SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the registrant þ
Filed by a party other than the registrant o

Check the appropriate box:		o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
o Preliminary proxy statement
þ Definitive proxy statement
o Definitive additional materials
o Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

COUSINS PROPERTIES INCORPORATED

(Name of Registrant as Specified in its Charter)

Payment of filing fee (Check the appropriate box):

	þ		No fee required
	o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transactions applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

(4)

Proposed maximum aggregate value of transaction:

(5)

Total fee paid:

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1)

Amount previously paid:

(2)

Form, Schedule or Registration Statement no.:

(3)

Filing Party:

(4)

Date Filed:

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2011

 

To our Stockholders:

 

The Annual Meeting of Stockholders of Cousins Properties Incorporated (“we,” “our,” “us,” or the “Company”) will be held on Tuesday, May 3, 2011, at 11:00 a.m. local time at 191 Peachtree Street NE, Atlanta, Georgia 30303-1740. The purposes of the meeting are:

 

(1) To elect ten Directors nominated by the Board of Directors (the “Board of Directors” or the “Board”);

 

(2) To conduct an advisory vote on executive compensation, often referred to as “say on pay”;

 

(3) To conduct an advisory vote on the frequency of future advisory votes on executive compensation, often referred to as “say when on pay”;

 

(4) To ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 31, 2011; and

 

(5) To transact any other business as may properly come before the meeting.

 

All holders of record of our common stock at the close of business on March 3, 2011 are entitled to vote at the meeting and any postponements or adjournments of the meeting.

 

By Order of the Board of Directors,

 

ROBERT M. JACKSON

Corporate Secretary

 

Atlanta, Georgia

March 25, 2011

 

Whether or not you expect to attend the Annual Meeting, you are urged to vote, date, sign and return the enclosed proxy in the enclosed postage-paid envelope. You also may vote your shares over the Internet or by telephone as described on your proxy card. If you attend the Annual Meeting, you may revoke the proxy and vote your shares in person.

 

TABLE OF CONTENTS

 

COUSINS PROPERTIES INCORPORATED
191 Peachtree Street NE, Suite 500
Atlanta, Georgia 30303-1740

 

PROXY STATEMENT

 

GENERAL INFORMATION

 

This proxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at our 2011 Annual Meeting of Stockholders. Our Annual Meeting will be held on Tuesday, May 3, 2011, at 11:00 a.m., local time, at 191 Peachtree Street NE, Atlanta, Georgia 30303-1740. The proxy is solicited by our Board of Directors. This proxy statement and proxy card are first being sent to holders of our common stock on March 25, 2011.

 

Why am I receiving this proxy statement and proxy card?

 

You are receiving this proxy statement and proxy card because you owned shares of Cousins Properties Incorporated common stock on March 3, 2011, and our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. This proxy statement describes issues on which we would like you to vote at our Annual Meeting. It also gives you information on these issues so that you can make an informed decision.

 

What is a proxy?

 

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. The written document in which you designate that person is called a proxy or a proxy card. Two of our Directors have been designated as proxies for the 2011 Annual Meeting of Stockholders. These Directors are S. Taylor Glover and William Porter Payne.

 

Who is entitled to vote?

 

Holders of our common stock at the close of business on March 3, 2011 are entitled to receive notice of the meeting and to vote at the meeting and any postponements or adjournments of the meeting. March 3, 2011 is referred to as the record date.

 

To how many votes is each share of common stock entitled?

 

Holders of our common stock are entitled to one vote per share.

 

What is the difference between a stockholder of record and a stockholder who holds common stock in “street name”?

 

If your shares of common stock are registered in your name, you are a stockholder of record. If your shares are in the name of your broker or bank, your shares are held in “street name.”

 

How do I vote?

 

Common stockholders of record may vote:

 

 

If you hold your shares of common stock through a broker or bank, please refer to your proxy card or the information forwarded by your broker or bank to see the voting options that are available to you. Written ballots will be passed out to anyone who wants to vote at the Annual Meeting. However, if you hold your shares of common

stock in street name, you must obtain a legal proxy from your broker or bank to be able to vote in person at the Annual Meeting.

 

What if I change my mind after I return my proxy?

 

You may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. You may do this by:

 

 

Attendance at the meeting will not by itself revoke a proxy.

 

On what items am I voting?

 

You are being asked to vote on four items:

 

 

No cumulative voting rights are authorized, and dissenters’ rights are not applicable to these matters.

 

How may I vote for the nominees for election of Directors, and how many votes must the nominees receive to be elected?

 

With respect to the election of Directors, you may:

 

 

Directors are elected by a plurality vote. As a result, the ten nominees receiving the highest number of FOR votes will be elected as Directors. Abstentions and broker non-votes will have no effect on the outcome of the vote.

 

We have a majority voting policy for the election of Directors. The policy, which is part of our Corporate Governance Guidelines, sets forth our procedures if a nominee is elected, but receives a majority of votes withheld. In an uncontested election, any nominee for Director who receives a greater number of votes withheld from his or her election than votes for his or her election is required to promptly tender his or her resignation. Our Compensation, Succession, Nominating and Governance Committee is required to promptly consider the resignation offer and make a recommendation to the Board with respect to the resignation. The Board is required to take action with respect to this recommendation. The policy is more fully described below under “Majority Voting Policy.”

What happens if a nominee is unable to stand for election?

 

If a nominee is unable to stand for election, the Board may, by resolution, provide for a lesser number of Directors or designate a substitute nominee. If the Board designates a substitute nominee, shares represented by proxies voted for the nominee unable to stand for election will be voted for the substitute nominee.

 

How may I vote on the proposal to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this proxy statement, and how many votes must the proposal receive to pass?

 

With respect to this proposal, you may:

 

 

If a quorum is present, the proposal is approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.

 

How may I vote on the proposal to indicate, on an advisory basis, my preference for the frequency of future advisory votes on executive compensation?

 

With respect to this proposal, you may vote to indicate your preference as follows:

 

 

Unlike the other proposals you are voting on, there is no threshold vote that must be obtained for this proposal to “pass”. Rather, the Board will take into consideration the outcome of the vote in setting a policy with respect to the frequency of future advisory votes on executive compensation.

 

How may I vote for the ratification of the appointment of the independent registered public accounting firm? How many votes must the proposal receive to pass?

 

With respect to the proposal to ratify the independent registered public accounting firm, you may:

 

 

If a quorum is present, the proposal is approved if the votes cast favoring the proposal exceed the votes cast opposing the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.

 

How does the Board of Directors recommend that I vote?

 

The Board recommends a vote:

 

 

What happens if I sign and return my proxy card but do not provide voting instructions?

 

If you return a signed card but do not provide voting instructions, your shares of common stock will be voted:

 

 

Will my shares be voted if I do not sign and return my proxy card, vote by phone or vote over the Internet?

 

If you are a common stockholder of record and you do not sign and return your proxy card, vote by phone, vote over the Internet or attend the Annual Meeting and vote in person, your shares will not be voted and will not count in deciding the matters presented for stockholder consideration in this proxy statement.

 

If your shares of common stock are held in “street name” through a broker or bank and you do not provide voting instructions before the Annual Meeting, your broker or bank may vote your shares on your behalf under certain limited circumstances, in accordance with New York Stock Exchange (“NYSE”) rules that govern the banks and brokers. These circumstances include voting your shares on “routine matters,” such as the ratification of the appointment of our independent registered public accounting firm. With respect to this proposal, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.

 

The remaining proposals — the election of directors, the say on pay vote and the say when on pay vote — are not considered routine matters under NYSE rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Broker non-votes that are represented at the Annual Meeting will be counted for purposes of establishing a quorum, but not for determining the number of shares voted for or against the non-routine matter.

 

We encourage you to provide instructions to your bank or brokerage firm by voting your proxy. This action ensures your shares will be voted at the meeting in accordance with your wishes.

 

How many votes do you need to hold the Annual Meeting?

 

Shares of our common stock are counted as present at the Annual Meeting if the stockholder either is present and votes in person at the Annual Meeting or properly has submitted a proxy.

 

As of the record date, 103,634,824 shares of our common stock were outstanding and are entitled to vote at the Annual Meeting. Holders of a majority of the outstanding shares entitled to vote as of the record date must be represented at the Annual Meeting either in person or by proxy in order to hold the Annual Meeting and conduct business. This is called a quorum. Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the meeting.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
Held on May 3, 2011:

 

The proxy statement and annual report on Form 10-K are available on the Investor Relations page of our website at www.cousinsproperties.com.

 

There are ten nominees for our Board of Directors this year. Our Directors are elected annually to serve until the next Annual Meeting of Stockholders and until their respective successors are elected. The Board has nominated the individuals named below for election as Directors at the Annual Meeting. All of the Director nominees are currently members of the Board and were elected as Directors by the stockholders at the Annual Meeting in 2010, except for Mr. Stone, who was elected to the Board effective March 2, 2011.

 

Biographical information about our nominees for Director, including business experience for at least the past five years, age, year he or she began serving as our Director and other public companies for which he or she has served on the board of directors in the past five years is provided below. In addition, the experience, qualifications, attributes and skills considered by our Compensation, Succession, Nominating and Governance Committee (also referred to herein as the “Nominating Committee”) and Board in determining to nominate the Director are provided below.

 

Our Board of Directors recommends that you vote “FOR”
each of the nominees for Director

 

 

There are no family relationships among our Directors or executive officers.

 

Our Board held five meetings during 2010. Each Director attended at least 75% of the total number of meetings of the Board and any committees of which he or she was a member.

 

We typically schedule a Board meeting in conjunction with our Annual Meeting and expect that our Directors will attend both, absent a valid reason. All Directors serving at the time of last year’s Annual Meeting attended the Annual Meeting.

 

Our Board has four standing committees — the Audit Committee; the Compensation, Succession, Nominating and Governance Committee; the Investment Committee; and the Executive Committee.

 

Audit Committee.  The current members of our Audit Committee are Mr. Edwards, Ms. Giornelli and Mr. Harrison. Mr. Edwards is the Chairman of the Committee. The Audit Committee held eight meetings during 2010. All of the members of the Audit Committee are independent within the meaning of the regulations promulgated by the Securities and Exchange Commission (“SEC”), the listing standards of the NYSE and our Director Independence Standards. All of the members of the Audit Committee are financially literate within the meaning of the SEC regulations, the listing standards of the NYSE and the Company’s Audit Committee Charter. The Board has determined that Mr. Edwards is an audit committee financial expert within the meaning of the SEC regulations and that he has accounting and related financial management expertise within the meaning of the NYSE listing standards.

 

The primary responsibilities of our Audit Committee include:

 

 

Compensation, Succession, Nominating and Governance Committee.  The current members of our Compensation, Succession, Nominating and Governance Committee are Mr. Bowles, Mr. Edwards, Mr. Hance, Mr. Harrison and Mr. Payne. Mr. Hance is the Chairman of the Committee. The Compensation, Succession, Nominating and Governance Committee held five meetings during 2010. All of the members of the Compensation, Succession, Nominating and Governance Committee are independent within the meaning of the listing standards of the NYSE and our Director Independence Standards.

 

The primary responsibilities of our Compensation, Succession, Nominating and Governance Committee include:

 

 

 

The Compensation, Succession, Nominating and Governance Committee retained Towers Watson, an outside human resources consulting firm, in 2010 to provide advice regarding executive compensation, including for our Named Executive Officers listed in the compensation tables in this proxy statement. Towers Watson advised the Compensation, Succession, Nominating and Governance Committee with respect to compensation trends, best practices and plan design. Towers Watson provided the Compensation, Succession, Nominating and Governance Committee with relevant market data, advice regarding the interpretation of such data, and alternatives to consider when making decisions regarding executive compensation, including for our Named Executive Officers. For more information about the market data provided to the committee, see “Compensation Discussion and Analysis.”

 

In addition, Towers Watson provided management information regarding benchmarking of non-executive officer positions and valuation services. The Compensation, Succession, Nominating and Governance Committee is aware of these additional services provided by Towers Watson to management.

 

Investment Committee.  Our Board created the Investment Committee in February 2010. The members of our Investment Committee are Mr. Bowles, Mr. Charlesworth, Ms. Giornelli, Mr. Hance and Mr. Payne. Mr. Charlesworth is Chairman of the Investment Committee. The Investment Committee held two meetings during 2010. Pursuant to its charter, the Investment Committee is required to have a majority of its members be independent under our Director Independence Standards. Currently, all the members of the Investment Committee are independent.

 

The primary responsibilities of our Investment Committee include:

 

 

Executive Committee.  The members of our Executive Committee are Mr. Gellerstedt, Mr. Glover, Mr. Edwards, Mr. Hance and Mr. Payne. Mr. Glover is Chairman of the Executive Committee. The Executive Committee may exercise all powers of the Board in the management of our business and affairs, except for those powers expressly reserved to the Board. The Executive Committee did not take any action during 2010, other than the approval of the final price for assets previously approved for sale by the full Board.

 

In order to evaluate the independence of each Director, our Board has adopted a set of Director Independence Standards as part of our Corporate Governance Guidelines. The Director Independence Standards can be found on the Investor Relations page of our website at www.cousinsproperties.com.

 

The Board has reviewed Director independence under NYSE Rule 303A.02(a) and our Director Independence Standards. In performing this review, the Board considered all transactions and relationships between each Director and our Company, subsidiaries, affiliates, senior executives and independent registered public accounting firm, including those reported under the section “Certain Transactions.” As a result of this review, the Board affirmatively determined that eight of our ten Directors currently serving on the Board are independent. The independent Directors are Mr. Bowles, Mr. Charlesworth, Mr. Edwards, Ms. Giornelli, Mr. Glover, Mr. Hance, Mr. Harrison and Mr. Payne. Mr. Gellerstedt is not an independent Director because of his employment as our Chief Executive Officer, and Mr. Stone is not an independent Director because he was an employee of the Company within the last three years.

Our Audit Committee, our Compensation, Succession, Nominating and Governance Committee and our Investment Committee are composed solely of independent Directors. We believe that the number of independent, experienced Directors that make up our Board, along with the independent oversight of the Board by the non-executive Chairman, benefits our Company and our stockholders.

 

Our independent Directors meet without management present at least two times each year. Mr. Glover, as our non-executive Chairman, is responsible for presiding at meetings of the independent Directors.

 

Any stockholder or interested party who wishes to communicate directly with the Chairman or the independent Directors as a group may do so by writing to: Cousins Properties Incorporated, 191 Peachtree Street NE, Suite 500, Atlanta, GA 30303-1740, Attention: Chairman.

 

Our Board has adopted a set of Corporate Governance Guidelines. The Corporate Governance Guidelines are available on the Investor Relations page of our website at www.cousinsproperties.com. The charters of the Audit Committee, the Compensation, Succession, Nominating and Governance Committee and the Investment Committee are also available on the Investor Relations page of our website.

 

Our Board has adopted a Code of Business Conduct and Ethics (the “Ethics Code”), which applies to all officers, Directors and employees. This Ethics Code reflects our long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Ethics Code is available on the Investor Relations page of our website at www.cousinsproperties.com. Copies of our Corporate Governance Guidelines, committee charters and Ethics Code are also available upon written request to Cousins Properties Incorporated, 191 Peachtree Street NE, Suite 500, Atlanta, Georgia 30303-1740, Attention: Corporate Secretary.

 

Any stockholder or interested party who wishes to communicate directly with our Board, or an individual member of our Board, may do so by writing to Cousins Properties Incorporated Board of Directors, c/o Corporate Secretary, 191 Peachtree Street NE, Suite 500, Atlanta, Georgia 30303-1740. At each regular Board meeting, the Corporate Secretary will present a summary of any communications received since the last meeting (excluding any communications that consist of advertising, solicitations or promotions of a product or service) and will make the communications available to the Directors upon request.

 

Until July 2009, we operated under a board leadership structure where our Chief Executive Officer also served as Chairman of the Board. Beginning in July 2009 with the appointment of Mr. Gellerstedt as our Chief Executive Officer, the Board re-evaluated its leadership structure and determined that one of our independent Directors, Mr. Glover, would serve as the independent Chairman of the Board. We believe this current board leadership structure is best for our Company and our stockholders.

 

The Chief Executive Officer is responsible for the day-to-day leadership and management of the Company and the Chairman’s responsibility is to provide oversight, direction and leadership of the Board. As regulatory requirements cause directors to have more significant oversight responsibilities, we believe it is beneficial to have an independent Chairman who is not a member of management leading the Board. By having another Director serve as Chairman, Mr. Gellerstedt will be able to focus his energy on his duties as our Chief Executive Officer.

 

Pursuant to our Corporate Governance Guidelines, the independent Chairman is responsible for:

 

 

 

By clearly delineating the role of the Chairman position in our Corporate Governance Guidelines, we attempt to minimize any duplication of effort between the Chief Executive Officer and the Chairman. We believe this provides strong leadership for our Board, while also positioning our Chief Executive Officer as the leader of the Company in the eyes of our business partners, employees, stockholders and other stakeholders.

 

Our Board is responsible for overseeing our risk management. The Board delegates some of its risk oversight role to the Audit Committee, the Compensation, Succession, Nominating and Governance Committee and the Investment Committee. Under its charter, the Audit Committee is responsible for discussing with management our financial risk assessment. The Audit Committee oversees our corporate compliance programs, as well as the internal audit function. Under its charter, the Compensation, Succession, Nominating and Governance Committee is responsible for reviewing the Company’s incentive compensation arrangements to confirm that incentive compensation does not encourage excessive risk taking and to periodically consider the relationship between risk management and incentive compensation. Pursuant to its charter, the Investment Committee focuses on issues related to our investments, acquisitions and developments. Following review and recommendation by the Investment Committee, the Board is required to approve significant developments, dispositions, acquisitions and investments, and the Board and the Investment Committee consider each such transaction in the context of our overall risk profile. In addition, our full Board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed, and the Board receives reports on risk management from senior officers of the Company and from the Chairmen of the Audit Committee, the Compensation, Succession, Nominating and Governance Committee and the Investment Committee, as well as from outside advisors. The Board believes that the work undertaken by the Audit Committee, the Compensation, Succession, Nominating and Governance Committee and the Investment Committee, together with the work of the full Board and management, enables the Board to effectively oversee the Company’s risk management function.

 

Our Corporate Governance Guidelines include a majority voting policy for the election of Directors. Pursuant to this policy, in an uncontested election of Directors, any nominee who receives a greater number of votes withheld from his or her election than votes for his or her election will promptly tender his or her resignation for consideration by the Compensation, Succession, Nominating and Governance Committee. The Compensation, Succession, Nominating and Governance Committee will promptly consider the resignation offer and make a recommendation to the Board. The Board will act on the Compensation, Succession, Nominating and Governance Committee’s recommendation within 90 days following the certification of the stockholder vote. We will publicly disclose, in a Form 8-K furnished to the SEC, the Board’s decision regarding whether to accept the resignation offer. Any Director who tenders his or her resignation will not participate in the Committee or Board deliberations regarding such matter.

 

Our Directors take a critical role in guiding our strategic direction and overseeing our management. Our Board has delegated to the Compensation, Succession, Nominating and Governance Committee (referred to in this discussion as the “Nominating Committee”) the responsibility for reviewing and recommending nominees for membership on the Board. Candidates are considered based upon various criteria. Candidates must have integrity, accountability, judgment and perspective. In addition, candidates are chosen based on their leadership and business

experience, as well as their ability to contribute toward governance, oversight and strategic decision-making. While we have not adopted a policy regarding diversity of our Board, the Nominating Committee considers the diversity of experience, qualifications, attributes and skills that a potential nominee would bring to the Board in identifying nominees for Director.

 

The Nominating Committee is responsible for recommending nominees for election to the Board at each Annual Meeting and for identifying one or more candidates to fill any vacancies that may occur on the Board. The Nominating Committee uses a variety of sources in order to identify new candidates. New candidates may be identified through recommendations from independent Directors or members of management, search firms, discussions with other persons who may know of suitable candidates to serve on the Board and stockholder recommendations. Evaluations of prospective candidates typically include a review of the candidate’s background and qualifications by the Nominating Committee, interviews with the Nominating Committee as a whole, one or more members of the Nominating Committee, or one or more other Board members, and discussions of the Nominating Committee and the full Board. The Nominating Committee then recommends candidates to the full Board, with the full Board selecting the candidates to be nominated for election by the stockholders or to be elected by the Board to fill a vacancy.

 

The Nominating Committee will consider Director nominees proposed by stockholders on the same basis as recommendations from other sources. Any stockholder who wishes to recommend a prospective nominee for consideration by the committee may do so by submitting the candidate’s name and qualifications in writing to Cousins Properties Incorporated Compensation, Succession, Nominating and Governance Committee, c/o Corporate Secretary, 191 Peachtree Street NE, Suite 500, Atlanta, Georgia 30303-1740.

 

The following table sets forth, as of February 1, 2011 unless otherwise noted, information regarding the beneficial ownership of our common stock by:

 

 

 

 

 

 

Introduction

 

The Compensation, Succession, Nominating and Governance Committee of our Board of Directors (also referred to in this Executive Compensation section as the “Compensation Committee”) is responsible for establishing the underlying policies and principles of our compensation program. This Compensation Discussion and Analysis describes our executive compensation programs for 2010. It also describes how and why the Committee made its 2010 compensation decisions for our Named Executive Officers (or “NEOs”) detailed in the tables that follow. Our NEOs for 2010 are as follows:

 

 

Executive Summary

 

Business Environment

 

For 2010, the Company exceeded in the aggregate its annual performance goals, notwithstanding the continued difficult real estate environment. “Funds from Operations” (or “FFO”)¹ increased significantly in 2010 compared to 2009. In a still-challenging leasing environment, the Company increased its percent leased at its office properties, retail properties and industrial properties during 2010. As a result of this activity, rental property revenues less rental property operating expenses increased across the Company’s portfolio of consolidated and joint venture properties in 2010. In addition, our overall sales and fee income exceeded our goals and contributed to FFO in 2010.

 

Summary of Key Compensation Decisions for 2010

 

The Compensation Committee made the following key decisions with respect to our 2010 compensation for our NEOs:

 

 

 

¹ For the definition of FFO, please see our Annual Report on Form 10-K for the year ended December 31, 2010 that forms part of our 2010 Annual Report and is also available at www.sec.gov or on the Investor Relations page of our website at www.cousinsproperties.com.

 

Compensation and Governance Practices

 

We believe that our compensation programs encourage executive decision-making that is aligned with the long-term interests of our stockholders by tying a significant portion of pay to Company performance over a multi-year period. Other compensation and governance practices that support these principles, each of which is described in more detail in this Compensation Discussion and Analysis, include the following:

 

 

Compensation Objectives and Policies and Competitive Positioning

 

In assessing the compensation of our executives, including our NEOs, we consider strategies intended to attract and retain talented executives in a competitive and dynamic real estate marketplace. While keeping in mind our accountability to our stockholders, we aim to reward executives commensurate with corporate and individual performance.

 

The success of our business strategy depends significantly on the performance of the executives responsible for its execution. While we have materially reduced our staffing levels as a result of the recent economic downturn, our business strategy still requires that our executives have a more diverse real estate skill set than if we were a passive real estate investment company in order to allow us to underwrite and execute on real estate investment and development opportunities across multiple product types and geographic areas. We have historically created value through the acquisition, development and redevelopment of several types of real estate. Currently, we are primarily focused on four core strategies:

 

 

The core principle of our compensation program is to position our NEOs’ cash and equity-based compensation to be within a competitive range (e.g., +/-15%) of the average compensation paid by the 50th to the 75th percentile of certain relevant labor markets (described below under “Peer Group Analysis”) for similarly situated positions. Providing compensation levels within this range allows us to be competitive in finding and retaining the top talent we need to execute our business plan. For 2010, the actual total direct compensation, base salary plus actual annual incentive cash awards plus expected value of long-term incentives, to our NEOs fell within our competitive ranges, other than with respect to our Chief Executive Officer, Mr. Gellerstedt, which fell below market median levels. However, this shortfall was not unexpected given Mr. Gellerstedt’s mid-year 2009 promotion and his limited tenure in the role.

Another key principle of our compensation strategy is to provide a meaningful portion of total compensation via equity-based awards, including awards that only vest if certain future performance conditions are satisfied. For 2010, 37.5% of the long-term incentive award is subject to future performance conditions related to total stockholder return and FFO.

 

All of our employees, including our NEOs, are employed “at-will.” Our NEOs, along with certain other key employees, are provided benefits under Change in Control Severance Agreements. These agreements are discussed below under “Severance Policy, Retirement and Change in Control Agreements.”

 

Other than a 401(k)/retirement savings plan (“Retirement Savings Plan”), we do not have a pension plan or deferred compensation program for any of our employees, including our NEOs. Rather, we focus on providing short and long-term cash compensation and long-term equity-based awards in amounts necessary to retain our NEOs and to allow them to provide for their own retirement. For the 2010 compensation period and for prior periods, we made an annual discretionary contribution to our Retirement Savings Plan for the benefit of all employees meeting certain service requirements. Beginning in 2011, we implemented a program to “match” employee contributions to the Retirement Savings Plan up to 3% of eligible compensation. We expect that in the future the Company’s contributions to the plan will be in the form of a “match” rather than a discretionary contribution. The “matching” contribution is available to all employees, including our NEOs.

 

Compensation Review Process

 

Peer Group Analysis

 

The Compensation Committee evaluates NEO compensation by reviewing available competitive data, representing organizations of varying sizes (measured by market capitalization) and varying operating strategies. For purposes of making decisions regarding 2010 compensation, the Compensation Committee engaged Towers Watson to compile data from three primary sources: (1) the 2009 National Association of Real Estate Investment Trusts (“NAREIT”) survey, (2) the 2008 Mercer Real Estate Survey and (3) a “custom cut” peer group of 10 companies with similar business activities, strategies and asset classes.

 

The NAREIT survey is conducted annually and collects compensation information for executive and non-executive positions exclusively for REITs. In addition to the total sample of all 99 companies in the NAREIT survey, the Compensation Committee considered data for the 30 companies in the survey with a total market capitalization of $1 billion to $3 billion (as of the time of the survey) and data for the 22 companies in the survey with a total market capitalization of $3 billion to $6 billion (as of the time of the survey). The NAREIT survey is used to provide the Compensation Committee with a broad view of the competitive labor market.

 

The Compensation Committee also uses a survey conducted bi-annually by Mercer Consulting, which focuses on businesses in the real estate development industry. The Mercer survey includes companies that are not REITs, as well as privately held companies.

 

We have no input regarding the companies included in the NAREIT or Mercer surveys. Management researched and selected the 10 companies in the “custom cut” peer group for use by the Compensation Committee in its discretion. For 2010, the custom cut group companies were:

 

 

The custom cut peer group changed in 2009 with the removal of Developers Diversified Realty Corporation, as this company did not participate in the NAREIT survey.

 

The Compensation Committee considered data from each survey for decisions regarding 2010 compensation of our NEOs, but the primary data reference for all our NEOs except Mr. McColl was the total sample of all companies in the NAREIT survey. With respect to Mr. McColl, the Mercer survey was the primary data reference.

Performance Review, Role of Management and Compensation Consultants

 

The Compensation Committee evaluates Company and individual performance when making compensation decisions with respect to our NEOs. In that regard, in making decisions regarding NEO compensation, the Compensation Committee considers recommendations from our CEO with respect to each of the other NEOs. These recommendations are based upon the CEO’s analysis of each executive officer’s performance and contributions. However, the Compensation Committee retains the right to act in its sole and absolute discretion. In addition, representatives of Towers Watson will from time to time attend Compensation Committee meetings and provide guidance regarding interpreting the competitive compensation data and trends in the marketplace.

 

Components of Compensation

 

The total compensation opportunity for our NEOs in 2010 incorporated four primary components: a base salary, an annual incentive cash award, a long-term incentive equity award (or “LTI”) and certain benefits and perquisites.

 

Base Salary

 

The Compensation Committee views base salary as the foundation of our compensation program. The Compensation Committee makes base salary decisions based on the individual’s scope of responsibilities, experience, qualifications, individual performance and contributions to the Company, as well as an analysis of data from the peer groups discussed previously. No particular weight is assigned to each factor.

 

The Compensation Committee reviewed base salaries of our NEOs, other than Mr. Adzema, at its meeting on December 7, 2009 and again, with respect to Mr. McColl and Mr. Jackson, at its meeting on February 15, 2010. Based on its review, the Compensation Committee determined that the base salaries of Messrs. Gellerstedt, Jones and Fleming were generally appropriate and were not increased for 2010. With respect to Mr. Jackson, his 2010 base salary was increased from $240,000 to $260,000 at the Committee’s December 7, 2009 meeting and then further increased to $300,000 at the Committee’s meeting on February 15, 2010. Mr. Jackson’s base salary was adjusted to be more consistent with the applicable benchmarks and based on considerations of internal equity. Mr. McColl’s base salary was increased on February 15, 2010, from $275,000 to $300,000, in connection with his promotion to Executive Vice President — Development, Office Leasing and Asset Management. With respect to Mr. Adzema, his base salary was established by the Compensation Committee contemporaneously with his joining the Company on November 30, 2010.

 

The annual base salaries of our NEOs for 2009 and 2010 were as follows (with Mr. Jackson’s 2010 annual base salary in the table below reflecting the two adjustments described above):

 

 

Annual Incentive Cash Award

 

Our NEOs each have an opportunity to earn an annual incentive cash award designed to reward annual corporate performance, as well as to encourage and reward individual achievement during the year. Each year the Compensation Committee establishes a target annual incentive cash award opportunity for each of our NEOs following a review of their individual scope of responsibilities, experience, qualifications, individual performance and contributions to the Company, as well as an analysis of data from the peer groups discussed previously. No particular weight is assigned to each factor. The targeted annual incentive cash award opportunity and the performance goals set by the Compensation Committee (discussed below) are communicated to the NEOs at the

beginning of each year. The determination of the actual annual incentive cash award paid to an executive officer is not entirely formulaic. Rather, the Compensation Committee, in exercising its judgment and discretion to adjust an award up or down, considers all facts and circumstances when evaluating an individual executive’s performance, including changing market conditions and broad corporate strategic initiatives, along with overall responsibilities and contributions.

 

2010 Target Opportunity

 

For 2010, the Compensation Committee, at its meetings on December 6, 2009 and February 15, 2010, established target annual incentive cash awards for our NEOs, other than Mr. Adzema, who was hired November 30, 2010 and was not eligible for a 2010 annual incentive cash award. No adjustments were made to the targeted percentage of base salary for the NEOs. However, as a result of the previously discussed adjustments to their respective base salaries, the 2010 target award amounts for Mr. McColl and Mr. Jackson increased. For 2010, the target annual incentive cash awards for our NEOs, other than Mr. Adzema, were as follows:

 

 

2010 Performance Goals

 

The Compensation Committee, at its February 15, 2010 meeting, adopted the performance goals for the 2010 annual incentive cash award following a review of our annual business plan and budget for the year. The Compensation Committee assigned each goal a weight of relative importance. The following were the annual incentive cash award performance goals for 2010:

 

1. Funds from Operations.  The Compensation Committee believes that FFO is an appropriate measure of corporate performance when it is properly adjusted for activities related to our investment and capital recycling strategies. The FFO goal for 2010 was $37,000,000, weighted to be 35% of the overall goals. The Compensation Committee retains the discretion to make adjustments to FFO in determining our performance against the goal to the extent it determines is appropriate for business decisions made during the year that are dilutive to FFO but otherwise in the best interests of the Company.

 

2. Gross Square Footage Leased.  We believe one of our core competencies is to lease property. We expect each of our properties to achieve near capacity occupancy after a pro forma lease-up period following completion of construction or acquisition. In that regard, for 2010, the Compensation Committee established a goal for us to lease 700,000 gross square feet in our office portfolio and 400,000 gross square feet in our retail portfolio, with the aggregate office and retail leasing goals representing 35% of the overall goals. In addition, for 2010 the Compensation Committee set a goal for us to lease 970,000 square feet of space in our industrial portfolio, representing 5% of the overall goals. These leasing goals for 2010 took into account overall market conditions.

 

3. Proceeds from Multi-Family Residential Unit, Residential Lot and Tract Sales.  One of our key strategies for 2010 was to sell multi-family residential units, residential lots, land tracts, outparcels and certain non-core properties. Consistent with this strategy, the Compensation Committee established a goal for 2010 that the Company realize $28,100,000 of gross proceeds from the sale of multi-family residential units, $14,800,000 of gross proceeds from residential lot sales and $30,300,000 of gross proceeds from outparcel and tract sales. The gross sales proceeds goal represented 15% of the overall goals.

 

4. Fee Income.  Another key strategy for 2010 was the generation of fee income. In that regard, the Compensation Committee established a goal for the Company to recognize $18,000,000 of fee income in 2010, representing 10% of the overall goals.

The Compensation Committee believes that the performance goals and the weighting of each for the 2010 annual incentive cash awards were aggressive and appropriate given our business strategy, historic performance and the current real estate market and that, if met, then the Company would have had a good year.

 

Performance Against Goals

 

The Compensation Committee evaluated the Company’s performance against these goals twice; first at its meeting on August 9, 2010 and then again at its meeting on February 2, 2011. At its August 9, 2010 meeting, the Compensation Committee determined, based on actual results as of June 30, 2010, that the Company had met each of its performance goals, pro-rated for the first half of the year, and that each of our NEOs had earned a partial annual incentive cash award for 2010. The Compensation Committee therefore approved the payment of an award for each of the NEOs of 40% of their respective target award, which was made in August 2010.

 

At its meeting on February 2, 2011, the Compensation Committee evaluated the Company’s performance against the 2010 goals for the full year ending December 31, 2010 and determined that we had materially outperformed against our goals — achieving 121% of the overall goals — as more particularly described below:

 

 

In determining the actual 2010 incentive cash award for our NEOs, in addition to our overall performance against the established goals, the Compensation Committee considered each NEO’s 2010 individual performance and contributions to the Company during the year, and determined that each NEO performed above target. Based on these considerations, the Compensation Committee determined that each of our NEOs, other than Mr. Jones, earned incentive cash awards equal to 110% of their respective target amounts. With respect to Mr. Jones, the Compensation Committee slightly reduced his award to 104% of his target amount based on considerations of internal equity. The annual incentive cash awards for 2010 were as follows:

 

 

 

 

Long-Term Incentive Equity Awards

 

Our LTI program is intended to provide an incentive to our executives for the creation of value and the corresponding growth of our stock price over time. The ultimate goal of equity-based compensation is to encourage executives to act as equity owners. We believe equity-based compensation plays an essential role in retaining and motivating our NEOs by providing incentives that are linked to our long-term success and increasing stockholder value. The Compensation Committee grants, or has granted in the past, stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”) under our LTI program. Details about the different types of awards are provided after the discussion of the LTI awards for 2010 (granted in 2011) and the LTI awards for 2009 (granted in 2010).

 

The LTI awards for 2010 that were granted in February 2011 do not appear in any of the tables that follow this Compensation Discussion and Analysis, in accordance with applicable SEC regulations. Rather, the LTI awards for 2009 that were granted in February 2010 appear in the 2010 Summary Compensation Table, the Grants of Plan Based Awards in 2010 and the Outstanding Equity Awards at 2010 Fiscal Year End tables that follow this Compensation Discussion and Analysis. We provide a description of both awards below.

 

LTI Grant Practices and Performance Conditions

 

We grant LTI awards to key employees at a regularly scheduled meeting of the Compensation Committee, typically in February of each year. We do not have any program, plan or practice that coordinates the grant of equity awards with the release of material information. We generally do not grant options to newly hired employees.

 

In 2006, the Compensation Committee established three performance factors for purposes of evaluating whether to grant LTI awards: (1) “total stockholder return” over various time periods, both on an absolute basis and relative to the MSCI US REIT Index; (2) the dollar amount of development starts and investments over time and (3) “value creation” over time. The Compensation Committee, at its meeting on February 15, 2010, reviewed these factors and determined that these factors were no longer appropriate in the current real estate environment. Rather, the Compensation Committee believes that in the current real estate environment it is more appropriate to make regular LTI awards at target levels, subject to adjustment by the Committee, with a meaningful portion of such awards being subject to future performance vesting conditions.

 

2010 LTI Targets (for Awards Granted in 2011)

 

The Compensation Committee, at its February 15, 2010 meeting, established the target dollar amount of LTI awards for our NEOs for 2010, other than Mr. Adzema, following a review of the individual’s scope of responsibilities, experience, qualifications, individual performance and contributions to the Company, as well as an analysis of data from the peer groups discussed previously. For Mr. Adzema, his 2010 target LTI award was established by the Compensation Committee contemporaneously with his joining the Company on November 30, 2010. Notwithstanding that Mr. Adzema joined the Company late in 2010, he was eligible for a full year LTI award so as to provide a more immediate performance and retention incentive. Mr. Fleming was not eligible to receive an LTI award for 2010 following his retirement on December 31, 2010.

 

The Compensation Committee utilizes a dollar amount as a target, rather than a number of shares, options or RSUs so as to neutralize the impact of stock price volatility and permit our equity-based compensation to be budgeted with greater accuracy. The Compensation Committee views LTI as an essential component of annual compensation of our NEOs and, as a result, the Committee does not consider prior grants when making current year determinations. The target 2010 LTI award values for our NEOs are included in the table under “2010 LTI Grants” below.

 

2010 LTI Grants (Made in 2011)

 

At its meeting on February 14, 2011, the Compensation Committee granted LTI awards to our NEOs at 100% of the 2010 target value using a mix of 25% options, 37.5% time-vested restricted stock and 37.5% performance conditioned RSUs. The time-vested restricted stock is primarily intended to be a retention tool. The balance of the 2010 LTI award is performance conditioned. With respect to the stock option grant, the value of the award is directly

contingent on the appreciation in the value of our stock. In the case of the performance conditioned RSUs granted on February 14, 2011 for the 2010 compensation period (“2010 Performance RSUs”), the award only has value if we achieve the performance measures described below.

 

 

The number of stock options, restricted stock and 2010 Performance RSUs granted by the Compensation Committee to our NEOs for 2010 are set forth in the table below. The value of the awards for purposes of determining the number of stock options, restricted shares and 2010 Performance RSUs granted to each NEO was determined using our average stock price over a 30-calendar day period ending on February 2, 2011. The actual grant to an NEO for each component of the 2010 LTI award was rounded to the nearest whole unit. The exercise price of the stock options granted was the closing price on February 14, 2011. As discussed previously, Mr. Fleming was not eligible for a 2010 LTI award.

 

 

 

 

In addition, the Compensation Committee, at its meeting on February 14, 2011, granted 29,411 shares of restricted stock to Mr. Adzema (“Special Stock Grant”), which “cliff” vests on the third anniversary of the grant date provided he is still employed by us on such date. The Special Stock Grant was part of the inducement for Mr. Adzema to join the Company and is intended to provide an additional performance and retention incentive. The grant was sized based on a target value of $250,000, at $8.50 per share (which was the value per share used to size the other time-vested restricted stock grants made on February 14, 2011).

2009 LTI Grants (Made in 2010)

 

As more particularly described in the 2010 Proxy Statement, the Compensation Committee, at its meeting on February 15, 2010, granted stock options, restricted stock and performance conditioned RSUs to our NEOs. With respect to the performance conditioned RSUs granted on February 15, 2010 for the 2009 compensation period (“2009 Performance RSUs”), the awards only have value if we achieve the performance measures described below.

 

 

The February 2010 grant of stock options, restricted stock and 2009 Performance RSUs granted by the Compensation Committee to our NEOs for 2009 are included in the Summary Compensation Table for 2010, Grants of Plan Based Awards in 2010 and the Outstanding Equity Awards at 2010 Fiscal Year End tables that follow this Compensation Discussion and Analysis.

 

Stock Options and Stock Appreciation Rights

 

The Compensation Committee believes that a meaningful portion of our equity-based compensation should be in the form of stock options or SARs, which reward stock price growth more directly than full value stock awards, such as restricted stock and RSUs. The Compensation Committee believes that stock options and SARs provide a significant link between the executive and our goal of maximizing stockholder value, as the award will have value only if the market value of our stock increases above the exercise price.

 

Stock options and SARs (i) are issued with an exercise price equal to the closing market price on the grant date, (ii) vest ratably over the four-year period beginning on the grant date and (iii) expire 10 years from the grant date. The vesting requirement creates an incentive for an executive to remain employed with us. Stock options and SARs do not include dividend equivalents or any reload grant features, but they are adjusted as a result of special dividends. Stock options and SARs are valued using the Black-Scholes method for purposes of determining the number of options or SARs granted to a particular NEO and the contribution of the grant to his total compensation.

 

In addition, stock options are potentially subject to accelerated vesting upon the retirement of a participant, including an NEO, who satisfies the “Rule of 65.” See “Severance Policy, Retirement and Change in Control Agreements” below.

 

Restricted Stock

 

Full value equity awards, such as restricted stock, do not reward stock price growth to the same extent as stock options and SARs. Nevertheless, the Compensation Committee believes that full value awards are an effective compensation tool because the current value of the award is more visible to the executive. Additionally, full value awards create an interest that encourages executives to think and act like stockholders and serve as a competitive retention vehicle. Restricted stock granted prior to 2010 generally vest ratably over four years. Restricted stock granted in 2010 “cliff” vests on the third anniversary of the grant date. Restricted stock granted in 2011 vests ratably

over three years. Also, holders of restricted stock generally receive all regular and special dividends declared with respect to our common stock.

 

Restricted Stock Units

 

An RSU is a bookkeeping unit that is essentially the economic equivalent of one share of restricted stock, the difference being that upon vesting the RSU is settled in cash. The Compensation Committee periodically issues RSUs as a portion or the entire full value component of LTI, after considering levels of stockholder dilution since the RSU awards do not result in additional dilution to existing stockholders versus grants of restricted stock.

 

Upon vesting, each RSU pays a cash amount equal to the 30-calendar day average closing price of our common stock for the period ending on the vesting date. For RSUs that vested prior to 2009, each RSU paid an amount equal to the closing price of our common stock on the vesting date. Also, holders of RSUs generally receive dividend equivalents in an amount equal to all regular and special dividends declared with respect to our common stock. RSUs granted prior to 2010 vest ratably over four years following the grant.

 

The performance conditioned RSUs granted in 2010 and 2011 generally “cliff” vest on the third anniversary of the grant date. Also, dividend equivalents are not paid currently on the performance conditioned RSUs. Rather, upon satisfaction of the vesting conditions, if at all, the dividend equivalents on the vested performance conditioned RSUs are determined and paid on a cumulative, reinvested basis over the term of the award, based on the ultimate payout. For example, if the payout of a performance conditioned RSU at vesting equaled 200% of target, such amount would include dividend equivalents on shares at 200% of target on a reinvested basis over the three-year performance period.

 

In addition, RSUs are subject to accelerated vesting, and Performance RSUs are subject to special rules waiving the requirement of continued employment but not the performance condition, upon the retirement of a participant, including an NEO, who satisfies the “Rule of 65.” See “Severance Policy, Retirement and Change in Control Agreements” below.

 

Benefits and Perquisites

 

To remain competitive in the market, we provide certain benefits and perquisites to our NEOs. These include health, life and disability insurance premiums paid by us on behalf of our NEOs, contributions to our Retirement Savings Plan and certain club membership dues. The Compensation Committee has reviewed the benefits and perquisites provided to our NEOs in 2010 and determined that they are appropriate.

 

Retirement of James A. Fleming

 

James A. Fleming retired as our Executive Vice President and Chief Financial Officer effective December 31, 2010. We entered into a Retirement and Consulting Agreement with Mr. Fleming (the “Fleming Retirement and Consulting Agreement”) pursuant to which Mr. Fleming is to provide consulting services to the Company from January 1, 2011 to June 30, 2011 in exchange for $320,000 payable in three installments. In addition, all of his stock options granted in 2009 and 2010, all of his shares of restricted stock and all of his RSUs granted prior to 2010 were vested as of his retirement date, and his vested options were modified to permit Mr. Fleming the right to exercise the options through the original stated term of the options. With respect to the 2009 Performance RSUs, these grants will vest only if the applicable performance conditions are met. In addition, we agreed to reimburse Mr. Fleming for the cost of COBRA health insurance benefits for up to one year after his retirement. Mr. Fleming agreed to certain non-disclosure and non-solicitation provisions, and the agreement also contains a general release and other customary terms and conditions. The consulting payments and the COBRA benefits are included in the “All Other Compensation” column and the fair value of the modification of Mr. Fleming’s option awards is included in “Option Awards” column in the “Summary Compensation Table for 2010.” The value on his retirement date of the accelerated vesting of his restricted stock and RSUs totaled $218,526 and is included in the “Value Realized on Vesting” column in the “Option Exercises and Stock Vested in 2010” table.

Incentive Based Compensation Recoupment Policy

 

On February 15, 2011, our Board of Directors adopted an incentive-based compensation recoupment policy (the “Recoupment Policy”, also sometimes commonly referred to as a “clawback”). Pursuant to the Recoupment Policy, if the Company is required to restate any previously issued financial statements due to the Company’s material noncompliance (as determined by the Company) with any financial reporting requirement under the federal securities laws, the Company will seek to recover incentive-based compensation (including stock options) from any current or former executive officer of the Company who received incentive-based compensation from the Company during the three-year period preceding the date on which the Company is required to prepare an accounting restatement. The amount to be recovered from the executive officer will be based on the excess, if any, of the incentive-based compensation paid to the executive officer based on the erroneous data over the incentive-based compensation that would have been paid to the executive officer if the financial accounting statements had been as presented in the restatement. The definition of “executive officer,” and “incentive-based compensation,” the date on which the Company is required to prepare an accounting restatement, the amount to be recovered, and any other interpretation of the policy, shall be determined by the Compensation Committee acting in its sole discretion. The Board of Directors may amend the Recoupment Policy from time to time in its discretion and as it deems necessary or appropriate to reflect applicable regulations of the SEC, any rules or standards adopted by a national securities exchange, any related guidance from a governmental agency which has jurisdiction over the administration of such provision, any judicial interpretation of such provision and any changes in applicable law.

 

Stock Ownership Guidelines and Insider Trading Policy

 

Our Corporate Governance Guidelines include stock ownership guidelines for our executive officers and Directors. With respect to our executive officers, the guidelines require ownership of our stock, within five years of becoming an executive officer or from promotion to a new executive office, with a value equal to the following multiple of his or her base salary:

 

 

With respect to our Directors, in February 2011 we amended our Corporate Governance Guidelines to increase the required stock ownership by our Directors from $100,000 to three-times the annual cash retainer for Directors, or $150,000. Directors generally must accumulate the required ownership within three years of joining the Board. However, if a Director has been on the Board for three or more years then such a Director has until February 2012 to accumulate shares to meet the increased ownership requirement.

 

The guidelines are consistent with our belief that our executive officers’ and Directors’ interests should be aligned with those of our stockholders and our expectation that executive officers and Directors maintain a significant level of investment in our Company. The Chairman of the Compensation Committee may approve exceptions to the guidelines from time to time as he or she deems appropriate. With respect to both executive officers and Directors, the following count toward the stock ownership requirements:

 

 

In February 2011 we adopted a policy for our executive officers requiring a holding period following the vesting of restricted stock or restricted stock units that settle in stock. Pursuant to the policy, executive officers are expected to retain for eight months following vesting at least 50% of the after tax number of shares of restricted stock or restricted stock units that settle in stock.

 

Our insider trading policy does not permit trading in our securities on a short-term basis, purchases of our stock on margin, short sales or trading puts or calls with respect to our stock.

 

Severance Policy, Retirement and Change in Control Agreements

 

We provide severance benefits to all employees, including our NEOs, following termination of employment by us other than for “cause.” In general, the severance benefit payable is an amount equal to the employee’s weekly pay times the sum of (i) four plus (ii) the number of his or her years of service or, alternatively, in the context of certain reductions in force as designated by the Company, the years of service multiplied by 1.5.

 

The 1999 Incentive Stock Plan (as amended, the “1999 Plan”), the 2009 Incentive Stock Plan (the “2009 Plan”) and the 2005 Restricted Stock Unit Plan (as amended, the “RSU Plan”) generally provide for accelerated vesting of awards upon a “change in control” if the plan is not continued or assumed. Under the 2009 Plan and the RSU Plan, even if one or both of these plans are continued or assumed, the awards vest if the employee is terminated or resigns for good reason within two years of the change in control. In contrast, for grants under our 1999 Plan and grants under the RSU Plan prior to its amendment in 2009, if either plan is continued or assumed after the change in control, accelerated vesting occurs in the event a participant’s employment is terminated for any reason (including voluntary resignation) during the two-year period following the change in control. With respect to performance conditioned RSUs, if accelerated vesting occurs as a result of a change in control, then the payout amount is at the target award amount. Our NEOs participate in the 1999 Plan, the 2009 Plan and the RSU Plan on the same terms as our other key employees. Pursuant to the terms of the cash LTI award that we made in 2009, it will be subject to accelerated vesting if, following a change in control, it is not continued, or if the executive’s employment with us is terminated without cause or the executive resigns for good reason within two years; however, the stock value vesting condition must be met on the date of change in control, termination or resignation following a change in control. The Compensation Committee believes that the accelerated vesting of outstanding equity awards following a change in control is a customary and reasonable component of an equity incentive program.

 

In general, an employee will forfeit any unvested LTI grants upon termination of employment for any reason other than following a change in control. However, stock options and RSUs, other than performance conditioned RSUs, vest upon retirement of the employee if the employee is at least 60 years of age and the sum of the employee’s whole years of age plus whole years of service equals at least 65 (collectively, the “Rule of 65”). With respect to performance conditioned RSUs, the Rule of 65 applies to waive any continuing service requirement but does not waive any performance condition. The Compensation Committee did not adopt the Rule of 65 for restricted stock awards because it would result in adverse tax consequences to the recipient. The Compensation Committee adopted the Rule of 65 to provide a further incentive for long-term employment, as well as to recognize that options and RSUs are part of annual compensation and, if an employee retires after satisfying certain age and service requirements, then he or she should get the benefit of outstanding options and RSUs.

 

In addition, each of our NEOs is a party to a Change in Control Severance Agreement (the “Severance Agreement”), which provides the NEOs with an additional severance benefit in the event that his employment is terminated under certain circumstances following a change in control, often referred to as a “double trigger.” The Compensation Committee approved the Severance Agreements at its meeting on August 13, 2007. On May 12, 2009, the Compensation Committee approved an amendment to the form of the Severance Agreements to make certain clarifications with respect to Section 409A of the Internal Revenue Code of 1986 (the “Code”) and to conform the definition of change in control in the Severance Agreements to correspond to the definition of change in control contained in the 2009 Plan that was approved by stockholders at the Annual Meeting held on the same date. On December 6, 2010, the Compensation Committee approved a second amendment to the form of Severance Agreements to make further clarifications with respect to Section 409A of the Code and to conform the agreements to recent changes in Georgia law. In both cases, the Compensation Committee viewed these amendments as

administrative in nature, and not designed to increase the amount of potential severance payments to the executive officers.

 

On December 6, 2010, the Compensation Committee approved a new form of Severance Agreement that does not include a tax gross-up provision. This new form was used for Mr. Adzema and Mr. McColl, and in the future the Company will not enter into, or materially amend, Severance Agreements that include tax gross-up provisions. The Compensation Committee believes that the cash severance and other benefits provided to each NEO pursuant to his Severance Agreement is a customary and reasonable component of our compensation program that keeps our NEOs focused on the interests of the stockholders in the event of a potential strategic transaction.

 

Tax Implications of Executive Compensation

 

For 2010, Section 162(m) of the Code limited our aggregate deductions for compensation paid to certain executive officers, primarily because portions of our compensation program generally do not qualify as paid under a predetermined objective performance plan meeting applicable requirements, and, in addition, we historically have not met other exceptions that would permit a deduction. The exception to this treatment is compensation resulting from the exercise of stock options, which qualify for a deduction. While we are mindful of the impact of the deduction limitation, we feel that our NEO compensation is structured in an appropriate manner. In light of our current pay levels and practices applicable to NEOs, we do not believe that the tax deduction limitation of Section 162(m) in the aggregate has, as was the case for 2010, a material impact on our financial results. Also, since we operate as a real estate investment trust under the Code and we intend to distribute all of our taxable income each year so that we do not pay any Federal income tax, the majority of the impact of the limitation under Section 162(m), if any, is a larger dividend distribution to our stockholders to the extent of the denied deduction for compensation paid.

 

The Compensation, Succession, Nominating and Governance Committee is responsible for, among other things, setting and administering the policies that govern executive compensation, establishing the performance goals on which the compensation plans are based and setting the overall compensation principles that guide the committee’s decision-making. The Compensation, Succession, Nominating and Governance Committee has reviewed the Compensation Discussion and Analysis herein and discussed it with management. Based on the review and the discussions with management, the Compensation, Succession, Nominating and Governance Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the 2011 proxy statement for filing with the Securities and Exchange Commission.

 

 

COMPENSATION, SUCCESSION, NOMINATING
AND GOVERNANCE COMMITTEE

 

James H. Hance, Jr., Chairman
Erskine B. Bowles
James D. Edwards
William B. Harrison, Jr.
William Porter Payne

 

The foregoing report should not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934 (the “Acts”), except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed filed under the Acts.

 

The following table sets forth information concerning total compensation for our NEOs for 2010, 2009 and 2008.

 

 

 

 

 

 

 

 

 

 

The following table sets forth information with respect to grants of plan-based awards to each of our NEOs during 2010. Mr. Adzema joined the Company November 30, 2010 and was not eligible to receive any plan-based awards in 2010.

 

 

 

 

The following table sets forth information with respect to all outstanding option and stock awards for each of our NEOs on December 31, 2010. Mr. Adzema did not hold any awards at year end.