Registrable Securities covered by such registration statement or
prospectus copies of such registration statement or prospectus or any amendment
or supplement thereto as proposed to be filed, and thereafter furnish to such
Selling Holder and Underwriter, if any, such number of conformed copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such Selling Holder or
Underwriter may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Selling Holder.
(c) The Company will notify each Holder of Registrable
Securities and counsel for such Holder promptly and, if requested by such
Holder or counsel, confirm such advice in writing promptly (i) when a
registration statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
Commission or any state securities authority for post-effective amendments and
supplements to a registration statement that has become effective, (iii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of a registration statement or the initiation of
any proceedings for that purpose, (iv) if, during the period a registration
statement is effective, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or other
similar agreement, if any, relating to such offering cease to be true and
correct in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (vi) of any determination
by the Company that a post-effective amendment to a registration statement
would be appropriate.
(d) The Company will use its reasonable best efforts to
(i) register or qualify the Registrable Securities under such other securities
or blue sky laws of such jurisdictions in the United States (where an exemption
is not available) as any Selling Holder or managing Underwriter or
Underwriters, if any, reasonably (in light of such Selling Holder's intended
plan of distribution) requests by the time the registration statement relating
thereto is declared effective by the Commission and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities, including the National Association of Securities
Dealers ("NASD"), as may be necessary by virtue of the business and operations
of the Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the
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Registrable Securities owned by such Selling Holder; provided that the Company
will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction except as may be
required by the Securities Act.
(e) The Company will immediately notify each Selling
Holder or Underwriter of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus and shall file with the Commission such amendments
and supplements to such prospectus and deliver copies of the same to the
Selling Holders or Underwriters, as the case may be, so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances then existing, not misleading and
promptly make available to each Selling Holder a reasonable number of copies of
any such supplement or amendment.
(f) The Company will enter into customary agreements
(including an underwriting agreement or securities sale agreement, if any, in
customary form) containing such representations and warranties to the Holders
of such Registrable Securities and the Underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities.
(g) The Company will make available for inspection by
any Selling Holder of such Registrable Securities, any Underwriter
participating in any disposition pursuant to such registration statement and
any attorney, accountant or other professional retained by any such Selling
Holder or Underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any Inspector in connection with such registration statement.
Records which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. Each Selling Holder agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company or its Affiliates or otherwise disclosed by it unless
and until such is made generally available to the public. Each Selling Holder
further agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its sole expense, to undertake appropriate action to
prevent disclosure of the Records that are deemed confidential.
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(h) The Company will furnish to each Selling Holder and
to each Underwriter, if any, a signed counterpart, addressed to such Selling
Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company
and (ii) a comfort letter or comfort letters from the Company's independent
public accountants (to the extent permitted by the standards of the American
Institute of Certified Public Accountants), each in customary form and covering
such matters of the type customarily covered by opinions or comfort letters, as
the case may be, as the Holders of a majority of the Registrable Securities
included in such offering or the managing Underwriter or Underwriters therefor
reasonably request.
(i) The Company will otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of the Commission,
and make available to its securityholders, as soon as reasonably practicable,
an earnings statement covering a period of twelve (12) months, beginning within
three (3) months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 of the Commission promulgated thereunder (or any
successor rule or regulation hereafter adopted by the Commission).
(j) The Company will use its reasonable best efforts to
cause all such Registrable Securities to be listed on each securities exchange
on which similar securities issued by the Company are then listed.
(k) The Company will use its reasonable best efforts to
obtain CUSIP numbers for the Preferred Stock not later than the effective date
of the Shelf Registration Statement.
The Company may require, as a condition precedent to the obligations
of the Company under the Agreement, each Selling Holder to promptly furnish in
writing to the Company such information regarding such Selling Holder, the
Registrable Securities held by it and the intended method of distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection
with such registration.
Each Selling Holder agrees that, upon receipt of any written notice
from the Company of the occurrence of any event of the kind described in
Section 2.2(e) hereof, such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
and prospectus covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.2(e) hereof, and, if so directed by the Company, such Selling Holder
will deliver to the Company all copies, other than permanent file copies then
in such Selling Holder's possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period during
which such registration statement shall be maintained effective by the number
of days during the period from and including the date of the giving of notice
pursuant to Section 2.2(e) hereof to the date when the Company shall make
available to the Selling Holders a prospectus supplemented or amended to
conform with the requirements of Section 2.2(e) hereof. Each Selling Holder
agrees that it will immediately notify the Company at any time when a
prospectus
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<PAGE> 8
relating to the registration of such Registrable securities is required to be
delivered under the Securities Act of the occurrence of an event as a result of
which information previously furnished by such Selling Holder to the Company in
writing for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
SECTION 2.3. REGISTRATION EXPENSES. In connection with any
registration statement required to be filed hereunder, the Company shall pay
the following registration expenses incurred in connection with the
registration hereunder (the "Registration Expenses"): (i) all Commission, stock
exchange, NASD or other registration and filing fees, (ii) fees and expenses of
compliance with securities or blue sky laws and compliance with the rules of
the NASD (including reasonable fees and disbursements of U.S. and local counsel
for any Underwriters and Holders in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses of any Persons in
preparing and distributing any Shelf Registration Statement, any prospectus,
any amendments or supplements thereto, any underwriting agreements, securities
sales agreements, certificates representing the Preferred Stock and any other
document relating to the performance of, and compliance with, this Agreement,
(iv) internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(v) the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange, (vi) reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any special audits or comfort letters or costs associated with
compliance with such special audits or with the delivery by independent
certified public accountants of a comfort letter or comfort letters requested
pursuant to Section 2.2(h) hereof), (vii) the reasonable fees and expenses of
any special experts retained by the Company in connection with such
registration and (viii) reasonable fees and expenses of one counsel (who shall
be reasonably acceptable to the Company) for the Selling Holders. Except as
expressly provided in the preceding sentence, the Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities, or any out-of-pocket expenses of the
Holders (or the agents who manage their accounts) or any transfer taxes
relating to the registration or sale of the Registrable Securities.
SECTION 2.4. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder, its officers, directors and
agents, and each Person, if any, who controls such Selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, expenses and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or
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omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by such Selling Holder or on such Selling
Holder's behalf expressly for inclusion therein. The Company also agrees to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 2.4, provided that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit of
any Underwriter of the Registrable Securities from whom the Person asserting
any such losses, claims, damages or liabilities purchased the Registrable
Securities which are the subject thereof if (i) such Person did not receive a
copy of the prospectus (or the prospectus as supplemented) at or prior to the
confirmation of the sale of such Registrable Securities to such Person in any
case where such delivery is required by the Securities Act and the untrue
statement or omission of a material fact contained in such preliminary
prospectus was corrected in the prospectus (or the prospectus as supplemented),
provided that such Underwriter received prior notice that such prospectus (or
the prospectus as supplemented) corrected such untrue statement or omission of
a material fact; or (ii) such Person received a prospectus at or prior to the
confirmation of the sale of such Registrable Securities to such Person during
the period when the use of such prospectus has been suspended in accordance
with Section 2.2, provided that such Underwriter received prior notice of such
suspension.
SECTION 2.5. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES.
Each Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors and agents and each Person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Selling Holder, but only with
respect to information relating to such Selling Holder furnished in writing by
such Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its officers,
directors or agents or any such controlling person, in respect of which
indemnity may be sought against such Selling Holder, such Selling Holder shall
have the rights and duties given to the Company, and the Company or its
officers, directors or agents or such controlling person shall have the rights
and duties given to such Selling Holder, by Section 2.6 hereof. In no event
shall the liability of Holder hereunder be greater in amount than the gross
dollar amount of the proceeds received by Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
SECTION 2.6. CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Sections 2.4 or 2.5 hereof, such Person (an "Indemnified Party") shall promptly
notify the Person against whom such indemnity may be sought (an "Indemnifying
Party") in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all fees and expenses. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel
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shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties,
and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by (i) in the case of Persons indemnified
pursuant to Section 2.4 hereof, by the Selling Holders which owned a majority
of the Registrable Securities sold under the applicable registration statement
and (ii) in the case of Persons indemnified pursuant to Section 2.5 hereof, by
the Company. The Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Party shall have requested an Indemnifying Party to reimburse
the Indemnified Party for fees and expenses of counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Party agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than thirty (30) Business
Days after receipt by such Indemnifying Party of the aforesaid request and (ii)
such Indemnifying Party shall not have reimbursed the Indemnified Party in
accordance with such request prior to the date of such settlement. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in which
any Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability
arising out of such proceeding.
SECTION 2.7. CONTRIBUTION. If the indemnification provided for in
Sections 2.4 or 2.5 hereof is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities
(i) as between the Company and the Selling Holders on the one hand and the
Underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Holders on the one
hand and the Underwriters on the other from the offering of the securities, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of each Selling Holder in
connection with such statements or omissions
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which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Holders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and the Selling Holders bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the prospectus. The
relative fault of the Company and the Selling Holders on the one hand and of
the Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Holders or by the
Underwriters. The relative fault of the Company on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Selling Holder, and the Company's
and the Selling Holder's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 2.7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in Sections 2.4 and 2.5
hereof shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Selling Holder's obligations to contribute
pursuant to this Section 2.7 are several in the proportion that the proceeds of
the offering received by such Selling Holder bears to the total proceeds of the
offering received by all the Selling Holders and not joint.
SECTION 2.8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS; OTHER
COVENANTS. No Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b)
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completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents in customary form and reasonably
required under the terms of such underwriting arrangements and these
registration rights provided for in this Article II. Each Holder covenants and
agrees that (i) such Holder will comply with the provisions of Regulation M
promulgated by the Commission as applicable to them in connection with sales of
Registrable Securities and (ii) such Holder will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities.
SECTION 2.9. RULE 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it
has complied with such requirements.
SECTION 2.10. HOLDBACK AGREEMENTS.
(a) Restrictions on Public Sale by Holder of Registrable
Securities. To the extent not inconsistent with applicable law, each Holder
whose securities are included in a registration statement pursuant to Section
2.1 agrees, upon receipt of prior written notice from the Company received not
later than 17 days prior to the effective date of such registration statement,
not to effect any sale or distribution of the securities being registered or a
similar security of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, including a "broker's
transaction" pursuant to Rule 144, but excluding any private sale made in
reliance on Section 4(2) of the Securities Act, during the 10 days prior to,
and during the 90-day period beginning on, the effective date of such
registration statement (except as part of such registration), if and to the
extent requested in writing by the Company in the case of a non-underwritten
public offering or if and to the extent requested in writing by the managing
Underwriter or Underwriters in the case of an underwritten public offering.
(b) If the Company determines in its good faith judgment
that the filing of the Shelf Registration Statement under Section 2.1 hereof or
the use of any related prospectus would require the disclosure of non-public
material information that the Company has a bona fide business purpose for
preserving as confidential or the disclosure of which would impede the
Company's ability to consummate a material transaction, and that the Company is
not otherwise required by applicable securities laws or regulations to
disclose, upon written notice of such determination by the Company, the rights
of the Holders to offer, sell or distribute any Registrable Securities pursuant
to the Shelf Registration Statement or to require the Company to take action
with respect to the registration or sale of any Registrable Securities pursuant
to the Shelf Registration Statement shall be suspended until the earlier of (i)
the date upon which the Company notifies the Holders in writing that suspension
of such rights for the grounds set forth in this Section 2.10(b) is no longer
necessary and (ii) 45 days; provided, however, that the
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Company shall only be entitled to give two (2) such notices within any twelve
month period. The Company agrees to give such notice as promptly as practicable
following the date that such suspension of rights is no longer necessary.
(c) If all reports required to be filed by the Company
pursuant to the Exchange Act have not been filed by the required date without
regard to any extension, or if the consummation of any business combination by
the Company has occurred or is probable for purposes of Rule 3-05 or Article 11
of Regulation S-X under the Securities Act, upon written notice thereof (a
"Suspension Notice") by the Company to the Holders, the rights of the Holders
to offer, sell or distribute any Registrable Securities pursuant to the Shelf
Registration Statement or to require the Company to take action with respect to
the registration or sale of any Registrable Securities pursuant to the Shelf
Registration Statement shall be suspended until the date on which the Company
has filed such reports or obtained and filed the financial information required
by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by
reference, as applicable, in the Shelf Registration Statement, and the Company
shall notify the Holders as promptly as practicable when such suspension is no
longer required (the "Termination Notice"). In the event the Company shall give
a Suspension Notice, the Company shall extend the period during which such
Shelf Registration Statement shall be maintained effective by the number of
days during the period from and including the date of the giving of the
Suspension Notice to the date of the Termination Notice.
(d) Restrictions on Public Sale by the Company and
Others. The Company agrees without the written consent of the managing
underwriters in an underwritten offering of Registrable Securities covered by a
registration statement filed pursuant to Section 2.1 hereof, not to effect any
public sale or distribution of any shares of preferred stock of the Company or
any securities convertible into or exchangeable for preferred stock of the
Company during the period beginning ten (10) days prior to, and ending ninety
(90) days after, the closing date of each underwritten offering made pursuant
to such registration statement (provided, however, that such period shall be
extended by the number of days from and including the date of the giving of any
notice pursuant to Section 2.2(c) hereof to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of the supplemented or amended prospectus contemplated
by Section 2.2(e) hereof).
ARTICLE III
MISCELLANEOUS
SECTION 3.1. REMEDIES. In addition to being entitled to exercise
all rights provided herein and granted by law, including recovery of damages,
the Holders shall be entitled to specific performance of the rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
SECTION 3.2. AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be
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given without the prior written consent of the Company and the Holders or any
such Holder's representative if any such Holder is Incapacitated. The parties
hereto agree to amend this Agreement as necessary to provide the parties with
substantially similar (and in any event, no less favorable) rights in the event
of the enactment by the SEC of changes to rules and regulations promulgated
under the Securities Act and the Exchange Act to the extent such changes modify
the currently existing registration scheme. No failure or delay by any party to
insist upon the strict performance of any covenant, duty, agreement or
condition of this Agreement or to exercise any right or remedy consequent upon
any breach thereof shall constitute a waiver of any such breach or any other
covenant, duty, agreement or condition.
SECTION 3.3. NOTICES. All notices and other communications in
connection with this Agreement shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(1) if to any Holder:
TMCT II, LLC
c/o The Times Mirror Company
Managing Member
Times Mirror Square
Los Angeles, California 90053
Attn: General Counsel
Facsimile Number: (213) 337-7696
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attn: Peter F. Ziegler
Facsimile Number: (213) 229-7520
(2) if to the Company or the Operating Partnership:
Post Properties, Inc.
One Riverside
4401 Northside Parkway
Suite 800
Atlanta, GA 30337-3057
Attention: President
Facsimile Number: (404) 504-9388
or to such other address as the Company may hereafter specify
in writing.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.
SECTION 3.4. SUCCESSORS AND ASSIGNS. The rights and obligations
under this Agreement shall be fully assignable to any Person to whom TMCT
transfers its Units pursuant to the terms and conditions of the Partnership
Agreement. Except as expressly provided in this Agreement, the rights and
obligations of the Holders under this Agreement shall not be assignable by any
Holder to any Person that is not a Holder. This Agreement shall be binding upon
the parties hereto and their respective successors and assigns.
SECTION 3.5. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto, which may be an original signature or facsimile
thereof.
SECTION 3.6. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Georgia
without regard to the choice of law provisions thereof.
SECTION 3.7. SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
SECTION 3.8. ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Registrable Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
SECTION 3.9. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 3.10. NO THIRD PARTY BENEFICIARIES. Nothing express or
implied herein is intended or shall be construed to confer upon any person or
entity, other than the parties hereto and their respective successors and
assigns, any rights, remedies or other benefits under or by reason of this
Agreement.
15
<PAGE> 16
SECTION 3.11. NO PIGGYBACK ON REGISTRATIONS. Neither the Company
nor any of its securityholders (other than the Holders of Registrable
Securities in such capacity) shall have the right to include any securities of
the Company in any registration effected under Section 2.1 hereof other than
Registrable Securities.
(Signature Page Follows)
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
Post Properties, Inc.,
a Georgia corporation
By: /s/ R. Byron Carlock, Jr.
-----------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
Post Apartment Homes, L.P.,
a Georgia limited partnership
By: Post GP Holdings, Inc.,
-----------------------------------
Its General Partner
By: /s/ R. Byron Carlock, Jr.
-----------------------------------
Name: R. Byron Carlock, Jr.
Title: Executive Vice President
TMCT II, LLC
By: The Times Mirror Company,
-----------------------------------
Its Managing Member
By: /s/ Roger H. Molvar
-----------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POST PROPERTIES, INC. FOR THE PERIOD ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000903127
<NAME> POST PROPERTIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,140,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,482,243,000
<DEPRECIATION> 287,841,000
<TOTAL-ASSETS> 2,257,398,000
<CURRENT-LIABILITIES> 0
<BONDS> 893,400,000
0
50,000
<COMMON> 386,000
<OTHER-SE> 1,054,637,000
<TOTAL-LIABILITY-AND-EQUITY> 2,257,398,000
<SALES> 0
<TOTAL-REVENUES> 254,442,000
<CGS> 0
<TOTAL-COSTS> 133,863,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,075,000
<INCOME-PRETAX> 89,655,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 69,541,000
<DISCONTINUED> 0
<EXTRAORDINARY> 458,000
<CHANGES> 0
<NET-INCOME> 69,083,000
<EPS-BASIC> 1.80
<EPS-DILUTED> 1.78
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001012271
<NAME> POST APARTMENT HOMES, L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,140,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,482,243,000
<DEPRECIATION> 287,841,000
<TOTAL-ASSETS> 2,257,398,000
<CURRENT-LIABILITIES> 0
<BONDS> 893,400,000
0
50,000
<COMMON> 386,000
<OTHER-SE> 1,247,859,000
<TOTAL-LIABILITY-AND-EQUITY> 2,257,398,000
<SALES> 0
<TOTAL-REVENUES> 254,442,000
<CGS> 0
<TOTAL-COSTS> 133,863,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,075,000
<INCOME-PRETAX> 89,655,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 78,976,000
<DISCONTINUED> 0
<EXTRAORDINARY> 521,000
<CHANGES> 0
<NET-INCOME> 78,455,000
<EPS-BASIC> 1.80
<EPS-DILUTED> 1.78
</TABLE>
