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)
þ Preliminary proxy statement
o 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)

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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.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2010

 

To our Stockholders:

 

The Annual Meeting of Stockholders of Cousins Properties Incorporated (“we,” “our,” “us,” or the “Company”) will be held on Tuesday, May 4, 2010, 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 amend our Restated and Amended Articles of Incorporation to increase the number of shares of common stock authorized for issuance from 150 million to 250 million shares;

 

(3) To ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 31, 2010; and

 

(4) 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 12, 2010 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

April 1, 2010

 

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 3600
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 2010 Annual Meeting of Stockholders. Our Annual Meeting will be held on Tuesday, May 4, 2010, 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 April 1, 2010.

 

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 12, 2010 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 2010 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 12, 2010 are entitled to receive notice of the meeting and to vote at the meeting and any postponements or adjournments of the meeting. March 12, 2010 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 three 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 for the proposal to amend our Restated and Amended Articles of Incorporation to increase the number of shares of common stock authorized for issuance from 150 million to 250 million shares? How many votes must the proposal receive to pass?

 

With respect to the proposal to amend our Restated and Amended Articles of Incorporation to increase the number of shares of common stock authorized for issuance from 150 million to 250 million shares, you may:

 

 

The proposal must receive the affirmative vote of a majority of the votes entitled to be cast by the holders of all of our issued and outstanding common stock as of the record date to pass. Abstentions will have the effect of a vote against the proposal.

 

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:

 

 

The proposal must receive the affirmative vote of a majority of the votes entitled to be cast by the holders of shares of our common stock present at the Annual Meeting either in person or by proxy to pass. Abstentions with respect to the proposal 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 and the proposal to amend our Restated and Amended Articles of Incorporation to increase the number of shares of common stock authorized for issuance from 150 million to 250 million shares described in this proxy statement. With respect to these proposals, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.

 

Beginning this year, the election of directors is not considered a routine matter 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, 100,046,701 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 4, 2010.

 

The proxy statement and annual report 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 eight of the nominees were elected as Directors by the stockholders at the Annual Meeting in 2009. Director Gellerstedt was elected to the Board in July 2009 contemporaneous with him becoming our Chief Executive Officer. Director Charlesworth was elected to the Board in December 2009. Our Chairman of the Board, S. Taylor Glover, recommended Mr. Charlesworth for nomination and election to the Board. Each Director nominee has consented to serve as a Director if so elected at the Annual Meeting.

 

Thomas G. Cousins, our founder and former Chairman of the Board, has served as Chairman Emeritus since December 2006. In this role he is invited to attend Board meetings, but does not have the right to vote as a Director.

 

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 seven meetings during 2009. 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, except for Mr. Knox, who was unable to attend several meetings due to illness.

 

We typically schedule a Board meeting in conjunction with our Annual Meeting and expect that our Directors will attend, absent a valid reason. All Directors serving at the time of last year’s Annual Meeting attended the Annual Meeting, except for Mr. Knox, who was unable to attend due to illness, and Mr. Hance, who was unable to attend due to a conflict with the meeting of another board of directors.

 

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. Charlesworth, Mr. Edwards, Ms. Giornelli, Mr. Harrison and Mr. Knox. Mr. Edwards is the Chairman of the Committee. The Audit Committee held nine meetings during 2009. All of the members of the Audit Committee are independent within the meaning of the SEC regulations, 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 nine meetings during 2009. 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 Perrin (now Towers Watson), an outside human resources consulting firm, in 2009 to provide advice regarding executive compensation, including for our Named Executive Officers listed in the compensation tables in this proxy statement. Towers Perrin provided the Compensation, Succession, Nominating and Governance Committee with relevant market 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.”

 

Towers Perrin advised the Compensation, Succession, Nominating and Governance Committee with respect to compensation trends and best practices, plan design and individual compensation amounts. Towers Perrin also provided to management information regarding benchmarking of non-executive officer positions and other matters. The Compensation, Succession, Nominating and Governance Committee is aware of these additional services provided by Towers Perrin 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 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 2009, 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 nine 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, Mr. Knox and Mr. Payne. Mr. Gellerstedt is not an independent Director because of his employment as our Chief Executive Officer.

 

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 3600, 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 3600, 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 3600, 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 the traditional U.S. board leadership structure with our Chief Executive Officer serving as Chairman of the Board. Upon the retirement of our Chairman and Chief Executive Officer, Thomas D. Bell, Jr., effective July 1, 2009, our Board re-evaluated its leadership structure. Beginning in July 2009 with the appointment of Mr. Gellerstedt as our Chief Executive Officer, the Board determined that one of our independent Directors, Mr. Glover, would serve as an independent Chairman of the Board. We believe this current board leadership structure is best for our Company and our stockholders.

 

We believe that the Chief Executive Officer is responsible for the day-to-day leadership and management of the Company, and that the Chairman’s responsibility is to provide oversight, direction and leadership of the Board. As directors continue to have more oversight responsibilities than ever before, we believe it is beneficial to have an independent Chairman whose sole job is 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 ensure there is no 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 and to 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. In addition to the Audit Committee’s work in overseeing risk management, 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 Chairman of the Audit Committee, as well as from outside advisors. The recently created Investment Committee focuses on issues related to our investments, acquisitions and developments. In addition, the Board is required to approve, following review and recommendation by the Investment Committee, 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. The Board believes that the work undertaken by the Audit 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 3600, Atlanta, Georgia 30303-1740.

 

The following table sets forth, as of February 1, 2010 unless otherwise noted, information regarding the beneficial ownership of our common stock by:

 

 

 

 

 

 

Compensation Objectives

 

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, as well as determining the compensation of our executive officers, including our Named Executive Officers (or “NEOs”) that is detailed in the tables that follow. 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 in a variety of circumstances.

 

The success of our business plan depends significantly on the performance of the executives responsible for its execution. We have historically created value through the acquisition, development and re-development of real estate. In addition, in the current real estate environment, we are focused on three core strategies: (1) leasing available space in our projects, (2) selling condominiums, lots, land tracts and outparcels and (3) securing and maintaining management, leasing, development and other related fees. Our executives have a wide array of real estate skills applicable to multiple product types and geographic areas. Although we have reduced our staffing levels significantly as a result of the current economic downturn, our business strategy requires that our executives have a more diverse skill set than if we were a passive real estate investment company in order to allow us to underwrite and implement development projects as well as value-added and distressed real estate opportunities.

 

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 continue to perform at high levels. Another principle of our compensation strategy is to provide a meaningful portion of total compensation via equity-based awards. For 2009, our actual total direct cash and equity-based compensation 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 promotion and his limited tenure in the role.

 

All of our employees, including our NEOs, are employed “at-will.” Other than a 401(k)/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. However, we have typically made annual discretionary contributions to our 401(k)/retirement savings plan for the benefit of all employees meeting certain service requirements. In addition, certain key employees, including our NEOs, are provided benefits under Change in Control Severance Agreements. These agreements are discussed below under “Severance Policy, Retirement and Change in Control Agreements.”

 

NEOs for 2009

 

Our NEOs for 2009 are Lawrence L. Gellerstedt, III — President and Chief Executive Officer; Craig B. Jones — Executive Vice President and Chief Investment Officer; James A. Fleming — Executive Vice President and Chief Financial Officer; Steve V. Yenser — Executive Vice President, Retail Leasing and Asset Management; and R. Dary Stone — Vice Chairman of the Company. In addition, Thomas D. Bell, Jr. and Daniel M. DuPree are NEOs for 2009. During 2009, Mr. Bell was our Chairman and Chief Executive Officer. Mr. Bell retired as of July 1, 2009. During 2009, Mr. DuPree served as our President & Chief Operating Officer and then as our Vice Chairman. In March 2009, Mr. DuPree resigned from the Company.

 

The real estate environment in 2009 was very difficult and it impacted both our Company performance and the performance-based awards earned by our executives in 2009. In response to our performance and the economic

environment in which we operated, the Compensation Committee made the following key decisions during 2009: (1) to make no changes to base salaries of our NEOs, other than increases attributable to promotions or significant changes in responsibilities; (2) to not make any annual incentive cash awards to our NEOs; (3) to terminate personal use of Company aircraft by our Chief Executive Officer, or any other employee, and then to sell the aircraft and our interest in a hangar used in our aviation operations; and (4) to reduce the annual discretionary contribution to our Retirement Savings Plan for all employees from the historical 10% to 5% of eligible compensation.

 

Notwithstanding the Company’s performance and the real estate market conditions, the Compensation Committee did take steps in 2009 to incentivize and retain our executive talent, including our NEOs, by granting a new cash-based performance conditioned long-term incentive award that is tied to stock value creation over a minimum of three years, as discussed in more detail below. In addition, in February 2010, with respect to 2009 compensation, the Compensation Committee took further steps to incentivize and retain our executive talent, by granting long-term, equity-based compensation, a significant portion of which is subject to future performance conditions related to total stockholder return and to the reduction of Company debt relative to net income, as adjusted for certain items, as discussed in more detail below. In each case, these long-term cash and equity awards are structured to fit within our overall compensation strategy and to align the interests of our executives with those of our stockholders.

 

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 operating strategies. For purposes of making decisions regarding 2009 compensation, the Compensation Committee engaged Towers Perrin (now Towers Watson) to compile data from three primary sources: (1) the 2008 National Association of Real Estate Investment Trusts (“NAREIT”) survey, (2) the 2008 Mercer Real Estate Survey and (3) a “custom cut” peer group of 11 companies with similar business activities, strategies and asset classes.

 

We have no input regarding the companies included in the NAREIT or Mercer surveys. Management did select the 11 companies in the “custom cut” peer group for use by the Compensation Committee in its discretion. For 2009, the custom cut group companies were:

 

 

There were no changes to the peer group from 2008.

 

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.

 

For 2009 compensation decisions for our NEOs, the Compensation Committee considered data from each survey, but the primary data reference for all NEOs except Mr. Gellerstedt was generally the total sample of all companies in the NAREIT survey. With respect to Mr. Gellerstedt, his initial 2009 compensation was determined while he was our Chief Development Officer and the Compensation Committee used primarily the Mercer survey data to determine his 2009 compensation because the committee believed it provided a better comparison role. When Mr. Gellerstedt subsequently became our President and Chief Operating Officer in February 2009 and then

became our Chief Executive Officer in July 2009, the Compensation Committee revised the comparable data to make adjustments to his compensation, in each case focusing on the NAREIT total sample.

 

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 making decisions regarding executive officer compensation, the Compensation Committee considers recommendations from our CEO with respect to each of the other executive officers. 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 Perrin 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

 

As described in more detail below, the total compensation opportunity for our NEOs in 2009 incorporated four primary components: a base salary, annual incentive cash award, a cash long-term incentive award (or “Cash LTI Award”), a long-term incentive equity award (or “LTI”) and certain benefits and perquisites.

 

Base Salary

 

The Compensation Committee, at its December 5, 2008 meeting, determined the 2009 base salaries for our NEOs. 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. Based on its review, the Compensation Committee determined that the base salaries of all of our NEOS were generally appropriate and were not increased for 2009 except to the extent that an NEO was promoted or assumed additional responsibilities. In that regard, Mr. Gellerstedt’s base salary was increased in February 2009 from $350,000 to $375,000 in connection with his becoming our President and Chief Operating Officer. When Mr. Gellerstedt subsequently became our Chief Executive Officer in July 2009, his base salary was further increased to $500,000. Mr. Yenser’s base salary was increased from $308,397 to $325,000 as a result of his promotion to Executive Vice President as of January 1, 2009. The annual base salaries of our NEOs for 2008 and 2009 were as follows (with Mr. Gellerstedt’s 2009 annual base salary in the table below reflecting the two adjustments described above):

 

 

Annual Incentive Cash Award Opportunity

 

Our NEOs each have an opportunity to earn an annual incentive cash award. This award is designed to reward annual corporate performance, as well as to encourage and reward individual achievement during the year. The Compensation Committee established a 2009 target incentive cash award opportunity for each NEO 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. No particular weight was assigned to each factor. The annual incentive cash award opportunity target 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. The Compensation Committee, in exercising its judgment and discretion to adjust an award up or down, considers all facts and circumstances when evaluating individual executive’s performance, including changing market conditions and broad corporate strategic initiatives, along with overall responsibilities and contributions. With respect to Dary Stone, in July 2009, he reduced his role to part-time and, as a result, he is not eligible to earn an annual incentive cash award or a long-term incentive equity award. For 2009, the target annual incentive cash awards for our NEOs were as follows:

 

 

2009 Annual Incentive Cash Award

 

The Compensation Committee, at its February 16, 2009 meeting, adopted performance goals for the Company for 2009. These performance goals were adopted 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 2009:

 

1. Funds from Operations.  The Compensation Committee established a “Funds from Operations” (or “FFO”)¹ goal of $1.00 per share. The Compensation Committee believes that FFO is an appropriate measure of corporate performance when it is properly adjusted for activities related to our development and capital recycling strategies. The FFO goal was weighted to be 35% of the overall goals.

 

2. Gross Square Footage Leased.  We believe one of our core competencies is to lease property. We expect each project to achieve near capacity occupancy after a pro forma lease-up period following completion of construction or acquisition. In that regard, the Compensation Committee established a 2009 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 2009 the Compensation Committee set a goal for us to lease 1,232,640 square feet of space in our industrial portfolio and/or to sell our completed industrial projects, and this goal represented 5% of the overall goals. These leasing goals for 2009 took into account overall market conditions.

 

3. Profits from Residential Lot, Condominium and Tract Sales.  Another goal established by the Compensation Committee for 2009 was for us to recognize (A) $4,142,000 of profits from the sale of residential lots, (B) $2,002,000 of profits from condominium sales and (C) $10,026,000 of profits from outparcel and tract sales. These profit goals represented 15% of the overall goals.

 

4. Investments and Acquisitions.  The final goal established by the Compensation Committee for 2009 was for us to deploy $100,000,000 of capital for new investments and acquisitions. This goal took into account our investment and development capacity, our development pipeline and the status of the real estate cycle. This goal represented 10% of the overall goals.

 

The Compensation Committee believed that the performance goals and the weighting of each for the 2009 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.

 

The Compensation Committee, at its January 28, 2010 meeting, evaluated our performance against these goals and determined that, while we had substantially met our office and retail leasing goals, we had materially

 

 

¹ For the definition of FFO, please see our Annual Report on Form 10-K for the year ended December 31, 2009 that forms part of our 2009 Annual Report and is also available at www.sec.gov or on the Investor Relations page of our website at www.cousinsproperties.com.

underperformed against our goals for FFO, industrial leasing, profits from sales and investments and acquisitions. As a result, the Compensation Committee determined that we did not sufficiently meet the overall performance goals to support an annual incentive cash award for 2009. Therefore, no annual incentive cash awards were paid for 2009.

 

Special Cash Bonus Award to Mr. Stone

 

The Compensation Committee, at its meeting on January 28, 2009, awarded Mr. Stone a special $150,000 bonus for 2008 to acknowledge his role in our receipt during 2008 of a $13.5 million fee, before commissions and taxes, from the sale of property by a third-party client. We expect to receive additional fees in the future with respect to the sale of the property. Also at the January 28, 2009 meeting, the Compensation Committee awarded Mr. Stone a second special bonus of $150,000 for 2009, provided he remained our employee until 2010. The 2009 special bonus was paid in February 2010. In addition, at the January 28, 2009 meeting, the Compensation Committee awarded Mr. Stone a third special bonus of $200,000 for 2015, payable on February 28, 2016, provided that the amount of such special bonus will be reduced in the same proportion that certain future amounts received by us from the sale of the property are less than anticipated. The third special bonus is not conditioned upon Mr. Stone’s continued employment with us.

 

2010 Annual Incentive Cash Award Targets

 

The Compensation Committee, at its meeting on December 7, 2009, established the 2010 target annual incentive cash awards for our NEOs, expressed as a percentage of base salary and also expressed as a dollar amount in the table below. The 2010 target annual incentive cash awards for our NEOs were not adjusted from the 2009 amounts. As discussed previously, Mr. Stone is not eligible for an annual incentive cash award.

 

 

The Compensation Committee, at its meeting on February 15, 2010, established the performance goals for 2010 annual incentive cash awards. The 2010 performance goals are comprised of (1) FFO — 35% of the overall goals, (2) gross square footage leased in our office and retail portfolios — 35% of the overall goals, (3) gross square footage leased in our industrial portfolio — 5% of the overall goals, (4) gross proceeds from residential lot, condominium and tract sales — 15% of the overall goals and (5) gross fees from third parties — 10% of the overall goals. The Compensation Committee considers these goals to be 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.

 

2009 Cash Long-Term Incentive Awards

 

The Compensation Committee, at its meetings on February 16, 2009, March 18, 2009 and May 12, 2009, evaluated the current long-term incentive compensation in place for our key executives, including our NEOs, and determined that the outstanding awards did not provide sufficient competitive performance or retention incentives. As a result, the Compensation Committee, at its meeting on May 12, 2009, approved Cash LTI Awards for certain key executives, including our NEOs. Each Cash LTI Award was sized for each executive so that total long-term incentive compensation, including this award and other equity-based awards, would reach the 75th percentile of the applicable competitive peer group data, if the maximum funding thresholds were achieved. Each Cash LTI Award vests as of the earliest testing date, if any, on which the “value” of a share of Company common stock has appreciated to a specified level as of the first testing date that the funding threshold has been satisfied. For this purpose, the “value” of our common stock is determined, both on the grant date and as of each testing date, based on the average of the closing price on each trading day during the 30-calendar day period ending on the testing date.

The testing dates are generally May 12, 2012, May 12, 2013 and May 12, 2014. In order for the Cash LTI Awards to vest, the value of our common stock must increase to at least $11.95 as of May 12, 2012, or to $13.38 as of May 12, 2013 or to $14.99 as of May 12, 2014. Once the funding threshold has been satisfied, and a payment made, the award terminates and no future payouts will occur. If the stock value vesting condition has not been met as of May 12, 2014 (the latest possible testing date) or, except as described below following a change in control, if the employee terminates employment before this vesting condition is met on a testing date, the Cash LTI Award is automatically forfeited.

 

Each executive’s Cash LTI Award specifies an award amount equal to a percentage share of “Stock Value Creation” as of the applicable testing date, subject to a maximum amount. For this purpose, “Stock Value Creation” is defined as an amount, expressed in dollars, equal to the aggregate appreciation in the value of all Company common stock beginning on May 12, 2009 and ending on the applicable testing date less the net proceeds received by us, if any, from the issuance of Company common stock during such period. Each NEO’s percentage share of Stock Value Creation and the maximum award amount assuming a value of our common stock of $11.95 as of May 12, 2012, the first testing date, are as follows:

 

 

Following a change in control, each Cash LTI Award is subject to accelerated vesting if 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 has discretion to: (1) adjust a Cash LTI Award amount up or down as is necessary so that the executive’s overall long-term incentive compensation under all Company plans and programs is consistent with the objectives of such plans and programs, as well as our overall compensation objectives, (2) in connection with a change in control, reduce a Cash LTI Award amount to the extent of any amounts paid under a severance arrangement with the executive that is not available to all employees, (3) adjust the Cash LTI Award in the event of any change in capitalization of the Company, (4) adjust the vesting condition or Stock Value Creation requirement as a result of a change in control and (5) amend or terminate the Cash LTI Award at any time.

 

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.

 

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.

 

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, creates an interest that encourages executives to think and act like stockholders and serves as a competitive retention vehicle. Restricted stock granted prior to 2010 generally vested ratably over four years. In contrast, the restricted stock granted in 2010 “cliff” vests on the third anniversary of the grant date. 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. Beginning with the RSU grants in 2009, upon vesting each RSU will pay 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 granted prior to 2009, each RSU pays 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. The Compensation Committee periodically issues cash settled 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. RSUs granted prior to 2010 generally vest ratably over four years following the grant. The performance conditioned RSUs granted in 2010 generally “cliff” vest in three years, as described in more detail below.

 

2009 LTI Targets

 

The Compensation Committee, at its February 16, 2009 meeting, established the target dollar amount of LTI awards for our NEOs for 2009. The Compensation Committee established a 2009 LTI target for each NEO 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. 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 2009 LTI awards for our NEOs are included in the table under “2009 LTI Awards” below. With respect to Dary Stone, as discussed previously, he was not eligible to receive an LTI award for 2009.

 

LTI Grant Practices

 

Prior to 2008, for at least 10 years, we granted LTI awards to key employees at a regularly scheduled meeting of the Compensation Committee in November or December of each year, in anticipation of our fiscal year ending December 31 and at the same time as annual incentive cash awards were evaluated. Beginning with the 2008 compensation period, we made the LTI decisions in February 2009. We continued this timing for awards with respect to the 2009 compensation period, making LTI decisions in February 2010. We anticipate granting LTI awards in February of each year for the foreseeable future.

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.

 

LTI Performance Goals and 2009 LTI Grants

 

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) 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 100% or more of target levels, with a meaningful portion of such awards being subject to future performance vesting conditions.

 

At its meeting on February 15, 2010, the Compensation Committee granted LTI to our NEOs at 100% of the 2009 target value using a mix of 25% options, 37.5% time vested restricted stock and 37.5% performance conditioned RSUs (“Performance RSUs”). The time vested restricted stock is primarily intended to be a retention tool, but only represents 37.5% of the total value of the 2009 LTI award to each NEO. The balance of the 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 RSU grant, the award only has value if we achieve the performance measures described below.

 

 

The number of stock options, restricted stock and performance conditioned RSUs granted by the Compensation Committee to our NEOs for 2009 are set forth in the table below. The grants for 2009 were made on February 15, 2010 and, therefore, are not included in the Grants of Plan Based Awards in 2009 or the Outstanding Equity Awards at 2009 Fiscal Year End tables that follow this Compensation Discussion and Analysis. The value of the awards for purposes of determining the number of stock options, restricted shares and Performance RSUs granted to each NEO was determined using our average stock price over a 30-calendar day period ending on February 10, 2010. The actual grant to an NEO for each component of the 2009 LTI Award was rounded to the nearest whole unit. The exercise price of the stock options granted was the closing price on February 12, 2010 since

the New York Stock Exchange was closed on February 15, 2010 in observance of Presidents Day. As discussed previously, Dary Stone was not eligible for an LTI award for 2009.

 

 

 

 

2010 LTI Targets

 

The Compensation Committee, at its meeting on February 15, 2010, established the target 2010 LTI awards, expressed as a dollar amount, for each of our NEOs 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. The 2010 LTI targets for our NEOs were not adjusted from 2009. As discussed previously, Mr. Stone is not eligible for an LTI grant for 2010.

 

 

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, certain club membership dues and contributions to our 401(k)/retirement savings plan. In addition, our former CEO was permitted to use the Company aircraft for personal use, the cost of which was borne by us. Following the retirement of Mr. Bell, the Compensation Committee determined that personal use of Company aircraft by our CEO, or any other employee, would no longer be permitted. We also paid the travel expenses of our former CEO, including the cost of using the Company aircraft, to attend meetings related to his service on boards of other companies. We do not pay the travel expenses of our current CEO to attend meetings related to his service on boards of other companies. The Compensation Committee has reviewed the benefits and perquisites provided to our NEOs in 2009 and determined that they are appropriate. Additional information on the aggregate incremental cost to us of providing these benefits and perquisites to our NEOs in 2009 is shown in the Summary Compensation Table for 2009 below.

 

Retirement of Thomas D. Bell, Jr.

 

Thomas D. Bell, Jr. retired as our Chairman of the Board and Chief Executive Officer, and as a Director, effective July 1, 2009. We entered into a Retirement Agreement and General Release with Mr. Bell (the “Bell Retirement Agreement”) with respect to his retirement. Pursuant to the Bell Retirement Agreement, Mr. Bell received a lump sum payment of $650,000, equivalent to one year’s base salary, all of his stock options, shares of restricted stock and RSUs were vested as of his retirement date, and his stock options were modified to permit Mr. Bell the right to exercise the options through the original stated term of the options. In addition, we agreed to

reimburse Mr. Bell for the cost of COBRA health insurance benefits for up to one year after his retirement. Mr. Bell agreed to certain non-disclosure, non-solicitation and standstill provisions, and the agreement also contains a general release and other customary terms and conditions. The lump sum payment and the COBRA benefits are included in “All Other Compensation” as “Separation Costs” in the Summary Compensation Table for 2009 and the fair value of the modification of Mr. Bell’s option awards is included in “Option Awards” in the Summary Compensation Table for 2009.

 

Stock Ownership Guidelines and Insider Trading Policy

 

Our Corporate Governance Guidelines include stock ownership guidelines for our executive officers. Generally, these guidelines require the executive officers to maintain ownership of our stock with a value equal to the following multiple of his or her base salary:

 

 

The guidelines are consistent with our belief that our executive officers’ interests should be aligned with those of our stockholders and our expectation that executive officers maintain a significant level of investment in our Company. The following count toward the executive officer stock ownership requirements:

 

 

Existing executives have five years from the adoption of the guidelines in 2006 to accumulate the required shares. New executives are allowed five years from the date of election, promotion to executive officer, or commencement of employment as an executive officer to accumulate the required shares. The Chairman of the Compensation Committee may approve exceptions to the guidelines from time to time as he or she deems appropriate.

 

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 the number of his or her years of service plus four.

 

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 the performance conditioned RSUs granted in 2010, if accelerated vesting occurs as a result of a change in control, then the payout amount is at the target award amount. With respect to the performance conditioned RSU granted to Mr. Gellerstedt

on February 20, 2006, upon a change in control, the Compensation Committee will in its discretion either (1) adjust in an equitable manner these RSUs and the underlying performance conditions and the adjusted RSUs will remain outstanding, or (2) adjust the number of RSUs and the underlying performance conditions to reflect the periods of the original vesting period that have lapsed from the grant date to the change in control date and, if the adjusted performance conditions are met, vest the adjusted number of RSUs. Our NEOs participate in the 1999 Plan, the 2009 Plan and the RSU Plan on the same terms as our other key employees. 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 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 the performance conditioned RSUs granted in February 2010, the Rule of 65 applies to waive any continuing service requirement but does not waive any performance condition. The Rule of 65 does not apply to restricted stock awards. 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 retired after satisfying certain age and service requirements, then he or she should get the benefit of outstanding options and RSUs. 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.

 

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. 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. 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 a plan to keep our NEOs focused on the interests of the stockholders in the event of a potential strategic transaction. The amount of the estimated payments to each NEO assuming retirement, severance or a change in control and a qualifying termination of employment as of December 31, 2009 are set forth in the Potential Payments Upon Termination, Retirement or Change in Control table below.

 

Tax Implications of Executive Compensation

 

For 2009, Section 162(m) of Code did not limit our aggregate deductions for compensation paid to certain executive officers. However, from time to time, our deductions have been limited by Code Section 162(m) primarily because certain elements of our compensation program generally are not considered paid under a predetermined objective performance plan meeting certain 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) would, if applicable, in the aggregate, have a material impact on our financial results.

 

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 principals that guide the committee’s decision-making. The Compensation, Succession, Nominating and Governance Committee has reviewed the Compensation Discussion and Analysis 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 2010 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 2009, 2008 and 2007.

 

 

 

 

 

 

 

 

 

 

The following table sets forth information with respect to grants of plan-based awards to each of our NEOs during 2009:

 

 

 

The following table sets forth information with respect to all outstanding option and stock awards for each of our NEOs on December 31, 2009.