Document:

EX-10.1 LETTER AGREEMENT DATED DECEMBER 22, 2004

 

POST APARTMENT HOMES, L.P.

December 22, 2004

Wachovia Bank, National Association,

     as Agent, and each of the Lenders

     that are parties to the Credit Agreement

     described below

	 	Re:	  	Credit Agreement dated as of January 16, 2004, among Post
Apartment Homes, L.P., Wachovia Bank, National Association,
as Administrative Agent, and the financial institutions that are
parties thereto, as amended through the date hereof (the “Credit Agreement”)

     We refer to the above-referenced Credit Agreement. Capitalized terms used in this letter that
are defined in the Credit Agreement are used in this letter with the respective meanings provided
for such capitalized terms in the Credit Agreement. By this letter, we are requesting your
agreement as to the treatment of certain charges and related calculation of certain financial
covenants in the Credit Agreement as more particularly described below.

     On March 16, 1998, the Borrower issued its $100,000,000 6.85% Mandatory Par Put Remarketed
Securities (“MOPPRS”) due March 16, 2015. Under the terms of the MOPPRS, Merrill Lynch, as
remarketing dealer, has the option to repurchase these senior promissory notes from investors at
par on March 16, 2005, and remarket them at a price equal to 5.715% plus the Borrower’s
then-applicable credit spread above the 10-year treasury rate (which price would represent an
above-market rate that, based on current interest rates, would be expected to result in a premium
to Merrill Lynch of approximately $12,000,000). Under the remarketing agreement, the Borrower has
the right to redeem the MOPPRS from Merrill Lynch on March 16, 2005, by repaying the principal debt
outstanding, plus an additional amount based on the difference between the 5.715% rate and
the spot 10-year treasury rate for the remaining payments due over the 10-year term of the
remarketed senior promissory notes. Today, this additional amount payable to Merrill Lynch for
effective termination of its remarketing option would be approximately $12,000,000.

     In accordance with GAAP, if the Borrower were to exercise its option to redeem the MOPPRS from
Merrill Lynch on March 16, 2005, the Borrower would incur a “loss on early extinguishment of
indebtedness” for the amount of the additional payment and for the write off of unamortized
deferred financing costs. Assuming no change in interest rates between now and March 16, 2005,
this additional amount would be approximately $13,000,000 (including approximately $700,000 of
unamortized deferred financing costs). For purposes of calculating financial covenants under the
Credit Agreement, losses on early extinguishment of indebtedness would be excluded from interest
and fixed charge coverage ratios and, as a result, would have no impact on the financial covenants
or the measurement of the Borrower’s ability to meet debt service requirements.

 

 

     The Borrower has determined that it would be in its best interests to terminate Merrill
Lynch’s remarketing option in the fourth quarter of 2004 rather than in March 2005. However, this
earlier termination, according to GAAP, would result in the characterization and treatment of this
additional amount as approximately $12,000,000 of additional interest expense and approximately
$700,000 of additional amortization of deferred financing costs—rather than as “loss on early
extinguishment of debt” as described above. Assuming that the forward yield curve accurately
reflects the market’s expectation of future interest rates, however, the economic impact of this
earlier termination is essentially the same as if the Borrower exercised its redemption option on
March 16, 2005. Rather than the Borrower paying Merrill Lynch $112,000,000 to redeem the MOPPRS on
March 16, 2005, the Borrower would pay approximately $12,000,000 to terminate the remarketing
option now, and would pay investors $100,000,000 to redeem the principal amount of the MOPPRS at
par on March 16, 2005. Although no different economically (again, assuming that future interest
rates are accounted for in the yield curve), the GAAP characterization of the approximately
$12,000,000 payment as interest expense and the additional $700,000 as amortization of deferred
financing costs would presumably be required to be included in the Borrower’s computation of
interest and fixed charge coverage ratios and could result in non-compliance with such financial
covenants.

     The Borrower does not believe that the 3-month difference in timing of this transaction should
alter the calculation of the financial covenants. Furthermore, the Borrower does not believe that
this non-recurring charge materially impacts its leverage or affects its ability to meet its
ongoing debt service obligations. Accordingly, the Borrower is requesting that the Lenders
acknowledge and agree that, notwithstanding the Borrower’s termination of Merrill Lynch’s
remarketing option prior to March 16, 2005 and the classification under GAAP of the related charges
as described above, the Borrower shall treat all such charges as a “loss on early extinguishment of
debt” rather than “interest expense” for purposes of computing its financial covenants under the
Credit Agreement as of December 31, 2004 and in future periods as applicable. Please sign and
return a copy of this letter to evidence your acknowledgment and agreement, which shall be
effective as of the date of this letter.

 

 

          
          
          
          
          Thank you for your response to this request.

	 	 	 	 	 	 	 	 	 
	 
	 	Yours very truly,
	 
	 	 	 	 	 	 	 	 
	 
	 	POST APARTMENT HOMES, L.P.
	 
	 	 	 	 	 	 	 	 
	 
	 	By:	 	Post GP Holdings, Inc.,
	 
	 	 	 	its Sole General Partner
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	By:  /s/  Sherry W. Cohen	 	 
	

	 	 	 	 	 	
 	 	 
	

	 	 	 	 	 	Name:  Sherry W. Cohen
	 	 
	

	 	 	 	 	 	Title:  EVP	 	 

Acknowledged and Agreed to:

	 	 	 	 	 	 	 	 	 	 	 
	WACHOVIA BANK NATIONAL 
ASSOCIATION,
as Agent and as a Lender
	 	WELLS FARGO BANK, NATIONAL
     ASSOCIATION
	
	 	
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	/s/  Cathy A. Casey	 	By:	/s/  John S. Misiura
	 
	
 	 	 	
 
	
	 	Name: 	Cathy A. Casey	 	 	 	Name: 	John S. Misiura	 
	
	 	 	
 	 	 	 	 	
 
	

	 	Title: 	Director	 	 	 	Title: 	Vice President
	
	 	 	
 	 	 	 	 	
 
	 
	 	 	 	 	 	 	 	 	 	 
	SUNTRUST BANK
	 	AMSOUTH BANK
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 
	 	
 	 	 	 	
 
	
	 	Name:	 	 	 	 	 	Name:	 	 
	

	 	 	 	
 
	 	 	 	 	 	
 
	

	 	Title:	 	 	 	 	 	Title:	 	 
	

	 	 	 	
 
	 	 	 	 	 	
 
	 
	 	 	 	 	 	 	 	 	 	 
	PNC BANK, NATIONAL ASSOCIATION
	 	JP MORGAN CHASE BANK, N.A.
	 
	 	 	 	 	 	     (formerly JP Morgan Chase Bank,
	 
	 	 	 	 	 	     for itself and as successor by
	 
	 	 	 	 	 	     merger to Bank One, NA)
	 
	 	 	 	 	 	 	 	 	 	 
	By: 
	/s/ Wayne Robertson	 	By: 	/s/ Susan M. Tate	 
	 
	
 	 	 	
 
	
	 	Name: 	Wayne Robertson	 	 	 	Name: 	Susan M. Tate
	
	 	 	
 	 	 	 	 	
 
	

	 	Title: 	Senior Vice President	 	 	 	Title: 	Vice President
	
	 	 	
 	 	 	 	 	
 
	 
	 	 	 	 	 	 	 	 	 	 
	SOUTHTRUST BANK

	 
	 	 	 	 	 	 	 	 	 	 
	By: 
	/s/ Cathy A. Casey	 	 	 	 	 	 
	 
	
 
	

	 	Name: 	Cathy A. Casey	 	 	 	 	 	 	 
	
	 	 	
 	 	 	 	 	 	 
	
	 	Title: 	Director	 	 	 	 	 	 
	
	 	 	
 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	FIRST COMMERCIAL BANK

	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 
	
 
	

	 	Name:	 	 	 	 	 	 	 	 
	

	 	 	 	
 	 	 	 	 	 	 
	

	 	Title:EX-10.2 LETTER AGREEMENT DATED DECEMBER 23, 2004

 

POST APARTMENT HOMES, L.P.

December 23, 2004

	 	 	 	 	 
	Fannie Mae

	 	 
	3900
Wisconsin Avenue

	Washington,
DC 20016

	Attention:
Susanne Hiegel

	 
	
	
	 

	 	 	 	 	 	 	 
	Re:

	 	 	(1	)	 	Master Reimbursement Agreements dated as of June 1, 1995, between
Federal National Mortgage Association and Post Apartment Homes, L.P.,
as amended through the date hereof, and
	

	 	 	(2	)	 	Reimbursement Agreements dated as of July 1, 1999, between
Fannie Mae and Post Apartment Homes, L.P., as amended through the date
hereof (the “Reimbursement Agreements”)

     We refer to the above-referenced Reimbursement Agreements. Capitalized terms used in this
letter that are defined in the Reimbursement Agreements are used in this letter with the respective
meanings provided for such capitalized terms in the Reimbursement Agreements. By this letter, we
are requesting your agreement as to the treatment of certain charges and related calculation of
certain financial covenants in the Reimbursement Agreements as more particularly described below.

     On March 16, 1998, Post issued its $100,000,000 6.85% Mandatory Par Put Remarketed Securities
(“MOPPRS”) due March 16, 2015. Under the terms of the MOPPRS, Merrill Lynch, as remarketing
dealer, has the option to repurchase these senior promissory notes from investors at par on March
16, 2005, and remarket them at a price equal to 5.715% plus Post’s then-applicable credit
spread above the 10-year treasury rate (which price would represent an above-market rate that,
based on current interest rates, would be expected to result in a premium to Merrill Lynch of
approximately $12,000,000). Under the remarketing agreement, Post has the right to redeem the
MOPPRS from Merrill Lynch on March 16, 2005, by repaying the principal debt outstanding,
plus an additional amount based on the difference between the 5.715% rate and the spot
10-year treasury rate for the remaining payments due over the 10-year term of the remarketed senior
promissory notes. Today, this additional amount payable to Merrill Lynch for effective termination
of its remarketing option would be approximately $12,000,000.

     In accordance with GAAP, if Post were to exercise its option to redeem the MOPPRS from Merrill
Lynch on March 16, 2005, Post would incur a “loss on early extinguishment of indebtedness” (and,
under GAAP as in effect on the respective dates of the Reimbursement Agreements, would have been
treated as an “extraordinary loss”) for the amount of the additional payment and for the write off
of unamortized deferred financing costs. Assuming no change in interest rates between now and
March 16, 2005, this additional amount would be approximately $13,000,000 (including approximately
$700,000 of unamortized deferred financing costs). For purposes of calculating financial covenants
under the Reimbursement Agreements, losses on

 

 

early extinguishment of indebtedness/extraordinary losses would be excluded from debt service
coverage ratios and, as a result, would have no impact on the financial covenants or the
measurement of Post’s ability to meet debt service requirements.

     Post has determined that it would be in its best interests to terminate Merrill Lynch’s
remarketing option in the fourth quarter of 2004 rather than in March 2005. However, this earlier
termination, according to GAAP, would result in the characterization and treatment of this
additional amount as approximately $12,000,000 of additional interest expense and approximately
$700,000 of additional amortization of deferred financing costs—rather than as “loss on early
extinguishment of debt” as described above. Assuming that the forward yield curve accurately
reflects the market’s expectation of future interest rates, however, the economic impact of this
earlier termination is essentially the same as if Post exercised its redemption option on March 16,
2005. Rather than Post paying Merrill Lynch $112,000,000 to redeem the MOPPRS on March 16, 2005,
Post would pay approximately $12,000,000 to terminate the remarketing option now, and would pay
investors $100,000,000 to redeem the principal amount of the MOPPRS at par on March 16, 2005.
Although no different economically (again, assuming that future interest rates are accounted for in
the yield curve), the GAAP characterization of the approximately $12,000,000 payment as interest
expense and the additional $700,000 as amortization of deferred financing costs would presumably be
required to be included in Post’s computation of debt service coverage ratios and could result in
non-compliance with such financial covenants.

     Post does not believe that the 3-month difference in timing of this transaction should alter
the calculation of the financial covenants. Furthermore, Post does not believe that this
non-recurring charge materially impacts its leverage or affects its ability to meet its ongoing
debt service obligations. Accordingly, Post is requesting that Fannie Mae acknowledge and agree
that, notwithstanding Post’s termination of Merrill Lynch’s remarketing option prior to March 16,
2005 and the classification under GAAP of the related charges as described above, Post shall treat
all such charges as a “loss on early extinguishment of debt” (and as an “extraordinary loss”)
rather than “interest expense” for purposes of computing its financial covenants under the
Reimbursement Agreements as of December 31, 2004 and in future periods as applicable. Please sign
and return a copy of this letter to evidence your acknowledgment and agreement, which shall be
effective as of the date of this letter.

          
          
          
          
          Thank you for your response to this request.

	 	 	 	 	 	 	 	 	 
	 
	 	Yours very truly,
	 
	 	 	 	 	 	 
	 
	 	POST APARTMENT HOMES, L.P.
	 
	 	 	 	 	 	 
	 
	 	By:	 	Post GP Holdings, Inc.,
	 
	 	 	 	its Sole General Partner
	 								
	

	 	 	 	By:	 	/s/ Sherry W. Cohen
	

	 	 	 	 	 	
 
	

	 	 	 	 	 	Name: Sherry W. Cohen
	

	 	 	 	 	 	Title: Executive Vice President

Acknowledged and Agreed to:

	 	 	 	 	 
	FANNIE MAE

	 
	 	 	 	 
	By:
	 	/s/ Gerald LaHaie	 
	 
	
 	 
	

	 	Name:	  Gerald LaHaie	 
	

	 	 	
 	 
	

	 	Title:	 Vice President

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