-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vfs+ShvVwHGx9mRg4bvTtbbOxtYMx8/ti74Kno/HPmB/IHh6bCbzDTIkUspJDg6P JiG2HifLRSoWM9gOTFb1qw== 0000025232-03-000015.txt : 20030327 0000025232-03-000015.hdr.sgml : 20030327 20030327141318 ACCESSION NUMBER: 0000025232-03-000015 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUSINS PROPERTIES INC CENTRAL INDEX KEY: 0000025232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 580869052 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-03576 FILM NUMBER: 03620514 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 10-K/A 1 fm10ka202.txt FORM 10-K AMENDMENT 2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A - Amendment 2 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 Commission file number 0-3576 COUSINS PROPERTIES INCORPORATED A GEORGIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052 2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339 TELEPHONE: 770-955-2200 Securities registered pursuant to Section 12(b) of the Act: Common Stock ($1 Par Value) Name of exchange on which registered: New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes X No -- As of June 28, 2002, the aggregate market value of the common stock of Cousins Properites Incorporated held by non-affiliates was $929,547,967. As of March 18, 2003, 48,264,013 shares of common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents have been incorporated by reference into the designated Part of this Form 10-K: Registrant's Proxy Statement Part III, Items 10, 11, 12 and 13 dated March 25, 2003 Registrant's Annual Report to Part II, Items 5, 6, 7 and 8 Stockholders for the year ended December 31, 2002 EXPLANATORY NOTE On March 25, 2003, the Company filed its Annual Report on Form 10-K for the year ended December 31, 2002 (the "10-K") and related exhibits with the Securities and Exchange Commission ("SEC"). The Company unintentionally omitted Exhibit 13 from its 10-K filing. An amendment to the 10-K (the "10-K/A") including Exhibit 13 was filed with the SEC on March 26, 2003. However, the 10-K/A did not include as exhibits new certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002. The Company hereby files this second amendment to the 10-K (the "10-K/A-2") to amend and restate the 10-K in its entirety, including all exhibits and new certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002. None of the information previously disclosed in the 10-K or the 10-K/A is modified by this 10-K/A-2. PART I Item 1. Business - -------------------- Corporate Profile Cousins Properties Incorporated (the "Registrant" or "Cousins") is a Georgia corporation, which since 1987 has elected to be taxed as a real estate investment trust ("REIT"). Cousins Real Estate Corporation and its subsidiaries ("CREC") is a taxable entity consolidated with the Registrant, which owns, develops, and manages its own real estate portfolio and performs certain real estate related services for other parties. CREC II Inc. ("CREC II"), another taxable entity consolidated with the Registrant, owns a 100% interest in Cousins Properties Services LP, a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management, development and leasing of office buildings. The Registrant, together with CREC and CREC II, is hereafter referred to as the "Company." Cousins is an Atlanta-based, fully integrated, self administered equity REIT. The Company has extensive experience in the real estate industry, including the acquisition, financing, development, management and leasing of properties. Cousins has been a public company since 1962, and its common stock trades on the New York Stock Exchange under the symbol "CUZ." The Company owns a portfolio of well-located, high-quality office, medical office, retail and land development projects and holds several tracts of strategically located undeveloped land. The strategies employed to achieve the Company's investment goals include the development of properties which are precommitted to quality tenants; the maintenance of high levels of occupancy within owned properties; the selective sale of assets; the creation of joint venture arrangements and the acquisition of quality income-producing properties at attractive prices. The Company also seeks to be opportunistic and take advantage of normal real estate business cycles. Unless otherwise indicated, the notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in the financial section of the Registrant's 2002 Annual Report to Stockholders, which are incorporated herein by reference.
Brief Description of Company Investments Office. As of December 31, 2002, the Company's office portfolio included the following thirty-eight commercial office buildings: Company's Percent Economic Leased Metropolitan Rentable Ownership (Fully Property Description Area Square Feet Interest Executed) -------------------- ----------------- ----------- --------- --------- Inforum Atlanta, GA 990,000 100% 96% 101 Independence Center Charlotte, NC 526,000 100% 98% Congress at Fourth Austin, TX 525,000 100% 33% (a) 101 Second Street San Francisco, CA 387,000 100% (b) 83% 55 Second Street San Francisco, CA 379,000 100% (b) 92% (c) AT&T Wireless Services Headquarters Los Angeles, CA 222,000 100% 100% The Points at Waterview Dallas, TX 201,000 100% 82% Lakeshore Park Plaza Birmingham, AL 190,000 100% (b) 82% 3100 Windy Hill Road Atlanta, GA 188,000 100% 100% 333 John Carlyle Washington, D.C. 153,000 100% 96% 555 North Point Center East Atlanta, GA 152,000 100% 91% 615 Peachtree Street Atlanta, GA 148,000 100% 91% 333 North Point Center East Atlanta, GA 129,000 100% 93% 600 University Park Place Birmingham, AL 123,000 100% (b) 95% 3301 Windy Ridge Parkway Atlanta, GA 107,000 100% 100% Cerritos Corporate Center - Phase II Los Angeles, CA 105,000 100% 100% 1900 Duke Street Washington, D.C. 97,000 100% 100% One Georgia Center Atlanta, GA 363,000 88.50% 78% Bank of America Plaza Atlanta, GA 1,261,000 50% 100% Gateway Village Charlotte, NC 1,065,000 50% 100% 3200 Windy Hill Road Atlanta, GA 687,000 50% 95% 2300 Windy Ridge Parkway Atlanta, GA 635,000 50% 88% The Pinnacle Atlanta, GA 424,000 50% 98% 1155 Perimeter Center West Atlanta, GA 362,000 50% 99% 2500 Windy Ridge Parkway Atlanta, GA 315,000 50% 89% Two Live Oak Center Atlanta, GA 279,000 50% 80% 4200 Wildwood Parkway Atlanta, GA 260,000 50% 100% Ten Peachtree Place Atlanta, GA 260,000 50% 100% John Marshall - II Washington, D.C. 224,000 50% 100% Austin Research Park - Building IV Austin, TX 184,000 50% 100% Austin Research Park - Building III Austin, TX 174,000 50% 100% 4300 Wildwood Parkway Atlanta, GA 150,000 50% 100% 4100 Wildwood Parkway Atlanta, GA 100,000 50% 100% First Union Tower Greensboro, NC 323,000 11.50% 66% Grandview II Birmingham, AL 149,000 11.50% 100% 200 North Point Center East Atlanta, GA 130,000 11.50% 47% 100 North Point Center East Atlanta, GA 128,000 11.50% 70% One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.80% 97% ---------- 13,310,000 ========== (a) Under construction and in lease-up. (b) These projects are owned through joint ventures with third parties, and a portion of the upside is shared with the other venturer. See "Item 2, Major Properties" - "101 Second Street," "55 Second Street" and "Cousins/Daniel LLC." (c) Effective January 31, 2003, a tenant occupying 158,000 rentable square feet terminated their lease. See "Item 1, Subsequent Event" for more information.
The weighted average leased percentage of these office buildings (excluding the property currently under construction and in lease-up and One Ninety One Peachtree Tower, in which the Company owns less than 10%) was approximately 94% as of December 31, 2002, and the leases expire as follows:
2012 & 2003 2004 2005 2006 2007 2008 2009 2010 2011 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- OFFICE - ------ Consolidated: - ------------- Square Feet Expiring (a) 123,660 157,592 330,557 356,900 161,531 388,970 554,319 266,561 225,779 1,272,408 3,838,277(b) % of Leased Space 3% 4% 9% 9% 4% 10% 15% 7% 6% 33% 100% Annual Base Rent (c) 2,023,808 2,756,542 5,672,451 5,530,032 2,596,271 8,310,884 9,684,456 7,496,350 5,566,717 39,303,896 88,941,407 Annual Base Rent/Sq. Ft. (c) 16.37 17.49 17.16 15.49 16.07 21.37 17.47 28.12 24.66 30.89 23.17 Joint Venture: - -------------- Square Feet Expiring (a) 288,041 394,004 424,473 607,136 698,753 168,103 428,434 225,191 244,171 3,483,400 6,961,706(d) % of Leased Space 4% 6% 6% 9% 10% 2% 6% 3% 4% 50% 100% Annual Base Rent (c) 4,731,379 5,427,619 7,191,479 10,913,350 16,878,496 2,983,343 9,662,815 5,073,409 4,868,076 74,259,074 141,989,040 Annual Base Rent/Sq. Ft. (c) 16.43 13.78 16.94 17.98 24.16 17.75 22.55 22.53 19.94 21.32 20.40 Total (including only Company's % share of Joint Venture Properties): - --------------------------------- ----------------------------------- Square Feet Expiring (a) 266,833 411,253 508,389 637,992 488,278 460,984 763,258 327,958 351,319 3,014,193 7,230,457 % of Leased Space 4% 6% 7% 9% 7% 6% 10% 4% 5% 42% 100% Annual Base Rent (c) 4,325,978 5,790,583 8,667,331 10,567,630 10,605,612 9,599,312 14,423,492 9,030,044 8,003,070 76,433,433 157,446,485 Annual Base Rent/Sq. Ft. (c) 16.21 14.08 17.05 16.56 21.72 20.82 18.90 27.53 22.78 25.36 21.78
(a) Where a tenant has the option to cancel its lease without penalty, the lease expiration date used in the table above reflects the cancellation option date rather than the lease expiration date. (b) Rentable square feet leased as of December 31, 2002 out of approximately 4,097,000 total rentable square feet. (c) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (d) Rentable square feet leased as of December 31, 2002 out of approximately 7,473,000 total rentable square feet. The weighted average remaining lease term of these thirty-six office buildings was approximately eight years as of December 31, 2002. Most of the Company's leases in these buildings provide for pass through of operating expenses and base rents which escalate over time. Medical Office. As of December 31, 2002, the Company's medical office -------------- portfolio included the following six medical office properties:
Company's Percent Economic Leased Metropolitan Rentable Ownership (Fully Property Description Area Square Feet Interest Executed) -------------------------- ------------- ----------- -------- --------- Northside/Alpharetta II Atlanta, GA 198,000 100% 79% Meridian Mark Plaza Atlanta, GA 161,000 100% 100% Northside/Alpharetta I Atlanta, GA 103,000 100% 93% AtheroGenics Atlanta, GA 50,000 100% 100% Emory Crawford Long Medical Office Tower Atlanta, GA 358,000 50% 85% Presbyterian Medical Plaza at University Charlotte, NC 69,000 11.50% 100% ------- 939,000 =======
The weighted average leased percentage of these medical office buildings was 89% as of December 31, 2002, and the leases expire as follows: 2012 & 2003 2004 2005 2006 2007 2008 2009 2010 2011 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- MEDICAL OFFICE - -------------- Consolidated: - ------------- Square Feet Expiring 8,717 42,669 23,836 9,210 32,538 38,255 130,276 10,535 27,119 139,074 462,229(a) % of Leased Space 2% 9% 5% 2% 7% 8% 28% 3% 6% 30% 100% Annual Base Rent (b) 165,398 793,546 407,310 166,631 686,517 853,330 2,637,282 202,799 736,974 3,276,120 9,925,907 Annual Base Rent/Sq. Ft. (b) 18.97 18.60 17.09 18.09 21.10 22.31 20.24 19.25 27.18 23.56 21.47 Joint Venture: - -------------- Square Feet Expiring 3,818 0 3,445 0 70,687 1,017 27,269 3,665 2,354 260,807 373,062(c) % of Leased Space 1% 0% 1% 0% 19% 0% 7% 1% 1% 70% 100% Annual Base Rent (b) 89,685 0 56,498 0 1,294,383 20,208 609,115 79,493 51,764 6,147,193 8,348,339 Annual Base Rent/Sq. Ft. (b) 23.49 0 16.40 0 18.31 19.87 22.34 21.69 21.99 23.57 22.38 Total (including only Company's % share of Joint Venture Properties): - -------------------------------------------------------------------- Square Feet Expiring 10,626 42,669 24,232 9,210 58,350 38,764 143,911 12,368 28,296 253,884 622,310 % of Leased Space 2% 7% 4% 1% 9% 6% 23% 2% 5% 41% 100% Annual Base Rent (b) 210,240 793,546 413,807 166,631 1,174,251 863,434 2,941,840 242,545 762,856 6,052,345 13,621,495 Annual Base Rent/Sq. Ft. (b) 19.79 18.60 17.08 18.09 20.12 22.27 20.44 19.61 26.96 23.84 21.89 (a) Rentable square feet leased as of December 31, 2002 out of approximately 512,000 total rentable square feet. (b) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (c) Rentable square feet leased as of December 31, 2002 out of approximately 427,000 total rentable square feet.
The weighted average remaining lease term of these six medical office buildings was approximately nine years as of December 31, 2002. The Company's leases in these medical office buildings provide for pass through of operating expenses and base rents which escalate over time. Retail. As of December 31, 2002, the Company's retail portfolio included the following thirteen properties: Company's Percent Economic Leased Metropolitan Rentable Ownership (Fully Property Description Area Square Feet Interest Executed) --------------------------- ------------------------- ----------- -------- --------- The Avenue of the Peninsula Rolling Hills Estates, CA 375,000 100% 91% Presidential MarketCenter Atlanta, GA 374,000 100% 100% The Avenue East Cobb Atlanta, GA 225,000 100% 100% The Avenue West Cobb Atlanta, GA 206,000 100% 28% (a) Perimeter Expo Atlanta, GA 176,000 100% 92% The Shops of Lake Tuscaloosa Tuscaloosa, AL 70,000 100% 63% (a) Mira Mesa MarketCenter San Diego, CA 480,000 88.50% 100% The Avenue Peachtree City Atlanta, GA 169,000 88.50% (b) 98% The Shops at World Golf Village St. Augustine, FL 80,000 50% 74% Greenbrier MarketCenter Chesapeake, VA 493,000 11.50% 100% North Point MarketCenter Atlanta, GA 401,000 11.50% 100% Los Altos MarketCenter Long Beach, CA 157,000 11.50% 100% Mansell Crossing Phase II Atlanta, GA 103,000 11.50% 100% --------- 3,309,000 --------- (a) Under construction and in lease-up. (b) This property is subject to a contractual participation in which a portion of the upside is shared with a third party.
The weighted average leased percentage of these retail properties (excluding the properties currently under construction and in lease-up) was approximately 96% as of December 31, 2002, and the leases expire as follows: 2012 & 2003 2004 2005 2006 2007 2008 2009 2010 2011 Thereafter Total ---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- ----- RETAIL - ------ Consolidated: - ------------- Square Feet Expiring 21,417 75,653 121,850 88,980 42,922 36,187 21,530 143,557 108,951 439,654 1,100,701(a) % of Leased Space 2% 7% 11% 8% 4% 3% 2% 13% 10% 40% 100% Annual Base Rent (b) 414,335 1,393,451 2,946,291 2,066,634 929,298 327,838 733,820 2,988,238 2,215,151 7,781,304 21,796,360 Annual Base Rent/Sq. Ft. (b) 19.35 18.42 24.18 23.23 21.65 9.06 34.08 20.82 20.33 17.70 19.80 Joint Venture: - -------------- Square Feet Expiring 13,111 34,343 88,402 178,400 85,968 46,361 38,602 140,895 173,056 1,059,128 1,858,266(c) % of Leased Space 1% 2% 5% 10% 5% 2% 2% 7% 9% 57% 100% Annual Base Rent (b) 213,996 717,124 1,584,126 2,639,475 1,887,378 883,778 528,429 2,104,236 2,546,229 14,619,722 27,724,493 Annual Base Rent/Sq. Ft. (b) 16.32 20.88 17.92 14.80 21.95 19.06 13.69 14.93 14.71 13.80 14.92 Total (including only Company's % share of Joint Venture Properties): - --------------------------------------------------------------------- Square Feet Expiring 22,925 82,225 162,591 137,894 80,082 73,583 31,455 194,555 160,817 888,001 1,834,128 % of Leased Space 1% 4% 9% 8% 4% 4% 2% 11% 9% 48% 100% Annual Base Rent (b) 438,944 1,536,695 3,827,593 3,144,155 1,808,886 1,051,843 932,149 4,081,380 3,042,547 14,465,649 34,329,841 Annual Base Rent/Sq. Ft.(b) 19.15 18.69 23.54 22.80 22.59 14.29 29.63 20.98 18.92 16.29 18.72 (a) Gross leasable area leased as of December 31, 2002 out of approximately 1,150,000 total gross leasable area. (b) Annual base rent excludes the operating expense reimbursement portion of the rent payable and any percentage rents due. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars. (c) Gross leasable area leased as of December 31, 2002 out of approximately 1,883,000 total gross leasable area.
The weighted average remaining lease term of these 11 retail properties was approximately ten years as of December 31, 2002. Most of the major tenant leases in these retail properties provide for pass through of operating expenses and base rents which escalate over time. Other. The Company's other real estate holdings include equity ----- interests in approximately 360 acres of strategically located land held for investment or future development at North Point and Wildwood Office Park, the option to acquire the fee simple interest in approximately 7,500 acres of land through its Temco Associates joint venture, and a mortgage note of approximately $26 million which is secured by a 250,000 rentable square foot office building in Washington, D.C. The terms of this note have some of the characteristics of an equity investment and management believes it should provide a comparable return on investment (see Note 3). The Company's joint venture partners include, but are not limited to, either the following companies or their affiliates: IBM, The Coca-Cola Company ("Coca-Cola"), Bank of America Corporation ("Bank of America"), The Prudential Insurance Company of America ("Prudential"), Temple-Inland Inc., Equity Office Properties Trust, CommonWealth Pacific, LLC ("CommonWealth") and CarrAmerica Realty Corporation. A more detailed description of the Company's real estate properties is included in Item 2 of this Report. Significant Changes in 2002 Significant changes in the Company's business and properties during the year ended December 31, 2002 were as follows: Office Division. In February 2002, 55 Second Street, an approximately --------------- 379,000 rentable square foot office building in San Francisco, California, became partially operational for financial reporting purposes. Also in February 2002, Emory Crawford Long Medical Office Tower, an approximately 358,000 rentable square foot medical office facility in Atlanta, Georgia, owned by Crawford Long - CPI, LLC (see Note 5), became partially operational for financial reporting purposes. Retail Division. In August 2002, the Company purchased 22.17 acres of --------------- land for approximately $4,945,000 for the development of The Avenue West Cobb, an approximately 206,000 square foot specialty retail center in suburban Atlanta, Georgia. Construction commenced on this center in September 2002. In October 2002, the Company sold Salem Road Station, an approximately 67,000 square foot retail center in suburban Atlanta, Georgia for $7,379,000, which was approximately $940,000 over the cost of the center. Including depreciation recapture of approximately $380,000 and net of an income tax provision of approximately $146,000, the net gain on this sale was approximately $1,174,000. Also in October 2002, the Company sold two outparcels at Salem Road Station for $548,000, which was approximately $195,000 over the cost of the outparcels. The gain on this sale, net of an income tax provision of approximately $74,000, was approximately $121,000. In December 2002, the Company purchased 11.91 acres of land for approximately $1,911,000 for the development of The Shops of Lake Tuscaloosa, an approximately 70,000 square foot retail center in Tuscaloosa, Alabama. Construction of this center commenced in February 2003. Land Division. The Company is currently developing or has developed ------------- nine residential communities, eight in suburban Atlanta, Georgia and one in Pine Mountain, Georgia. These nine communities include land on which approximately 2,957 lots are being or were developed, of which 166, 121 and 217 lots were sold in 2002, 2001 and 2000, respectively. Of the nine communities, four containing 1,076 lots were completely sold as of December 31, 2000. Two communities containing 704 lots were completely sold as of December 31, 2002. The three residential communities remaining under development at December 31, 2002 contain approximately 1,177 lots, 146 of which have been sold. In November 1998, Temco Associates began development of the Bentwater residential community, which will consist of approximately 1,669 lots on approximately 1,290 acres (see Note 5). Temco Associates sold 289, 233 and 219 lots in 2002, 2001 and 2000, respectively. In December 2002, the Company sold approximately 5.5 acres of Wildwood land for $2,500,000. The net gain on this sale was approximately $2,143,000. Financings. On February 22, 2002, CSC Associates, L.P. ("CSC"), an ---------- entity in which the Company owns a 50% equity interest, completed a $150 million non-recourse mortgage note payable (the "New Loan") with an interest rate of 6.958% and a maturity of March 1, 2012. The New Loan is secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $150 million proceeds of the New Loan to the Company under a non-recourse loan (the "New Cousins Loan") secured by the Company's interest in CSC under the same payment terms as those of the New Loan. The Company paid all costs of issuing the New Loan and the New Cousins Loan, including a $750,000 fee to an affiliate of Bank of America Corporation. On March 15, 2002, $65,873,925 of the proceeds from the New Loan was used to pay off in full the existing collateralized non-recourse mortgage notes (the "Prior Notes"). The $65,873,925 included $65,525,710 for the payoff of the principal balance as of February 15, 2002 (the last payment date of the Prior Notes) and $348,215 for accrued interest from February 15, 2002 through March 14, 2002. The existing non-recourse loan to CSC, which was secured by the Company's interest in CSC under the same payment terms as those of the Prior Notes, was also repaid in full. In connection with the prepayment in full of the Prior Notes, the Company paid a prepayment premium in the amount of $2,871,925. This prepayment premium, along with the unamortized balance of closing costs paid by the Company related to the Prior Notes in the amount of $629,278, were expensed as an extraordinary item in the Company's Consolidated Statements of Income in 2002. Stock Repurchase Plan In November 2001, the Board of Directors of the Company adopted a stock repurchase plan authorizing the repurchase of up to 5 million shares of common stock prior to January 1, 2004 (see Note 6). During January 2003, the Company purchased an additional 234,100 shares at an average price of $23.657. As of March 18, 2003, the Company had repurchased a total of 2,691,582 shares for an aggregate price of $64,893,935. Subsequent Event The Company and Cable & Wireless Internet Services, Inc. ("Cable") have executed an agreement under which Cable's lease on 158,000 rentable square feet at 55 Second Street was terminated effective January 31, 2003, conditioned upon the payment to the Company of a termination fee of $20 million. The Company received $10 million of the termination fee in February 2003, with the remaining $10 million due April 1, 2003 from an irrevocable letter of credit held by the Company. Environmental Matters Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is generally liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to remediate such substances properly, may subject the owner to substantial liability and may adversely affect the owner's ability to develop the property or to borrow using such real estate as collateral. The Company is not aware of any environmental liability that the Company's management believes would have a material adverse effect on the Company's business, assets or results of operations. Certain environmental laws impose liability on a previous owner of property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not relieve an owner of such liability. Thus, although the Company is not aware of any such situation, the Company may be liable in respect of properties previously sold. In connection with the development or acquisition of certain properties, the Company has obtained Phase One environmental audits (which generally involve inspection without soil sampling or ground water analysis) from independent environmental consultants. The remaining properties (including most of the Company's land held for investment or future development) have not been so examined. No assurance can be given that no environmental liabilities exist, that the reports revealed all environmental liabilities, or that no prior owner created any material environmental condition not known to the Company. The Company believes that it and its properties are in compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances. Competition The Company's properties compete for tenants with similar properties located in our markets primarily on the basis of location, rent charged, services provided and the design and condition of the facilities. The Company also competes with other real estate companies, financial institutions, pension funds, partnerships, individual investors and others when attempting to acquire and develop properties. Forward-Looking Statements Certain matters contained in this report are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks. These include, but are not limited to, general and local economic conditions, local real estate conditions, the activity of others developing competitive projects, the cyclical nature of the real estate industry, the financial condition of existing tenants, interest rates, the Company's ability to obtain favorable financing or zoning, the environmental impact, the effects of terrorism and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Form 8-K filed on March 9, 2001. The words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Executive Offices; Employees The Registrant's executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 2002, the Company employed 403 people. Website Access to 1934 Act Reports The Company makes available free of charge on its website, www.CousinsProperties.com, its filed reports on Forms 10-K, 10-Q and 8-K, and all amendments thereto, as soon as reasonably practicable after the reports are filed with or furnished to the Securities and Exchange Commission. The information contained in the Company's website is not incorporated herein by reference. Copies of these documents are also available without exhibits free of charge upon request to the Company at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683, Attention: Mark A. Russell, Vice President - Chief Financial Analyst and Director of Investor Relations. Mr. Russell, the Company's investor relations contact, may also be reached by telephone at (770) 857-2449, by facsimile at (770) 857-2360 or by email at markrussell@cousinsproperties.com.
Item 2. Properties - ---------------------- Table of Major Properties The following tables set forth certain information relating to major office, medical office and retail properties, stand alone retail lease sites, and land held for investment and future development in which the Company has a 10% or greater ownership interest. All information presented is as of December 31, 2002. Dollars are stated in thousands. Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office - ------ Inforum Atlanta, GA 30303-1032 1999 N/A 100% 990,000 96% 97% BellSouth Corporation 4 Acres (2) Georgia Lottery Corp. (2013) Lockwood Greene Engineers, Inc. (2007/2012)(4) Co Space Services, LLC (2020/2025) Turner Broadcasting (2006/2016) Sapient Corporation (2009/2019) 101 Independence Center Charlotte, NC 28246-1000 1996 N/A 100% 526,000 98% 97% Bank of America (3) 2 Acres (5) (2008/2028)(6) Robinson Bradshaw & Hinson, P.A.(2014)(7) Ernst & Young LLP(2004) Congress at Fourth Austin, TX 78701-3619 (8) N/A 100% 525,000 33%(8) (8) Jenkins & Gilchrist (2013)(8) 2 Acres Winstead, Sechrest & Minick P.C. (2014/2024)(8) 101 Second Street San Francisco, CA 94105-3601 2000 Myers Second 100%(9) 387,000 83% 86% Thelen, Reid & Priest Street Company 1 Acre (2012/2022) LLC 55 Second Street San Francisco, CA 94105-3601 2002 Myers Bay 100%(9) 379,000 92%(10) 89%(11) Cable & Wireless (3) Area Company LLC 1 Acre (2014/2019)(10) Paul Hastings (2017/2027) Fritz Companies (2012/2017) Preston Gates (2010/2015)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office - ------ Inforum Atlanta, GA 30303-1032 277,744 $ 91,476 $ 0 N/A 127,827 $ 64,862 125,916 110,797 57,827 57,689 101 Independence Center Charlotte, NC 28246-1000 359,327 $ 79,559(5) $ 44,928 12/1/07 $ 60,357(5) 8.22% 89,584 24,125 Congress at Fourth Austin, TX 78701-3619 45,552(8) $ 53,632 $ 0 N/A 37,000 (8) 101 Second Street San Francisco, CA 94105-3601 135,919 $ 99,272 $ 88,055 4/19/10 $ 84,282 8.33% 55 Second Street San Francisco, CA 94105-3601 158,550 $109,960 $ 0 N/A $107,014 73,708 57,380 43,968
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office (Continued) - ------------------ AT&T Wireless Services Headquarters Suburban Los Angeles, CA 90703-8573 1999 N/A 100% 222,000 100% 100% AT&T Wireless Services 6 Acres (12) (2014/2029) Cerritos Corporate Center - Phase II Suburban Los Angeles, CA 90703-8573 2001 N/A 100% 105,000 100% 100% AT&T Wireless Services 3 Acres (12) (2011/2021) The Points at Waterview Suburban Dallas, Texas 75080-1472 2000 N/A 100% 201,000 82% 45% Bombadier Aerospace Corp. 15 Acres (5) (2013/2023) Cisco Systems, Inc. (2005/2010) Lakeshore Park Plaza Birmingham, AL 35209-6719 1998 Daniel Realty 100%(9) 190,000 82% 78% Infinity Insurance (2005/2015) Company 12 Acres 600 University Park Place Birmingham, AL 35209-6774 2000 Daniel Realty 100%(9) 123,000 95% 95% Southern Company, Inc. (3) Company 10 Acres (2005/2011) Southern Progress (2006) 333 John Carlyle Suburban Washington, D.C. 22314-5745 1999 N/A 100% 153,000 96% 94% A.T. Kearney (2009/2019) 1 Acre 1900 Duke Street Suburban Washington, D.C. 22314-5745 2000 N/A 100% 97,000 100% 99% Municipal Securities Rulemaking 1 Acre Board (2016/2026) American Society of Clinical Oncology (2010/2015) 333 North Point Center East Suburban Atlanta, GA 30022-8274 1998 N/A 100% 129,000 93% 96% Alltel Telecom Information 9 Acres Services, Inc. (2003) J.C. Bradford (2005/2010)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office (Continued) - ----------------- AT&T Wireless Services Headquarters Suburban Los Angeles, CA 90703-8573 222,000 $ 56,214 $ 0 N/A $ 48,295 Cerritos Corporate Center - Phase II Suburban Los Angeles, CA 90703-8573 105,000 $ 19,344 $ 0 N/A $ 18,082 The Points at Waterview Suburban Dallas, Texas 75080-1472 97,740 $ 27,535(5) $ 0 N/A $ 24,846(5) 48,303 Lakeshore Park Plaza Birmingham, AL 35209-6719 107,293 $ 16,022 $ 10,088 11/1/08 $ 13,856 6.78% 600 University Park Place Birmingham, AL 35209-6774 41,961 $ 20,229 $ 13,822 8/10/11 $ 17,115 7.38% 25,465 333 John Carlyle Suburban Washington, D.C. 22314-5745 94,115 $ 29,161 $ 48,459(13) 11/1/11 $ 24,877 7.00% (13) 1900 Duke Street Suburban Washington, D.C. 22314-5745 47,556 $ 24,169 (13) (13) $ 22,050 36,247 333 North Point Center East Suburban Atlanta, GA 30022-8274 48,559 $ 13,277 $ 31,960(14) 11/1/11 $ 9,377 7.00% (14)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office (Continued) - ------------------ 555 North Point Center East Suburban Atlanta, GA 30022-8274 2000 N/A 100% 152,000 91% 91% Regus Business Centre 10 Acres (2011/2016)(15) 615 Peachtree Street Atlanta, GA 30308-2312 1996 N/A 100% 148,000 91% 91% Wachovia (3)(2004/2007) 2 Acres One Georgia Center Atlanta, GA 30308-3619 2000 Prudential (3) 88.50%(9) 363,000 78% 84% Norfolk & Southern (2004/2014) 3 Acres (5) SouthTrust Bank (2004/2019) Wildwood Office Park, Atlanta, GA: 2300 Windy Ridge Parkway 30339-5671 1987 IBM 50% 635,000 88% 99% Manhattan Associates, LLC 12 Acres (2008/2013)(16) Computer Associates (2005/2010) Profit Recovery Group (2005/2010) Financial Services Corporation (2006/2011) Life Office Management Associates (2005/2010)(16) Chevron USA (2005) 2500 Windy Ridge Parkway 30339-5683 1985 IBM 50% 315,000 89% 93% Coca-Cola Enterprises Inc. 8 Acres (2018/2023) Cousins Properties Incorporated (2003) 3200 Windy Hill Road 30339-5609 1991 IBM 50% 687,000 95% 100% IBM (2006/2011) 15 Acres IBM (2009/2014)(17) General Electric (2003) W.H. Smith Inc. (2012/2017)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office (Continued) - ----------------- 555 North Point Center East Suburban Atlanta, GA 30022-8274 89,688 $ 16,818 (14) (14) $ 14,124 615 Peachtree Street Atlanta, GA 30308-2312 50,073 $ 13,489 $ 0 N/A $ 9,421 One Georgia Center Atlanta, GA 30308-3619 91,425 $ 40,327(5) $ 0 N/A 80,895 $ 36,321(5) Wildwood Office Park, Atlanta, GA: 2300 Windy Ridge Parkway 30339-5671 135,398 $ 79,829 $ 57,662 12/1/05 $ 41,539 7.56% 74,255 62,576 61,928 57,692 (2005/2010)(16) 45,967 2500 Windy Ridge Parkway 30339-5683 187,251 $ 30,659 $ 20,812 12/15/05 $ 14,723 7.45% 44,030 3200 Windy Hill Road 30339-5609 421,489 $ 85,452 $ 63,938 1/1/07 69,108 $ 50,527 8.23% 65,947 41,858
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office (Continued) - ------------------ 4100 and 4300 Wildwood Parkway 30339-8400 1996 IBM 50% 250,000 100% 100% Georgia-Pacific 13 Acres Corporation (2012/2017)(18) 4200 Wildwood Parkway 30339-8402 1997 IBM 50% 260,000 100% 100% General Electric (3)(2014/2024) 8 Acres 3301 Windy Ridge Parkway 30339-5685 1984 N/A 100% 107,000 100% 100% Indus International, Inc. 10 Acres (2012/2017) 3100 Windy Hill Road 30339-5605 1983 N/A 100%(19) 188,000 100% 100% IBM (2006) 13 Acres Bank of America Plaza Atlanta, GA 30308-2214 1992 Bank of America (3) 50% 1,261,000 100% 100% Bank of America (3)(2012/2042) 4 Acres Troutman Sanders (2007/2017) Ernst & Young LLP (2007/2017) Paul Hastings (2012/2017)(21) Hunton & Williams (2009/2014) Gateway Village Charlotte, NC 28202-1125 2001 Bank of America (3) 50%(9) 1,065,000 100% 100%(9) Bank of America (3)(2015/2035) 8 Acres The Pinnacle Atlanta, GA 30326-1234 1999 LORET 50% 424,000 98% 98% Merrill Lynch (2010/2011) Holdings, L.L.L.P. 4 Acres A.T. Kearney (2009/2019) UBS PaineWebber (2013/2018)(22) Two Live Oak Center Atlanta, GA 30326-1234 1997 LORET 50% 279,000 80% 89% SYNAVANT Inc. (2007/2017) Holdings, L.L.L.P. 2 Acres Chubb & Son, Inc. (3) (2007/2017) 1155 Perimeter Center West Atlanta, GA 30338-5416 2001 J. P. Morgan (3) 50% 362,000 99% 100% Mirant Corporation (2015) 6 Acres
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office (Continued) - ----------------- 4100 and 4300 Wildwood Parkway 30339-8400 250,000 $ 26,596 $ 26,888 4/1/12 $ 19,773 7.65% 4200 Wildwood Parkway 30339-8402 260,000 $ 36,973 $ 40,806 3/31/14 $ 30,717 6.78% 3301 Windy Ridge Parkway 30339-5685 107,000 $ 12,600 $ 0 N/A $ 6,559 3100 Windy Hill Road 30339-5605 188,000 $ 17,005(19) $ 0 N/A $ 12,924(19) Bank of America Plaza Atlanta, GA 30308-2214 572,742 $225,468 (20) (20) 224,181 $151,916 211,211 92,224 91,103 Gateway Village Charlotte, NC 28202-1125 1,065,000 $202,269 $181,532 12/1/16 $191,048 6.41% The Pinnacle Atlanta, GA 30326-1234 72,866 $ 92,830 $ 67,754 12/31/09 47,866 $ 75,200 7.11% 47,738 Two Live Oak Center Atlanta, GA 30326-1234 65,451 $ 47,127 $ 28,526 10/1/07 48,520 $ 34,604 7.90% 1155 Perimeter Center West Atlanta, GA 30338-5416 360,395 $ 58,566 $ 0 N/A
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office (Continued) - ------------------ Ten Peachtree Place Atlanta, GA 30309-3814 1991 Coca-Cola (3) 50%(9) 260,000 100% 14% AGL Services Co. (2013/2028) 5 Acres (5) Domtar (2006)(23) John Marshall-II Suburban Washington, D.C. 22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Booz-Allen & Hamilton Corporation (3) 3 Acres (2011/2016) Austin Research Park - Building III Austin, TX 78759-2314 2001 CommonWealth 50% 174,000 100% 100% Charles Schwab & Co., Inc. Pacific, LLC 4 Acres (5) (2012/2032)(24) and CalPERS Austin Research Park - Building IV Austin, TX 78759-2314 2001 CommonWealth 50% 184,000 100% 100% Charles Schwab & Co., Inc. Pacific, LLC 7 Acres (5) (2012/2032)(24) and CalPERS First Union Tower Greensboro, NC 27401-2167 1990 Prudential (3) 11.50%(9) 323,000 66% 77% Smith Helms Mullis & 1 Acre Moore (2010/2015) Wachovia Bank (3) (2009/2019) Grandview II Birmingham, AL 35243-1930 1998 Prudential (3) 11.50%(9) 149,000 100% 100% Fortis Benefits Insurance 8 Acres Company (2005/2011) Daniel Realty Company (2008) 100 North Point Center East Suburban Atlanta, GA 30022-4885 1995 Prudential (3) 11.50%(9) 128,000 70% 76% Schweitzer-Mauduit 7 Acres International, Inc. (2007/2012)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office (Continued) - ----------------- Ten Peachtree Place Atlanta, GA 30309-3814 226,779 $ 33,997(5) $ 13,212 12/31/08 32,720 $ 27,479(5) LIBOR + 0.75% John Marshall-II Suburban Washington, D.C. 22102-3802 224,000 $ 27,768 $ 19,244 4/1/13 $ 20,660 7.00% Austin Research Park - Building III Austin, TX 78759-2314 174,000 $ 24,627(5) $ 0 N/A $ 23,202(5) Austin Research Park - Building IV Austin, TX 78759-2314 184,000 $ 26,557(5) $ 0 N/A $ 25,301(5) First Union Tower Greensboro, NC 27401-2167 70,360 $ 54,264 $ 0 N/A $ 38,120 62,622 Grandview II Birmingham, AL 35243-1930 69,652 $ 23,115 $ 0 N/A $ 16,963 23,440 100 North Point Center East Suburban Atlanta, GA 30022-4885 32,696 $ 25,337 $ 22,870(25) 8/1/07 $ 16,737 7.86% (25)
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Office (Continued) - ------------------ 200 North Point Center East Suburban Atlanta, GA 30022-4885 1996 Prudential (3) 11.50%(9) 130,000 47% 53% APAC Teleservices, Inc. 9 Acres (2004/2009) Motorola, Inc. (2003) Dean Witter (2007) Medical Office Northside/Alpharetta I Suburban Atlanta, GA 30005-3707 1998 N/A 100% 103,000 93% 95% Northside Hospital (3)(2013)(27) 1 Acre (26) Northside/Alpharetta II Suburban Atlanta, GA 30005-3707 1999 N/A 100% 198,000 79% 76% Northside Hospital (3)(2019)(28) 2 Acres (26) $ 15,715 Meridian Mark Plaza Atlanta, GA 30342-1613 1999 N/A 100% 161,000 100% 99% Northside Hospital (3) 3 Acres (2013/2023)(29) Scottish Rite Hospital for Crippled Children, Inc. (2013/2018)(29) AtheroGenics Suburban Atlanta, GA 30004-2148 1999 N/A 100% 50,000 100% 100% AtheroGenics (2019/2029) 4 Acres Emory Crawford Long Medical Office Tower Atlanta, GA 30308-9999 2002 Emory University 50% 358,000 85% 65%(11) Emory University (2017/2047) (30) Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 1997 Prudential (3) 11.50%(9) 69,000 100% 100% Novant Health, Inc. 1 Acre (31) (2012/2027)(32)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Office (Continued) - ----------------- 200 North Point Center East Suburban Atlanta, GA 30022-4885 22,409 $ 21,836 (25) (25) $ 15,135 22,492 15,709 Medical Office Northside/Alpharetta I Suburban Atlanta, GA 30005-3707 49,908 $ 15,922 $ 9,903 1/1/06 $ 13,021 7.70% Northside/Alpharetta II Suburban Atlanta, GA 30005-3707 75,342 $ 18,175 $ 0 N/A $ 15,715 Meridian Mark Plaza Atlanta, GA 30342-1613 51,054 $ 26,751 $ 24,926 10/1/10 $ 22,264 8.27% 29,556 AtheroGenics Suburban Atlanta, GA 30004-2148 50,000 $ 7,655 $ 0 N/A $ 5,697 Emory Crawford Long Medical Office Tower Atlanta, GA 30308-9999 136,053 $ 48,931 $ 0 N/A $ 47,442 Presbyterian Medical Plaza at University Charlotte, NC 28233-3549 63,862 $ 8,615 $ 0 N/A $ 6,907
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Retail Centers - -------------- Presidential MarketCenter Suburban Atlanta, GA 30278-2149 1994, 1996 N/A 100% 490,000 100% 99% Target (33) and 2000 66 acres overall of Publix Super Market (374,000 100% Company (2019/2044) square feet of Company owned Carmike Cinemas (3)(2023/2033) and 49 acres owned Bed, Bath & Beyond (2008/2023) are owned T.J. Maxx (2004/2014) by the Office Depot, Inc. (2011/2026) Company) Ross (2012/2032) Marshalls (2010/2025) Gap (2006/2016) The Avenue of the Peninsula Rolling Hills Estates, CA 90274-3664 2000 N/A 100% 375,000 91% 80% Regal Cinema (2015/2030) 14 Acres Saks & Company (2019/2049) Borders (2018/2038) Restoration Hardware (2010/2020) Pottery Barn (2013) Banana Republic (3)(2006/2016) Gap (2006/2016) Perimeter Expo Atlanta, GA 30338-1519 1993 N/A 100% 291,000 92% 92% The Home Depot Expo (33) 19 acres overall of Marshalls (2014/2029) (176,000 92% of Company Best Buy (2014/2029) square feet Company owned Linens `N Things (2014/2024) and 10 acres owned Office Max (2013/2033) are owned by Gap's Old Navy Store the Company) (2007/2012) The Avenue East Cobb Suburban Atlanta, GA 30062-8197 1999 N/A 100% 225,000 100% 97% Borders, Inc. (2015/2030) 30 Acres Bed, Bath & Beyond (2010/2025) Gap (2005/2015) Talbot's (2010/2020) Pottery Barn (3)(2006/2012) Banana Republic (3)(2005/2015)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Retail Centers - -------------- Presidential MarketCenter Suburban Atlanta, GA 30278-2149 N/A $ 29,672 $ 27,667 5/2/11 56,146 $ 23,955 7.65% 44,565 35,127 32,000 31,628 30,464 30,000 12,000 The Avenue of the Peninsula Rolling Hills Estates, CA 90274-3664 55,673 $ 91,858 $ 0 N/A 42,404 $ 81,751 14,286 13,521 12,089 9,705 9,000 Perimeter Expo Atlanta, GA 30338-1519 N/A $ 19,853 $ 19,792 8/15/05 36,598 $ 16,038 8.04% 36,000 30,351 23,500 13,939 The Avenue East Cobb Suburban Atlanta, GA 30062-8197 24,882 $ 41,145 $ 38,255 8/1/10 21,000 $ 33,318 8.39% 19,434 12,905 10,000 8,009
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Retail Centers (Continued) - -------------------------- The Avenue West Cobb Suburban Atlanta, GA 30064-1615 (8) N/A 100% 206,000 28%(8) (8) Linens N Things (2013/2028)(8) 22 Acres Barnes & Noble (2013/2023)(8) Talbots (2013/2023)(8) The Shops of Lake Tuscaloosa Tuscaloosa, AL 35406-2649 (8) N/A 100% 70,000 63%(8) (8) Publix Super Markets (3) 12 Acres (2024/2054)(8) Mira Mesa MarketCenter Suburban San Diego, CA 92126-2960 2000 Prudential (3) 88.50%(9) 480,000 100% 100% Home Depot (2020/2045) 40 Acres Edwards Theaters (2020/2035) Albertsons (2020/2060) Ross (2011/2026) Barnes & Noble Superstores, Inc. (2015/2030) Gap's Old Navy Store (2006/2016) Long's Drugs (2021/2041) The Avenue Peachtree City Suburban Atlanta, GA 30269-3120 2001 Prudential (3) 88.50%(9) 169,000 98% 78% Books a Million (2008/2013) 18 Acres Gap (2012/2022) Homebanc Mortgage Corporation (2007/2012) Banana Republic (3)(2012/2022) Rack Room Shoes (2008/2015) The Shops at World Golf Village St. Augustine, FL 32092-2724 1999 W.C. Bradley Co. 50% 80,000 74% 70% Bradley Specialty Retailing, 3 Acres Inc. (2013/2023)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Retail Centers - -------------- The Avenue West Cobb Suburban Atlanta, GA 30064-1615 24,025(8) $ 8,380 $ 0 N/A 28,030(8) (8) 6,502(8) The Shops of Lake Tuscaloosa Tuscaloosa, AL 35406-2649 44,271(8) $ 2,109 $ 0 N/A (8) (8) Mira Mesa MarketCenter Suburban San Diego, CA 92126-2960 129,833 $ 51,683 $ 0 N/A 94,041 $ 47,965 55,489 30,187 26,566 22,448 21,018 The Avenue Peachtree City Suburban Atlanta, GA 30269-3120 13,750 $ 29,351 $ 0 N/A 10,800 $ 26,730 8,851 8,015 6,720 The Shops at World Golf Village St. Augustine, FL 32092-2724 31,044 $ 13,454 $ 0 N/A $ 11,339
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Retail Centers (Continued) - -------------------------- North Point MarketCenter Suburban Atlanta, GA 30202-4889 1994/1995 Prudential (3) 11.50%(9) 517,000 100% 100% Target (33) 60 Acres (34) Babies "R" Us (2012/2032) (401,000 Media Play (2010/2025) square feet Marshalls (2010/2025) and 49 acres Rhodes (2011/2021) are owned by Linens `N Things (2005/2025) CP Venture United Artists (2014/2034) Two LLC) Circuit City (2015/2030) PETsMART (2009/2029) Gap's Old Navy Store (2006/2011) Greenbrier MarketCenter Chesapeake, VA 23327-2840 1996 Prudential (3) 11.50%(9) 493,000 100% 100% Target (2016/2046)(35) 44 Acres Harris Teeter, Inc. (2016/2036) Best Buy (2015/2030) Bed, Bath & Beyond (2012/2027) Babies "R" Us (2006/2021) Stein Mart, Inc. (2006/2026) Barnes & Noble Superstores, Inc. (2012/2022) PETsMART(2011/2031) Office Max (2011/2026) Gap's Old Navy Store (2007/2012) Los Altos MarketCenter Long Beach, CA 90815-3126 1996 Prudential (3) 11.50%(9) 258,000 100% 100% Sears (33) 19 Acres Circuit City (3)(2017/2037) (157,000 square Borders, Inc. (2017/2037) feet and 17 Acres Bristol Farms (3)(2012/2032) are owned by CompUSA, Inc. (2011/2021) CP Venture Sav-on Drugs (3)(2016/2036) Two LLC) Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 1996 Prudential (3) 11.50%(9) 103,000 100% 92% Bed, Bath & Beyond (2012/2027) 13 Acres Ross Stores Inc. (2013/2033) Rooms To Go (2016/2036)
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Retail Centers - -------------- North Point MarketCenter Suburban Atlanta, GA 30202-4889 N/A $ 56,919 $ 26,409 7/15/05 $ 48,113 8.50% 48,884 40,000 40,000 35,000 34,733 33,420 25,465 20,000 Greenbrier MarketCenter Chesapeake, VA 23327-2840 117,220 $ 51,355 $ 0 N/A 51,806 $ 43,848 45,106 40,484 40,000 36,000 29,974 26,040 23,484 14,000 Los Altos MarketCenter Long Beach, CA 90815-3126 N/A $ 32,812 $ 0 N/A 38,541 $ 28,524 30,000 28,200 25,620 16,914 Mansell Crossing Phase II Suburban Atlanta, GA 30202-4822 40,787 $ 12,574 $ 0 N/A 32,144 $ 10,757 21,000
Percentage Description, Year Rentable Leased Average Location Development Company's Square Feet as of 2002 Major Tenants (lease and Completed Venture Ownership and Acres December Economic expiration/options Zip Code or Acquired Partner Interest as Noted 31, 2002 Occupancy expiration) - ------------ ----------- ------- ---------- ---------- ---------- --------- -------------------- Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 1985-1993 IBM 50% 14 Acres 100% 88% N/A North Point Suburban Atlanta, GA 30202-4885 1993 N/A 100% 24 Acres 100% 95% N/A
Adjusted Cost and Adjusted Cost Less Debt Description, Major Depreciation Maturity Location Tenants' and and and Rentable Amortization Debt Interest Zip Code Sq. Feet (1) Balance Rate - ----------- -------- ------------ ------- -------- Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects - ------------------------------------------------------------------------- Wildwood Office Park Suburban Atlanta, GA 30339-5671 N/A $ 8,717 $ 0 N/A $ 6,594 North Point Suburban Atlanta, GA 30202-4885 N/A $ 3,697 $ 0 N/A $ 3,501
(1) Cost as shown in the accompanying table includes deferred leasing costs and other related assets. For each of the following projects; 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100 and 4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand Alone Retail Lease Sites, the cost shown is what the cost would be if Wildwood Associates' land cost were adjusted downward to the Company's lower basis in the land it contributed to Wildwood Associates. (2) Approximately .18 acres of the total 4 acres of land at Inforum is under a ground lease expiring 2068. (3) Actual tenant or venture partner is affiliate of entity shown. (4) Lockwood Green Engineers, Inc. reduced its space under lease from 125,916 square feet to 97,918 square feet effective February 1, 2003. (5) Includes acreage and cost of land available for future development. See "Land Held for Investment or Future Development." (6) 103,656 square feet of this lease of 101 Independence Center expires in 2010. Additionally, the tenant has the right to terminate increments of space each year beginning in 2005 with 18 months notice. (7) 3,060 square feet of this lease of 101 Independence Center expires in 2004. (8) Project was under construction and in lease-up as of December 31, 2002. In certain situations, lease expiration dates are based upon estimated commencement dates and square footage is estimated. (9) See "Major Properties" - "101 Second Street," " 55 Second Street," "Cousins/Daniel, LLC," "One Georgia Center," "Charlotte Gateway Village, LLC," "Ten Peachtree Place," "CP Venture Two LLC," and "CP Venture Two LLC and CP Venture Three LLC" where these ventures' preferences and/or terms are discussed. (10) See "Item 1, Subsequent Event" for information concerning the termination of the Cable and Wireless lease effective January 31, 2003. (11) 55 Second Street and Emory Crawford Long Medical Office Tower became partially operational for financial reporting purposes in February 2002. Thus, economic occupancy does not include a full year of operations. (12) AT&T Wireless Services Headquarters and Cerritos Corporate Center - Phase II are located on a total of 9 acres which are subject to a ground lease expiring in 2034, with an option to renew through 2087. (13) 333 John Carlyle and 1900 Duke Street were financed together as one non-recourse mortgage note payable. Until certain events occur, this mortgage note is cross-defaulted with the note referred to in Note 14. (14) 333 North Point Center East and 555 North Point Center East were financed together as one non-recourse mortgage note payable. Until certain events occur, this mortgage note is cross-defaulted with the note referred to in Note 13. (15) On January 14, 2003, Regus Business Centre filed Chapter 11 bankruptcy. To date this lease has not been assumed or rejected. (16) 5,448 square feet of the Manhattan Associates lease expires in 2005; 7,208 square feet of the Life Office Management Associates lease expires in 2008. (17) IBM has the right to terminate its lease on 69,108 square feet at 3200 Windy Hill Road in 2004 upon the payment of a termination fee. (18) Georgia-Pacific Corporation has the right to terminate its lease in 2007, upon payment of a cancellation penalty. Additionally, Georgia-Pacific Corporation has the option to purchase the building on its lease expiration date for a price of $33,750,000. (19) See "Major Properties" - "Wildwood Office Park" where the accounting for the 3100 Windy Hill Road Building is discussed. (20) See "Item 1, Significant Changes in 2002, Financings" where debt on Bank of America Plaza is discussed. (21) Paul Hastings has a cancellation right on 12,812 square feet and 20,574 square feet of this lease of Bank of America Plaza in 2005 and 2006, respectively. (22) UBS PaineWebber has the right to terminate its lease in 2008, upon payment of a cancellation penalty. ( 23) Domtar has the right to terminate its lease in 2004 with six months notice. 24) Charles Schwab & Co., Inc. has the right to terminate its lease with respect to either 50% or all of the space in either or both of Buildings III and IV in 2009, upon 14 months notice and payment of a termination fee. (25) 100 North Point Center East and 200 North Point Center East were financed together as one non-recourse mortgage note payable. (26) Northside/Alpharetta I and II are located on 1 acre and 2 acres subject to ground leases, which expire in 2058 and 2060, respectively. (27) 4,716 square feet, 12,532 square feet and 4,716 square feet of this lease of Northside/Alpharetta I expire in 2005, 2009 and 2011, respectively. (28) 17,444 square feet and 10,754 square feet of this lease of Northside/Alpharetta II expire in 2009 and 2011, respectively. (29) 8,718 square feet of the Northside Hospital lease expires in 2008; 7,521 square feet of the Scottish Rite Hospital lease expires in 2004. (30) Emory Crawford Long Medical Office Tower was developed on top of a building within the Crawford Long Hospital campus. The Company received a fee simple interest in the air rights above this building in order to develop the medical office tower. (31) Presbyterian Medical Plaza at University is located on 1 acre which is subject to a ground lease expiring in 2057. (32) Novant Health, Inc. has the option to renew 23,359 square feet of this lease of Presbyterian Medical Plaza at University through 2027, with the option to renew the balance through 2022. (33) This anchor tenant owns its own space. (34) North Point MarketCenter includes approximately 4 outparcels which are ground leased to freestanding users. (35) Tenant has exercised an option to acquire the land on which tenant's store resides. Major Properties - ---------------- General - ------- This section describes the major operating properties in which the Company has an interest either directly or indirectly through joint venture arrangements. A "negative investment" in a joint venture results from distributions of capital to the Company, if any, exceeding the sum of (i) the Company's contributions of capital and (ii) reported earnings (losses) of the joint venture allocated to the Company. "Investment" in a joint venture means the book value of the Company's investment in the joint venture. Wildwood Office Park - -------------------- Wildwood Office Park is a 285 acre commercial development in Atlanta, Georgia, master planned by I.M. Pei, which includes eight office buildings containing 2,442,000 rentable square feet. The property is zoned for office, institutional, commercial and residential use. Approximately 104 acres in the park are owned by, or committed to be contributed to, Wildwood Associates (see below), including approximately 34 acres of land held for future development. The Company owns 100% of the 96 acre balance of the land available for future development. (See "Land Held for Investment or Future Development.") Located in Atlanta's northwest commercial district, just north of the Interstate 285/Interstate 75 intersection, Wildwood features convenient access to all of Atlanta's major office, commercial and residential districts. The Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of national forest, thus providing an urban office facility in a forest setting. Wildwood Associates. Wildwood Associates is a joint venture formed in 1985 between the Company and IBM. The Company and IBM each have a 50% interest in Wildwood Associates. At December 31, 2002, the Company's investment in Wildwood Associates and a related partnership, which included the cost of the land the Company is committed to contribute to Wildwood Associates, was a negative investment of approximately $37,565,000. Wildwood Associates owns the 3200 Windy Hill Road building (687,000 rentable square feet), the 2300 Windy Ridge Parkway building (635,000 rentable square feet), the 2500 Windy Ridge Parkway building (315,000 rentable square feet), the 4100 and 4300 Wildwood Parkway buildings (250,000 rentable square feet in total) and the 4200 Wildwood Parkway building (260,000 rentable square feet). As of December 31, 2002, 3200 Windy Hill Road was 95% leased, 2300 Windy Ridge Parkway was 88% leased, 2500 Windy Ridge Parkway was 89% leased and the remaining buildings were all 100% leased. Wildwood Associates also owns 14 acres leased to two banking facilities and five restaurants. Other Buildings in Wildwood Office Park. Wildwood Office Park also contains the 3301 Windy Ridge Parkway building, a 107,000 rentable square foot office building located on approximately ten acres which is wholly owned by the Company. The 3301 Windy Ridge Parkway Building was 100% leased as of December 31, 2002. In addition, the 3100 Windy Hill Road building, a 188,000 rentable square foot corporate training facility, occupies a 13-acre parcel of land which is wholly owned by the Company. The training facility improvements were sold in 1983 to a limited partnership of private investors, at which time the Company received a leasehold mortgage note. The training facility land was simultaneously leased to the partnership for thirty years, along with certain equipment for varying periods. The training facility had been leased by the partnership to IBM through November 30, 1998. Effective January 1, 1997, the IBM lease was extended eight years beyond its previous expiration, to November 30, 2006. Based on the economics of the lease, the Company will receive substantially all of the economic risks and rewards from the property through the term of the IBM lease. In addition, the Company will receive substantially all of the future economic risks and rewards from the property beyond the IBM lease because of the short term remaining on the land lease (seven years as of January 1, 1997) and the large mortgage note balance ($25.9 million as of January 1, 1997) that would have to be paid off, with interest, in that seven year period before the limited partnership would receive any significant benefit. Therefore, effective January 1, 1997, the $17,005,000 balance of the mortgage note and land was reclassified to Operating Properties, and revenues and expenses (including depreciation) from that point forward have been recorded as if the building were owned by the Company. North Point - ----------- North Point is a mixed-use commercial development located in north central suburban Atlanta, Georgia, off of Georgia Highway 400, a six-lane state highway that runs from downtown Atlanta to the northern Atlanta suburbs. The Company owns either directly or through a venture arrangement approximately 134 and 221 acres located on the east and west sides, respectively, of Georgia Highway 400. Development had been mainly concentrated on the land located east of Georgia Highway 400 until July 1998 when the Company commenced construction of the first building, AtheroGenics, on the west side. Planning and infrastructure work has also begun for additional development on the west side property. The east side land surrounds North Point Mall, a 1.3 million square foot regional mall on a 100-acre site which the Company sold in 1988. The following describes the various components of North Point. North Point MarketCenter and Mansell Crossing Phase II. North Point MarketCenter, which was 100% leased as of December 31, 2002, is a 517,000 square foot retail power center (of which 401,000 square feet are owned in a venture) located adjacent to North Point Mall. Mansell Crossing Phase II, which was 100% leased as of December 31, 2002, is an approximately 103,000 square foot expansion of an existing retail power center, previously developed by the Company for a third party. These two centers are located on 49 and 13 acres of land, respectively, at North Point. Both of these properties were contributed to the Prudential venture in November 1998 (see Note 5). North Point Center East. The Company owns either directly or indirectly through a venture arrangement four office buildings located adjacent to North Point Mall and the retail properties discussed above. 100 North Point Center East and 200 North Point Center East, which were completed in 1995 and 1996, respectively, and contain 128,000 and 130,000 rentable square feet, respectively, were contributed to the Prudential venture in November 1998 (see Note 5). 333 North Point Center and 555 North Point Center East, which were completed in 1998 and 2000, respectively, and contain 129,000 and 152,000 rentable square feet, respectively, are wholly owned by the Company. These four office buildings are located on 35 acres of land at North Point. 555 North Point Center East became partially operational for financial reporting purposes in February 2000. 100, 200, 333 and 555 North Point Center East were 70%, 47%, 93% and 91% leased, respectively, as of December 31, 2002. AtheroGenics. The Company owns directly the AtheroGenics building, an approximately 50,000 rentable square foot office and laboratory building located on a four-acre site on the west side of Georgia Highway 400. The AtheroGenics building was 100% leased as of December 31, 2002. Other North Point Property. Approximately 24 acres of the North Point land are ground leased in one to five acre sites to freestanding users. These 24 acres were 100% leased as of December 31, 2002. The remaining approximately 230 developable acres at North Point are wholly owned by the Company. Approximately 13 acres of this land are located on the east side of Georgia Highway 400 and are zoned for office use. Approximately 217 acres of the land are located on the west side of Georgia Highway 400 and are zoned for office, institutional and light industrial use. The Company has submitted a zoning request for a mixed use development, including residential, office and commercial as well as facilities for a performing arts center, assisted living, education and a community center. (See "Land Held for Investment or Future Development.") Other Operational Office Properties - ----------------------------------- Inforum. In June 1999, the Company acquired Inforum, a 990,000 rentable square foot office building in downtown Atlanta, Georgia, for $71 million by completing a tax-deferred exchange with the proceeds ($69 million) from the sale of the Company's 50% interest in Haywood Mall. Inforum was 96% leased as of December 31, 2002. 101 Independence Center. In December 1996, the Company acquired 101 Independence Center, a 526,000 rentable square foot office building (including an underground parking garage and an adjacent parking deck) located at the intersection of Trade and Tryon Streets in the central business district of Charlotte, North Carolina. The acquisition included land upon which an approximately 535,000 rentable square foot building can be developed. 101 Independence Center was 98% leased as of December 31, 2002. 101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a venture formed in 1997 between the Company and Myers Second Street Company LLC ("Myers"), purchased approximately one acre of undeveloped land in downtown San Francisco, California upon which 101 Second Street, an approximately 387,000 rentable square foot office building was developed. 101 Second Street became partially operational for financial reporting purposes in April 2000. In August 2002, the 148,000 square foot lease with Arthur Andersen was terminated, and in September 2002, 88,000 square feet of this space was re-leased. This property was 83% leased as of December 31, 2002. Myers' economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. This venture is treated as a consolidated entity in the Company's financial statements. 55 Second Street. In November 1999, the Company formed Cousins/Myers II, LLC, a venture with Myers Bay Area Company LLC ("Myers Bay"). The venture purchased approximately one acre of fully entitled undeveloped land in downtown San Francisco, California and began development of 55 Second Street, an approximately 379,000 rentable square foot office building. 55 Second Street became partially operational for financial reporting purposes in February 2002 and was 92% leased as of December 31, 2002. Effective January 31, 2003, a major tenant's lease on 158,000 square feet was terminated (see "Item 1, Business, Subsequent Event" and Note 10). Myers Bay's economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. The venture is treated as a consolidated entity in the Company's financial statements. AT&T Wireless Services Headquarters. On November 18, 1998, the Company entered into Commonwealth/Cousins I, LLC (the "Venture") with CommonWealth for the purpose of developing AT&T Wireless Services Headquarters, a 222,000 rentable square foot office building in suburban Los Angeles, California, which became partially operational for financial reporting purposes in September 1999 and was 100% leased as of December 31, 2002. CommonWealth transferred all rights in the project and in exchange received an initial credit to its capital account of $4,980,039, which was equal to a 49.9% interest in the Venture. The Company contributed $5,000,000 as its capital contribution for a 50.1% interest in the Venture. The Venture entered into a put and call agreement which CommonWealth exercised in January 2001 to sell its entire interest for approximately $7.5 million. Upon completion of the buyout, the Venture's name was changed to Cousins/Cerritos I, LLC, which is 100% owned by the Company. Cerritos Corporate Center - Phase II. In June 2000, the Company commenced construction of Cerritos Corporate Center - Phase II, an approximately 105,000 rentable square foot office building in suburban Los Angeles, California, adjacent to the Company's AT&T Wireless Services Headquarters office building. Cerritos Corporate Center - Phase II became fully operational for financial reporting purposes in June 2001 and was 100% leased to AT&T Wireless Services as of December 31, 2002 The Points at Waterview. In December 2000, the Company purchased The Points at Waterview, an approximately 201,000 rentable square foot office building in suburban Dallas, Texas. The purchase price was approximately $25.4 million which included an adjacent parcel of land on which a second building of approximately 60,000 rentable square feet can be developed. The Points at Waterview was 82% leased as of December 31, 2002. Cousins/Daniel, LLC. Cousins/Daniel, LLC ("Cousins/Daniel") was formed in 1997 between Cousins, Inc. (a wholly-owned subsidiary of Cousins) and Daniel Realty Company ("Daniel"). The purpose of this venture is to develop certain projects proposed by Daniel and selected by the Company. Daniel's economic rights are limited to development fees, leasing fees, management fees and certain incentive interests. These incentive interests include a residual interest in the cash flow and capital proceeds. All projects undertaken within the venture are pooled for purposes of calculating the aforementioned residuals. This venture is treated as a consolidated entity in the Company's financial statements. In June 1998, Cousins/Daniel acquired Lakeshore Park Plaza, an approximately 190,000 rentable square foot office building and also purchased the land for and commenced construction of 600 University Park Place, an approximately 123,000 rentable square foot office building which became partially operational for financial reporting purposes in June 2000. Both of these office buildings are located in Birmingham, Alabama, and were 82% and 95% leased, respectively, as of December 31, 2002. 333 John Carlyle. In January 1998, the Company purchased the land for and commenced construction of 333 John Carlyle, an approximately 153,000 rentable square foot office building in suburban Washington, D.C. 333 John Carlyle became partially operational for financial reporting purposes in May 1999 and was 96% leased as of December 31, 2002. 1900 Duke Street. In January 1999, the Company purchased the land for and commenced construction of 1900 Duke Street, an approximately 97,000 rentable square foot office building in suburban Washington, D.C., which became partially operational for financial reporting purposes in October 2000 and was 100% leased as of December 31, 2002. 615 Peachtree Street. In August 1996, the Company acquired 615 Peachtree Street, a 148,000 rentable square foot 12-story downtown Atlanta office building, located across from Bank of America Plaza. 615 Peachtree Street was 91% leased as of December 31, 2002. One Georgia Center. In December 2000, CP Venture Three LLC (see Note 5) acquired One Georgia Center, an approximately 363,000 rentable square foot office building in midtown Atlanta, Georgia. The purchase price of the building was approximately $35.8 million, which included an adjacent parcel of land upon which an approximately 350,000 rentable square foot building can be developed. One Georgia Center was 78% leased as of December 31, 2002. Bank of America Plaza. Bank of America Plaza is a 55-story, approximately 1.3 million rentable square foot office tower designed by Kevin Roche and is located on approximately 4 acres of land between the midtown and downtown districts of Atlanta, Georgia. The building, which was completed in 1992, was 100% leased as of December 31, 2002. An affiliate of Bank of America leases approximately 46% of the rentable square feet. Bank of America Plaza was developed by CSC Associates, L.P. ("CSC"), a joint venture formed by the Company and a wholly-owned subsidiary of Bank of America, each as 50% partners. CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). At December 31, 2002, the Company's investment in CSC was approximately $84,133,000. Charlotte Gateway Village, LLC ("Gateway"). On December 14, 1998, the Company and a wholly-owned subsidiary of Bank of America Corporation formed Gateway for the purpose of developing and owning Gateway Village, an approximately 1.1 million rentable square foot office building complex in downtown Charlotte, North Carolina. Construction of Gateway Village commenced in July 1998. The project, which is 100% leased to Bank of America Corporation with a term of 15 years, became partially operational for financial reporting purposes in November 2000. Gateway's net income or loss and cash distributions are allocated to the members as follows: first to the Company so that it receives a cumulative compounded return equal to 11.46% on its capital contributions, second to a wholly-owned subsidiary of Bank of America Corporation until it has received an amount equal to the aggregate amount distributed to the Company, and then 50% to each member. At December 31, 2002, the Company had an investment in Gateway of approximately $10,655,000. Cousins LORET Venture, L.L.C.("Cousins LORET"). Effective July 31, 1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live Oak Center, a 279,000 rentable square foot office building located in Atlanta, Georgia, which was renovated in 1997, and was 80% leased as of December 31, 2002. LORET also contributed an adjacent four-acre site on which construction of The Pinnacle, a 424,000 rentable square foot office building, commenced in August 1997 and was completed in November 1998. The Pinnacle was 98% leased as of December 31, 2002. The Company contributed $25 million of cash to Cousins LORET to match the value of LORET's agreed-upon equity. At December 31, 2002, the Company had an investment in Cousins LORET of approximately $6,599,000. 285 Venture, LLC. In March 1999, the Company and a commingled trust fund advised by J.P. Morgan Investment Management Inc. (the "J.P. Morgan Fund") formed 285 Venture, LLC, each as 50% partners, for the purpose of developing 1155 Perimeter Center West, an approximately 362,000 rentable square foot office building complex in Atlanta, Georgia. 1155 Perimeter Center West became partially operational for financial reporting purposes in January 2000 and was 99% leased as of December 31, 2002. The J.P. Morgan Fund contributed the approximately six-acre site upon which 1155 Perimeter Center West was developed. The land had an agreed-upon value of approximately $5.4 million which the Company matched with a cash contribution. At December 31, 2002, the Company's investment in 285 Venture, LLC was approximately $31,031,000. Ten Peachtree Place. Ten Peachtree Place is a 20-story, 260,000 rentable square foot office building located in midtown Atlanta, Georgia. Completed in 1991, this structure was designed by Michael Graves and was 100% leased to Coca-Cola through November 30, 2001. Ten Peachtree Place was 100% leased as of December 31, 2002. Approximately four acres of adjacent land, currently used for surface parking, are available for future development of an approximately 400,000 square foot office building or a 350-unit apartment complex. Ten Peachtree Place is owned by Ten Peachtree Place Associates ("TPPA"), a general partnership between the Company (50%) and a wholly-owned subsidiary of Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal cash investment, subject to a ten-year purchase money note. The TPPA partnership agreement generally provides that each partner is entitled to receive 50% of cash flows from operating activities, net of note principal amortization, through the ten-year term of the Coca-Cola lease. After the expiration of the Coca-Cola lease, in accordance with the partnership agreement, each partner must contribute on a 50% basis capital contributions needed for tenant improvements and leasing commissions related to the releasing of the building, as well as to fund any operating deficits. The cash flows from operating activities, net of note principal amortization, will be used first to repay these capital contributions plus 8% interest to each partner on a 50% basis. After these capital contributions plus 8% interest are repaid in full, the Company and its partner are entitled to receive 15% and 85% of the cash flows (including any sales proceeds), respectively, until the two partners have received a combined distribution of $15.3 million. Thereafter, each partner is entitled to receive 50% of cash flows. At December 31, 2002, the Company had an investment in Ten Peachtree Place Associates of approximately $4,262,000. CC-JM II Associates. This joint venture was formed in 1994 between the Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general partners, to develop and own John Marshall-II, a 224,000 square foot office building in suburban Washington, D.C. The building is 100% leased until 2011 to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus. At December 31, 2002, the Company had an investment in CC-JM II Associates of approximately $2,204,000. CPI/FSP I, L.P. In May 2000, CPI/FSP I, L.P., a 50% limited partnership, was formed. 50% of the venture is owned by the Company through a general partnership, Cousins Austin GP, Inc. (1%), and a limited partnership, Cousins Austin, Inc. (49%). The remaining 50% is owned by a general partnership, Fifth Street Properties - Austin, LLC (1%), and a limited partnership, Fifth Street Properties - Austin Investor, LLC (49%), which are both owned by CommonWealth Pacific LLC and CalPERS. CPI/FSP I, L.P. developed Austin Research Park - Buildings III and IV, two approximately 174,000 and 184,000 rentable square foot office buildings, respectively, in Austin, Texas, which became partially operational for financial reporting purposes in June 2001 and September 2001, respectively. Both buildings were 100% leased as of December 31, 2002. Additionally, the venture owns an adjacent six-acre parcel of land for future development of an approximately 175,000 rentable square foot office building. At December 31, 2002, the Company had an investment in CPI/FSP I, L.P. of approximately $25,277,000. CP Venture Two LLC. On November 12, 1998, the Company entered into a venture agreement with Prudential. On such date the Company contributed its interest in nine properties to the venture and Prudential contributed cash (see Note 5). The nine properties contributed included four office properties, 100 and 200 North Point Center East as discussed above, First Union Tower and Grandview II, and one medical office property, Presbyterian Medical Plaza at University. First Union Tower is an office building containing approximately 323,000 rentable square feet, located on one acre of land in downtown Greensboro, North Carolina. First Union Tower was 66% leased as of December 31, 2002. Grandview II is an approximately 149,000 rentable square foot office building in Birmingham, Alabama, which was owned by Cousins/Daniel, LLC prior to being contributed. Grandview II was 100% leased as of December 31, 2002. Presbyterian Medical Plaza at University, an approximately 69,000 rentable square foot medical office building in Charlotte, North Carolina, was 100% leased as of December 31, 2002. See "Other Retail Properties" where retail properties contributed to the Prudential venture are discussed. One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a 50-story, office tower located in downtown Atlanta, Georgia that was completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2 million rentable square feet, was designed by John Burgee Architects, with Phillip Johnson as design consultant. One Ninety One Peachtree Tower was developed on approximately 2 acres of land, of which approximately 1.5 acres is owned and approximately one-half acre under the parking facility is leased for a 99-year term expiring in 2087 with a 99-year renewal option. One Ninety One Peachtree Tower was 97% leased as of December 31, 2002. C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988 between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety One Peachtree Tower results in an effective 9.8% ownership interest by CREC, subject to a preference in favor of the majority partner, in the One Ninety One Peachtree Tower project. Therefore, C-H Associates is not treated as a consolidated entity in the Company's financial statements. The balance of the One Ninety One Peachtree Tower project was owned by DIHC Peachtree Associates, which was an affiliate of Dutch Institutional Holding Company, but was acquired by Cornerstone Properties, Inc. in October 1997. In June 2000, Equity Office Properties Trust acquired Cornerstone Properties, Inc. Through C-H Associates, CREC received 50% of the development fees from the One Ninety One Peachtree Tower project. In addition, CREC owns a 50% interest in two general partnerships which received fees from leasing and managing the One Ninety One Peachtree Tower project. In December 2002, CREC contributed its interest in C-H Associates to Cousins Texas LLC. The One Ninety One Peachtree Tower project was funded substantially by debt until March 1993, at which time the predecessor owner contributed equity in the amount of $145,000,000 which repaid approximately one-half of the debt. Subsequent to the equity contribution, C-H Associates received a priority distribution of $250,000 per year (of which CREC was entitled to receive $112,500) for seven years beginning in 1993 and ending in 2000. The equity contributed is entitled to a preferred return at a rate increasing over the first 14 years from 5.5% to 11.5% (payable after CREC's priority return); at December 31, 2002, the cumulative undistributed preferred return was $18,162,399. After Equity Office Properties Trust recovers its preferred return, the partners share in any operating cash flow distributions in accordance with their percentage interests. The project is subject to long-term debt of approximately $140,433,713 at December 31, 2002. At December 31, 2002, the Company had a negative investment of approximately $91,000 in the One Ninety One Peachtree Tower project. Operational Medical Office Properties - ------------------------------------- Medical Office Properties. In June 1998, the Company acquired Northside/Alpharetta I, an approximately 103,000 rentable square foot medical office building in suburban Atlanta, Georgia. Northside/Alpharetta I was 93% leased as of December 31, 2002. Northside/Alpharetta II, an approximately 198,000 rentable square foot medical office building in suburban Atlanta, Georgia, was 79% leased as of December 31, 2002. Additionally, Meridian Mark Plaza, an approximately 161,000 rentable square foot medical office building in Atlanta, Georgia, was 100% leased as of December 31, 2002. Crawford Long - CPI, LLC. In October 1999, the Company formed Crawford Long - CPI, LLC with Emory University, each as 50% partners, for the purpose of developing and owning the Emory Crawford Long Medical Office Tower, an approximately 358,000 rentable square foot medical office building located in midtown Atlanta, Georgia. This property became partially operational for financial reporting purposes in February 2002 and was 85% leased as of December 31, 2002. At December 31, 2002, the Company had an investment in Crawford Long - CPI, LLC of approximately $25,434,000. Office Properties Under Development - ----------------------------------- Congress at Fourth. In January 2001, the Company acquired approximately two acres of land for approximately $12,500,000 in Austin, Texas and began development of Congress at Fourth, an approximately 525,000 rentable square foot office building which was 33% leased as of December 31, 2002. Other Retail Properties - ----------------------- Operational Retail Properties. The Company owns four retail centers which were fully operational for financial reporting purposes as of December 31, 2002. Perimeter Expo is an approximately 291,000 square foot retail power center (of which the Company owns approximately 176,000 square feet) in Atlanta, Georgia which was 92% leased (Company owned) as of December 31, 2002. Presidential MarketCenter is an approximately 490,000 square foot retail power center (of which the Company owns approximately 374,000 square feet) in suburban Atlanta, Georgia, which was 100% leased (Company owned) as of December 31, 2002. The Avenue East Cobb is an approximately 225,000 square foot open-air retail specialty center in suburban Atlanta, Georgia. The Avenue East Cobb was 100% leased as of December 31, 2002. The Avenue of the Peninsula is an approximately 375,000 square foot open-air retail specialty center in Rolling Hills Estates, California, in the greater Los Angeles metropolitan area. The Avenue of the Peninsula became partially operational for financial reporting purposes in May 2000 and was 91% leased as of December 31, 2002. CP Venture Two LLC and CP Venture Three LLC. In November 1998, the Company contributed both Greenbrier MarketCenter and Los Altos MarketCenter, in addition to North Point MarketCenter and Mansell Crossing II (see "North Point" discussion), to the aforementioned Prudential venture (see Note 5). Greenbrier MarketCenter is an approximately 493,000 square foot retail power center located in Chesapeake, Virginia, which was 100% leased as of December 31, 2002. Los Altos MarketCenter is an approximately 258,000 square foot retail power center (of which the Prudential venture owns 157,000 square feet) located in Long Beach, California, which was 100% leased as of December 31, 2002. Mira Mesa MarketCenter, an approximately 480,000 square foot retail power center in suburban San Diego, California, became partially operational for financial reporting purposes in April 2000. Mira Mesa MarketCenter is owned by CP Venture Three LLC (see Note 5) and was 100% leased as of December 31, 2002. The Avenue Peachtree City, an approximately 169,000 square foot open-air retail specialty center in suburban Atlanta, Georgia, became partially operational for financial reporting purposes in April 2001. The Avenue Peachtree City is also owned by CP Venture Three LLC (see Note 5) and was 98% leased as of December 31, 2002. Brad Cous Golf Venture, Ltd. Effective January 31, 1998, the Company formed the Brad Cous Golf Venture, Ltd. with W.C. Bradley Co., each as 50% partners, for the purpose of developing and owning The Shops at World Golf Village, an approximately 80,000 square foot retail center located adjacent to the PGA Hall of Fame in St. Augustine, Florida. The Shops at World Golf Village was 74% leased as of December 31, 2002. At December 31, 2002, the Company had an investment in Brad Cous Golf Venture, Ltd. of approximately $5,767,000. Retail Properties Sold. In October 2002, the Company sold Salem Road Station, an approximately 67,000 square foot retail center in suburban Atlanta, Georgia. See "Item 1, Business, Significant Changes in 2002, Retail Division" and Note 8. Retail Properties Under Development - ----------------------------------- The Avenue West Cobb. In August 2002, the Company purchased approximately 22 acres of land for approximately $4,945,000 and began development of The Avenue West Cobb, an approximately 206,000 square foot specialty retail center in suburban Atlanta, Georgia. This center was 28% leased as of December 31, 2002. The Shops of Lake Tuscaloosa. In December 2002, the Company purchased approximately 12 acres of land for approximately $1,911,000 and began developing The Shops of Lake Tuscaloosa, an approximately 70,000 square foot center in Tuscaloosa, Alabama. This center will be anchored by a Publix supermarket and was 63% leased as of December 31, 2002. Residential Lots Under Development As of December 31, 2002, CREC and Temco Associates owned the following parcels of land which are being developed into residential communities ($ in thousands):
Estimated Total Lots Purchase Initial on Land Money Year Currently Lots Remaining Carrying Debt Description Acquired Owned (1) Sold to Date Lots Value Balance ----------- -------- --------- ------------ --------- -------- --------- CREC ---- Callaway Gardens Harris County Pine Mountain, GA 2002 141 - 141 $ 2,358 $1,760 Echo Mill West Cobb County Suburban Atlanta, GA 1994 541 541 - (192) - River's Call East Cobb County Suburban Atlanta, GA 1971-1989 108 10 98 5,237 43 The Lakes at Cedar Grove Fulton County Suburban Atlanta, GA 2001 928 136 792 12,697 1,450 ----- --- ----- ------- ------ Total 1,718 687 1,031 $20,100 $3,253 ===== === ===== ======= ====== Temco Associates ---------------- Bentwater Paulding County Suburban Atlanta, GA 1998 1,669(2) 847 822 $17,861 $ - ======== === ===== ======= ======
(1) Includes lots sold to date. (2) See discussion of Temco Associates below. Land Held for Investment or Future Development - ---------------------------------------------- As of December 31, 2002, the Company owned or controlled the following significant land holdings either directly or indirectly through venture arrangements, and this land was not subject to any debt. The Company intends to convert these land holdings to income-producing assets but may sell portions of land holdings if opportunities arise at favorable prices before development is feasible.
Developable Company's Adjusted Land Area Joint Venture Ownership Cost Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest ($ in thousands) - ----------------------------------- ------------- ----------- ------------- --------- ---------------- Wildwood Land Suburban Atlanta, Georgia Office and Commercial 1971-1989 96 N/A 100% $ 4,802 Office and Commercial 1971-1982 34 IBM 50% $ 9,008(2) North Point Land (Georgia Highway 400 & Haynes Bridge Road) (3) Suburban Atlanta, Georgia Office and Commercial - East 1970-1985 13 N/A 100% $ 956 Office and Commercial - West (4) 1970-1985 217 N/A 100% $ 8,055 Ridenour Land Suburban Atlanta, Georgia 2002 8 N/A 100% $ 2,533 Salem Road Station Suburban Atlanta, Georgia Retail Outparcel 2000 2 N/A 100% $ 286 Temco Associates (Paulding County) Suburban Atlanta, Georgia 1991 (5) Temple-Inland 50% $17,861 Inc. (6) (1) Based upon management's current estimates. (2) For the portion of the Wildwood Office Park land owned by a joint venture, the cost shown is what the cost would be if the venture's land cost were adjusted downward to the Company's lower basis in the land it contributed to the venture. The adjusted cost excludes building predevelopment costs, net, of $1,042,000. (3) The North Point property is located both east and west of Georgia Highway 400. See "Major Properties, North Point" for a description of the development in this area. (4) The Company has submitted a zoning request for a mixed-use development, including residential, office and commercial, as well as facilities for a performing arts center, assisted living, education and a community center. (5) See "Temco Associates" discussion below. (6) Joint venture partner is an affiliate of the entity shown.
In addition, the Company owned, directly or indirectly, the following land parcels located adjacent to operating properties discussed above. The basis of each of these building pads is included in the basis of the operating properties in the Company's consolidated financial statements or the applicable joint venture's financial statements. Potential Office Building Square Footage ------------------------- 101 Independence Center 535,000 Ten Peachtree Place 400,000 (1) One Georgia Center 350,000 Austin Research Park (2) 175,000 The Points at Waterview 60,000 (1) This building pad will accommodate the above noted office building or a 350-unit apartment complex. (2) Owned by CPI/FSP I, L.P. Temco Associates. Temco Associates was formed in March 1991 as a partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 7,500 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period, and the option price of the fee simple land was $1,107 per acre at January 1, 2002, escalating at 6% on January 1 of each succeeding year during the term of the option. During 2002, 2001 and 2000, approximately 1,595, 487 and 734 acres, respectively, of the option related to the fee simple interest were exercised. In 2002, approximately 607 acres were simultaneously sold for gross profits of $1,005,000 and approximately 78 acres were held for sale under three-year options to two third parties. Approximately three acres were sold in 2002 for gross profits of $336,000, which were a component of the 13 acres purchased in 2000 that were being held for sale or future development. Also, in 2002, approximately 281 acres were acquired for additional phases of the Bentwater residential community and approximately 629 acres were acquired and are being held for a future development in Paulding County. In 2001, approximately 359 acres were simultaneously sold for gross profits of $1,902,000 and approximately 128 acres were held for sale under a three-year option to a third party. Approximately two acres were sold in 2001 for gross profits of $291,000, which were a component of the 13 acres purchased in 2000 that were being held for sale or future development. In 2000, approximately 461 acres were simultaneously sold for gross profits of $1,546,000, 13 acres are being held for sale or future development (of which approximately 3 and 2 acres were sold in 2002 and 2001, respectively, as noted above) and approximately 260 acres were acquired for the development of the Bentwater residential community. Approximately 1,669 lots will be developed within Bentwater on an approximate total of 1,290 acres. Temco Associates sold 289, 233 and 219 lots within Bentwater in 2002, 2001 and 2000, respectively. Other Investments - ----------------- Air Rights Near the CNN Center. The Company owns a leasehold interest in the air rights over the approximately 365,000 square foot CNN Center parking facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting System, Inc. and Cable News Network. The air rights are developable for additional parking or office use. The Company's net carrying value of this interest is $0.
Supplemental Financial and Leasing Information - ---------------------------------------------- Depreciation and amortization, net of minority interest's share, include the following components for the years ended December 31, 2002 and 2001 ($ in thousands): 2002 2001 ------------------------------------- -------------------------------------- Share of Share of Unconsolidated Unconsolidated Consolidated Joint Ventures Total Consolidated Joint Ventures Total ------------ -------------- ----- ------------ -------------- ----- Furniture, fixtures and equipment $ 2,122 $ 9 $ 2,131 $ 1,485 $ 52 $ 1,537 Goodwill and specifically identifiable intangible assets 26 -- 26 681 -- 681 Building (including tenant first generation) 50,370 17,305 67,675 38,727 15,357 54,084 Tenant second generation 2,327 777 3,104 3,964 744 4,708 ------- ------- ------- ------- ------- ------- $54,845 $18,091 $72,936 $44,857 $16,153 $61,010 ======= ======= ======= ======= ======= =======
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the years ended December 31, 2002 and 2001, including its share of unconsolidated joint ventures ($ in thousands): 2002 2001 ------------------------ ------------------------ Office Retail Total Office Retail Total ------- ------ ------- ------ ------ ------ Second generation related costs $11,348 $456 $11,804 $3,292 $290 $3,582 Building improvements 888 296 1,184 2,484 7 2,491 ------- ---- ------- ------ ---- ------ Total $12,236 $752 $12,988 $5,776 $297 $6,073 ======= ==== ======= ====== ==== ====== Item 3. Legal Proceedings - ----------------------------------- No material legal proceedings are presently pending by or against the Company. Item 4. Submission of Matters to a Vote of Security Holders - --------------------------------------------------------------- No matter was submitted for a vote of the security holders during the fourth quarter of the Registrar's fiscal year ended December 31, 2002. Item X. Executive Officers of the Registrant - ------------------------------------------------ The Executive Officers of the Registrant as of the date hereof are as follows: Name Age Office Held ---- --- ----------- Thomas G. Cousins 71 Chairman of the Board of Directors Thomas D. Bell, Jr. 53 President, Chief Executive Officer and Vice Chairman of the Board of Directors Daniel M. DuPree 56 Vice Chairman of the Company R. Dary Stone 49 Vice Chairman of the Company Tom G. Charlesworth 53 Executive Vice President, Chief Financial Officer and Chief Investment Officer James A. Fleming 44 Senior Vice President, General Counsel and Secretary Craig B. Jones 52 Senior Vice President and President of the Office Division John S. McColl 40 Senior Vice President - Office Division Joel T. Murphy 44 Senior Vice President and President of the Retail Division Family Relationships: - --------------------- Lillian C. Giornelli, Mr. Cousins' daughter, is a director of the Company. Hugh L. McColl, Jr., John S. McColl's father, is a director of the Company. There are no other family relationships among the current Executive Officers or Directors. Term of Office: - --------------- The term of office for all officers expires at the annual stockholders' meeting, but the Board has the power to remove any officer at any time. Business Experience: - -------------------- Mr. Cousins has served as Chairman of the Board of the Company since inception. He was also the Chief Executive Officer of the Company from inception until January 2002. Mr. Cousins is also Director Emeritus of Total System Services, Inc.; Trustee Emeritus of Emory University; Trustee of the High Museum of Art; Member of the Board of Georgia Research Alliance and Chairman and Trustee of the CF Foundation. Mr. Bell has served as the President and Chief Executive Officer of the Company since January 2002. He is also Vice Chairman of the Board and Chairman of the Executive Committee, having served in these capacities since June 2000. He was a Special Limited Partner with Forstmann Little & Co. from January 2001 until January 2002. He was Worldwide Chairman and Chief Executive Officer of Young & Rubicam, Inc. from January 2000 to November 2000; President and Chief Operating Officer of Young & Rubicam, Inc. from August 1999 to December 1999; and Chairman and Chief Executive Officer of Young & Rubicam Advertising from September 1998 to August 1999. He was President and Chief Executive Officer of Burson-Marsteller from May 1995 to September 1998. Mr. Bell is also a director of Lincoln Financial Group, McLeod USA, Credit Suisse Group, Regal Entertainment and the United States Chamber of Commerce. Mr. DuPree rejoined the Company in March 2003 as Vice Chairman of the Company. During his previous tenure with the Company from October 1992 until April 2001, he became Senior Vice President in April 1993, Senior Executive Vice President in April 1995 and President and Chief Operating Officer in November 1995. From September 2002 until February 2003, Mr. DuPree was Chief Executive Officer of Barry Real Estate Companies, a privately held development firm. From 1984 to 1992, he was President and Chief Executive Officer of New Market Companies, Inc. and affiliates. Mr. Stone joined the Company in June 1999 as President of Cousins Stone LP, a venture in which the Company purchased a 50% interest in June 1999. In July 2000, the Company purchased an additional 25% interest in Cousins Stone LP and in February 2001, the Company purchased the remaining 25% interest. The name Cousins Stone LP was changed to Cousins Properties Services LP in August 2001. Mr. Stone was President and Chief Operating Officer of the Company from February 2001 to January 2002 and has been a Director of the Company since 2001. Effective January 2002, he relinquished the positions of President and Chief Operating Officer and assumed the position of President - Texas. In February 2003 he became Vice Chairman of the Company. Prior to June 1999, and since at least January 1998, he was founder and President of the predecessor to Cousins Stone LP, Faison-Stone. Mr. Charlesworth joined the Company in October 1992 and became Senior Vice President, Secretary and General Counsel in November 1992 and Executive Vice President and Chief Investment Officer in January 2001. He became Chief Financial Officer in February 2003. Prior to 1992 he worked for certain affiliates of Thomas G. Cousins as Chief Financial Officer and Legal Counsel. Mr. Fleming joined the Company in July 2001 as Senior Vice President, General Counsel and Secretary. He was a partner in the Atlanta law firm of Fleming & Ray from October 1994 until July 2001. Prior to that he was a partner at Long, Aldridge & Norman, where he served as Managing Partner from 1991 through 1993. Mr. Jones joined the Company in October 1992 and became Senior Vice President in November 1995 and President of the Office Division in September 1998. From 1987 until joining the Company, he was Executive Vice President of New Market Companies, Inc. and affiliates. Mr. McColl joined the Company in April 1996 as Vice President of the Office Division. He was promoted in May 1997 to Senior Vice President. Prior to that he was President of Hutchinson Capital Group, Inc. and an officer of Quest Capital Corp. Mr. Murphy joined the Company in October 1992 and became Senior Vice President of the Company and President of the Retail Division in November 1995. From 1988 until joining the Company, he was Senior Vice President of New Market Companies, Inc. and affiliates. PART II ------- Item 5. Market for Registrant's Common Stock and Related Stockholder Matters - -------------------------------------------------------------------------------- The information concerning the market prices for the Registrant's common stock and related stockholder matters appearing under the caption "Market and Dividend Information" and "About Your Dividends" in the Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. Item 6. Selected Financial Data - ----------------------------------- The information appearing under the caption "Five Year Summary of Selected Financial Data" in the Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------------------- Results of Operations --------------------- "Management's Discussion and Analysis of Financial Condition and Results of Operations," which appears in the Registrant's 2002 Annual Report to Stockholders, is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosure about Market Risk - --------------------------------------------------------------------- "Quantitative and Qualitative Disclosures about Market Risk," which appears in the Registrant's 2002 Annual Report to Stockholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - ------------------------------------------------------- The Consolidated Financial Statements and Notes to Consolidated Financial Statements of the Registrant and Independent Auditors' Report which appear in the Registrant's 2002 Annual Report to Stockholders are incorporated herein by reference. The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" in the Registrant's 2002 Annual Report to Stockholders is incorporated herein by reference. Other financial statements and financial statement schedules required under Regulation S-X are filed pursuant to Item 15 of Part IV of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and - ----------------------------------------------------------------------- Financial Disclosure -------------------- In June 2002 the Board of Directors of the Registrant, upon recommendation of its Audit Committee, ended the engagement of Arthur Andersen LLP ("Arthur Andersen") as the Company's independent public accountants and engaged Deloitte & Touche LLP ("Deloitte") to serve as the Registrant's independent public accountants for the fiscal year ended December 31, 2002. As discussed in the Registrant's Form 8-K dated June 7, 2002, there were no disagreements with or reportable events concerning Arthur Andersen, and the Registrant had not engaged Deloitte in any consultation. PART III -------- Item 10. Directors and Executive Officers of the Registrant - -------------------------------------------------------------- The information concerning the Directors and Executive Officers of the Registrant that is required by this Item 10, except that which is presented in Item X in Part I above, is included under the captions "Directors and Executive Officers of the Company" and "Section 16(A) Beneficial Ownership Reporting Compliance" in the Proxy Statement dated March 25, 2003 relating to the 2003 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 11. Executive Compensation - ---------------------------------- The information concerning executive compensation required by this Item 11 is included under the captions "Executive Compensation" (other than the Committee Report on Compensation) and "Compensation of Directors" in the Proxy Statement dated March 25, 2003 relating to the 2003 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and - ------------------------------------------------------------------------------ Related Stockholder Matters --------------------------- The information concerning security ownership of certain beneficial owners and management required by this Item 12 is included under the captions "Directors and Executive Officers of the Company," "Principal Stockholders" and "Equity Compensation Plan Information" in the Proxy Statement dated March 25, 2003 relating to the 2003 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - ---------------------------------------------------------- The information concerning certain relationships and related transactions required by this Item 13 is included under the caption "Certain Transactions" in the Proxy Statement dated March 25, 2003 relating to the 2003 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference. Item 14. Controls and Procedures - ----------------------------------- Within the 90 days prior to the date of this annual report, the Company, under the supervision of the Chief Executive Officer and Chief Financial Officer and with the participation of the Company's management, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic Securities and Exchange Commission filings. No significant changes were made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART IV ------- Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - ---------------------------------------------------------------------------- (a) 1. Financial Statements -------------------- A. The following Consolidated Financial Statements of the Registrant, together with the applicable Independent Auditors' Report, are contained in the Registrant's 2002 Annual Report to Stockholders and are incorporated herein by reference: Page Number in Annual Report ---------------- Consolidated Balance Sheets - December 31, 2002 and 2001 19 Consolidated Statements of Income for the Years Ended December 31, 2002, 2001 and 2000 20 Consolidated Statements of Stockholders' Investment for the Years Ended December 31, 2002, 2001 and 2000 21 Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 22 Notes to Consolidated Financial Statements December 31, 2002, 2001 and 2000 23 through 44 Independent Auditors' Report 45 B. The following Financial Statements, together with the applicable Report of Independent Auditors, of CSC Associates, L.P., a joint venture of the Registrant meeting the criteria for a significant subsidiary under the rules and regulations of the Securities and Exchange Commission, are filed as a part of this report. Page Number in Form l0-K ------------ Report of Independent Auditors F-1 Balance Sheets - December 31, 2002 and 2001 F-2 Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000 F-3 Statements of Partners' Capital for the Years Ended December 31, 2002, 2001 and 2000 F-4 Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 F-5 Notes to Financial Statements December 31, 2002, 2001 and 2000 F-6 through F-10 Item 15. Continued - --------------------- 2. Financial Statement Schedules ----------------------------------- The following financial statement schedules, together with the applicable report of independent public accountants are filed as a part of this report. Page Number in Form l0-K ------------ A. Cousins Properties Incorporated and Consolidated Entities: Independent Auditors' Report on Supplemental Schedule S-9 Schedule III- Real Estate and Accumulated Depreciation - December 31, 2002 S-10 through S-15 B. CSC Associates, L.P. Schedule III- Real Estate and Accumulated Depreciation - December 31, 2002 F-11 NOTE: Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. Item 15. Continued - --------------------- 3. Exhibits -------------- 3(a)(i) Restated and Amended Articles of Incorporation of Registrant, as amended August 9, 1999, filed as Exhibit 3.1 in the Registrant's Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference. 3(b) By-laws of Registrant, as amended April 29, 1993, filed as Exhibit 3.2 in the Registrant's Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference. 4(a) Dividend Reinvestment Plan as restated as of March 27, 1995, filed in the Registrant's Form S-3 dated March 27, 1995, and incorporated herein by reference. 10(a)(i) Cousins Properties Incorporated 1989 Stock Option Plan, as renamed the 1995 Stock Incentive Plan and approved by the Stockholders on May 6, 1996, filed as Exhibit A to the Registrant's Proxy Statement dated May 6, 1996, and as amended by the Stockholders on April 21, 1998, filed in the Registrant's Proxy Statement dated March 27, 1998, and incorporated herein by reference. 10(a)(ii) Cousins Properties Incorporated 1999 Incentive Stock Plan, approved by the Stockholders on May 4, 1999, filed as Exhibit A to the Registrant's Proxy Statement dated March 29, 1999; as amended and restated, approved by the Stockholders on December 28, 2000, filed as Exhibit A to the Registrant's Proxy Statement dated December 1, 2000; as amended and restated, approved by the Stockholders on May 1, 2001, filed as Annex B in the Registrant's Proxy Statement dated March 30, 2001; and as amended and restated, approved by the Stockholders on May 7, 2002, filed as Annex A in the Registrant's Proxy Statement dated March 29, 2002, and incorporated herein by reference. 10(b)(i) Cousins Properties Incorporated Profit Sharing Plan, as amended and restated effective as of January 1, 2002. 10(b)(ii) Cousins Properties Incorporated Profit Sharing Trust Agreement as effective as of January 1, 1991. 10(d) Cousins Properties Incorporated Stock Plan for Outside Directors, as approved by the Stockholders on April 29, 1997. 10(e) Cousins Properties Incorporated Credit Agreement as of August 31, 2001 among Cousins Properties Incorporated, Banks (as defined), Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent and each of Bank of America Securities LLC and Wachovia Securities, Inc., as Joint Lead Arrangers and Joint Book Managers, filed as Exhibit 10(e) to the Registrant's Form 10-K for the year ended December 31, 2001, and incorporated herein by reference. Item 15. Continued - --------------------- 11 Computation of Per Share Earnings. Data required by SFAS No. 128, "Earnings Per Share," is provided in Note 1 of the Consolidated Financial Statements of Registrant included in the Registrant's 2002 Annual Report to Stockholders, and incorporated herein by reference. 13 Portions of the Annual Report to Stockholders for the year ended December 31, 2002 expressly incorporated by reference herein: Pages 19 through 58, and the information under the caption "Selected Quarterly Financial Information: on Page 59. 21 Subsidiaries of the Registrant. 23(a) Consent of Independent Auditors (Deloitte & Touche LLP). 23(b) Independent Auditor's Consent (Ernst & Young LLP). 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K. -------------------------- There were no reports filed on Form 8-K in the quarter ended December 31, 2002. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Cousins Properties Incorporated (Registrant) Dated: March 27, 2003 BY: /s/ Tom G. Charlesworth ---------------------------------------- Tom G. Charlesworth Executive Vice President, Chief Financial Officer and Chief Investment Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. CERTIFICATION I, Thomas D. Bell, Jr., certify that: 1. I have reviewed this annual report on Form 10-K/A of Cousins Properties Incorporated; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Thomas D. Bell, Jr. - ---------------------------------- Thomas D. Bell, Jr. President, Chief Executive Officer and Vice Chairman of the Board CERTIFICATION I, Tom G. Charlesworth, certify that: 1. I have reviewed this annual report on Form 10-K/A of Cousins Properties Incorporated; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 /s/ Tom G. Charlesworth - ----------------------------------- Tom G. Charlesworth Executive Vice President, Chief Financial Officer and Chief Investment Officer INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE To Cousins Properties Incorporated: We have audited the consolidated financial statements of Cousins Properties Incorporated and consolidated entities as of December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002, and have issued our report thereon dated February 14, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the impact of the adoption of Statements of Financial Accounting Standards No. 133 and No. 144); such consolidated financial statements and report are included in your 2002 Annual Report to Stockholders and are incorporated herein by reference. Our audit also included the consolidated financial statement schedule of Cousins Properties Incorporated and consolidated entities, listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Atlanta, Georgia February 14, 2003
SCHEDULE III (Page 1 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT - ---------------------------------------------- North Point Land - Fulton Co., GA $ -- $ 10,294 $ -- $ 15,767 $(17,050) $ 9,011 $ -- $ 9,011 Salem Road Station Outparcels - Newton Co., GA -- 611 -- -- (325) 286 -- 286 Wildwood Land - Atlanta, GA -- 10,214 -- 4,873 (10,285) 4,802 -- 4,802 Ridenour Land - Cobb County, GA -- 1,696 -- 837 -- 2,533 -- 2,533 ---------------------------------------------------------------------------------------------- -- 22,815 -- 21,477 (27,660) 16,632 -- 16,632 ----------------------------------------------------------------------------------------------
SCHEDULE III (Page 1 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- -------- -------- ----------- LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT - ---------------------------------------------- North Point Land - Fulton Co., GA $ -- -- 1970-1985 -- Salem Road Station Outparcels - Newton Co., GA -- -- 1999 -- Wildwood Land - Atlanta, GA -- -- 1971-1989 -- Ridenour Land - Cobb County, GA -- -- 2002 -- -------- -- --------
SCHEDULE III (Page 2 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- OPERATING PROPERTIES - -------------------- Inforum - Atlanta, GA $ -- $ 5,226 $ 67,370 $ 18,880 $ -- $ 5,226 $ 86,250 $ 91,476 101 Independence Center - Charlotte, NC 44,928 11,096 62,824 5,639 -- 11,155 68,404 79,559 101 Second Street - San Francisco, CA 88,055 11,698 -- 80,070 7,504 11,698 87,574 99,272 333 John Carlyle - Washington, D.C. 48,459 (b) 5,371 -- 22,307 1,483 5,371 23,790 29,161 333 North Point Center East - Fulton Co., GA 31,960 (c) 551 -- 11,917 809 551 12,726 13,277 555 North Point Center East - Fulton Co., GA -- (c) 368 -- 15,278 1,172 368 16,450 16,818 600 University Park Place - Birmingham, AL 13,822 1,899 -- 16,562 1,768 1,899 18,330 20,229 615 Peachtree Street - Atlanta, GA -- 4,740 7,229 1,520 -- 4,740 8,749 13,489 AT&T Wireless Services Headquarters - Los Angeles, CA -- -- -- 54,871 1,343 -- 56,214 56,214 Cerritos Corporate Center - Phase II - Los Angeles, CA -- -- -- 18,992 352 -- 19,344 19,344 1900 Duke Street - Washington, D.C. -- (b) -- -- 22,969 1,200 3,469 20,700 24,169 Lakeshore Park Plaza - Birmingham, AL 10,088 3,362 12,261 399 -- 3,362 12,660 16,022
SCHEDULE III (Page 2 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- -------- -------- ----------- OPERATING PROPERTIES - -------------------- Inforum - Atlanta, GA $ 26,614 -- 1999 25 Years 101 Independence Center - Charlotte, NC 19,202 -- 1996 25 Years 101 Second Street - San Francisco, CA 14,990 1998 1984 30 Years 333 John Carlyle - Washington, D.C. 4,284 1998 1998 30 Years 333 North Point Center East - Fulton Co., GA 3,900 1996 1996 30 Years 555 North Point Center East - Fulton Co., GA 2,694 1998 1998 30 Years 600 University Park Place - Birmingham, AL 3,114 1998 1998 30 Years 615 Peachtree Street - Atlanta, GA 4,068 -- 1996 15 Years AT&T Wireless Services Headquarters - Los Angeles, CA 7,919 1998 1998 30 Years Cerritos Corporate Center - Phase II - Los Angeles, CA 1,262 1999 1999 30 Years 1900 Duke Street - Washington, D.C. 2,119 2000 2000 30 Years Lakeshore Park Plaza - Birmingham, AL 2,166 -- 1998 30 Years
SCHEDULE III (Page 3 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- OPERATING PROPERTIES (Continued) - -------------------------------- One Georgia Center - Atlanta, GA -- 9,267 27,079 3,979 2 9,267 31,060 40,327 The Points at Waterview - Collin Co., TX -- 2,558 22,910 2,067 -- 2,558 24,977 27,535 Wildwood - 3100 Windy Hill Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005 Wildwood - 3301 Windy Ridge Parkway - Atlanta, GA -- 20 -- 11,064 1,516 1,439 11,161 12,600 AtheroGenics - Fulton Co., GA -- 200 -- 7,375 80 200 7,455 7,655 Meridian Mark Plaza - Atlanta, GA 24,926 2,200 -- 22,816 1,735 2,219 24,532 26,751 Northside/Alpharetta I - Fulton Co., GA 9,903 -- 15,577 345 -- -- 15,922 15,922 Northside/Alpharetta II - Fulton Co., GA -- -- -- 17,163 1,012 -- 18,175 18,175 The Avenue East Cobb - Cobb Co., GA 38,255 7,205 -- 32,058 1,882 7,205 33,940 41,145 The Avenue of the Peninsula - Rolling Hills Estates, CA -- 4,338 17,152 63,248 7,120 4,338 87,520 91,858 The Avenue Peachtree City - Fayette Co., GA -- 3,510 -- 24,156 1,685 3,643 25,708 29,351 Mira Mesa MarketCenter - San Diego, CA -- 14,465 -- 34,803 2,415 14,465 37,218 51,683 North Point Stand Alone Retail Sites - Fulton Co., GA -- 4,559 -- 431 (1,293) 3,697 -- 3,697
SCHEDULE III (Page 3 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- -------- -------- ----------- OPERATING PROPERTIES (Continued) - -------------------------------- One Georgia Center - Atlanta, GA 4,006 -- 2000 30 Years The Points at Waterview - Collin Co., TX 2,689 -- 2000 25 Years Wildwood - 3100 Windy Hill Road - Atlanta, GA 4,081 1997 1997 25 Years Wildwood - 3301 Windy Ridge Parkway - Atlanta, GA 6,041 1984 1984 30 Years AtheroGenics - Fulton Co., GA 1,958 1998 1998 30 Years Meridian Mark Plaza - Atlanta, GA 4,487 1997 1997 30 Years Northside/Alpharetta I - Fulton Co., GA 2,901 -- 1998 25 Years Northside/Alpharetta II - Fulton Co., GA 2,460 1998 1998 30 Years The Avenue East Cobb - Cobb Co., GA 7,827 1998 1998 30 Years The Avenue of the Peninsula - Rolling Hills Estates, CA 10,107 1998 1998 30 Years The Avenue Peachtree City - Fayette Co., GA 2,621 2002 2002 30 Years Mira Mesa MarketCenter - San Diego, CA 3,718 1999 1999 30 Years North Point Stand Alone Retail Sites - Fulton Co., GA 196 -- 1970-1985 Various
SCHEDULE III (Page 4 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- OPERATING PROPERTIES (Continued) - -------------------------------- Perimeter Expo - Atlanta, GA 19,792 8,550 -- 11,232 71 8,550 11,303 19,853 Presidential MarketCenter - Gwinnett Co., GA 27,667 3,956 -- 24,816 900 3,956 25,716 29,672 Miscellaneous -- 398 145 101 (474) -- 170 170 ----------------------------------------------------------------------------------------------- 357,855 105,537 249,552 525,058 32,282 109,376 803,053 912,429 ----------------------------------------------------------------------------------------------- PROJECTS UNDER CONSTRUCTION - --------------------------- 55 Second Street - San Francisco, CA $ -- $ 22,141 $ -- $ 78,346 $ 9,473 $ 24,296 $ 85,664 $ 109,960 Congress at Fourth - Austin, TX -- 12,270 -- 38,186 3,176 12,964 40,668 53,632 The Avenue West Cobb - Cobb Co., GA -- 4,945 -- 3,266 169 4,945 3,435 8,380 The Shops of Lake Tuscaloosa - Tuscaloosa, AL -- 1,911 -- 192 6 1,911 198 2,109 ----------------------------------------------------------------------------------------------- -- 41,267 -- 119,990 12,824 44,116 129,965 174,081 -----------------------------------------------------------------------------------------------
SCHEDULE III (Page 4 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- -------- -------- ----------- OPERATING PROPERTIES (Continued) - -------------------------------- Perimeter Expo - 3,815 1993 1993 30 Years Presidential MarketCenter - Gwinnett Co., GA 5,717 1993-2000 1993 30 Years Miscellaneous 144 -- 1977-1984 Various -------- 155,100 -------- PROJECTS UNDER CONSTRUCTION 55 Second Street - San Francisco, CA $ 2,946 1999 1999 30 Years Congress at Fourth - Austin, TX -- 2001 2001 -- The Avenue West Cobb - Cobb Co., GA -- 2002 2002 -- The Shops of Lake Tuscaloosa - Tuscaloosa, AL -- 2002 2002 -- -------- 2,946 --------
SCHEDULE III (Page 5 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisition December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings and Improve- of Sales and Land and Total Description Encumbrances Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ ----- RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Echo Mill - Cobb Co., GA $ -- $ 5,298 $ -- $ 11,211 $(16,701) $ (192) $ -- $ (192) River's Call - Cobb Co., GA 43 2,001 -- 6,167 (2,931) 5,237 -- 5,237 The Lakes at Cedar Grove - Fulton Co., GA 1,450 4,720 -- 12,256 (4,279) 12,697 -- 12,697 Callaway Gardens - Harris Co., GA 1,760 2,098 -- 244 16 2,358 -- 2,358 ----------------------------------------------------------------------------------------------- 3,253 14,117 -- 29,878 (23,895) 20,100 -- 20,100 ----------------------------------------------------------------------------------------------- $361,108 $ 183,736 $249,552 $696,403 $ (6,449) $190,224 $933,018 $1,123,242 ===============================================================================================
SCHEDULE III (Page 5 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- -------- -------- -------- ----------- RESIDENTIAL LOTS UNDER DEVELOPMENT - ---------------------------------- Echo Mill - Cobb Co., GA $ -- 1994 1994 -- River's Call - Cobb Co., GA -- 2000 1971-1989 -- The Lakes at Cedar Grove - Fulton Co., GA -- 2001 2001 -- Callaway Gardens - Harris Co., GA -- 2002 2002 -- -------- -- -------- $158,046 ========
SCHEDULE III (Page 6 of 6) COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) NOTES: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 2002 are as follows: Real Estate Accumulated Depreciation --------------------------------- ----------------------------- 2002 2001 2000 2002 2001 2000 ---- ---- ---- ---- ---- ---- Balance at beginning of period $1,045,805 $ 954,480 $768,783 $106,039 $ 70,032 $35,929 ---------------------------------- ----------------------------- Additions during the period: Improvements and other capitalized costs 89,650 132,023 213,783 -- -- -- Provision for depreciation -- -- -- 52,387 36,007 34,103 ---------------------------------- ----------------------------- 89,650 132,023 213,783 52,387 36,007 34,103 ---------------------------------- ----------------------------- Deductions during the period: Cost of real estate sold (12,213) (40,698) (28,086) (380) -- -- ---------------------------------- ----------------------------- (12,213) (40,698) (28,086) (380) -- -- ---------------------------------- ----------------------------- Balance at close of period $1,123,242 $1,045,805 $954,480 $158,046 $106,039 $70,032 ================================= ============================= (b) 333 John Carlyle and 1900 Duke Street were financed together as one non-recourse mortgage note payable. (c) 333 North Point Center East and 555 North Point Center East were financed together as one non-recourse mortgage note payable.
REPORT OF INDEPENDENT AUDITORS To the Partners of CSC Associates, L.P. (A Limited Partnership) We have audited the accompanying balance sheets of CSC Associates, L.P. (the Partnership) as of December 31, 2002 and 2001, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 2002. Our audits also include the financial statement schedule of CSC Associates, L.P. listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CSC Associates, L.P. as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ERNST & YOUNG LLP Atlanta, Georgia February 7, 2003 CSC ASSOCIATES, L.P. -------------------- BALANCE SHEETS -------------- DECEMBER 31, 2002 AND 2001 -------------------------- ($ in thousands) ASSETS ------ 2002 2001 -------- -------- REAL ESTATE ASSETS: Building and improvements, including land and land improvements of $22,818 in 2002 and 2001 $224,445 $223,187 Accumulated depreciation (73,289) (65,710) -------------------- 151,156 157,477 -------------------- CASH AND CASH EQUIVALENTS 5,323 1,662 -------------------- RESTRICTED CASH (Note 2) 690 - -------------------- NOTE RECEIVABLE (Note 4) 148,283 66,007 -------------------- OTHER ASSETS: Straight-line rent, interest and other receivables (Note 3) 10,941 11,282 Deferred expenses, net of accumulated amortization of $1,063 and $843 in 2002 and 2001, respectively 412 617 Furniture, fixtures and equipment, net of accumulated depreciation of $134 and $99 in 2002 and 2001, respectively 70 73 Other, net of accumulated amortization of $263 and $217 in 2002 and 2001, respectively (Note 6) 760 801 -------------------- Total other assets 12,183 12,773 -------------------- $317,635 $237,919 ==================== LIABILITIES AND PARTNERS' CAPITAL --------------------------------- NOTE PAYABLE (Note 4) $148,283 $ 66,007 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 5,482 2,975 -------------------- Total liabilities 153,765 68,982 -------------------- PARTNERS' CAPITAL (Note 1) 163,870 168,937 -------------------- $317,635 $237,919 ==================== The accompanying notes are an integral part of these balance sheets. CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF OPERATIONS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 ---------------------------------------------------- ($ in thousands) 2002 2001 2000 ------- ------- ------- REVENUES: Rental income (Note 2) and recovery of expenses charged directly to specific tenants $42,489 $39,948 $39,339 Interest income (Note 4) 9,673 4,306 4,478 --------------------------- Total revenues 52,162 44,254 43,817 --------------------------- EXPENSES: Real estate taxes 4,471 4,222 4,133 Management and personnel costs 2,064 1,958 1,867 Cleaning 1,485 1,473 1,475 Utilities 825 826 813 Contract security 813 627 517 Repairs and maintenance 418 486 456 Elevator 363 355 337 Parking 296 279 276 General and administrative expenses 169 173 75 Grounds maintenance 133 135 129 Insurance 653 115 110 Marketing and other expenses 60 63 63 Interest expense (Note 4) 9,673 4,306 4,478 Depreciation and amortization 7,656 7,662 7,710 --------------------------- Total expenses 29,079 22,680 22,439 --------------------------- NET INCOME $23,083 $21,574 $21,378 =========================== The accompanying notes are an integral part of these statements. CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF PARTNERS' CAPITAL (NOTE 1) ---------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 ---------------------------------------------------- ($ in thousands) BALANCE, December 31, 1999 $183,685 Net income 21,378 Distributions (27,980) -------- BALANCE, December 31, 2000 177,083 Net income 21,574 Distributions (29,720) -------- BALANCE, December 31, 2001 168,937 Net income 23,083 Distributions (28,150) -------- BALANCE, December 31, 2002 $163,870 ======== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- STATEMENTS OF CASH FLOWS ------------------------ FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 ---------------------------------------------------- ($ in thousands) 2002 2001 2000 -------- ------- ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 23,083 $21,574 $21,378 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,656 7,662 7,710 Rental revenue recognized on straight-line basis different from rental revenue specified in the lease agreements 1,261 362 207 Change in other receivables and other assets (747) 109 130 Change in accounts payable and accrued liabilities related to operations 2,506 775 (1,015) ------------------------------ Net cash provided by operating activities 33,759 30,482 28,410 ------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to building and improvements (1,258) (54) (1,604) Issuance of note receivable (Note 4) (150,000) - - Payoff of note receivable (Note 4) 65,526 - - Collection of note receivable (Note 4) 2,198 2,782 2,610 Reserve Funds deposits (Note 4) (690) - - Payments for furniture, fixtures and equipment - (28) (113) ------------------------------ Net cash (used in) provided by investing activities (84,224) 2,700 893 ------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds of long-term debt (Note 4) 150,000 - - Payoff of long-term note (Note 4) (65,526) - - Repayments of long-term debt (Note 4) (2,198) (2,782) (2,610) Partnership distributions (28,150) (29,720) (27,980) ------------------------------ Net cash provided by (used in) financing activities 54,126 (32,502) (30,590) ------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,661 680 (1,287) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,662 982 2,269 ------------------------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,323 $ 1,662 $ 982 ============================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 10,181 $ 4,314 $ 4,485 ============================== The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P. -------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 2002, 2001 AND 2000 -------------------------------- 1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT ------------------------------------------------------------------- CSC Associates, L.P. ("CSC" or the "Partnership") was formed under the terms of a Limited Partnership Agreement dated September 29, 1989 and by the filing of its Certificate of Limited Partnership on October 27, 1989. C&S Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own a 1% general partnership and a 49% limited partnership interest in the Partnership. Premises is a wholly-owned subsidiary of NB Holdings Corporation, which is a wholly-owned subsidiary of Bank of America. In 1996 Premises transferred its 1% general partnership interest in the partnership to C&S Premises-SPE, Inc., a wholly-owned subsidiary of Premises. The Partnership was formed for the purpose of developing and owning a 1.3 million gross square foot office tower in midtown Atlanta, Georgia (the "Building"), which is the Atlanta headquarters of Bank of America Corporation. The Partnership Agreement and related documents (the "Agreements") contain among other provisions, the following: a. CPI is the Managing Partner. b. CPI contributed $18.2 million cash to the Partnership and Premises contributed land parcels to the Partnership having an aggregate agreed upon value of $18.2 million. The property value, in the opinion of the partners, was equal to the estimated fair market value of the land at the time of formation of the Partnership. The value of the property contributed by Premises was recorded on the Partnership's books at an amount equal to the cash contributed by CPI for an equal (50%) partnership interest. In October 1993, the partners each contributed an additional $86.7 million. c. No interest is earned on partnership capital. d. Net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). 2. SIGNIFICANT ACCOUNTING POLICIES ------------------------------- Capitalization Policies - ----------------------- All costs related to planning, developing and constructing the Building plus expenditures for the Building prior to the date it became operational for financial reporting purposes have been capitalized. Interest expense, amortization of financing costs, and real estate taxes were also capitalized while the Building was under development. Depreciation and Amortization - ----------------------------- Real estate assets are carried at cost. Depreciation of the building commenced on the date the building became operational for financial reporting purposes, and the building is being depreciated over 40 years. Leasehold and tenant improvements are amortized over the life of the related lease or the useful life of the asset, whichever is shorter. Furniture, fixtures, and equipment are depreciated over 5 years. Deferred expenses, which include certain marketing and leasing costs and deferred operating expenses which are being passed through to the tenants, are amortized over the period of estimated benefit. The straight-line method is used for all depreciation and amortization. Income Taxes - ------------ No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnership will be passed through to be included on each partner's separate tax return. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include all cash and highly liquid money market instruments. Highly liquid money market instruments include securities and repurchase agreements with original maturities of three months or less or money market mutual funds. Restricted Cash - --------------- Restricted Cash includes reserve funds established under the debt agreement (Note 4). Long-Lived Assets - ----------------- Long-lived assets include property, equipment and other assets which are held and used by an entity. These assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying value of long-lived assets is periodically reviewed by management, and impairment losses, if any, are recognized when the expected undiscounted future operating cash flows derived from such assets are less than their carrying value. Management believes no such impairments have occurred during any of the periods presented. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and discontinued operations. The Partnership adopted the standard effective January 1, 2002, and the adoption had no impact on its financial statements. Rental Income - ------------- In accordance with SFAS No. 13, "Accounting for Leases," income on leases which include increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) and/or free rent periods is recognized on a straight-line basis. Allowance for Doubtful Accounts - ------------------------------- The Partnership makes valuation adjustments to all tenant-related revenue based upon the tenant's credit and business risk. The Partnership generally suspends the accrual of income on specific tenants where rental payments or reimbursements are delinquent 90 days or more. As of December 31, 2002 and 2001, there is no allowance for doubtful accounts included in the accompanying Balance Sheets. Use of Estimates - ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. 3. LEASES ------ The Partnership has leased office space to NB Holdings Corporation, as well as to unrelated third parties. The leases contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases. At December 31, 2002, future minimum rentals to be received under existing non-cancelable leases, excluding tenants' current pro rata share of operating expenses, are as follows ($ in thousands): Lease Leases With With NB Holdings Third Corporation Parties Total ----------- ------- -------- 2003 $ 14,117 $17,200 $ 31,317 2004 14,117 13,128 27,245 2005 14,117 16,292 30,409 2006 14,118 16,476 30,594 2007 14,118 9,374 23,492 Subsequent to 2007 64,693 13,503 78,196 -------------------------------------- $135,280 $85,973 $221,253 ====================================== In the years ended December 31, 2002 and 2001, income which would have accrued in accordance with the lease terms exceeded income recognized on a straight-line basis by $1,261,000 and $362,000, respectively. At December 31, 2002 and 2001, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled approximately $8,989,000 and $10,250,000, respectively. Of that amount, 14% was related to leases with NB Holdings Corporation and approximately 40% and 34% was related to each of two professional services firms. At December 31, 2002, NB Holdings Corporation leased approximately 46% and two professional services firms leased approximately 18% and 17% of the net rentable space of the Building. 4. NOTE PAYABLE AND NOTE RECEIVABLE -------------------------------- On February 6, 1996, the Partnership issued $80 million of 6.377% collateralized notes (the "Prior Notes"). The Prior Notes amortized in equal monthly installments of $590,680 based on a 20-year amortization schedule and were to mature February 15, 2011. The Prior Notes were non-recourse obligations of the Partnership and were secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement covering the Partnership's interest in the Building. The Partnership then loaned the $80 million proceeds of the Prior Notes to CPI under a non-recourse loan (the "Prior Cousins Loan") secured by CPI's interest in CSC under the same payment terms as those of the Prior Notes. CPI paid all costs of issuing the Prior Notes and the Prior Cousins Loan, including a $400,000 fee to an affiliate of Bank of America. In addition, CPI paid a monthly fee to an affiliate of Bank of America of .025% of the outstanding principal balance of the Prior Notes. These fees totaled approximately $203,000 and $211,000 in 2001 and 2000, respectively. On February 22, 2002, CSC refinanced the Prior Notes, completing a $150 million non-recourse mortgage note payable (the "New Loan") with an interest rate of 6.958% and a maturity of March 1, 2012. The New Loan is secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $150 million proceeds of the New Loan to CPI under a non-recourse loan (the "New Cousins' Loan") secured by CPI's interest in CSC under the same payment terms as those of the New Loan. CPI paid all costs of issuing the New Loan and the New Cousins Loan, including a $750,000 fee to an affiliate of Bank of America Corporation. The New Loan requires establishment of Reserve Funds for capital replacements and repairs for the Building and costs and expenses incurred with respect to leases. These funds are increased by $76,677 per month throughout the life of the loan. At December 31, 2002, these Reserve Funds totaled $690,093. On March 15, 2002, $65,873,925 of the proceeds from the New Loan was used to pay off in full the Prior Notes. The $65,873,925 included $65,525,710 for the payoff of the principal balance as of February 15, 2002 (the last payment date of the Prior Notes) and $348,215 for accrued interest from February 15, 2002 through March 14, 2002. The Prior Cousins Loan to CSC was also repaid in full. In connection with the prepayment in full of the Prior Notes, CPI paid a prepayment premium in the amount of $2,871,925. The estimated fair value of both the note payable and related note receivable at December 31, 2002 was $148 million, which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently. The maturities of the New Cousins Loan and the New Loan at December 31, 2002 are as follows (in thousands): 2003 $ 2,433 2004 2,608 2005 2,795 2006 2,996 2007 3,212 Subsequent to 2007 134,239 -------- $148,283 ======== 5. RELATED PARTIES --------------- The Partnership engaged CPI and an affiliate of CPI to manage, develop and lease the Building. During 2002, 2001 and 2000, fees to CPI and its affiliate incurred by the Partnership were as follows ($ in thousands): 2002 2001 2000 ------ ------ ------ Leasing and procurement fees $ 131 $ 303 $ 109 Management fees 1,085 1,007 990 ------------------------------ $1,216 $1,310 $1,099 ============================== 6. PARKING AGREEMENT ----------------- On February 7, 1996, CSC entered into a 25-year Cross Parking License Agreement ("Parking Agreement") with the North Avenue Presbyterian Church ("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck which is located adjacent to NAPC. The agreement commenced on October 1, 1996. CSC paid a $1,000,000 contribution toward the construction cost of the parking deck as consideration for the Parking Agreement. The $1,000,000 contribution plus additional costs of approximately $23,000 are included in Other Assets and are being amortized over the 25-year life of the Parking Agreement. NAPC may reduce the number of parking spaces available to the Partnership or may terminate the Parking Agreement under certain conditions after the sixth year, at which time a partial refund of the $1,000,000 would be due to CSC. In addition, CSC is responsible for the maintenance of the parking deck and the payment of the related operating expenses.
SCHEDULE III CSC ASSOCIATES, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Costs Capitalized Gross Amount at Which Initial Cost Subsequent Carried at to Company to Acquisitions December 31, 2002 ------------------- -------------------- ---------------------------------- Carrying Costs Buildings Less Cost Land Buildings Encumbrances and Improve- of Sales and Land and Total Description (b) Land Improvements ments and Other Improvements Improvements (a) - ----------- ------------ ---- ------------ -------- --------- ------------ ------------ --- Bank of America Plaza Atlanta, Georgia $148,283 $ 18,200 $ -- $195,796 $ 10,449 $ 22,818 $201,627 $224,445 =============================================================================================
SCHEDULE III CSC ASSOCIATES, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2002 ($ in thousands) Column A Column F Column G Column H Column I -------- -------- -------- -------- -------- Life on Which De- preciation Accumu- In 2002 lated Date of Income Deprecia- Construc- Date Statement Description tion (a) tion Acquired Is Computed - ----------- ---------- --------- -------- ----------- Bank of America Plaza Atlanta, Georgia $73,289 1990-1992 1990 5-40 =======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated depreciation for the three years ended December 31, 2002 are as follows:
Real Estate Accumulated Depreciation ---------------------------------- ------------------------------- 2002 2001 2000 2002 2001 2000 -------- -------- -------- ------- ------- ------- Balance at beginning of period $223,187 $223,687 $222,436 $65,710 $58,678 $51,208 Improvements and other capitalized costs 1,258 54 1,604 -- -- -- Write-offs of improvements and other capitalized costs -- (554) (353) -- (554) (378) Provision for depreciation -- -- -- 7,579 7,586 7,848 ---------------------------------- ------------------------------- Balance at end of period $224,445 $223,187 $223,687 $73,289 $65,710 $58,678 ================================== =============================== (b)CSC's interest in Bank of America Plaza and related leases and agreements secure a note.
EX-10 3 ex10bi-02.txt EXHIBIT 10(B)(I) EXHIBIT 10(b)(i) COUSINS PROPERTIES INCORPORATED PROFIT SHARING PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF January 1, 2002 TABLE OF CONTENTS ss.1. DEFINITIONS.....................................................1 1.1. Account.................................................1 1.2. Actual Deferral Percentage..............................1 1.3. Adjustment..............................................1 1.4. Affiliate...............................................1 1.5. Average Actual Deferral Percentage......................2 1.6. Beneficiary.............................................2 1.7. Board...................................................2 1.8. Break in Service........................................2 1.9. Brokerage Account.......................................2 1.10. Catch-Up Contributions..................................2 1.11. Catch-Up Account........................................2 1.12. Code....................................................2 1.13. Company.................................................2 1.14. Company Account.........................................3 1.15. Company Contribution....................................3 1.16. Compensation............................................3 1.17. Contributory Account....................................3 1.18. Distributable Account...................................3 1.19. Elective Deferrals......................................4 1.20. Eligible Employee.......................................4 1.21. Employee................................................4 1.22. Employer................................................4 1.23. Employment Commencement Date............................4 1.24. Employment Termination Date.............................5 1.25. ERISA...................................................5 1.26. Excess Contributions....................................5 1.27. Excess Deferrals........................................5 1.28. Forfeiture..............................................5 1.29. 401(k) Account..........................................5 1.30. 401(k) Contributions....................................5 1.31. Fund....................................................5 1.32. Highly Compensated Employee.............................6 1.33. Leave of Absence........................................7 1.34. Maternity or Paternity..................................7 1.35. Multiple Employer Plan..................................7 1.36. Nonhighly Compensated Employee..........................7 1.37. OBRA'93 Annual Compensation Limit.......................7 1.38. Participant.............................................7 1.39. Plan....................................................7 1.40. Plan Sponsor............................................7 1.41. Plan Year...............................................7 1.42. Trust Agreement.........................................8 1.43. Trustee.................................................8 1.44. Valuation Date..........................................8 1.45. W-2 Compensation........................................8 ss.2. PARTICIPATION...................................................8 2.1. Participation Requirements..............................8 2.2. Reemployment............................................8 ss.3. CONTRIBUTIONS...................................................8 3.1. Company Contribution....................................8 3.2. 401(k) Contributions....................................9 3.3. Contribution Limitations................................9 3.4. No After-Tax or Rollover Contributions..................9 3.5. USERRA.................................................10 3.6. Catch-Up Contributions.................................10 ss.4. ALLOCATIONS TO ACCOUNTS........................................10 4.1. Administrative Action..................................10 4.2. Allocation of Investment Gains or Losses...............10 4.3. Allocation of Pre-Tax Contributions....................10 4.4. Annual Allocation of Forfeitures and Company Contribution.........................................11 4.5. Statutory Allocation Restrictions......................12 4.6. Allocation Report......................................16 4.7. Allocation Corrections.................................16 ss.5. PLAN BENEFITS..................................................16 5.1. Retirement Benefit.....................................16 5.2. Disability Benefit.....................................16 5.3. Death Benefit..........................................17 5.4. Vested Benefit.........................................18 5.5. Missing Claimant.......................................20 ss.6. BENEFIT DISTRIBUTION...........................................21 6.1. Lump Sum Distribution..................................21 6.2. Distribution Deadlines and Consent Requirement.........22 6.3. Distributions Procedure................................23 6.4. Hardship Distributions.................................23 6.5. Minimum Distributions Requirements.....................25 ss.7. ADMINISTRATION.................................................30 7.1. Plan Sponsor Powers and Duties.........................30 7.2. Liquidity Requirements.................................30 7.3. Records................................................30 7.4. Information from Others................................31 ss.8. TRUST FUNDS AND TRUSTEE........................................31 8.1. Trust Funds............................................31 8.2. Notification to Trustee................................33 8.3. Loans..................................................33 ss.9. AMENDMENT, TERMINATION AND INDEMNIFICATION.....................35 9.1. Amendment..............................................35 9.2. Termination............................................36 9.3. Indemnification........................................36 ss.10. MISCELLANEOUS..................................................36 10.1. Headings and References................................36 10.2. Construction...........................................36 10.3. Spendthrift Clause.....................................36 10.4. Legally Incompetent....................................37 10.5. Benefits Supported Only by Funds.......................37 10.6. No Discrimination......................................37 10.7. Claims.................................................37 10.8. Nonreversion...........................................37 10.9. Merger or Consolidation................................38 10.10. Agent for Service of Process...........................38 10.11. Qualified Domestic Relations Order.....................38 10.12. Top Heavy Rules........................................39 10.13. Special Multiple Employer Plan Rules...................41 COUSINS PROPERTIES INCORPORATED PROFIT SHARING PLAN ------------------- Cousins Properties Incorporated hereby amends and restates the Plan to (1) include the requirements of and Plan design changes allowed under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") effective as of January 1, 2002 (or as such other date as set forth herein), (2) modify the allocation formula set forth in ss. 3.1(a) of the Plan effective beginning as of the 2002 Plan Year, and (3) adopt changes in calculating minimum distributions in accordance with recently issued final Treasury Regulations under Code ss. 401(a)(9), effective as of September 1, 2002. The amendments set forth in this Plan regarding EGTRRA changes are intended as good faith compliance with the requirements of EGTRRA and are to be construed in accordance with EGTRRA and guidance issued thereunder. Unless otherwise expressly set forth in this Plan, the terms of this Plan shall apply only to Eligible Employees whose employment as such terminates on or after January 1, 2002. The rights and benefits, if any, of a former Eligible Employee whose employment terminated before such date, and who is not reemployed after such date, shall be determined solely in accordance with the terms of this Plan as in effect on the date his or her employment as such terminated. This Plan has been a profit sharing plan, and this amended and restated Plan shall continue to be a profit sharing plan, up to 100% of the assets of which may be invested in common stock issued by the Plan Sponsor. ss. 1. DEFINITIONS ----------- The following terms shall have the meanings set forth opposite such terms for purposes of this Plan. 1.1. Account - means such amount of money, if any, as is evidenced by the ------- last balance posted to the individual bookkeeping account of each Participant and each Beneficiary in accordance with this Plan. Each Account may consist of more than one sub-Account, and the record of each such individual account shall be maintained by the Plan Sponsor. An Account shall cease to exist when the money evidenced thereby is exhausted through distributions or Forfeitures made in accordance with this Plan. 1.2. Actual Deferral Percentage - means for each Plan Year for each ---------------------------- Participant who is eligible to make 401(k) Contributions at any time during such Plan Year the ratio (expressed as a percentage) of (a) the 401(k) Contributions, if any, made on his or her behalf for such Plan Year to (b) his or her Compensation for such Plan Year. The Actual Deferral Percentage of a Participant who is eligible to make, but does not make, 401(k) Contributions shall be zero. 1.3. Adjustment - means for each Valuation Date the net increase or ---------- decrease in the fair market value of the Funds attributable to investments (after deducting expenses) for the period beginning immediately after the preceding Valuation Date and ending on such Valuation Date as such increase or decrease is determined by the Plan Sponsor. 1.4. Affiliate - means for each calendar year (a) any parent, subsidiary or --------- sister corporation which during such year is a member of a controlled group of corporations (as defined in Code ss. 1563(a), disregarding Code ss.ss. 1563(a)(4) and 1563(e)(3)(C)) of which a Company is a member, (b) any trade or business, whether or not incorporated, which during such year is considered to be under common control with a Company under Code ss. 414(c), (c) any member of an affiliated service group (under Code ss. 414(m)) which includes a Company, and (d) any entity required to be aggregated with a Company under Code ss. 414(o). 1.5. Average Actual Deferral Percentage - means for each Plan Year the ------------------------------------- average (expressed as a percentage) of the Actual Deferral Percentages computed separately (a) for the group of Participants who are Highly Compensated Employees during such Plan Year and (b) for the group of Participants who are Nonhighly Compensated Employees during the preceding Plan Year. 1.6. Beneficiary - means the person or persons so designated as such in ----------- accordance with ss. 5.3 by a Participant or by operation of this Plan. 1.7. Board - means the Plan Sponsor's Board of Directors. ----- 1.8. Break in Service - means any 12 consecutive month period which begins ---------------- on an Employee's Employment Termination Date during which the Employee is neither paid nor entitled to payment for the performance of duties as an Employee; provided, however, if an Employee is absent from service for Maternity or Paternity reasons, the 12 consecutive month period beginning on the first anniversary of the first date of the absence shall neither constitute a Break in Service nor a period of severance or a period of service. 1.9. Brokerage Account - means an account which the Plan Sponsor directs ------------------ the Trustee to establish pursuant to a Participant's direction at a brokerage firm (selected by the Plan Sponsor) through which such Participant can exercise investment discretion over his or her Account upon the transfer of the assets of such Account (in accordance with ss. 8.1(b)) to such brokerage account. 1.10. Catch-Up Contributions - means the part of a Participant's ------------------------ Compensation that is contributed to the Plan pursuant to ss. 3.6 and Code ss. 414(v). 1.11. Catch-Up Account - means the account established and maintained by ----------------- the Plan Sponsor for each Participant with respect to his or her total interest in the Plan and Trust Agreement resulting from Catch-Up Contributions (made under ss. 3.6). 1.12. Code - means the Internal Revenue Code of 1986, as amended, and, if ---- the Code is amended, any reference to a section of the Code in this Plan automatically shall be deemed amended to conform to the related amendment to the Code. 1.13. Company - means the Plan Sponsor, Cousins Real Estate Corporation, ------- CREC II, Cousins Properties Services L.P. (which was formerly known as Cousins Stone L.P.) and New Land Realty, LLC and each other Affiliate which the Board designates as such for such calendar year. 1.14. Company Account - means the sub-Account which reflects a ----------------- Participant's share of Forfeitures, Company Contributions and the related investment gains and losses. 1.15. Company Contribution - means any payment by a Company to the Fund --------------------- with respect to a calendar year in accordance withss. 3.1. 1.16. Compensation - means for each Employee for each calendar year the ------------ lesser of (a) the OBRA `93 Annual Compensation Limit or (b) the actual compensation which is paid to such Employee by a Company for such calendar year and which is subject to federal income tax withholding, (1) plus his or her 401(k) Contributions, any elective deferrals (as defined under Code ss. 402(g)(3), and any other amount which is contributed on his or her behalf for such calendar year by a Company to a plan pursuant to a salary reduction agreement and which is not includable in his or her gross income for federal income tax purposes under Code ss.ss. 125, 457 or effective for Plan Years beginning on or after January 1, 2001, ss. 132(f)(4), and (2) minus all of the following (to the extent subject to federal income tax withholding): (A) expense reimbursements and other expense allowances, (B) fringe benefits (cash and noncash), (C) reimbursements for moving expenses, (D) deferred compensation benefits (including, without limitation, contributions to this Plan and income attributable to the exercise of any stock options or stock appreciation rights or similar arrangements) and (E) welfare benefits (including, without limitation, contributions to group insurance plans and any other employee welfare benefit plans which are not made pursuant to a salary reduction agreement and compensation paid to such Employee specifically for the purchase of life insurance and other welfare benefits). Amounts under ss. 125 of the Code include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under the Code only if the Company does not request or collect information regarding the Participant's other health coverage as part of the enrollment process for the health plan. 1.17. Contributory Account - means the fully vested sub-Account which --------------------- reflects the amounts contributed by a Participant as a Minimum Contribution (as defined in this Plan as in effect on December 31, 1981 and as made on or before such date) and as a Voluntary Contribution (as defined in this Plan as in effect on December 31, 1986 and as made on or before such date), and the related investment gains and losses. 1.18. Distributable Account - means the 401(k) Contribution Account, ---------------------- Catch-up Account and Contributory Account, if any, and the vested percentage of a Company Account which is distributable to a Participant or Beneficiary under ss. 6 as a result of an event described in ss. 5. 1.19. Elective Deferrals - means the 401(k) Contributions made on a ------------------- Participant's behalf under this Plan and the employer contributions made on his or her behalf pursuant to an election to defer under any qualified cash or deferred arrangement as described in Code ss. 401(k), any simplified employee pension cash or deferred arrangement as described in Code ss. 402(h)(1)(B), any plan described under Code ss. 501(c)(18), any salary reduction agreement for the purchase of an annuity contract under Code ss. 403(b) and, to the extent required under Code ss. 402(g)(8)(A)(ii), any eligible deferred compensation plan under Code ss. 457. 1.20. Eligible Employee - means as of any date each Employee who is ------------------ classified as of such date by a Company on such Company's payroll records as an employee of such Company (without regard to whether he or she is classified by any other person as a common law employee of such Company) other than an Employee who as of such date is (a) a leased employee as described in ss. 1.21, (b) included in a unit of employees covered by a collective bargaining agreement unless the agreement by specific reference to this Plan permits participation in this Plan, (c) a nonresident alien receiving no earned income from a Company or an Affiliate from sources within the United States (as more fully described in Code ss. 410(b)(3)(C)), (d) a student attending a college or university that works for a Company or an Affiliate (whether full time or part-time) primarily during school holidays or vacation, or (e) an "off-duty" policeman. 1.21. Employee - means each person who is an employee of a Company or any -------- of its Affiliates (which is not a Company) under such organization's uniform and nondiscriminatory personnel policy and each person who is treated as such as a result of the "leased employee" rules under Code ss. 414(n). For this purpose, a "leased employee" means an employee who is not a common-law employee of the Company or an Affiliate ("recipient") but who, pursuant to an agreement with another person, has performed services for the recipient and related persons on a substantially full-time basis for a period of at least one year and whose services are performed under primary direction or control by the recipient; provided, however, the term "leased employee" shall not include an individual who is described in the safe harbor rules under Code ss. 414(n) or an individual who is not treated as a leased employee under Code ss. 414(n). 1.22. Employer - means each Company and its Affiliates. -------- 1.23. Employment Commencement Date - means the first date for which a new ----------------------------- Employee is paid or is entitled to payment as an Employee for the performance of duties as an Employee or, in the event such person subsequently incurs a Break in Service, the first date for which such Employee thereafter is paid or is entitled to payment as an Employee for the performance of duties as a result of his or her reemployment as such; provided, further, that the Employment Commencement Date for a person who is an employee of an organization on the date such organization becomes an Affiliate shall be treated as the date such organization becomes an Affiliate unless such person was an Employee immediately before such date. 1.24. Employment Termination Date - means for each Employee the first to ------------------------------ occur of (a) the earlier of the date his or her employment terminates either on account of a quit, discharge, death or retirement or (b) the date on which ends a 12 consecutive month period of absence from active employment during which period such Employee is neither on a Leave of Absence nor paid nor entitled to payment for the performance of duties as an Employee; provided, further, that the Employment Termination Date for a person who is an Employee of an Affiliate on the date on which its status as an Affiliate terminates (other than by reason of a merger into a Company or another Affiliate) shall be treated as the date such organization terminates its status as an Affiliate unless such person remains an Employee after such date. 1.25. ERISA - means the Employee Retirement Income Security Act of 1974, as ----- amended and, if ERISA is amended, any reference to a section of ERISA in this Plan automatically shall be deemed amended to conform to the related amendment to ERISA. 1.26. Excess Contributions - means for each Highly Compensated Employee for -------------------- each Plan Year the excess of (a) the 401(k) Contributions actually taken into account in determining his or her Actual Deferral Percentage for such Plan Year over (b) the maximum amount of such contributions permitted for such Plan Year under Code ss. 401(k)(3)(A), where such maximum shall be determined by reducing such contributions made on behalf of such Highly Compensated Employees in order of their Actual Deferral Percentages, beginning with the highest of such percentages. 1.27. Excess Deferrals - means for each Participant for each taxable year ----------------- the 401(k) Contributions for such taxable year that exceed $11,000 (or, after 2002, the dollar limit under Code ss. 402(g) in effect at the beginning of such taxable year) and that the Participant elects to be refunded from this Plan pursuant to the procedures set forth in ss. 4.5(b). 1.28. Forfeiture - means the balance of a Participant's Company Account ---------- which is forfeited under this Plan as a result of a termination of his or her employment as an Employee. 1.29. 401(k) Account - means the fully vested sub-Account which reflects a -------------- Participant's 401(k) Contributions and the related investment gains and losses. 1.30. 401(k) Contributions - means the contributions made by a Company on a -------------------- Participant's behalf in lieu of cash compensation pursuant to his or her election under ss. 3.2. 1.31. Fund - means the trust fund which is established and maintained as ---- part of and in accordance with this Plan under the Trust Agreement. 1.32. Highly Compensated Employee - --------------------------- (a) General. The term "Highly Compensated Employee" means for ------- each Plan Year each Participant who performs service for a Company or an Affiliate during the Plan Year and who: (1) is a 5% owner of a Company or an Affiliate as defined in Codess. 416(i)(1)(B)(i) at any time during the Plan Year or the preceding 12-month period; (2) receives compensation in excess of $80,000 adjusted for cost-of-living increases in accordance with Code ss. 414(q) for the preceding 12-month period and was a member of the "top-paid group" for the preceding 12-month period. The "top-paid group" consists of the top 20% of Employees ranked on the basis of compensation received during the applicable 12-month period. For purposes of determining the number of Employees in the top-paid group, the following Employees shall be excluded: (A) Employees who have not completed 6 months of service, (B) Employees who normally work less than 17 1/2 hours per week, (C) Employees who normally work during less than 6 months during any year, (D) Employees who have not attained age 21, and (E) except to the extent provided in regulations, Employees who are included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and a Company or an Affiliate and that does not provide for participation in this Plan The determination of which Employees are Highly Compensated Employees is subject to Code ss. 414(q) and any regulations, rulings, notices or revenue procedures under that section. In determining whether an Employee is a Highly Compensated Employee for any Plan Year, a Company may use any allocations and elections authorized under the applicable regulations, rulings or revenue procedures under Code ss. 414(q). For purposes of this ss. 1.32, "compensation" means the Participant's W-2 Compensation, plus the Participant's 401(k) Contributions, any elective deferrals as defined in Code ss. 402(g)(3), and any other contributions or deferrals made on his or her behalf to a plan of a Company or an Affiliate under Code ss. 125, 457 and for Plan Years beginning on or after January 1, 2001, "compensation" shall also include elective amounts that are not includable in gross income by reason of Code ss. 132(f)(4). Amounts under ss. 125 of the Code include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under the Code only if the Company does not request or collect information regarding the Participant's other health coverage as part of the enrollment process for the health plan. 1.33. Leave of Absence - means an approved leave of absence granted in ---------------- writing to an Employee by a Company or, where appropriate, an Affiliate (which is not a Company) in accordance with applicable federal or state law or such organization's personnel policy for a period during which such Employee is expected to cease actively performing duties for which such Employee is paid or entitled to payment as an Employee under circumstances which do not involve a quit, discharge or retirement. 1.34. Maternity or Paternity - means an Employee's absence from work by ----------------------- reason of the Employee's pregnancy, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of such child by such Employee, or for purposes of caring for such child for a period beginning immediately following such birth or placement. 1.35. Multiple Employer Plan - means a plan (within the meaning of ss. ------------------------ 413(c) of the Code) that is maintained for the Employees of more than one Employer. 1.36. Nonhighly Compensated Employee - means an individual who performs -------------------------------- service for a Company or an Affiliate and who is not a Highly Compensated Employee. 1.37. OBRA'93 Annual Compensation Limit - means the dollar amount set forth --------------------------------- in Code ss. 401(a)(17), as adjusted for increases in the cost of living in accordance with Code ss. 401(a)(17). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA'93 Annual Compensation Limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. Any reference in this Plan to the limitation under Code ss. 401(a)(17) shall mean the OBRA'93 Annual Compensation Limit set forth in this ss. 1.37. 1.38. Participant - means for any calendar year each Eligible Employee of a ----------- Company who satisfies the requirements described in ss. 2 and each former Employee from whom an Account is maintained. 1.39. Plan - means this Cousins Properties Incorporated Profit Sharing Plan ---- as effective as of January 1, 2002 and all amendments to such plan or, when required by the context, this Plan as in effect before January 1, 2002. 1.40. Plan Sponsor - means Cousins Properties Incorporated and any ------------- successor to such organization. 1.41. Plan Year - means the calendar year. --------- 1.42. Trust Agreement - means each separate agreement that establishes a --------------- separate trust fund which is a part of this Plan. 1.43. Trustee - means the corporation, individual or individuals, or other ------- legal entity appointed by the Plan Sponsor and designated to serve as the trustee of the Fund from time to time. 1.44. Valuation Date - means each business day of the Trustee. -------------- 1.45. W-2 Compensation - means for each Participant his or her wages and ----------------- other payments required to be reported as "wages, tips and other compensation" on his or her Form W-2 under Code ss.ss. 6041, 6051 and 6052 as determined in accordance with the regulations under Code ss. 415. ss. 2. PARTICIPATION ------------- 2.1. Participation Requirements. Each Eligible Employee shall be eligible --------------------------- to participate in this Plan as of the January 1 coinciding with or immediately following his or her Employment Commencement Date if he or she is an Eligible Employee on such date with respect to Company Contributions under ss. 3.1. Each Eligible Employee shall be eligible to participate in this Plan for purposes of making 401(k) Contributions under ss. 3.2 as of his or her Employment Commencement Date. 2.2. Reemployment. If a Participant terminates employment and is reemployed ------------ as an Eligible Employee, he or she will be reinstated as a Participant on the first day he or she completes an Hour of Service as an Eligible Employee. Each other former Eligible Employee who is reemployed will become a Participant in accordance with ss. 2.1. ss. 3. CONTRIBUTIONS ------------- 3.1. Company Contribution. -------------------- (a) General Rule. Subject toss. 4.5, the Plan Sponsor ------------ contemplates that each Company for each calendar year will contribute the same percentage of Compensation for Participants who are Non-highly Compensated Employees and who are employed by a Company on the last day of such calendar year. Further, subject toss.4.5, the Plan Sponsor contemplates that each Company for each calendar year will contribute the same percentage of Compensation for Participants who are Highly Compensated Employees (which will be equal to or less than the percentage contributed for Non-highly Compensated Employees), and who are employed by a Company on the last day of such calendar year. In no event will any Company contribute a percentage of Compensation on behalf of Highly Compensated Employees which is greater than the percentage of Compensation contributed for Participants who are Non-highly Compensated Employees for such calendar year. If a Participant has Compensation from more than one Company and his or her total Compensation underss. 1.16(b) exceeds the OBRA'93 Annual Compensation Limit, each Company's contribution under thisss. 3.1 with respect to such Participant shall be based on a fraction of the OBRA'93 Annual Compensation Limit, where the numerator of such fraction shall be his or her Compensation attributable underss. 1.16(b) to such Company and the denominator of which shall be his or her total Compensation underss. 1.16(b). (b) Top Heavy. As of the last day of each Plan Year, a determination shall be made on whether this Plan is "top heavy" under ss. 10.12 and, if this Plan is "top heavy," each company shall contribute such amounts, if any, as are necessary to satisfy minimum allocation requirements under ss. 10.12. Any such contribution shall be credited as of the last day of such Plan Year to the affected Participant's Company Account. 3.2. 401(k) Contributions. -------------------- (a) General Rule. Subject to the rules set forth in this ss. 3.2 and the limitations set forth in ss. 4.5, each Participant who is an Eligible Employee may elect that the Company employing such Participant make 401(k) Contributions (in accordance with the Company's payroll practices) from his or her Compensation for each payroll period for which such election is effective. All such 401(k) Contributions shall be made exclusively through payroll withholding and shall be transferred to the Trustees as soon as practicable after the end of the payroll period during which such contributions are withheld, and in any event, by the deadlines, if any established for making those payments under ERISA or the Code. (b) Election Procedure. The Plan Sponsor from time to time shall establish and shall communicate in writing to Participants such procedures for making the elections described in thisss. 3.2 as the Plan Sponsor deems appropriate under the circumstances for the uniform and proper administration of this Plan. A Participant's election shall be made on an election form provided for this purpose and no election shall be effective unless such election form is properly completed and timely filed in accordance with such procedures. An election shall remain in effect until revised or terminated in accordance with such procedures. The Plan Sponsor shall have the right at any time unilaterally to reduce the amount or percentage of 401(k) Contributions which a Participant has elected be made on his or her behalf if the Plan Sponsor determines that such reduction might be necessary to satisfy the limitations underss. 4.5. 3.3. Contribution Limitations. The 401(k) Contributions and Company ------------------------- Contribution for each calendar year in no event shall exceed the limitations described in ss. 4.5 for such calendar year. Furthermore, in the event a suspense account under ss. 4.5(a)(3) is in existence on the first day of a calendar year, no Company Contribution for such year shall be made if the allocation in such year of the amount in such suspense account then would be precluded by Code ss. 415. 3.4. No After-Tax or Rollover Contributions. The only contributions that a -------------------------------------- Participant can elect to make are 401(k) Contributions under ss. 3.2 or Catch-Up Contributions under ss. 3.6. No other elective contributions shall be made by Participants or Employees under this Plan either directly or through a rollover from an individual retirement account or any other employee benefit plan. 3.5. USERRA. Notwithstanding anything in this Plan to the contrary, ------ contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Code ss. 414(u). 3.6. Catch-Up Contributions. All Participants who are eligible to make ----------------------- 401(k) Contributions under ss. 3.2 and who have attained age 50 before the close of the Plan Year shall be eligible to make Catch-Up Contributions in accordance with the procedures established by the Plan Sponsor and communicated to Participants from time to time and subject to the limitations of Code ss. 414(v). Such Catch-Up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code ss.ss. 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code ss.ss. 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such Catch-Up Contributions. Catch-Up Contributions shall be credited to a Participant's Catch-Up Account and shall be fully vested at all times. The election rules for 401(k) Contributions under ss. 3.2(b) shall also apply to Catch-Up Contributions. In addition, Catch-Up Accounts can be used for a loan under ss. 8.1 and for hardship withdrawal under ss. 6.4. All such contributions shall be made exclusively through payroll withholding and shall be transferred to the Trustees as soon as practicable after the end of the payroll period during which such contributions are withheld, and in any event by the deadlines, if any established for making those payments under ERISA or the Code. ss.4. ALLOCATIONS TO ACCOUNTS ----------------------- 4.1. Administrative Action. As soon as practicable after each Valuation ---------------------- Date, Participants and Beneficiaries who as of such Valuation Date are entitled to one or more of the allocations called for in this ss. 4 shall be identified and the information which the Plan Sponsor (in its judgment) needs to make such allocations shall be furnished to the Plan Sponsor by each Company as a condition to the Plan Sponsor making such allocations. 4.2. Allocation of Investment Gains or Losses. The Plan Sponsor shall ------------------------------------------- allocate the Adjustment for each Valuation Date among the applicable sub-Accounts of each Participant and Beneficiary in the proportion that each such sub-Account bears to all such sub-Accounts in order that each such sub-Account will proportionately benefit from any earnings or appreciation in the value of the assets of the Funds in which such sub-Account is invested or proportionately suffer any losses or depreciation in the value of such assets. This allocation shall be made in accordance with such reasonable and equitable procedures as may be established from time to time by the Plan Sponsor, which procedures may include allocations based on units, and shall be made wholly without reference to the suspense account referred to in ss. 4.5(a)(3) or to Brokerage Accounts. Notwithstanding the foregoing, all investment gains and losses attributable to the assets of a Brokerage Account shall be allocated exclusively to such account as of each Valuation Date. 4.3. Allocation of Pre-Tax Contributions. ----------------------------------- (a) 401(k) Contributions. Subject to the restrictions set -------------------- forth in ss. 4.5, as of each Valuation Date the Plan Sponsor shall credit any 401(k) Contributions made for the period ending on such Valuation Date to the 401(k) Account of each Participant on whose behalf such contributions are made. (b) Catch-Up Contributions. As of each Valuation Date the ---------------------- Plan Sponsor shall credit any Catch-Up Contributions made for the period ending on such Valuation Date to the Catch-Up Account of each Participant on whose behalf such contributions are made. 4.4. Annual Allocation of Forfeitures and Company Contribution. ---------------------------------------------------------- (a) Forfeitures. Subject to the restrictions set forth in ----------- ss. 4.5, the Plan Sponsor as the first allocation step in the annual allocations shall allocate the Forfeitures for each calendar year as of the last day of such calendar year among the Company Accounts of each Participant described in ss. 4.4(c) in the same proportion that his or her Compensation for such calendar year bears to the total Compensation of all such Participants for such year. (b) Company Contribution. Subject to the restrictions set -------------------- forth in ss. 4.5, the Plan Sponsor as the second allocation step in the annual allocations shall allocate the Company Contribution for each calendar year as of the last day of such calendar year among the Company Accounts of each Participant described in ss. 4.4(c) in the same proportion that his or her Compensation for such calendar year bears to the total Compensation of all such Participants for such year. (c) Special Rule. ------------ (1) If a Company for any calendar year elects to contribute a different percentage of Compensation for Participants who are employed by that Company than the percentage of Compensation contributed for Participants who are employed by any other Company, the Company Contribution made by such Company shall be allocated exclusively to Participants employed by such Company in the same manner as described in ss. 4.4(b). (2) If a Company for any calendar year elects to contribute a different percentage of Compensation for Participants who are employed by that Company and who are Highly Compensated Employees than the percentage of Compensation contributed for Participants who are employed by the Company or any other Company, the Company Contribution made by such Company for its Participants who are Non-Highly Compensated Employees shall be allocated exclusively to such Non-Highly Compensated Participants and the Company Contribution made by such Company for its Participants who are Highly Compensated Employees shall be allocated exclusively to such Highly Compensated Employees. (3) If a Company is described in ss. 4.4(c)(1) or (2), the allocation of Forfeitures and Company Contributions attributable to Participants employed by such Company shall be allocated exclusively to Participants (or group of Non-Highly Compensated Employees or group of Highly Compensated Employees) employed by such Company and no contributions made by any other Company or Forfeitures attributable to any other Company shall be allocated to such Participants. (d) Eligible Participants. A Participant shall be eligible --------------------- to share in the allocations of the Forfeitures and Company Contribution for a Plan Year only if he or she is an Eligible Employee on the last day of such Plan Year. 4.5. Statutory Allocation Restrictions. --------------------------------- (a) Code ss. 415 Limitations. ------------------------ (1) General Rule. Except to the extent permitted under ------------ Code ss. 414(v), the sum of the 401(k) Contributions (excluding any 401(k) Contributions refunded pursuant to ss. 4.5(b) but including any Excess Contributions distributed to the Participant under ss. 4.5 (c)), Forfeitures and the Company Contribution allocated for any calendar year (the "limitation year") to the Account of any Participant ("annual addition") shall (after taking in account the special rules under ss. 4.5(a)(2)) under no circumstances exceed the lesser of: (A) $40,000, as adjusted for increases in the cost-of-living under Code ss. 415(d), or (B) 100 percent of the Participant's compensation, within the meaning of Codess. 415(c)(3), for the limitation year. (C) The compensation limit referred to in (B) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code ss. 401(h) or Code ss. 419A(f)(2)) which is otherwise treated as an annual addition. For purposes of this ss. 4.5, Compensation shall mean W-2 Compensation plus the Participant's 401(k) Contributions, any elective deferrals as defined under Code ss. 402(g)(3) and any other contributions or deferrals made on the Participant's behalf by a Company or an Affiliate to a retirement plan or cafeteria plan that are excludible under Code ss.ss. 125, 457 and, for Plan years beginning on or after January 1, 2001, elective amounts that are not includable in gross income for such calendar year by reason of Code ss. 132(f)(4). Amounts under ss. 125 of the Code include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under the Code only if the Company does not request or collect information regarding the Participant's other health coverage as part of the enrollment process for the health plan. (2) Special Rules. ------------- (A) A contribution made by or on behalf of an Employee under any other defined contribution plan (as defined in Code ss. 414(i)) which is maintained by a Company or an Affiliate (which is not a Company) shall be treated as made under this Plan by or on behalf of such Employee. (B) A contribution which is credited under a welfare benefit fund maintained by a Company or any Affiliate (which is not a Company) for any year to a reserve for post-retirement medical benefits for an Employee who is a "key employee" (as defined in Code ss. 416(i)) shall be treated as part of the Company Contribution made on his or her behalf under this Plan when, and to the extent, required under Code ss. 419A(d). (3) Excess Amount. In the event thatss. 4.5(a)(1) ------------- actually restricts the amount otherwise allocable in any allocation step to any Account, the total amount which was unallocable in such step ("Excess Amount") shall be disposed of as follows. First, the Participant's 401(k) Contributions, if any, (and any investment gain attributable to such contributions) shall be refunded to the extent that such refund would satisfy such limitation. If an Excess Amount still exists after such refund, the amount otherwise allocable in any allocation step shall be deemed to be a Forfeiture and shall be allocated and reallocated (subject toss. 4.5(a)(1)) in successive allocation steps by the Plan Sponsor among the Accounts of the remaining Participants according to the allocation procedure describedss. 4.4(a) until such Excess Amount has been allocated in its entirety. If the restriction set forth inss. 4.5(a)(1) applies to all Participants before such Excess Amount has been allocated in its entirety, the Plan Sponsor shall transfer such unallocable amount to a suspense account which (1) shall not be subject to any Adjustment, (2) shall be deemed to be a Forfeiture for purposes of the annual allocations for the succeeding calendar year and (3) shall be added to the Adjustment as an investment gain in the event that there is a termination of this Plan (within the meaning ofss. 9.2) before the date as of which such suspense account becomes allocable in its entirety as a Forfeiture. (4) Any 401(k) Contributions refunded under thisss. 4.5(a)(3) shall be disregarded for purposes of the Codess. 402(g) limitations underss. 4.5(b) and the Codess. 401(k) limitations underss. 4.5(c). (b) Dollar Limitations on 401(k) Contributions. ------------------------------------------ (1) General. Except to the extent permitted under ss. ------- 3.6 and ss. 414(v) of the Code, no Participant shall be permitted to have Elective Deferrals made on his or her behalf under this Plan or any other qualified plan maintained by a Company or an Affiliate during any taxable year in excess of $11,000 (or, after 2002, the dollar limit under Code ss. 402(g) in effect at the beginning of such taxable year). If a Participant's 401(k) Contributions under this Plan exceed such dollar limit, such Participant shall be deemed to have made a request for a refund under ss. 4.5(b)(2) and such excess shall be refunded in accordance with ss. 4.5(b)(3). Although a Participant's 401(k) Contributions under this Plan cannot exceed such dollar limit, his or her aggregate Elective Deferrals nevertheless can exceed such dollar limit in a calendar year if he or she participates in at least one other plan that provides for Elective Deferrals. In that event, such Participant may request a refund in accordance with ss. 4.5(b)(2) and his or her Excess Deferrals shall be refunded in accordance with ss. 4.5(b)(3). (2) Refund Election. A Participant may request a refund --------------- from this Plan of any Excess Deferrals made during a taxable year by filing a claim with the Plan Sponsor on or before March 1 of the next taxable year. Such claim shall be in writing, shall specify the dollar amount of the Participant's Excess Deferrals assigned to this Plan for such taxable year and shall include a written statement that such amounts, if not distributed to such Participant, will exceed the limit imposed on the Participant by Code ss. 402(g) for the taxable year in which the deferral occurred. (3) Distribution of Excess Deferrals. Excess Deferrals, -------------------------------- plus any income and minus any loss allocable to such Excess Deferrals for the taxable year in which such Excess Deferrals were made (as determined in accordance with ss. 4.2 and the regulations under Code ss. 402(g)), shall be distributed no later than April 15 of any calendar year to Participants whose Excess Deferrals for the preceding Plan Year were assigned to this Plan under ss. 4.5(b)(2). (4) Treatment. Any 401(k) Contributions that exceed the --------- Code ss. 402(g) limit shall be taken into account for purposes of the limitations under ss. 4.5(c) even if the excess 401(k) Contributions are refunded in accordance with this ss. 4.5(b). However, excess 401(k) Contributions refunded to a Nonhighly Compensated Employee shall not be taken into account for purposes of ss. 4.5(c) to the extent the excess arises solely from 401(k) Contributions under this Plan and elective deferrals under all other qualified plus, contracts and arrangements maintained by a Company or an Affiliate pursuant to Code ss. 401(a)(3). Excess 401(k) Contributions refunded under this ss. 4.5(b) shall not be taken into account for purposes of this Code ss. 415 limitations under ss. 4.5(a). (c) Limitations on 401(k) Contributions for Highly Compensated ---------------------------------------------------------- Employees. --------- (1) General. The Average Actual Deferral Percentage for ------- Participants who are Highly Compensated Employees for any Plan Year shall not exceed the greater of (A) the Average Actual Deferral Percentage for Participants who are Nonhighly Compensated Employees for the preceding Plan Year multiplied by 1.25, or (B) the Average Actual Deferral Percentage for Participants who are Nonhighly Compensated Employees for the preceding Plan Year multiplied by 2, provided that the Average Actual Deferral Percentage for Participants who are Highly Compensated Employees does not exceed the Average Actual Deferral Percentage for Participants who are Nonhighly Compensated Employees by more than 2 percentage points. (2) Special Rules. ------------- (A) Other Plan or Arrangements. For purposes of -------------------------- this ss. 4.5(c), the Actual Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have "elective deferrals" as described in Code ss. 402(g)(3)(A) allocated to his or her account under two or more plans or arrangements described in Code ss. 401(k) that are maintained by a Company or an Affiliate shall be determined as if all such contributions were made under this Plan. (B) Code ss. 410(b) Aggregation. If this Plan --------------------------- satisfies the requirements of Code ss.ss. 401(k), 401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this ss. 4.5(c) shall be applied by determining the Actual Deferral Percentages of Participants as if all such plans were a single plan. (C) Other Requirements. The determination and ------------------ treatment of the 401(k) Contributions and Actual Deferral Percentage and Excess Contributions of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (3) Distribution of Excess Contributions. Excess ------------------------------------ Contributions made for any Plan Year, plus any income and minus any loss allocable to such Excess Contributions for such Plan Year (as determined in accordance with ss. 4.2 and the regulations under Code ss. 401(k)), shall be distributed no later than the last day of the immediately following Plan Year to Participants who are Highly Compounded Employee on whose behalf such Excess Contributions were made. Such distributions shall be made to such Participants on the basis of the amount of the Excess Contributions starting with the Highly Compensated Employee with the greatest dollar amount of 401(k) Contributions and ending when the Excess Contributions have been refunded in full. (4) Order for Determining Excess Contributions. Excess ------------------------------------------ Contributions shall be determined after first determining Excess Deferrals. The Excess Contributions which would otherwise be distributed to the Participant shall be reduced, in accordance with federal income tax regulations, by the Excess Deferrals distributed to the Participant under ss. 4.5(b). 4.6. Allocation Report. After the Plan Sponsor has made the allocations for ----------------- any Valuation Date described in this ss. 4, the Plan Sponsor shall deliver to each Company a report which lists each Participant and states the balance credited to each Account maintained for each such person. The Plan Sponsor also shall deliver at least annually to each Company an individual statement for each Participant which states the balance credited to his or her Account and which may be forwarded to that person. 4.7. Allocation Corrections. If an error or omission is discovered in any ----------------------- Account, the Plan Sponsor shall make such adjustment as it, acting in its discretion, deems appropriate to correct such error or omission. ss.5. PLAN BENEFITS ------------- 5.1. Retirement Benefit. The Company Account of a Participant who is an ------------------- Employee on the date he or she reaches age 65 shall become fully vested not later than such date, and his or her Distributable Account thereafter shall be payable to such Participant under ss. 6 upon his or her retirement. 5.2. Disability Benefit. ------------------ (a) In order to compensate for a disability and to provide a measure of security to the disabled Participant and his or her family, the Company Account of a Participant whose employment with a Company or an Affiliate is terminated by reason of his or her being disabled shall become nonforfeitable on the date his or her employment is so terminated, and his or her Distributable Account shall be payable to such Participant in accordance with ss. 6 upon his or her termination of employment. (b) A person shall be treated as disabled for purposes of this ss. 5.2 if he or she is unable to engage in any substantially gainful activity at his or her customary level of compensation, competence or responsibility as an Employee due to any medically determinable physical or mental impairment or impairments which may be expected to result in death or to be permanent. (c) The Plan Sponsor shall have exclusive responsibility for determining whether a person is disabled and they may consider whether a person is disabled upon their own motion or upon the written request of such person. The Plan Sponsor's determination shall be based on a consideration of all the facts and circumstances which in its absolute discretion it deems pertinent, including reports from one or more licensed physicians or psychiatrists appointed by the Plan Sponsor and paid by the Company (which employs or had employed the Participant) to examine the Participant. Any determination by the Plan Sponsor of whether a person is disabled for purposes of this Plan shall be conclusive. 5.3. Death Benefit. ------------- (a) In order to provide a measure of security in the event of a Participant's death, the Company which employs (or which last employed) a Participant immediately before his or her death promptly shall notify the Plan Sponsor of the name of his or her Beneficiary, and his or her Account shall be changed to the name of his or her Beneficiary and shall be paid to such Beneficiary under ss. 6. Furthermore, if a Participant dies while he or she is an Employee, his or her Company Account shall become fully vested on his or her date of death. (b) If a Participant under applicable law has a spouse on his or her date of death, such spouse automatically shall (unless otherwise permissible under Codess. 401(a)(11)) be treated as his or her Beneficiary under this Plan absent such spouse's written and notarized consent to the designation by the Participant of any other person as his or her Beneficiary or to the designation of any other person as his or her Beneficiary in accordance with the terms of this Plan. On the other hand, if a Participant has no such spouse or if his or her spouse so consents, such Participant's Beneficiary shall be a person or persons so designated in writing by a Participant on a form satisfactory to the Plan Sponsor or, in the event no such designation is made, or if no person so designated survives the Participant, or if after checking his or her last known mailing address the whereabouts of the person so designated is unknown and no death benefit claim is submitted to the Plan Sponsor by such person within one year after the date of his or her death, the personal representative of such Participant, if any has qualified within twelve (12) months from the date of his or her death or, if no personal representative has so qualified, any heirs at law of the Participant whose whereabouts are known by the Plan Sponsor. 5.4. Vested Benefit. -------------- (a) General. A Participant who (as of the date of the termination of his or her employment as an Employee) is ineligible for any other benefit payment under this Plan shall be eligible for the payment of his or her 401(k) Account and Contributory Account, if any, and the vested percentage, if any, of his or her Company Account under ss. 6. The vested percentage, if any, of his or her Company Account shall be determined under this ss. 5.4. (b) Vesting Schedule. The Plan Sponsor shall determine the vested percentage of a Participant's Company Account as of the date his or her employment as an Employee terminates in accordance with the vesting schedule set forth in thisss. 5.4(b). Such determination shall be made based on the Participant's Years of Service underss. 5.4(c). The vested percentage of his or her Company Account shall be maintained as a separate special Account until distributed by the Plan Sponsor underss. 6. The balance, or the nonvested percentage, of his or her Company Account shall become a Forfeiture as of the earlier of (1) the date as of which payment of the vested portion of the Participant's Company Account is made or, if such vested portion is zero, the date payment otherwise would have been made underss. 6 if such vested portion at the Participant's termination of employment was $5,000 or less, (2) the last day of the Plan Year in which the Participant terminates employment, or (3) the date as of which the Participant has 5 consecutive Breaks in Service. Full Years Vested Percentage of of Service Company Account ---------- -------------------- Less than 1 0% 1. 30% 2. 65% 3 or more 100% (c) Year of Service. --------------- (1) General. Subject to the exceptions set forth in ss. 5.4(c)(2) and (3), a Participant's Years of Service shall equal his or her full years of service as an Employee completed during the period from his or her Employment Commencement Date to his or her Employment Termination Date which coincides with the first day of his or her first Break in Service following that Employment Commencement Date. If an Employee has two or more periods of employment, the number of days in each such period in excess of the full years of employment in each such period shall be aggregated into additional full years of service on the assumption that 365 days of service equal one full year of service. (2) Former Employee Service. ----------------------- (i) New Market Employees. With respect to a -------------------- former Employee of Cousins MarketCenters, Inc. (which formerly was known as Cousins/New Market Development Company, Inc.), such Employee's employment by New Market Development Company, Ltd. or one of its affiliates for periods after October 31, 1987 shall be treated as employment by a Company under this ss. 5.4(c) if such Employee became an employee of Cousins/New Market Development Company, Inc. on November 1, 1992 and he or she had been an employee of New Market Development Company, Ltd. or one of its affiliates on October 31, 1992. (ii) Former Faison-Stone Employees. With respect ----------------------------- to a Former Employee of CREC II Inc. and Cousins Stone L.P., such Employee's employment by Faison-Stone, Inc. or one of its affiliates shall be treated as employment by a Company under this ss. 5.4(c) (but not for purposes of being eligible to share in the allocations of the Forfeitures and Company Contribution under ss. 4.5(c) for the 1999 Plan Year), if such Employee became an employee of CREC II Inc. or Cousins Stone L.P. on June 1, 1999 as part of the transactions contemplated in the Contributions and Purchase Agreement dated as of June 1, 1999 among Cousins Properties Incorporated, Faison-Stone, Inc. and others. (3) Breaks in Service. If an Employee is reemployed ----------------- after he or she has 5 or more consecutive Breaks in Service and the vested percentage of his or her Account before the first such Break in Service had been zero, Year of Service credit shall be carried forward from his or her prior period of employment only if the number of his or her full Years of Service completed before the first such Break in Service exceeds the number of consecutive Breaks in Service which such Employee had immediately before his or her reemployment. (d) Reemployment. ------------ (1) If a Participant is reemployed before he or she has 5 consecutive Breaks in Service and before the balance, or nonvested percentage, of his or her Company Account is treated as a Forfeiture under ss. 5.4(b), his or her vested interest in that part of his or her Company Account thereafter shall be determined in accordance with the formula set forth in ss. 5.4(d)(3). (2) If a Participant is reemployed before he or she has 5 consecutive Breaks in Service and while this Plan remains in effect but after the balance, or nonvested percentage, of his or her Company Account has been treated as a Forfeiture under ss. 5.4(b), the Plan Sponsor shall cause the Trustee, upon the Participant's completion of one Year of Service (after his or her reemployment) to restore such balance to a special Company Account for such Participant (subject to the Adjustment which the Plan Sponsor determines would have been allocable to that balance on the assumption that such balance were invested in the Funds as described inss. 8.1(a) and not in a Brokerage Account as described inss. 8.1(b) or other individually directed investments as described inss. 8.1(c)), and his or her vested interest in such special Company Account thereafter shall be determined in accordance with the formula set forth inss. 5.4(d)(3). Such restoration shall be made from appropriate Company Contributions or from an assessment against the appropriate Company, whichever the Plan Sponsor deems reasonable and appropriate under the circumstances. (3) For purposes of ss. 5.4(d)(1) and ss. 5.4(d)(2), X = P (AB + D) - D, where X = the dollar amount, if any, of the vested percentage of the Participant's existing or restored special Company Account; P = the vested percentage of his or her existing or restored special Company Account as determined under the vesting schedule inss. 5.4(b); AB = the then balance of his or her existing or restored special Company Account; and D = the dollar amount, if any, distributed to the former Employee from the vested percentage of his or her Company Account as a result of his or her previous termination of employment. 5.5. Missing Claimant. If no Beneficiary of a deceased Participant is ----------------- identified and located pursuant to the procedure set forth in ss. 5.3(b), or if the Account of a Participant becomes payable under ss. 5 for any reason other than his or her death and the Plan Sponsor is unable to locate such Participant after sending written notice to his or her last known mailing address and the last known mailing address of any Beneficiaries such Participant may have designated, the Plan Sponsor, in its discretion, may treat his or her Account as a Forfeiture as of the last day of the calendar year which includes the second anniversary of the date his or her Account first became payable, or as of the last day of any subsequent calendar year. However, if such missing Beneficiary or Participant in a subsequent calendar year files a written claim with the Plan Sponsor while this Plan remains in effect for the Account forfeited and proves to the satisfaction of the Plan Sponsor his or her identity as the person then entitled to such benefit under the terms of this Plan, the Plan Sponsor shall direct the payment to such Beneficiary or Participant in accordance with ss. 6 of an amount which equals dollar for dollar the amount treated as a Forfeiture. Such payment at the Plan Sponsor's discretion may come from appropriate Company Contributions or directly from one, or more than one, Company, or from an assessment against the appropriate Company, whichever the Plan Sponsor deems reasonable and appropriate under the circumstances. ss.6. BENEFIT DISTRIBUTION -------------------- 6.1. Lump Sum Distribution. --------------------- (a) General. A Participant's Distributable Account shall be paid ------- only as a result of an event described in ss. 5 or in ss. 6.4 and, further, shall be paid only to such Participant or, in the case of his or her death before payment has been made, only to his or her Beneficiary in a lump sum. (b) Direct Rollovers. ---------------- (1) Election. Notwithstanding any provision of the -------- Plan to the contrary that would otherwise limit a distributee's election under this ss. 6, a distributee (as described in ss. 6.1(b) (4)) may elect, at the time and in the manner prescribed by the Plan Sponsor, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (2) Eligible rollover distribution. An eligible ------------------------------ rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code ss. 401(a)(9); the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and a hardship distribution. (3) Eligible retirement plan. An eligible retirement ------------------------ plan is an individual retirement account described in Codess. 408(a), an individual retirement annuity described in Codess. 408(b), an annuity plan described in Codess. 403(a), or a qualified trust described in Code ss. 401(a), that accepts the distributee's eligible rollover distribution. An eligible retirement plan shall also include an annuity contract described in Code ss. 403(b) and an eligible plan under Code ss. 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code ss.ss. 408(a) or (b), or to a qualified defined contribution plan described in Code ss.ss. 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable. (4) Distributee. A distributee includes an employee or ----------- former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code ss. 414(p), are distributees with regard to the interest of the spouse or former spouse. (5) Direct rollover. A direct rollover is a payment by --------------- the Plan to the eligible retirement plan specified by the distributee. 6.2. Distribution Deadlines and Consent Requirement. ---------------------------------------------- (a) General Rule. A Participant's Distributable Account ------------- automatically shall be paid as soon as practicable after his or her employment as an Employee terminates unless his or her Distributable Account exceeds $5,000. If his or her Distributable Account exceeds $5,000, his or her Distributable Account shall be paid (1) as soon as practicable after the Plan Sponsor determines that the Codess. 411(a)(11) consent requirements for a Distributable Account in excess of $5,000, have been satisfied with respect to such account or, if earlier, (2) when required underss. 6.2(b). The distribution of each Distributable Account shall be made no later than the later of 60 days after the end of the calendar year in which a Participant reaches age 65 or retires unless such consent requirements prohibit such a distribution orss. 6.2(b) requires an earlier distribution. (b) Statutory Deadlines. ------------------- (1) Participant. ----------- (A) Initial Deadline. A Participant's ---------------- Distributable Account shall in any event be distributed to such Participant no later than April 1 of the calendar year which follows the calendar year in which he or she reaches age 70 1/2. Payment of a Participant's Distributable Account will be made to the Participant no later than April 1 of the calendar year following the calendar year in which he or she (1) reaches age 70-1/2 or (2) for a Participant who is not a 5% owner (as defined in Code ss. 416), terminates employment, whichever is last. (B) Additional Contributions. Any contributions ------------------------ credited to a Participant's Distributable Account after the date payment is required to be made to such Participant under this ss. 6.2(b)(1) shall be paid to such Participant in a lump sum in cash no later than 270 days after the date as of which such contributions are credited to such account. (2) Beneficiary. If a distribution is made to a ----------- Participant's Beneficiary, such distribution shall be made by December 31 of the calendar year cotaining the fifth anniversary of the date of the Participant's death. 6.3. Distributions Procedure. ----------------------- (a) General. The amount of a Distributable Account to be ------- distributed under this ss. 6 shall be determined by the Plan Sponsor on the basis of the Valuation Date which immediately precedes the date that such distribution is made, and no distribution shall be made to a Participant or Beneficiary on the basis of a Valuation Date which comes before the event which triggers such distribution under ss. 5. (b) Special Rule. A Participant may elect (subject to ss. ------------ 6.3(c)) that the Plan Sponsor pay the Participant's Distributable Account in whole or in part in common stock issued by the Plan Sponsor (to the extent such Distributable Account is invested in such stock) if the Participant satisfies such reasonable requirements as the Plan Sponsor may set for such an election. (c) Exception to Special Rule. If either the Plan Sponsor or the ------------------------- Trustee determines that a distribution of common stock issued by the Plan Sponsor underss. 6.3(b) might result in "Excess Shares" under Article 11 of the Plan Sponsor's Articles of Incorporation or might violate any applicable law or any other provision in the Plan Sponsor's Articles of Incorporation, or might cause the Plan Sponsor to lose its status as a real estate investment trust under the Code, such distribution shall be made in cash or in cash and other property (in lieu of such stock) in accordance with thisss. 6.3(c). If such a determination is made, the Trustee shall as of the first day of the calendar month which follows such determination set aside the Participant's entire Distributable Account in a Brokerage Account. Only the Trustee shall have the right to make investment decisions regarding buying or selling of the Plan Sponsor's common stock in such Brokerage Account, and the Trustee shall begin an orderly liquidation of the Plan Sponsor's common stock allocated to such account with a view towards completing such liquidation on or before the third anniversary of the establishment of such Brokerage Account. The affected Participant shall have the right to direct the Trustee respecting the timing of distributions from such account. (d) Statutory Restrictions. The Plan Sponsor shall have the ---------------------- right to unilaterally direct the Trustee to make part or all of any distribution under this ss. 6.3 in the form of common stock issued by the Plan Sponsor and held by the Funds if the Plan Sponsor determines (on the advice of counsel) that any statute, rule or regulation makes it impermissible or imprudent for the Trustee to sell such common stock in order to effect a distribution or transfer. (e) No Annuities. In no event shall a Participant's ------------ Distributable Account be distributed to such Participant in the form of a life annuity. 6.4. Hardship Distributions. ---------------------- (a) Hardship Distribution of Contributory Account. Upon the --------------------------------------------- request of an Employee who has a Contributory Account, the Plan Sponsor may distribute all or a part of a Participant's Contributory Account to such Participant during any calendar month (based on the immediately preceding Valuation Date) to the extent that the Plan Sponsor determines that such a distribution (1) is necessary in order to avoid a hardship due to a death, serious illness or accident in his or her immediate family or (2) is for use by the Participant in acquiring a personal residence or (3) is needed to pay his or her educational expenses of educating members of his or her immediate family. (b) Hardship Distribution of 401(k) Account. A Participant shall --------------------------------------- have the right to request a withdrawal of all or any portion of his or her 401(k) Account (other than the investment gains or losses allocated to such 401(k) Account) at any time before he or she terminates employment with a Company and all Affiliates, and the Plan Sponsor shall grant such request if, and to the extent that, it determines (based on all the relevant facts and circumstances and in accordance with the regulations under Code ss. 401(k)) that the withdrawal is "necessary" (as described in ss. 6.4(b)(1)) to satisfy an "immediate and heavy financial need" (as described in ss. 6.4(b)(2)). Any request for a withdrawal for a financial hardship shall be made in writing and shall set forth in detail the nature of such hardship and the amount of the withdrawal needed as a result of such hardship, and the Participant shall supplement such request with such additional information as the Plan Sponsor requests consistent with this ss. 6.4(b). (1) Amount Necessary to Satisfy Need. A withdrawal -------------------------------- shall be deemed to be "necessary" to satisfy an immediate and heavy financial need only if (A) the withdrawal is not in excess of the amount of such need, including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from such withdrawal, and (B) the Participant has obtained all distributions (other than hardship distributions, including distributions under ss. 6.4(c)) and all nontaxable loans currently available from this Plan and all other plans maintained by a Company and all Affiliates. Notwithstanding the foregoing, a Participant will not be required to obtain a loan from this Plan or any other plan maintained by a Company or an Affiliate if the effect of the loan would be to increase the amount of the need. A Participant who receives a withdrawal for a financial hardship under this ss. 6.4(b) shall not be eligible to make any 401(k) Contributions under this Plan or any elective contributions or employee contributions under any other qualified plan or nonqualified plan of deferred compensation maintained by a Company or an Affiliate for the six month period following the date of such withdrawal. Further, such Participant's 401(k) Contributions under this Plan and any elective contributions under any other plan maintained by a Company or an Affiliate for the calendar year immediately following the calendar year in which such withdrawal occurred shall not exceed the dollar limitation under Code ss. 402(g) for such following calendar year (as described in ss. 4.5(b)) reduced by the amount of his or her 401(k) Contributions under this Plan and any elective contributions under any other plan maintained by a Company or an Affiliate for a calendar year in which such withdrawal occurred. (2) Immediate and Heavy Financial Need. An "immediate ---------------------------------- and heavy financial need" shall mean (A) expenses for medical care described in Code ss. 213(d) previously incurred by the Participant or his or her spouse or dependents (as defined in Code ss. 152) or amounts necessary for such individuals to obtain such medical care, (B) costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant, (C) the payment of tuition, related educational fees and room and board for the next twelve months of post- secondary education for the Participant or his or her spouse, children or dependents, (D) payments necessary to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence, or (E) such other events as the Internal Revenue Service deems to constitute an "immediate and heavy financial need" under Code ss. 401(k). (3) Catch-Up Account. A Participant shall have the ---------------- right to request a withdrawal of all of any portion of his or her Catch-Up Account at any time before he or she terminates employment with a Company and all Affiliates subject to the same hardship distribution rules set for in this ss. 6.4(b), provided, that all amounts available for a hardship distribution in such Participant's 401(k) Account have been withdrawn before any amounts are withdrawn from his or her Catch-Up Account. In addition, the restrictions regarding continued 401(k) Contributions following a hardship withdrawal shall also apply to a Participant's Catch-Up Contributions to the Plan. (c) Age Related Withdrawals. A Participant who is an Eligible ----------------------- Employee and who has reached at least age 59-1/2 shall have the right to withdraw all or any portion of his or her Distributable Account one time each Plan Year if he or she requests such withdrawal in writing in accordance with such procedures as set by the Plan Sponsor. 6.5. Minimum Distributions Requirements. ---------------------------------- (a) General Rules. ------------- (1) Effective Date. The provisions of thisss. 6.5 will -------------- apply for purposes of determining required minimum distributions beginning September 1, 2002. (2) Coordination with Minimum Distribution Requirements --------------------------------------------------- Previously in Effect. Required minimum distributions for 2002 under -------------------- this ss. 6.5 will be determined as follows: If the total amount of 2002 required minimum distributions under the Plan made to the distributee prior to September 1, 2002 equals or exceeds the required minimum distributions determined under this ss. 6.5, then no additional distributions will be required to be made for 2002 on or after such date to the distributee. If the total amount of 2002 required minimum distributions under the Plan made to the distributee prior to September 1, 2002 is less than the amount determined under this ss. 6.5, then required minimum distributions for 2002 on and after such date will be determined so that the total amount of required minimum distributions for 2002 made to the distributee will be the amount determined under this ss. 6.5. (3) Precedence. The requirements of thisss. 6.5 will ---------- take precedence over any inconsistent provisions of the Plan other than the first sentence ofss.6.2(a). (4) Requirements of Treasury Regulations Incorporated. ------------------------------------------------- All distributions required under thisss. 6.5 will be determined and made in accordance with the Treasury regulations underss. 401(a)(9) of the Code. (5) TEFRA ss. 242(b)(2) Elections. Notwithstanding the ----------------------------- other provisions of this ss. 6.5, distributions may be made under a designation made before January 1, 1984, in accordance with ss. 242(b) (2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to ss. 242(b)(2) of TEFRA. (b) Time and Manner of Distribution. ------------------------------- (1) Required Beginning Date. The Participant's entire ----------------------- interest will be distributed, or begin to be distributed, to the Participant no later than the Participant's Required Beginning Date. (2) Death of Participant Before Distributions Begin. If ----------------------------------------------- the Participant dies before distributions begin, the Participant's entire interest will be distributed, or begin to be distributed, no later than as follows: (i) If the Participant's surviving spouse is the Participant's sole Designated Beneficiary, then, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later. (ii) If the Participant's surviving spouse is not the Participant's sole Designated Beneficiary, then, distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died. (iii) If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, the Participant's entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (iv) If the Participant's surviving spouse is the Participant's sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this ss. 6.5(b)(2), other than ss. 6.5(b)(2)(i), will apply as if the surviving spouse were the Participant. For purposes of this ss. 6.5(b)(2) and 6.5(d), unless ss. 6.5 (b)(2)(iv) applies, distributions are considered to begin on the Participant's Required Beginning Date. If ss. 6.5(b)(2) (iv) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under ss. 6.5(b)(2)(i) . If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant's Required Beginning Date (or to the Participant's surviving spouse before the date distributions are required to begin to the surviving spouse under ss. 6.5(b)(2)(i), the date distributions are considered to begin is the date distributions actually commence. (3) Forms of Distribution. Unless the Participant's --------------------- interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year, distributions will be made in accordance with ss. 6.5(c) and ss. 6.5(d). If the Participant's interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of ss. 401(a)(9) of the Code and the Treasury regulations. (c) Required Minimum Distributions During Participant's Lifetime. ------------------------------------------------------------ (1) Amount of Required Minimum Distribution For Each ------------------------------------------------ Distribution Calendar Year. During the Participant's lifetime, the -------------------------- minimum amount that will be distributed for each Distribution Calendar Year is the lesser of: (i) the quotient obtained by dividing the Participant's Account Balance by the distribution period in the Uniform Lifetime Table set forth in ss. 1.401(a)(9)-9 of the Treasury regulations, using the Participant's age as of the Participant's birthday in the Distribution Calendar Year; or (ii) if the Participant's sole Designated Beneficiary for the Distribution Calendar Year is the Participant's spouse, the quotient obtained by dividing the Participant's Account Balance by the number in the Joint and Last Survivor Table set forth in ss. 1.401(a)(9)-9 of the Treasury regulations, using the Participant's and spouse's attained ages as of the Participant's and spouse's birthdays in the Distribution Calendar Year. (2) Lifetime Required Minimum Distributions Continue ------------------------------------------------ Through Year of Participant's Death. Required minimum distributions ----------------------------------- will be determined under this ss. 6.5(c) beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant's date of death. (d) Required Minimum Distributions After Participant's Death. -------------------------------------------------------- (1) Death On or After Date Distributions Begin. ------------------------------------------ (i) Participant Survived by Designated ---------------------------------- Beneficiary. If the Participant dies on or after the date ----------- distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant's Designated Beneficiary, determined as follows: (A) The Participant's remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. (B) If the Participant's surviving spouse is the Participant's sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant's death using the surviving spouse's age as of the spouse's birthday in that year. For Distribution Calendar Years after the year of the surviving spouse's death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse's birthday in the calendar year of the spouse's death, reduced by one for each subsequent calendar year. (C) If the Participant's surviving spouse is not the Participant's sole Designated Beneficiary, the Designated Beneficiary's remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant's death, reduced by one for each subsequent year. (ii) No Designated Beneficiary. If the ------------------------- Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant's death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the Participant's remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. (2) Death Before Date Distributions Begin. ------------------------------------- (i) Participant Survived by Designated ---------------------------------- Beneficiary. If the Participant dies before the date ----------- distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account Balance by the remaining Life Expectancy of the Participant's Designated Beneficiary, determined as provided in ss. 6.5(d)(1). (ii) No Designated Beneficiary. If the ------------------------- Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant's death, distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (iii) Death of Surviving Spouse Before -------------------------------- Distributions to Surviving Spouse Are Required to Begin. If ------------------------------------------------------- the Participant dies before the date distributions begin, the Participant's surviving spouse is the Participant's sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under ss. 6.5(b)(2), this ss. 6.5(d)(2) will apply as if the surviving spouse were the Participant. (e) Definitions. ----------- (1) Designated Beneficiary. The individual who is ---------------------- designated as the Beneficiary under ss. 5.3 of the Plan and is the Designated Beneficiary under ss. 401(a)(9) of the Code and ss. 1.401(a) (9)-1, Q&A-4, of the Treasury regulations. (2) Distribution Calendar Year. A calendar year for -------------------------- which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant's Required Beginning Date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under ss. 6.5(b)(2). The required minimum distribution for the Participant's first Distribution Calendar Year will be made on or before the Participant's Required Beginning Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant's Required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year. (3) Life Expectancy. Life Expectancy as computed by use --------------- of the Single Life Table inss. 1.401(a)(9)-9 of the Treasury regulations. (4) Participant's Account Balance. The Account balance ----------------------------- as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or Forfeitures allocated to the Account balance as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year. (5) Required Beginning Date. The date specified inss. ----------------------- 6.2(b) of the Plan. ss. 7. ADMINISTRATION -------------- 7.1. Plan Sponsor Powers and Duties. The Plan Sponsor shall have the --------------------------------- exclusive responsibility and complete discretionary authority to control the operation, management and administration of this Plan, with all powers necessary to enable it properly to carry out its duties in that respect, including but not limited to, the power to construe the terms of this Plan and the Trust Agreements, to determine status, coverage and eligibility for benefits, and to resolve all interpretative, equitable, and other questions that shall arise in the operation and administration of this Plan. The Plan Sponsor shall act through its Chief Executive Officer or his or her delegate. All actions and decisions of the Plan Sponsor on all matters within the scope of its authority shall be final, conclusive and binding on all persons. 7.2. Liquidity Requirements. The Plan Sponsor shall determine anticipated ----------------------- liquidity requirements to meet projected benefit payments for each calendar year and, if any adjustment from previous annual liquidity requirements is appropriate, the Plan Sponsor shall appropriately coordinate the Trustee's Fund investment policies with Plan needs. 7.3. Records. All records of this Plan, together with such other documents ------- as may be necessary for the administration of this Plan shall be maintained for at least six years in the custody of the Plan Sponsor. 7.4. Information from Others. The Plan Sponsor, the Trustee, and the ------------------------ officers and directors of each Company shall be entitled to rely upon all information and data contained in any certificate or report or other material prepared by any actuary, accountant, attorney or other consultant or adviser selected by the Plan Sponsor or the Trustee to perform services on behalf of this Plan or any Fund. ss.8. TRUST FUNDS AND TRUSTEE ----------------------- 8.1. Trust Funds. ----------- (a) General. The assets of this Plan shall be held in one or ------- more separate Funds, as determined by the Plan Sponsor. Each of the Funds shall be held and managed by the Trustee appointed by the Plan Sponsor pursuant to a separate Trust Agreement and may be invested up to 100% in the common stock of the Plan Sponsor, or any successor to the Plan Sponsor. No Participant's 401(k) Account or Contributory Account may be invested in the common stock of the Plan Sponsor. A Participant who is an Employee may exercise his or her right under ss. 8.1(b) to direct the investment of his or her Account through a Brokerage Account or in other individually directed investments underss. 8.1(c). The Plan Sponsor shall determine how assets of this Plan are to be allocated among the Funds and shall have the power to direct the Trustee of any Fund to transfer assets of such Fund to the Trustee of any other Fund or Funds. No Participant's Catch-Up Account may be invested in the common stock of the Plan Sponsor. (b) Brokerage Account. A Participant who desires to manage the ----------------- investment of his or her own Account may file a written election to do so with the Plan Sponsor, and the Plan Sponsor will direct the Trustee to establish a Brokerage Account on behalf of such Participant and to transfer the assets of his or her Account to such Brokerage Account as of the first day of the calendar month which follows the date the Plan Sponsor actually receives such Participant's election. The cash or other assets to be transferred to a Participant's Brokerage Account shall be determined underss. 6.3 as if the Participant's employment had terminated on the date the Plan Sponsor receives his or her election under thisss. 8.1(b). A Participant upon the establishment of his or her Brokerage Account shall be exclusively responsible for the management of the assets of such Brokerage Account subject to the following terms and conditions: (1) All investments shall be made through the broker designated by the Plan Sponsor as the broker for all Brokerage Accounts, (2) Investments shall be made only in securities which are ordinarily and customarily available through the brokerage firm which maintains the Brokerage Account, (3) No investment shall be made under any circumstances on "margin" or in any "naked" option, (4) Investments shall be made only if such investments will be shown on the standard monthly account statements prepared by the brokerage firm which maintains the Brokerage Account, and (5) The Participant agrees to such other terms and conditions as the Trustee, the Plan Sponsor and the brokerage firm (whether individually or collectively) shall establish from time to time for Brokerage Accounts. All transaction fees, commissions and any annual maintenance fee for a Participant's Brokerage Account will be paid directly from such Brokerage Account. If a Brokerage Account is maintained for a Participant and the Participant desires that the Trustee resume the management of his or her Account, a Participant can request the Plan Sponsor in writing that the Trustee does so, and the Plan Sponsor shall direct the Trustee to do so on the Valuation Date which first follows the date the Participant converts all of his or her investments in his or her Brokerage Account to cash[; provided, however, a Participant shall not have the right to make more than one such request in any 12 consecutive month period.] No part of an Adjustment shall be allocated to a Brokerage Account, but all investment gains and losses (whether realized or unrealized) from the investment of the assets of a Brokerage Account shall be allocated exclusively to such account as of each Valuation Date. Finally, if a Participant's employment terminates as an Employee (for any reason, including death) while he or she has a Brokerage Account, his or her Brokerage Account shall be payable under ss. 6 subject to the following special rules: (A) if such Participant's Account exceeds $5,000, and is fully vested, he or she shall have the right to maintain his or her Brokerage Account or to request a distribution of the assets of his or her Brokerage Account when his or her employment terminates, and (B) if such Participant's Account is less than $5,000, and is fully vested, he or she shall have the right to request a distribution of the assets of his or her Brokerage Account when his or her employment terminates but, if he or she fails to do so, the Plan Sponsor shall convert the assets in his or her Brokerage Account to cash, and (C) if his or her Account is less than fully vested, the Participant shall, within 20 days after the end of the calendar month in which his or her employment terminates, convert assets in his or her Brokerage Account to cash in an amount equal to no less than the dollar amount of the nonvested portion of his or her Company Account (as determined as of the end of such calendar month). If the Participant fails to convert sufficient assets in his or her Brokerage Account within such time period, the Plan Sponsor shall direct the Trustee to convert sufficient assets to cash by selling assets in such amounts and at such times as it determines in its sole discretion as necessary or appropriate to effectuate the Forfeiture of the Participant's nonvested Company Account. The Plan Sponsor thereafter shall direct the Trustee to transfer cash equal to the nonvested portion of the Participant's Account from his or her Brokerage Account to one or more of the funds described inss. 8.1(a) as soon as practicable after such cash is available in such Brokerage Account, and such transferred amounts shall remain in the Participant's Account until it becomes a Forfeiture under ss. 5.4(b). A Beneficiary of a Participant described in clause (A) above shall also have the right to maintain and direct the investment of a Brokerage Account. (c) Other Individually Directed Investments. The Plan Sponsor --------------------------------------- shall establish procedures to allow individuals to direct the investment of their Account. The Plan Sponsor as part of establishing any such procedures shall direct the Trustee to establish the investment alternatives designated by the Plan Sponsor and to accept directions to invest all or any specified portion of the individual's Account among such alternatives. The Plan Sponsor shall establish as part of such procedures such rules for effecting the investment elections as it deems necessary or appropriate, which rules shall be applied on a uniform and nondiscriminatory basis to all similarly situated individuals. Except as required under ERISA, neither a Company nor the Trustee shall be responsible for any investment decisions made by an individual with respect to his or her Account. If an individual fails to direct the investment of his or her Account, the Trustee shall assume the investment responsibility for such Account. (d) ERISA 404(c). To the extent that the Plan Sponsor chooses ------------ to do so, the Plan Sponsor may take advantage of any relief afforded to Plan fiduciaries under ERISAss. 404(c) and the related regulations. If Participants, Beneficiaries or alternate payees are permitted to direct the investment of their Accounts, the Plan Sponsor shall designate a fiduciary who shall implement such individuals' directions and shall determine the manner and frequency of investment instructions, any limitations on such instructions and such other procedures as may be necessary or appropriate to implement such individuals' directions or to satisfy the requirements of ERISAss. 404(c). Any such procedures may be amended or modified from time to time by the Plan Sponsor in its discretion and all such procedures and any amendments or modifications to such procedures are incorporated into and made a part of this Plan. 8.2. Notification to Trustee. Any action of the Plan Sponsor pursuant to ----------------------- any of the provisions of this Plan shall be communicated to the Trustee in accordance with such procedures as the Plan Sponsor deems appropriate under the circumstances. 8.3. Loans. ----- (a) Administration and Procedures. The Plan Sponsor shall ----------------------------- establish objective nondiscriminatory procedures for the administration of the loan program under this Plan and such procedures and any amendments to such procedures are incorporated by this reference as a part of this Plan. Such procedures shall include, but are not limited to: (1) the class of Participants and Beneficiaries who are eligible for a loan; (2) the identity of the person or position authorized to administer the loan program; (3) the procedures for applying for a loan; (4) the basis on which loans will be approved or denied; (5) the limitations, if any, on the types and amounts of loans offered; (6) the procedures for determining a reasonable rate of interest; (7) the types of collateral that may be used as security for a loan; and (8) the events constituting default and the steps that will be taken to preserve Plan assets in the event of such default. (b) General Statutory Requirements. All loans made under this ------------------------------ Plan will comply with the provisions ofss. 408(b)(1) of ERISA and shall (1) be made available to Participants and Beneficiaries who are eligible for a loan on a reasonably equivalent basis; (2) not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees; (3) be made in accordance with specific provisions regarding loans set forth in this Plan and the procedures described above; (4) bear a reasonable rate of interest; and (5) be adequately secured. (c) Other Conditions. All loans made under this Plan shall be ---------------- subject to the following additional conditions. (1) Principal and interest on the loan shall be repaid in substantially level installments with payments not less frequently than quarterly over a period of 5 years or less. However, if so provided in the loan procedures described above, the repayment period may exceed 5 years if the loan is classified as a "home loan" (as described in Code ss. 72(p)). (2) If the loan is secured by any portion of the Participant's Account, the Account balance shall not be reduced as a result of a default until a distributable event occurs under the Plan. (3) The Participant or Beneficiary must agree to any other terms and conditions required under the procedures described above. (4) In no event shall a Participant or Beneficiary have more than two loans outstanding under this Plan at any time. (d) Statutory Limitation on Amounts. The principal amount of any ------------------------------- loan to a Participant (when added to the outstanding principal balance of any outstanding loans made to the Participant under this Plan and all other plans maintained by a Company or an Affiliate that are tax exempt under Code ss. 401) may not exceed the lesser of: (1) $50,000 reduced by the excess, if any, of (A) the highest outstanding principal balance of previous loans to the Participant from the Plan (and all other plans described above) during the one year period ending immediately before the date the current loan is made, over (B) the current outstanding principal balance of those previous loans on the date the current loan is made; or (2) 50% of the vested interest in the Participant's Account at the time the loan is made. (e) Distributions. The vested Account balance actually payable to ------------- an individual who has an outstanding loan shall be determined by reducing the vested Account balance by the amount of the security interest in the Account (if any). The Trustee may cancel the Plan's security interest in the Account and distribute the note in full satisfaction of that portion of the Participant's Account equal to the outstanding balance of the loan or the amount that would have been outstanding but for a discharge in bankruptcy or through any other legal process. Notwithstanding anything to the contrary in this Plan or the loan procedures described above, in the event of default, foreclosure on the note and execution of the Plan's security interest in the Account shall not occur until a distributable event occurs under this Plan and interest shall continue to accrue only to the extent permissible under applicable law. ss.9. AMENDMENT, TERMINATION AND INDEMNIFICATION ------------------------------------------ 9.1. Amendment. The Plan Sponsor reserves the right at any time and from --------- time to time to amend this Plan in writing, provided that no amendment shall be made which would divert any of the assets of the Funds to any purpose other than the exclusive benefit of Participants and Beneficiaries unless such amendment is necessary to cause this Plan to continue to be exempt from income taxes under the Code. 9.2. Termination. The Plan Sponsor expects this Plan to be continued ----------- indefinitely but, of necessity, reserves the right to completely or partially terminate this Plan or to discontinue contributions at any time by action of the Board. If this Plan is completely or partially terminated under this ss. 9.2, or if the Plan Sponsor or a Company declares a permanent discontinuance of contributions to this Plan, the Company Account of each affected Participant who then is an Employee shall become fully vested on the date of such complete or partial termination or on the date of such declaration of discontinuance, as the case may be. In the case of such a complete termination of this Plan or such a permanent discontinuance of contributions, the Trustee shall liquidate Fund investments as necessary and distribute Accounts to Participants and Beneficiaries after the receipt of a favorable determination letter from the Internal Revenue Service respecting such termination or discontinuance. 9.3. Indemnification. Each Company (to the extent permissible under --------------- applicable law) shall indemnify each of its officers and Employees from and against any liability, assessment, loss, expense or other cost of any kind or description whatsoever, including legal fees and expenses, actually incurred by such person on account of any action or proceeding, actual or threatened, which arises as a result of his or her acting on behalf of a Company under this Plan, provided (1) such action or proceeding does not arise as a result of his or her own negligence, willful misconduct or lack of good faith and (2) such protection is not otherwise provided through insurance. ss. 10. MISCELLANEOUS ------------- 10.1. Headings and References. The headings and subheadings in this Plan ------------------------ have been inserted for convenience of reference only and are to be ignored in construction of the provisions of this Plan. All references to sections and subsections shall be to sections and subsections in this Plan unless otherwise set forth in this Plan. 10.2. Construction. In the construction of this Plan, the masculine shall ------------ include the feminine and the singular the plural in all cases where such meanings would be appropriate. This Plan shall be construed in accordance with the laws of the State of Georgia to the extent that such laws are not preempted by federal law. 10.3. Spendthrift Clause. Except to the extent permitted by law or ss. ------------------- 10.11, no Account, benefit, payment or distribution under this Plan shall be subject to the claim of any creditor of a Participant or Beneficiary, or to any legal process by any creditor of such person and no Participant or Beneficiary shall have any right to alienate, commute, anticipate, or assign (either at law or equity) all or any portion of his or her Account, benefit, payment or distribution under this Plan. 10.4. Legally Incompetent. The Plan Sponsor in its discretion shall direct ------------------- the Trustee to make payment on such direction directly to (i) an incompetent or disabled person, whether because of minority or mental or physical disability, (ii) to the guardian of such person or to the person having custody of such person, or (iii) to any person designated or authorized under any state statute to receive such payment on behalf of such incompetent or disabled person, without further liability either on the part of the Plan Sponsor or the Trustee for the amount of such payment to the person on whose account such payment is made. 10.5. Benefits Supported Only by Funds. Any person having any claim for any -------------------------------- benefit under this Plan shall (except to the extent required under ERISA) look solely and exclusively to the assets of the Funds for satisfaction. In no event will a Company or the Trustee, or any of its officers, members of its board of directors be liable to any person whomsoever for the payment of benefits under this Plan. 10.6. No Discrimination. The Plan Sponsor shall administer this Plan in a ------------------ uniform and consistent manner with respect to all Participants and Beneficiaries. 10.7. Claims. Any payment to a Participant or Beneficiary or to their legal ------ representative, or heirs-at-law, made in accordance with the provisions of this Plan shall to the extent of such payment be in full satisfaction of all claims under this Plan against the Trustee and each Company, either of whom may require such person, his or her legal representative or heirs-at-law, as a condition precedent to such payment, to execute a receipt and release therefor in such form as shall be determined by the Trustee or the Plan Sponsor, as the case may be. 10.8. Nonreversion. ------------ (a) Except as provided in ss. 10.8(b), no Company shall have any present or prospective right, claim, or interest in the Fund or in any Company Contribution made to the Trustee. (b) To the extent permitted by Code and ERISA, the Company Contributions, plus any earnings and less any losses on such contributions, shall be returned by the Trustee to a Company in the event that: (1) A Company Contribution is made by such Company by a mistake of fact, provided such return is effected within one year after the payment of such contribution; or (2) A deduction for a Company Contribution is disallowed under Code ss. 404, in which event such contribution shall be returned to the Company which made such contribution within one year after such disallowance, all contributions being hereby conditioned upon being deductible under Code ss. 404. The Trustee shall have no obligation or responsibility whatsoever to determine whether the return of any such Company Contribution is permissible under the Code or ERISA and shall be indemnified and held harmless by each Company for their actions in accordance with this ss. 10.8. 10.9. Merger or Consolidation. In the case of any merger or consolidation ------------------------ of this Plan with, or transfer of assets or liabilities of this Plan to, any other employee benefit plan, each person for whom an Account is maintained shall be entitled to receive a benefit from such other employee benefit plan, if it is then terminated, which is equal to or greater than the benefit such person would have been entitled to receive immediately before the merger, consolidation or transfer, if this Plan had been terminated. 10.10. Agent for Service of Process. The agent for service of process for ---------------------------- this Plan shall be the person currently listed in the records of the Secretary of State of Georgia as the agent for service of process for the Plan Sponsor. 10.11. Qualified Domestic Relations Order. In accordance with uniform and ----------------------------------- nondiscriminatory procedures established by the Plan Sponsor from time to time, the Plan Sponsor upon the receipt of a domestic relations order which seeks to require the distribution of a Participant's Account in whole or in part to an "alternate payee" (as that term is defined in Code ss. 414(p)(8)) shall (a) promptly notify the Participant and such "alternate payee" of the receipt of such order and of the procedure which the Plan Sponsor will follow to determine whether such order constitutes a "qualified domestic relations order" within the meaning of Code ss. 414(p), (b) determine whether such order constitutes a "qualified domestic relations order", notify the Participant and the "alternate payee" of the results of such determination and, if the Plan Sponsor determines that such order does constitute a "qualified domestic relations order", (c) direct the Trustee to transfer such amounts, if any, as the Plan Sponsor determines necessary or appropriate from the Participant's Account to a special Account for such "alternate payee", and (d) direct the Trustee to make such distribution to such "alternate payee" from such special Account as the Plan Sponsor deems called for under the terms of such order in accordance with Code ss. 414(p). An "alternate payee's" special Account shall be distributed in accordance with ss. 6 as if the "alternate payee" was a Beneficiary as soon as practicable after that Account has been established under this ss. 10.11, without regard to whether the date of such distribution is prior to the earliest date that a distribution could be made to a Participant under the terms of this Plan and prior to a Participant's "earliest retirement age" under Code ss. 414(p). An "alternate payee" shall have the right to designate (in the same manner as a Participant who has no spouse) a Beneficiary for the payment of his or her special Account in the event of the alternate payee's death before such special Account is paid. The determinations and the distributions made by, or at the direction of, the Plan Sponsor under this ss. 10.11 shall be final and binding on the Participant, the "alternate payee" and all other persons interested in such order. 10.12. Top Heavy Rules. --------------- (a) Determination. The Plan Sponsor as of each Determination ------------- Date shall determine the sum of the present value of the accrued benefits of Key Employees and the sum of the present value of the accrued benefits of all other Employees in accordance with the rules in Code ss. 416(g) or shall take such other action as the Plan Sponsor deems appropriate to conclude that no such determination is necessary under the circumstances. If the sum of the present value of the accrued benefits of Key Employees exceeds 60% of the sum of the present value of the accrued benefits of all Employees as of any Determination Date, this Plan shall be "top heavy" for the immediately following Plan Year. (b) Special Top Heavy Contribution. If the Plan Sponsor ------------------------------ determines that this Plan is top heavy for any Plan Year, a contribution shall be made for such Plan Year for each Participant who is a Non-Key Employee and who is employed by a Company on the last day of such Plan Year (regardless of such Participant's Hours of Service or compensation level for such Plan Year) which, when added to the Company Contribution actually credited to such Participant's Account for such Plan Year, equal to the lesser of (1) 3% of his or her W-2 Compensation for such Plan Year or (2) the largest percentage of Company Contributions and 401(k) Contributions allocated on behalf of any Key Employee (as expressed as a percentage of his or her W-2 Compensation) for such Plan Year. (c) Coordination. The contribution required for a Participant ------------ under this ss. 10.12, if any, shall not be made to the extent that the contribution made or the benefit accrued on behalf of such Participant under any other plan maintained by an Affiliate satisfies the minimum requirements of Code ss. 416(c). (d) Special Rules and Definitions. For purposes of this ss. ----------------------------- 10.12, the following special rules and definitions shall apply: (1) "Determination Date" means the last day of the immediately preceding Plan Year. (2) "Key Employee" means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the Plan Year containing the Determination Date or any of the four immediately preceding Plan Years was (i) an officer of a Company or an Affiliate whose W-2 Compensation for such Plan Year exceeds 50% of the dollar limitation under Codess. 415(b)(1)(A) for such Plan Year, (ii) an owner (or considered to be an owner within the meaning of Code ss. 318) of one of the 10 largest interests in a Company or an Affiliate whose W-2 Compensation for such Plan Year exceeds 100% of the dollar limitation under Code ss. 415(c)(1)(A); provided that the value of such ownership interest is more than one-half of one percent, (iii) a 5% owner of a Company or an Affiliate, or (iv) a 1% owner of a Company or an Affiliate whose W-2 Compensation for such Plan Year exceeds $150,000. For purposes of this ss. 10.12, a 1% owner or 5% owner shall be determined without regard to the aggregation rules under Code ss. 414(b), (c) and (m). (3) "Non-Key Employee" means any Employee or former Employee who is not a Key Employee, including any Employee who is a former Key Employee. (4) When two or more plans constitute an aggregation group in accordance with Code ss. 416(g)(2), the present value of the accrued benefits (including distributions) is determined separately for each plan as of each plan's determination date and the results for each plan as of the determination dates for such plans that fall within the same calendar year are added together to determine whether the aggregated plans are top heavy. (5) The value of any account balance and the present value of any accrued benefit shall include the value of any distributions made during the five year period ending on such determination date and any contributions due but as yet unpaid as of the determination date which are required to be taken into account on that date under Code ss. 416. (6) The account balance or accrued benefit of a Participant who is not a Key Employee for the current Plan Year but who was a Key Employee in a prior Plan Year or who has not performed an Hour of Service for a Company or any Affiliate at any time during the five year period ending on the Determination Date shall be disregarded. (e) Rules for the Plan After December 31, 2001. Section 13.5(e) ------------------------------------------ shall apply for purposes of determining whether the Plan is a top-heavy plan under Code ss. 416(g) for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirement of Code ss. 416(c) for such years. This ss. 10.12(e) amends ss.ss. 10.12(a) through (c) of the Plan to the extent required by applicable law. (1) Determination of Present Values and Amounts. ------------------------------------------- Paragraphs (i) and (ii) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of Employees as of the Determination Date. (i) Distributions During Year Ending on ----------------------------------- Determination Date. The present values of accrued benefits and ------------------ the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Codess.416(g)(2) during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Codess.416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "5-year period" for "1-year period." (ii) Employees Not Performing Service. The -------------------------------- accrued benefits and accounts of any individual who has not performed services for the Employer or an Affiliate during the 1-year period ending on the determination date shall not be taken into account. (2) Contributions Under Other Plans. The Plan Sponsor may ------------------------------- provide in the records of the Plan (or may amend the Plan to reflect) that the minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of Code ss. 401(k)(12) and matching contributions with respect to which the requirements of Code ss. 401(m)(11)). (3) Key employee. For purposes of this section, Key ------------ employee shall mean any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination date as an officer of the Employer having annual Compensation greater that $130,000 (as adjusted under Codess.416(i)(1) for Plan Years beginning after December 31, 2002), a five percent owner of the Employer, or a one percent owner of the Employer having annual Compensation of more than $150,000. For this purpose, annual Compensation means compensation within the meaning of Codess.415(c)(3). The determination of who is a Key employee will be made in accordance with Codess.416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder. 10.13. Special Multiple Employer Plan Rules. ------------------------------------ (a) Contributions and Forfeitures. If this Plan is a Multiple ------------------------------- Employer Plan, no Company Contributions made by one Company under the Plan shall be allocated either directly or as Forfeitures to Participants employed by any other Company. (b) Participant Transfers. If this Plan is a Multiple Employer --------------------- Plan and a Participant employed by one Company transfers employment to another Company during a Plan Year, he or she shall be treated under this Plan as if there had been no interruption in his or her employment. Such Participant shall continue to participate in this Plan and be eligible to receive an allocation of Company Contributions for such Plan Year from each Company based on his or her Compensation from each Company in such Plan Year (provided he or she otherwise meets the requirements under ss. 4.4(c)). (c) 415 Suspense Account. If this Plan is a Multiple Employer -------------------- Plan and the Plan Sponsor transfers any unallocable amounts to a suspense account pursuant to ss. 4.5(a)(3), separate suspense accounts shall be maintained with respect to such amounts attributable to each Company. (d) Limitations and Testing. If this Plan is a Multiple ----------------------- Employer Plan, the Code ss. 415 limitations under ss. 4.5(a), the 401(k) Contribution limitations under ss. 4.5(c), the top-heavy rules under ss. 10.12, the compensation limit under Code ss. 401(a)(17), the highly compensated employee determination under Code ss. 414(q) , and the nondiscrimination tests under Code ss. 401(a)(4) and ss. 410(b) shall be separately applied to each Employer that participates in this Plan for each Plan Year unless otherwise permitted under applicable law. (e) Years of Service. If this Plan is a Multiple Employer Plan, ---------------- all an Employee's years of service with each Company (and its Affiliates) shall (subject to ss. 5.4(c)(3)) be taken into account for determining his or her vested percentage under ss. 5.4(b). (f) Benefit Payments. If this Plan is a Multiple Employer Plan, ---------------- all of this Plan's assets shall be available on an ongoing basis to pay benefits to all Participants and Beneficiaries under this Plan. 10.14. Permitted Offsets. A Participant's benefits provided under the Plan ----------------- may be offset by an amount that the Participant is ordered or required to pay to the Plan if; (a) The order or requirement to repay arises (i) under a judgment for a conviction for a crime involving such plan, (ii) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of Title I of ERISA, or (ii) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person, and (b) The judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant's benefits provided under the Plan. IN WITNESS WHEREOF, the Plan Sponsor has caused this Plan to be executed by its duly authorized officers and its seal to be affixed to this Plan this 12th day of December, 2002. COUSINS PROPERTIES INCORPORATED (CORPORATE SEAL) By: /s/ Thomas D. Bell ---------------------------------------- Title: President, Chief Executive Officer and Vice Chairman of the Board ATTEST: By: /s/ James A. Fleming ---------------------------------------- Title: Senior Vice President and General Counsel ACKNOWLEDGMENT BY PARTICIPATING COMPANIES. To acknowledge its acceptance of this amended and restated Plan, each Company has caused this Plan to be executed by its duly authorized officers and its seal to be affixed to this Plan. COUSINS REAL ESTATE CORPORATION (CORPORATE SEAL) By: s/s Thomas D. Bell ---------------------------------------- Title: President, Chief Executive Officer and Vice Chairman of the Board Date: December 12, 2002 ATTEST: By: /s/ James A. Fleming ----------------------------------------------- Title: Senior Vice President and General Counsel CREC II (CORPORATE SEAL) By: /s/ Thomas D. Bell ---------------------------------------- Title: President, Chief Executive Officer and Vice Chairman of the Board Date: December 12, 2002 ATTEST: By: /s/ James A. Fleming ----------------------------------------------- Title: Senior Vice President and General Counsel COUSINS PROPERTIES SERVICES L.P. By: Cousins Properties Services, Inc., its General Partner (CORPORATE SEAL) By: s/s Thomas D. Bell ---------------------------------------- Title: President, Chief Executive Officer and Vice Chairman of the Board Date: December 12, 2002 ATTEST: By: /s/ James A. Fleming - ------------------------------------------------- Title: Senior Vice President and General Counsel NEW LAND REALTY, LLC By: Cousins Real Estate Corporation, its sole member (CORPORATE SEAL) By: /s/ Thomas D. Bell ---------------------------------------- Title: President, Chief Executive Officer and Vice Chairman of the Board Date: December 12, 2002 ATTEST: By: /s/ James A. Fleming ---------------------------------------------- Title: Senior Vice President and General Counsel EX-10 4 ex10d-02.txt EXHIBIT 10(D) EXHIBIT 10(d) COUSINS PROPERTIES INCORPORATED STOCK PLAN FOR OUTSIDE DIRECTORS AS AMENDED AND RESTATED TABLE OF CONTENTS Page SECTION 1. PURPOSE................................................B-1 SECTION 2. DEFINITIONS............................................B-1 2.1 CPI....................................................B-1 2.2 Board..................................................B-1 2.3 Effective Date.........................................B-1 2.4 Executive Stock Plan...................................B-1 2.5 Issuance Date..........................................B-1 2.6 Market Price...........................................B-1 2.7 Old Plan...............................................B-1 2.8 Outside Director.......................................B-1 2.9 Plan...................................................B-2 2.10 Restricted Stock.......................................B-2 2.11 Rule 16b-3.............................................B-2 2.12 Stock ................................................B-2 SECTION 3. AVAILABLE SHARES.......................................B-2 SECTION 4. STOCK IN LIEU OF CASH..................................B-2 4.1 Election...............................................B-2 4.2 Election and Election Revocation Procedure.............B-3 4.3 Number of Shares.......................................B-3 4.4 Insufficient Shares....................................B-3 4.5 Restriction on Shares..................................B-3 SECTION 5. STOCK OPTIONS..........................................B-3 5.1 General................................................B-3 5.2 Terms and Conditions...................................B-4 5.3 Minimum Terms and Conditions...........................B-4 5.4 Payment................................................B-4 SECTION 6. RESTRICTED STOCK.......................................B-4 6.1 General................................................B-4 6.2 Conditions.............................................B-4 6.3 Dividend and Voting Rights.............................B-5 6.4 Nonforfeitable Stock...................................B-5 SECTION 7. NO TRANSFER............................................B-5 SECTION 8. OLD PLAN...............................................B-6 SECTION 9. MISCELLANEOUS..........................................B-6 9.1 References.............................................B-6 9.2 Construction...........................................B-6 9.3 Stock Transfer.........................................B-6 9.4 Source of Stock........................................B-6 9.5 Adjustment.............................................B-6 9.6 Change in Control or Sale of Assets....................B-6 9.7 Amendment..............................................B-7 9.8 Termination............................................B-7 SECTION 1. PURPOSE The primary purpose of this Plan is to attract and retain well qualified individuals as Outside Directors of CPI by (1) granting Outside Directors the right to elect to receive compensation in Stock in lieu of cash and (2) providing for grants of options to purchase Stock and grants of shares of Restricted Stock. This Plan is an amendment and restatement of the Cousins Properties Incorporated Stock Plan for Outside Directors. SECTION 2. DEFINITIONS 2.1. CPI -- means Cousins Properties Incorporated and any successor to such corporation. 2.2. Board -- means the Board of Directors of CPI. 2.3. Effective Date -- means August 27, 1996. 2.4. Executive Stock Plan -- means the Cousins Properties Incorporated 1995 Stock Incentive Plan, as amended, and any successor to such plan. 2.5. Issuance Date -- means (i) with respect to shares of Stock to be issued for fees earned on the date of a regular quarterly Board meeting, the date of such meeting and (ii) with respect to shares of Stock to be issued for fees earned between regular quarterly Board meetings, the date of the next regular Board meeting. 2.6. Market Price -- means the average between the high and the low price for a share of Stock as reported for a day on the national securities exchange on which Stock is actively traded, as such prices are accurately reported in The Wall Street Journal or, if there is no such report for such day, as such prices as so reported for the last business day before such day. 2.7. Old Plan -- means the Cousins Properties Incorporated Stock Plan for Outside Directors as in effect immediately before the Effective Date. 2.8. Outside Director -- means a member of the Board who performs no services whatsoever for CPI as a common law employee of CPI. 2.9. Plan -- means this Cousins Properties Incorporated Stock Plan for Outside Directors, as first effective on the Effective Date and as thereafter as amended from time to time. 2.10. Restricted Stock -- means a share of Stock granted to an Outside Director subject to such conditions, if any, as the Board deems appropriate under the circumstances. 2.11. Rule 16b-3 -- means the exemption under Rule 16b-3 to Section 16b of the Securities Exchange Act of 1934, as amended, or any successor to such rule. 2.12. Stock -- means the $1.00 par value common stock of CPI. SECTION 3. AVAILABLE SHARES There shall be 350,000 shares of Stock made available for payments, options and Restricted Stock grants to Outside Directors under this Plan, which number of shares of Stock shall include the number of shares which remain available for payments under the Old Plan immediately before the Effective Date. SECTION 4. STOCK IN LIEU OF CASH 4.1. Election. Each Outside Director shall have the right on or after the Effective Date to elect (in accordance with Section 4.2) to receive Stock in lieu of cash as part of his or her compensation package with respect to all or a specific percentage of: (a) any installment of his or her annual cash retainer fee as an Outside Director; (b) any fee payable in cash to him or to her for attending a meeting of the Board or a committee of the Board; and (c) any fee payable in cash to him or to her for serving as the chairperson of a committee of the Board. Any election to receive Stock in lieu of cash which was in effect under the Old Plan immediately before the Effective Date shall remain in effect under this Plan until revoked under Section 4.2. 4.2. Election and Election Revocation Procedure. An election by an Outside Director under Section 4.1 to receive Stock in lieu of cash shall be made in writing and shall be effective as of the date the Outside Director delivers such election to the Secretary of CPI. An election may apply to one, or more than one, cash payment described in Section 4.1. After an Outside Director has made an election under this Section 4.2, he or she may elect to revoke such election or may elect to revoke such election and make a new election. Any such subsequent election shall be made in writing and shall be effective as of the date the Outside Director delivers such election to the Secretary of CPI. There shall be no limit on the number of elections which an Outside Director can make under this Section 4.2. 4.3. Number of Shares. The number of shares of Stock which an Outside Director shall receive in lieu of any cash payment shall be determined by CPI by dividing the amount of the cash payment which the Outside Director has elected under Section 4.1 to receive in the form of Stock by 95% of the Market Price of a share of Stock on the Issuance Date, and by rounding down to the nearest whole share of Stock. Such shares shall be issued to the Outside Director as of the Issuance Date. 4.4. Insufficient Shares. If the number of shares of Stock available under this Plan is insufficient as of any date to issue the Stock called for under Section 4.3, CPI shall issue Stock under Section 4.3 to each Outside Director based on a fraction of the then available shares of Stock, the numerator of which fraction shall equal the amount of the cash payment to the Outside Director on which the issuance of such Stock was to be based under Section 4.1 and the denominator of which shall equal the amount of the total cash payments to all Outside Directors on which the issuance of such Stock was to be based under Section 4.1. All elections made under this Section 4 thereafter shall be null and void, and no further Stock shall be issued under this Plan with respect to any such elections. 4.5 Restriction on Shares. CPI shall have the right to issue the shares of Stock which an Outside Director shall receive in lieu of any cash payment subject to a restriction that the Outside Director have no right to transfer such Stock (except to the extent permissible under Rule 16b-3) for the six month period which starts on the date the Stock is issued or to take such other action as CPI deems necessary or appropriate to make sure that the Outside Director satisfies the applicable holding period requirement, if any, set forth in Rule 16b-3. SECTION 5. STOCK OPTIONS 5.1. General. The Board as part of an Outside Director's compensation package may grant options to purchase Stock to such Outside Director. 5.2. Terms and Conditions. Each option granted under this Plan shall be evidenced by an option certificate which shall set forth the specific terms and conditions, if any, under which such option has been granted in addition to the minimum terms and conditions set forth in Section 5.3. 5.3. Minimum Terms and Conditions. (a) The option price for a share of Stock subject to an option shall be no less than the Market Price for a share of Stock on the date the option is granted. (b) No Outside Director shall have the right to exercise an option until after the end of the six month period which begins on the date the option is granted. (c) Each option shall expire no later than the tenth anniversary of the date the option is granted. 5.4. Payment. The option price for a share of Stock shall be payable in full upon the exercise of any option, and an Outside Director may pay the option price either in cash or in Stock which has been held by the Outside Director for at least six months or in any combination of cash and such Stock. If the option price is paid in whole or in part in Stock, such payment shall be made in Stock acceptable to the Board, and any such payment shall be treated as equal to the Market Price of a share of Stock on the date the properly endorsed certificate for such Stock is delivered to the Secretary of CPI. SECTION 6. RESTRICTED STOCK 6.1. General. The Board as part of an Outside Director's compensation package may grant Restricted Stock to such Outside Director. Each Restricted Stock grant shall be evidenced by a Restricted Stock certificate, and each such certificate shall set forth the conditions, if any, under which the Stock will be issued in the name of the Outside Director and the conditions, if any, under which the Outside Director's interest in such Stock will become nonforfeitable. 6.2. Conditions. (a) Issuance. The Board acting in its absolute discretion may -------- make the issuance of Restricted Stock in the name of an Outside Director subject to one, or more than one, condition which the Board deems appropriate under the circumstances, and the shares of Restricted Stock subject to a Restricted Stock grant shall be issued by CPI in the name of the Outside Director only after the Board determines that each such condition, if any, has been satisfied. (b) Forfeiture. The Board acting in its absolute discretion ---------- may make Restricted Stock issued in the name of an Outside Director subject to one, or more than one, forfeiture condition which the Board deems appropriate under the circumstances, and any Stock issued in the name of an Outside Director shall be forfeited unless the Board determines that each such forfeiture condition, if any, has been satisfied. 6.3. Dividend and Voting Rights. Each Restricted Stock certificate shall specify what rights, if any, an Outside Director shall have with respect to the Restricted Stock issued in his or her name pending the forfeiture of such Restricted Stock or the lapse of each forfeiture condition, if any, with respect to such Stock. 6.4 Nonforfeitable Stock. A share of Stock issued in the name of an Outside Director shall cease to be Restricted Stock at such time as the Outside Director's interest in such Stock becomes nonforfeitable, and the certificate representing such share shall be released by CPI and transferred to the Outside Director as soon as practicable thereafter. However, if a share of Restricted Stock is issued and is nonforfeitable before the end of the six month period which starts on the date the Restricted Stock is granted to an Outside Director, CPI shall have the right to issue such Stock subject to a restriction that the Outside Director hold such Stock for the remainder of such six month period or to take such other action as CPI deems necessary or appropriate to make sure that the Outside Director satisfies the applicable holding period requirement, if any, set forth in Rule 16b-3. SECTION 7. NO TRANSFER No Outside Director shall have the right to transfer any option granted to him or to her under this Plan, or to transfer any Restricted Stock before such Stock has become nonforfeitable, other than by will or by the laws of the descent and distribution. An option shall be exercisable during an Outside Director's lifetime only by the Outside Director. The person or persons to whom an option or Restricted Stock is transferred by will or by the laws of descent and distribution after the death of an Outside Director thereafter shall be subject to the terms and conditions of this Plan and the related certificates. SECTION 8. OLD PLAN Each option granted under Section 5 and each Restricted Stock grant made under Section 6 shall be granted or made subject to the approval of this Plan by CPI's shareholders. However, each election under Section 4 to receive Stock in lieu of cash shall be effective prior to such shareholder approval to the extent such election would have been permissible under the Old Plan. If CPI's shareholders fail to approve this Plan, the Old Plan shall remain in full force and effect. SECTION 9. MISCELLANEOUS 9.1. References. All references made to sections under this Plan shall be to sections of this Plan. 9.2. Construction. The headings and sub-headings in this Plan have been included for convenience of reference only. This Plan shall be construed in accordance with the laws of the State of Georgia. 9.3. Stock Transfer. If any Stock issued under this Plan has not been registered under the Securities Act of 1933, as amended, or any applicable state securities law at the time such Stock is issued, CPI shall have the right as a condition to the issuance of such Stock to require the Outside Director to make such representations or take such other or additional action to satisfy any requirements of, or any exemptions to, any applicable state or federal securities laws respecting such issuance as CPI deems necessary or appropriate under the circumstances, and no such issuance shall be made under this Plan until such condition or conditions have been satisfied to CPI's satisfaction in full. 9.4. Source of Stock. Stock issued under this Plan may (at CPI's discretion) be issued from treasury Stock or from authorized but unissued Stock. 9.5. Adjustment. The Board shall have the right to adjust the number of shares of Stock subject to an option and the related option price, or adjust the number of shares of Restricted Stock subject to grants, under the same circumstances, terms and conditions that adjustments can be made under the Executive Stock Plan. 9.6. Change in Control or Sale of Assets. If the Board determines that there will be a change in control of CPI or any form of disposition of CPI or a sale of substantially all of CPI's assets, the Board shall have the right to waive any conditions in the exercise of any outstanding options granted under this Plan and to waive any and all issuance and forfeiture conditions on Restricted Stock. Any such determination shall be based on the same factors taken into account under the Executive Stock Plan under such circumstances. 9.7. Amendment. The Board may amend this Plan from time to time; provided, no such amendment shall become effective absent the approval of CPI's shareholders to the extent such approval is required under Rule 16b-3, under the rules of the stock exchange on which Stock is then actively traded or under applicable law. 9.8. Termination. The Board shall have the right to terminate this Plan at any time and, if deemed fair and appropriate under the circumstances, to cancel all then outstanding options and Restricted Stock grants as part of such termination. IN WITNESS WHEREOF, CPI has caused its President to execute this Plan on its behalf this ________ day of _____________, 1996. COUSINS PROPERTIES INCORPORATED By:________________________________ President EX-13 5 ar2002.txt ANNUAL REPORT Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- ($ in thousands, except share and per share amounts) December 31, ------------------------ 2002 2001 ---------- ---------- ASSETS - ------ PROPERTIES: Operating properties, net of accumulated depreciation of $155,100 in 2002 and $105,795 in 2001 $ 757,329 $ 764,810 Operating property held for sale, net of accumulated depreciation of $244 in 2001 -- 6,309 Land held for investment or future development 16,632 15,294 Projects under construction 171,135 140,833 Residential lots under development 20,100 12,520 ------------------------ Total Properties 965,196 939,766 CASH AND CASH EQUIVALENTS, at cost, which approximates market 9,471 10,556 NOTES AND OTHER RECEIVABLES 50,607 44,533 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 185,516 185,397 OTHER ASSETS, including goodwill of $15,612 in 2002 and 2001 37,287 36,377 ------------------------ TOTAL ASSETS $1,248,077 $1,216,629 ======================== LIABILITIES AND STOCKHOLDERS' INVESTMENT - ---------------------------------------- NOTES PAYABLE $ 669,792 $ 585,275 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 35,445 31,762 DEPOSITS AND DEFERRED INCOME 3,429 2,422 ------------------------ TOTAL LIABILITIES 708,666 619,459 ------------------------ DEFERRED GAIN 103,568 107,676 ------------------------ MINORITY INTERESTS 26,959 26,821 ------------------------ COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) STOCKHOLDERS' INVESTMENT: Common stock, $1 par value; authorized 150,000,000 shares, issued 50,843,835 in 2002 and 50,106,110 in 2001 50,844 50,106 Additional paid-in capital 288,172 276,268 Treasury stock at cost, 2,457,482 shares in 2002 and 681,000 shares in 2001 (59,356) (17,465) Unearned compensation (2,647) (3,580) Cumulative undistributed net income 131,871 157,344 ------------------------ TOTAL STOCKHOLDERS' INVESTMENT 408,884 462,673 ------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $1,248,077 $1,216,629 ========================= See notes to consolidated financial statements. Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF INCOME - -------------------------------------------------------------------------------- ($ in thousands, except share and per share amounts) Years Ended December 31, ------------------------------ 2002 2001 2000 -------- -------- -------- REVENUES: Rental property revenues $168,046 $144,754 $113,825 Development income 4,625 6,179 4,251 Management fees 9,313 7,966 4,841 Leasing and other fees 4,297 5,344 1,608 Residential lot and outparcel sales 9,126 6,682 13,951 Interest and other 4,393 6,061 5,995 ------------------------------ 199,800 176,986 144,471 ------------------------------ INCOME FROM UNCONSOLIDATED JOINT VENTURES 26,670 22,897 19,452 ------------------------------ COSTS AND EXPENSES: Rental property operating expenses 49,015 43,826 33,379 General and administrative expenses 27,670 27,010 18,452 Depreciation and amortization 54,248 44,453 32,742 Stock appreciation right expense (credit) 29 (276) 468 Residential lot and outparcel cost of sales 7,309 5,910 11,684 Interest expense 37,423 27,610 13,596 Property taxes on undeveloped land 675 619 40 Other 4,857 4,324 4,086 ------------------------------ 181,226 153,476 114,447 ------------------------------ INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 45,244 46,407 49,476 PROVISION (BENEFIT) FOR INCOME TAXES FROM OPERATIONS 1,526 (691) (1,145) ------------------------------ INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES 43,718 47,098 50,621 GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION 6,254 23,496 11,937 ------------------------------ INCOME FROM CONTINUING OPERATIONS 49,972 70,594 62,558 ------------------------------ DISCONTINUED OPERATIONS, NET OF APPLICABLE INCOME TAX PROVISION: Income from discontinued operations 227 221 51 Gain on sale of investment property 1,174 -- -- ------------------------------ 1,401 221 51 ------------------------------ EXTRAORDINARY LOSS (3,501) -- -- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- -- (566) ------------------------------ NET INCOME $ 47,872 $ 70,815 $ 62,043 ============================== BASIC NET INCOME PER SHARE: Income from continuing operations $ 1.01 $ 1.43 $ 1.29 Discontinued operations .03 .01 -- Extraordinary loss (.07) -- -- Cumulative effect of change in accounting principle -- -- (0.01) ------------------------------ Basic net income per share $ .97 $ 1.44 $ 1.28 ============================== DILUTED NET INCOME PER SHARE: Income from continuing operations $ 1.00 $ 1.40 $ 1.26 Discontinued operations .03 .01 -- Extraordinary loss (.07) -- -- Cumulative effect of change in accounting principle -- -- (0.01) ------------------------------ Diluted net income per share $ .96 $ 1.41 $ 1.25 ============================== CASH DIVIDENDS DECLARED PER SHARE $ 1.48 $ 1.39 $ 1.24 ============================== WEIGHTED AVERAGE SHARES 49,252 49,205 48,632 ============================== DILUTED WEIGHTED AVERAGE SHARES 49,937 50,280 49,731 ============================== See notes to consolidated financial statements.
Cousins Properties Incorporated and Consolidated Entities - ----------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT Years Ended December 31, 2002, 2001 and 2000 ($ in thousands) Additional Cumulative Common Paid-In Treasury Unearned Undistributed Stock Capital Stock Compensation Net Income Total -------- -------- -------- ------------ ------------- ------- BALANCE, December 31, 1999 $48,415 $240,901 $ (4,990) $ -- $153,396 $437,722 Net income, 2000 -- -- -- -- 62,043 62,043 Common stock issued pursuant to: Exercise of options and director stock plan 195 727 -- -- -- 922 Dividend reinvestment plan 489 11,436 -- -- -- 11,925 Stock grant 265 6,595 -- (4,690) -- 2,170 Dividends declared -- -- -- -- (60,315) (60,315) --------------------------------------------------------------------------------- BALANCE, December 31, 2000 49,364 259,659 (4,990) (4,690) 155,124 454,467 Net income, 2001 -- -- -- -- 70,815 70,815 Common stock issued pursuant to: Exercise of options and director stock plan 162 3,339 -- -- -- 3,501 Dividend reinvestment plan 578 13,299 -- -- -- 13,877 Stock grant and related amortization, net of forfeitures 2 (29) -- 1,110 -- 1,083 Dividends declared -- -- -- -- (68,595) (68,595) Purchase of treasury stock -- -- (12,475) -- -- (12,475) --------------------------------------------------------------------------------- BALANCE, December 31, 2001 50,106 276,268 (17,465) (3,580) 157,344 462,673 Net income, 2002 -- -- -- -- 47,872 47,872 Common stock issued pursuant to: Exercise of options and director stock plan 750 12,234 -- -- -- 12,984 Stock grant and related amortization, net of forfeitures (12) (330) -- 933 -- 591 Dividends declared -- -- -- -- (73,345) (73,345) Purchase of treasury stock -- -- (41,891) -- -- (41,891) --------------------------------------------------------------------------------- BALANCE, December 31, 2002 $50,844 $288,172 $(59,356) $(2,647) $131,871 $408,884 ================================================================================= See notes to consolidated financial statements.
Cousins Properties Incorporated and Consolidated Entities CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------------------------------------------------- ($ in thousands) Years Ended December 31, ------------------------------- 2002 2001 2000 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations before gain on sale of investment properties $ 43,718 $ 47,098 $ 50,621 Adjustments to reconcile income from continuing operations before gain on sale of investment properties to net cash provided by operating activities: Depreciation and amortization, net of minority interest's share 54,248 44,357 31,480 Amortization of unearned compensation 591 1,019 -- Stock appreciation right expense (credit) 29 (276) 468 Cash charges to expense accrual for stock appreciation rights (347) (975) (536) Effect of recognizing rental revenues on a straight-line basis (2,137) (2,380) (2,111) Residential lot and outparcel cost of sales 5,715 4,445 10,576 Changes in other operating assets and liabilities: Change in other receivables (2,634) 2,042 (2,763) Change in accounts payable and accrued liabilities 3,562 (5,159) 2,692 ------------------------------- Net cash provided by operating activities of continuing operations 102,745 90,171 90,427 ------------------------------- Net cash provided by operating activities of discontinued operations 366 420 93 ------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Gain on sale of investment properties, net of applicable income tax provision 7,428 23,496 11,937 Adjustments to reconcile gain on sale of investment properties to net cash provided by sales activities: Cost of sales 6,118 36,253 17,510 Deferred income recognized (4,104) (4,126) (4,112) Non-cash gain on disposition of leasehold interests -- (236) -- Property acquisition and development expenditures (87,988) (140,346) (215,958) Distributions in excess of income from unconsolidated joint ventures 9,366 22,081 13,086 Investment in unconsolidated joint ventures, including interest capitalized to equity investments (9,485) (44,030) (36,820) Investment in notes receivable (1,308) (1,308) (1,214) Collection of notes receivable 5 2,916 2,742 Change in other assets, net (2,992) (9,839) (4,998) Net cash paid in acquisition of a business -- (2,126) -- ------------------------------- Net cash used in investing activities (82,960) (117,265) (217,827) ------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of credit facility (246,362) (318,510) (287,711) Proceeds from credit facility 251,703 298,030 331,356 Common stock sold, net of expenses 12,984 16,414 15,017 Common stock repurchases (41,891) (12,475) -- Dividends paid (73,345) (68,595) (60,315) Proceeds from other notes payable 152,843 126,500 154,500 Repayment of other notes payable (73,667) (5,830) (25,317) Extraordinary loss (3,501) -- -- ------------------------------- Net cash (used in) provided by financing activities (21,236) 35,534 127,530 ------------------------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,085) 8,860 223 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,556 1,696 1,473 ------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,471 $ 10,556 $ 1,696 =============================== See notes to consolidated financial statements.
Cousins Properties Incorporated and Consolidated Entities NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- December 31, 2002, 2001 and 2000 1. SIGNIFICANT ACCOUNTING POLICIES Consolidation and Presentation: The Consolidated Financial Statements include the accounts of Cousins Properties Incorporated ("Cousins"), its majority-owned partnerships and wholly-owned subsidiaries, Cousins Real Estate Corporation ("CREC") and its subsidiaries and CREC II Inc. ("CREC II") and its subsidiaries. Information regarding CREC and CREC II is included in Note 2. All of the entities included in the Consolidated Financial Statements are hereinafter referred to collectively as the "Company." The Company's investments in its non-majority-owned and/or non-controlled joint ventures are recorded using the equity method of accounting. Information regarding the non-majority-owned and/or non-controlled joint ventures is included in Note 5. Income Taxes: Since 1987, Cousins has elected to be taxed as a real estate investment trust ("REIT"). As a REIT, Cousins is not subject to corporate federal income taxes to the extent that it distributes 100% of its taxable income (excluding the consolidated taxable income of CREC and its wholly-owned subsidiaries and CREC II and its wholly-owned subsidiaries) to stockholders, which is Cousins' current intention. The Company computes taxable income on a basis different from that used for financial reporting purposes (see Note 7). CREC and its wholly-owned subsidiaries and CREC II and its wholly-owned subsidiaries each file a consolidated federal income tax return. Depreciation and Amortization: Real estate assets are stated at depreciated cost. Buildings are depreciated over 30 years. Buildings that were acquired are depreciated over 15, 25 or 30 years. Furniture, fixtures and equipment are depreciated over three to five years. Tenant improvements, leasing costs and leasehold improvements are amortized over the life of the applicable leases or the estimated useful life of the assets, whichever is shorter. Deferred expenses are amortized over the period of estimated benefit. The straight-line method is used for all depreciation and amortization. Long-Lived Assets: Long-lived assets include property, goodwill and other assets which are held and used by an entity. Effective January 1, 2002, the Company values its long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144. The carrying value of long-lived assets is periodically reviewed by management, and impairment losses, if any, are recognized when the expected undiscounted future operating cash flows derived from such assets are less than their carrying value. Management believes no such impairments have occurred during any of the periods presented. See "Recent Accounting Pronouncements" for a further discussion of SFAS No. 144. Fee Income and Cost Capitalization: Development, construction and leasing fees received from unconsolidated joint ventures and related salaries and other direct costs incurred by the Company are recognized as income and expense based on the percentage of the joint venture which the Company does not own. Correspondingly, investment in unconsolidated joint ventures is adjusted for these fees and related costs based on the percentage of the unconsolidated joint venture which the Company owns. Management fees received from unconsolidated joint ventures are recognized as earned. The Company expenses salaries and other direct costs related to these management fees. Development, construction, and leasing fees between consolidated entities are eliminated in consolidation. These fees totaled $2,784,000, $2,585,000 and $3,048,000 in 2002, 2001 and 2000, respectively. Management fees received from consolidated entities are eliminated in consolidation, and related salaries and other direct costs are reflected in rental property operating expenses. Costs related to planning, developing, leasing and constructing a property (including related general and administrative expenses) are capitalized to the basis of the property. Interest, real estate taxes and operating expenses of properties are also capitalized from the date a project receives its certificate of occupancy and for one year thereafter based on the percentage of the project available for occupancy. Interest is capitalized to investments accounted for by the equity method when the investee has property under development with a carrying value in excess of the investee's borrowings. Deferred leasing and other capitalized costs associated with a particular property are classified with Properties in the Consolidated Balance Sheets. Stock-Based Employee Compensation: The Company has several stock-based employee compensation plans which are described fully in Note 6. The Company has elected to account for its plans under Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," which requires the recording of compensation expense for some, but not all, stock-based compensation, rather than the alternative accounting permitted by SFAS No. 123, "Accounting for Stock-Based Compensation." No stock-based employee compensation cost is reflected in net income for options granted under the plans, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. Stock-based employee compensation cost is reflected in net income for stock appreciation rights ("SARs") and restricted stock grants issued under the plans. For purposes of the pro forma disclosures required by SFAS No. 123, the Company has computed the value of all stock awards and stock options granted during 2002, 2001 and 2000 using the Black-Scholes option pricing model with the following weighted average assumptions and results: 2002 2001 2000 ----- ----- ----- Assumptions - ----------- Risk-free interest rate 4.51% 4.70% 5.33% Assumed dividend yield 6.12% 5.97% 4.91% Assumed lives of option awards 8 years 8 years 8 years Assumed volatility 0.192 0.197 0.202 Results - ------- Weighted average fair value of options granted $2.33 $2.62 $4.20 The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions. In the Company's opinion, because the Company's stock-based compensation awards have characteristics significantly different from traded options and because changes in the subjective assumptions can materially affect the fair value estimate, the results obtained from the valuation model do not necessarily provide a reliable single measure of the value of its stock-based compensation awards. If the Company had accounted for its stock-based compensation awards in 2002, 2001 and 2000 in accordance with SFAS No. 123, pro forma results would have been as follows ($ in thousands, except per share amounts): 2002 2001 2000 ------- ------- ------ Net income, as reported $47,872 $70,815 $62,043 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 607 1,055 1,180 Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects (3,040) (3,393) (2,780) ------------------------- Pro forma net income $45,439 $68,477 $60,443 ========================= Net income per share: Basic - as reported $ .97 $ 1.44 $ 1.28 ========================= Basic - pro forma $ .92 $ 1.39 $ 1.24 ========================= Diluted - as reported $ .96 $ 1.41 $ 1.25 ========================= Diluted - pro forma $ .91 $ 1.36 $ 1.22 ========================= Earnings Per Share ("EPS"): Basic EPS is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares is calculated to reflect the potential dilution that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. The net income amount used in the Company's EPS calculations is the same for both basic and diluted EPS. Share data is as follows (in thousands): 2002 2001 2000 ---- ---- ---- Weighted average shares 49,252 49,205 48,632 Dilutive potential common shares 685 1,075 1,099 ------------------------ Diluted weighted average shares 49,937 50,280 49,731 ======================== Anti-dilutive options not included 976 957 906 ======================== Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid money market instruments. Highly liquid money market instruments include securities and repurchase agreements with original maturities of three months or less, money market mutual funds, and securities on which the interest or dividend rate is adjusted to market rate at least every three months. At December 31, 2002 and 2001, cash and cash equivalents included approximately $2,838,000 and $804,000, respectively, which is restricted under debt agreements. Rental Property Revenues: In accordance with SFAS No. 13, "Accounting for Leases," income on leases which include scheduled increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) and/or periods of free rent is recognized on a straight-line basis. The Company makes valuation adjustments to all tenant-related revenue based upon the tenant's credit and business risk. The Company generally suspends the accrual of income on specific tenants where rental payments or reimbursements are delinquent 90 days or more. Recent Accounting Pronouncements: In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets." Under the provisions of SFAS No. 142, there will be no amortization of goodwill and other intangible assets that have indefinite useful lives. Instead, these assets must be tested for impairment upon the adoption of SFAS No. 142 and annually thereafter. On January 1, 2002, the adoption date, the Company had goodwill totaling approximately $15.6 million. The Company's initial impairment test of this goodwill in the first quarter 2002 and the annual test in the fourth quarter 2002 both resulted in no impairment. Amortization expense recorded related to this goodwill was approximately $654,000 and $321,000 for the years ended December 31, 2001 and 2000, respectively. Had amortization expense not been recorded in 2001 and 2000, diluted net income per share would have been $1.42 and $1.25 for the years ended December 31, 2001 and 2000, respectively. In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issued, which the Company adopted effective January 1, 2002. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and long-lived assets to be disposed of. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and establishes criteria beyond that previously specified in SFAS No. 121 to determine when a long-lived asset is to be considered as held for sale. The Company believes that the impairment provisions of SFAS No. 144 are similar to SFAS No. 121, and the adoption had no impact on the Company's financial statements. SFAS No. 144 also requires that the gains and losses from the disposition of certain real estate assets and the related historical operating results be included in a separate line item, Income from Discontinued Operations, in the Consolidated Statements of Income for all periods presented. In the normal course of business, the Company recycles invested capital by disposing of existing assets and redeploying the proceeds in order to enhance total returns to stockholders. In October 2002, the Company sold Salem Road Station, a 67,000 square foot retail neighborhood center, which met the criteria of a qualifying disposition in accordance with SFAS No. 144 in the third quarter 2002. The Company reclassified the carrying amount of Salem Road Station to an Operating Property Held for Sale as of December 31, 2001 in the accompanying Consolidated Balance Sheets. Additionally, the results of operations for Salem Road Station were reclassified as Income from Discontinued Operations in the accompanying Consolidated Statements of Income for all periods presented. The following table details the adjustments made to the Consolidated Statements of Income ($ in thousands): 2002 2001 2000 ------ ---- ---- Rental property revenues $ 626 $715 $161 Rental property operating expenses 121 159 37 Depreciation and amortization 139 199 42 Provision for income taxes 139 136 31 ------ ---- ---- Income from discontinued operations $ 227 $221 $ 51 ====== ==== ==== Gain on sale of investment property $1,320 Provision for income taxes 146 ------ Gain on sale of investment property, net $1,174 ====== In April 2002, SFAS No. 145, "Rescission of FASB Nos. 4, 44 and 64, Amendment of FASB No. 13, and Technical Corrections," was issued. SFAS No. 145, which will be effective for the Company January 1, 2003, among other things eliminates the requirement that all gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item. However, a gain or loss arising from such an event or transaction would continue to be classified as an extraordinary item if the event or transaction is both unusual in nature and infrequent in occurrence per the criteria in APB No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." As part of the transition guidance, although net income would not be affected, gains and losses from debt extinguishment in prior periods that do not meet the criteria in APB No. 30 cannot be treated as extraordinary items for all periods presented. The Company anticipates that the extraordinary item recognized in 2002 will be reclassified to recurring operations upon adoption of SFAS No. 145. In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of SFAS Nos. 5, 57, and 107, and rescission of FASB Interpretation No. 34." The interpretation elaborates on the disclosures to be made by a guarantor in its financial statements. It also requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. This interpretation, which the Company adopted in the fourth quarter 2002, had no effect on the financial position or results of operations of the Company. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." The interpretation addresses consolidation by business enterprises of variable interest entities. The Company does not anticipate that adoption will have a material effect on the Company's consolidated financial statements. Cumulative Effect of Change in Accounting Principle: The cumulative effect of change in accounting principle is related to the Company's adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," in 2000. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and notes. Actual results could differ from those estimates. Reclassifications: Certain 2001 and 2000 amounts have been reclassified to conform with the 2002 presentation. 2. CREC AND CREC II CREC develops and owns an interest in certain real estate projects and provides development, management and leasing services to the Company and to other owners. Cousins provides all the operating capital for CREC and has approval rights over services CREC performs. At December 31, 2002, 2001 and 2000, Cousins owned 100% of CREC's $5,025,000 par value 8% cumulative preferred stock and 100% of CREC's non-voting common stock, which is entitled to 95% of any dividends of CREC after preferred dividend requirements. T. G. Cousins, Chairman of the Board of Cousins and an officer and director of CREC, owns 100% of the voting common stock of CREC, which he purchased for $100 and which voting common stock is entitled to 5% of any dividends of CREC after preferred dividend requirements. CREC is included in the Company's Consolidated Financial Statements, but is taxed as a regular corporation. CREC has paid no common dividends to date, and for financial reporting purposes, none of CREC's income is attributable to Mr. Cousins' minority interest because the face amount of CREC's preferred stock plus accumulated dividends thereon ($11,055,000 in aggregate) exceeds CREC's $9,104,456 of equity. CREC II owns the Company's investment in Cousins Properties Services LP (see Note 5). Cousins provides all of the operating capital for CREC II and has approval rights over services CREC II performs. Cousins owns 100% of CREC II's $835,000 par value, 10% cumulative preferred stock and 100% of CREC II's non-voting common stock, which is entitled to 95% of any dividends of CREC II after preferred dividend requirements. Mr. Cousins, who is also an officer and director of CREC II, owns 100% of the voting common stock of CREC II, which he purchased for $64,000 and which voting common stock is entitled to 5% of any dividends of CREC II after preferred dividend requirements. CREC II is included in the Company's Consolidated Financial Statements, but is taxed as a regular corporation. CREC II has paid no common dividends to date and as of December 31, 2002, undistributed cumulative preferred dividends were $83,500. Minority interest has been recognized for Mr. Cousins' ownership. - -------------------------------------------------------------------------------- 3. NOTES AND OTHER RECEIVABLES At December 31, 2002 and 2001, notes and other receivables included the following ($ in thousands): 2002 2001 ------- ------- 650 Massachusetts Avenue Mortgage Note $26,309 $25,001 Miscellaneous Notes 12 18 Cumulative rental revenue recognized on a straight-line basis in excess of revenue accrued in accordance with lease terms (see Note 1) 10,022 7,885 Other Receivables, net (see Note 1) 14,264 11,629 -------------------- Total Notes and Other Receivables $50,607 $44,533 ==================== - -------------------------------------------------------------------------------- 650 Massachusetts Avenue Mortgage Notes - On March 10, 1994, the Company purchased from the Resolution Trust Corporation ("RTC") two notes aggregating $37 million (a $32 million and a $5 million note) at a total cost of approximately $28 million. The two notes, which resulted from the RTC's restructuring in December 1993 of a $53 million note, are secured by a first deed of trust on an office building containing approximately 250,000 rentable square feet located at 650 Massachusetts Avenue, NW, in Washington, D.C. The notes mature December 31, 2003, at which time their unamortized balance will be a maximum of approximately $27.6 million. The notes require minimum monthly payments totaling $2,818,000 annually, which are supported by a U.S. government agency lease. For financial reporting purposes, the discounted notes are treated as non-amortizing notes to the extent of the minimum required payments, with the minimum required payments treated as interest income. Amounts in excess of the minimum required payments ($543,000 and $750,000 in 2001 and 2000, respectively) were treated as a reduction of principal. During 2000, it became probable that the Company's $5 million note would be repaid in full (which subsequently occurred in April 2001), thus reducing the carrying value of the $32 million note to $23 million, which was substantially lower than the balance of the $32 million note originally estimated to be approximately $27.6 million. As a result, beginning in the third quarter of 2000 and continuing until the notes mature December 31, 2003, the Company is amortizing into interest income this difference of approximately $4.6 million between the Company's carrying value and the amount due under the note, which equals $327,000 per quarter. Fair Value - The estimated fair value of the Company's $26.3 million and $25.0 million of notes receivable at December 31, 2002 and 2001, respectively, was $27.2 million and $29.2 million, respectively, calculated by discounting future cash flows from the notes receivable at estimated rates at which similar loans would be made currently.
4. NOTES PAYABLE, COMMITMENTS AND CONTINGENT LIABILITIES At December 31, 2002 and 2001, notes payable included the following ($ in thousands): 2002 2001 ------------------------------------ ------------------------------------- Share of Share of Unconsolidated Unconsolidated Company Joint Ventures Total Company Joint Ventures Total -------- -------------- -------- -------- --------------- -------- Floating Rate Credit Facility and Floating Rate Debt $160,253 $ 6,606 $166,859 $153,816 $ 7,614 $161,430 Other Debt (primarily non-recourse fixed rate mortgages) 509,539 259,248 768,787 431,459 268,299 699,758 ------------------------------------------------------------------------------- $669,792 $265,854 $935,646 $585,275 $275,913 $861,188 ===============================================================================
The following table summarizes the terms of the debt outstanding at December 31, 2002 ($ in thousands): Term/ Amortization Balance at Period Final December 31, Description Rate (Years) Maturity 2002 ----------- -------------- ------------ -------- ------------ Company Debt: - ------------- Credit facility (a maximum of $275,000), Floating based unsecured on LIBOR 3/N/A 8/31/04 $159,157 Perimeter Expo mortgage note 8.04% 10/30 8/15/05 19,792 Northside/Alpharetta I mortgage note 7.70% 8/28 1/01/06 9,903 101 Independence Center mortgage note 8.22% 11/25 12/01/07 44,928 Lakeshore Park Plaza mortgage note 6.78% 10/30 11/01/08 10,088 101 Second Street mortgage note 8.33% 10/30 4/19/10 88,055 The Avenue East Cobb mortgage note 8.39% 10/30 8/01/10 38,255 Meridian Mark Plaza mortgage note 8.27% 10/28 10/01/10 24,926 Presidential MarketCenter mortgage note 7.65% 10/30 5/02/11 27,667 600 University Park Place mortgage note 7.38% 10/30 8/10/11 13,822 333 John Carlyle/1900 Duke Street mortgage note 7.00% 10/25 11/01/11 48,459 333/555 North Point Center East mortgage note 7.00% 10/30 11/01/11 31,960 Note secured by Company's interest in CSC Associates, L.P. 6.958% 10/20 3/01/12 148,283 Other miscellaneous notes Various Various Various 4,497 -------- 669,792 -------- Share of Unconsolidated Joint Venture Debt: - ------------------------------------------- Wildwood Associates: 2300 Windy Ridge Parkway mortgage note 7.56% 10/25 12/01/05 28,831 2500 Windy Ridge Parkway mortgage note 7.45% 10/20 12/15/05 10,406 3200 Windy Hill Road mortgage note 8.23% 10/28 1/01/07 31,969 4100/4300 Wildwood Parkway mortgage note 7.65% 15/25 4/01/12 13,444 4200 Wildwood Parkway mortgage note 6.78% 15.75/18 3/31/14 20,403 Cousins LORET Venture, L.L.C.: Two Live Oak Center mortgage note 7.90% 10/30 10/01/07 14,263 The Pinnacle mortgage note 7.11% 12/30 12/31/09 33,877 CP Venture Two LLC: North Point MarketCenter mortgage note 8.50% 10/25 7/15/05 3,037 100/200 North Point Center East mortgage note 7.86% 10/25 8/01/07 2,630 Ten Peachtree Place Associates mortgage note LIBOR + 0.75% 7/18 12/31/08 6,606 CC-JM II Associates mortgage note 7.00% 17/17 4/01/13 9,622 Charlotte Gateway Village, LLC mortgage note 6.41% 15/15 12/01/16 90,766 -------- 265,854 -------- $935,646 ========
- -------------------------------------------------------------------------------- In 1996, CSC Associates, L.P. ("CSC"), an entity in which the Company owns a 50% equity interest, issued $80 million of 6.377% collateralized non-recourse mortgage notes (the "Prior Notes") secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $80 million proceeds of the Prior Notes to the Company under a non-recourse loan (the "Prior Cousins Loan") secured by the Company's interest in CSC under the same payment terms as those of the Prior Notes. The Company paid all costs of issuing the Prior Notes and the Prior Cousins Loan, including a $400,000 fee to an affiliate of Bank of America Corporation. In addition, the Company paid a fee to an affiliate of Bank of America Corporation of .3% per annum of the outstanding principal balance of the Prior Notes. On February 22, 2002, CSC refinanced the Prior Notes, completing a $150 million non-recourse mortgage note payable (the "New Loan") with an interest rate of 6.958% and a maturity of March 1, 2012. The New Loan is secured by CSC's interest in the Bank of America Plaza building and related leases and agreements. CSC loaned the $150 million proceeds of the non-recourse mortgage note payable to the Company under a non-recourse loan (the "New Cousins Loan") secured by the Company's interest in CSC under the same payment terms as those of the New Loan. The Company paid all costs of issuing the New Loan and the New Cousins Loan, including a $750,000 fee to an affiliate of Bank of America Corporation. On March 15, 2002, $65,873,925 of the proceeds from the New Loan was used to pay off in full the Prior Notes. The $65,873,925 included $65,525,710 for the payoff of the principal balance as of February 15, 2002 (the last payment date of the Prior Notes) and $348,215 for accrued interest from February 15, 2002 through March 14, 2002. The Prior Cousins Loan to CSC was also repaid in full. In connection with the prepayment in full of the Prior Notes, the Company paid a prepayment premium in the amount of $2,871,925. This prepayment premium, along with the unamortized balance of closing costs paid by the Company related to the Prior Notes in the amount of $629,278, were expensed as an Extraordinary Item in the accompanying Consolidated Statements of Income. Because CSC loaned the proceeds of the Prior Notes and the New Loan to the Company, the Prior Notes and the New Loan and their related interest expense and maturities are disclosed as obligations of the Company and are not included in the unconsolidated joint venture balances disclosed in the above table or in Note 5. (The related note receivable and interest income are also not included in Note 5). The Wildwood Associates 2300 Windy Ridge Parkway, 3200 Windy Hill Road, 4100/4300 Wildwood Parkway and 4200 Wildwood Parkway mortgage notes and the CC-JM II Associates mortgage note provide for additional amortization in the later years of the notes (over that required by the amortization periods disclosed in the table) concurrent with scheduled rent increases. The Company has a credit facility with Bank of America, Wachovia and certain other banks for $275 million, which expires August 31, 2004. The credit facility is unsecured and bears interest at a rate equal to the London Interbank Offering Rate ("LIBOR") plus a spread which is based on the ratio of total debt to total assets, as defined by the credit facility, according to the following table: Applicable Leverage Ratio Spread ------------------ ---------- <= to 35% 1.05% >35.00% but <= 45% 1.15% >45.00% but <= 50% 1.25% >50.00% but <= 55% 1.45% >55% 1.70% At December 31, 2002, the Company had outstanding letters of credit totaling $4,657,000, and assets, including the Company's share of joint venture assets, with carrying values of $670,003,000 were pledged as security on the debt of the Company and its share of unconsolidated joint venture debt. The fixed rate long-term mortgage debt of the Company and its unconsolidated joint ventures is non-recourse to the Company. As of December 31, 2002, the weighted average maturity of the Company's debt, including its share of unconsolidated joint ventures, was eight years. - -------------------------------------------------------------------------------- The aggregate maturities of the indebtedness at December 31, 2002 summarized above are as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total -------- -------------- --------- 2003 $ 8,274 $ 10,318 $ 18,592 2004 168,867 11,146 180,013 2005 37,035 48,957 85,992 2006 9,040 10,737 19,777 2007 47,933 39,554 87,487 Thereafter 398,643 145,142 543,785 ------------------------------------------- $669,792 $265,854 $935,646 ===========================================
For each of the years ended December 31, 2002, 2001 and 2000, interest expense was recorded as follows ($ in thousands): Share of Unconsolidated Company Joint Ventures Total ------------------------------ ------------------------------ ------------------------------ Year Expensed Capitalized Total Expensed Capitalized Total Expensed Capitalized Total - ---- -------- ----------- ----- -------- ----------- ----- -------- ----------- ----- 2002 $37,423 $ 5,934 $43,357 $13,208 $ -- $13,208 $50,631 $ 5,934 $56,565 2001 27,610 9,712 37,322 17,086 1,186 18,272 44,696 10,898 55,594 2000 13,596 15,285 28,881 14,819 3,545 18,364 28,415 18,830 47,245 - --------------------------------------------------------------------------------------------------------------------
The Company has future lease commitments under land leases aggregating $45.9 million over an average remaining term of 57 years. As of December 31, 2002, outstanding commitments for the construction and design of real estate projects, including the Company's share of unconsolidated joint venture commitments, totaled approximately $131.5 million. At December 31, 2002 and 2001, the estimated fair value of the Company's notes payable, including its share of unconsolidated joint ventures, was $989 million and $882 million, respectively.
5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES The following information summarizes financial data and principal activities of unconsolidated joint ventures in which the Company had ownership interests ($ in thousands). Audited financial statements for CSC Associates, L.P. are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Company's Total Assets Total Debt Total Equity Investment ---------------------- ------------------- ------------------- ------------------- 2002 2001 2002 2001 2002 2001 2002 2001 ---------- ---------- -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION: Wildwood Associates $ 226,342 $ 237,729 $210,103 $217,794 $ 8,266 $ 12,674 $(37,565) $(35,144) Charlotte Gateway Village, LLC 203,648 209,360 181,531 189,370 20,861 18,903 10,655 10,828 CSC Associates, L.P. 168,493 171,731 -- -- 163,870 168,937 84,133 86,793 Cousins LORET Venture, L.L.C. 113,129 120,482 96,279 97,430 13,629 20,156 6,599 9,918 285 Venture, LLC 58,929 60,203 -- -- 57,716 58,971 31,031 31,554 CPI/FSP I, L.P. 50,971 50,393 -- -- 48,925 49,111 25,277 25,659 Crawford Long - CPI, LLC 49,599 43,218 -- -- 47,894 40,701 25,434 21,214 Ten Peachtree Place Associates 27,586 19,743 13,212 15,228 11,665 4,216 4,262 693 Temco Associates 24,405 20,728 -- -- 24,241 20,391 12,678 10,332 CC-JM II Associates 23,133 23,973 19,243 20,418 3,364 2,944 2,204 1,998 Brad Cous Golf Venture, Ltd. 11,789 11,966 -- -- 11,541 11,678 5,767 5,839 CP Venture LLC -- -- -- -- -- -- 12,957 13,900 CP Venture Two LLC 228,225 238,317 49,285 50,380 177,579 186,558 1,777 1,864 Other 700 -- -- -- 700 -- 307 (51) ---------------------- ------------------- ------------------- ------------------- $1,186,949 $1,207,843 $569,653 $590,620 $590,251 $595,240 $185,516 $185,397 ====================== =================== =================== ===================
Company's Share Total Revenues Net Income (Loss) of Net Income (Loss) ---------------------------- -------------------------- ------------------------- 2002 2001 2000 2002 2001 2000 2002 2001 2000 -------- -------- -------- ------- ------- ------- ------- ------- ------- SUMMARY OF OPERATIONS: SUMMARY OF OPERATIONS: Wildwood Associates $ 55,755 $ 53,631 $ 50,918 $12,720 $10,917 $ 7,688 $ 6,360 $ 5,223 $ 3,844 Charlotte Gateway Village, LLC 29,377 16,029 2,841 3,167 (232) (593) 1,184 620 762 CSC Associates, L.P. 42,489 39,948 39,339 23,083 21,574 21,378 11,466 10,711 10,613 Cousins LORET Venture, L.L.C. 21,226 21,604 20,717 (1,376) (107) (767) (729) (54) (384) 285 Venture, LLC 11,490 11,217 3,434 5,774 5,312 1,684 2,725 2,596 831 CPI/FSP I, L.P. 8,670 2,198 -- 4,412 775 -- 2,119 352 -- Crawford Long - CPI, LLC 5,336 -- -- 1,924 -- -- 927 -- -- Ten Peachtree Place Associates 1,172 4,324 4,438 (1,708) 737 959 (854) 169 279 Temco Associates 14,428 12,378 10,023 3,850 3,815 2,708 1,949 1,720 678 CC-JM II Associates 4,722 4,509 4,356 1,158 952 786 546 464 381 Brad Cous Golf Venture, Ltd. 1,142 1,011 853 (137) (134) 61 (68) (67) 31 CP Venture LLC -- -- -- -- -- -- 955 923 611 CP Venture Two LLC 32,681 34,048 34,046 9,099 8,792 5,815 91 87 58 Cousins Properties Services LP -- 1,400 10,076 -- 203 3,161 -- 153 1,649 Other -- -- 55 (1) -- 55 (1) -- 99 ---------------------------- -------------------------- ------------------------- $228,488 $202,297 $181,096 $61,965 $52,604 $42,935 $26,670 $22,897 $19,452 ============================ ========================== =========================
Company's Share Of ------------------------------------------------------ Cash Flows From Cash Flows From Operating Activities Operating Activities Cash Distributions --------------------------- --------------------------- ------------------------- 2002 2001 2000 2002 2001 2000 2002 2001 2000 ------- ------- ------- ------- ------- ------- ------- ------- ------ SUMMARY OF OPERATING CASH FLOWS: Wildwood Associates $ 22,085 $19,712 $18,430 $11,043 $ 9,856 $ 9,215 $ 8,564 $ 1,500 $ 6,000 Charlotte Gateway Village, LLC 9,710 1,240 1,524 4,855 620 762 1,408 19,053 731 CSC Associates, L.P. 32,000 30,482 28,410 16,000 15,241 14,205 14,075 14,860 13,990 Cousins LORET Venture, L.L.C. 4,939 7,584 6,830 2,470 3,792 3,415 2,575 2,950 2,900 285 Venture, LLC 6,797 5,738 1,840 3,399 2,869 920 3,296 2,918 1,044 CPI/FSP I, L.P. 6,356 1,514 -- 3,178 757 -- 700 846 -- Crawford Long - CPI, LLC 2,776 -- -- 1,388 -- -- 1,000 -- -- Ten Peachtree Place Associates (978) 1,836 1,113 (489) 278 367 -- 183 200 Temco Associates 3,898 3,440 1,356 1,949 1,720 678 -- -- 1,800 CC-JM II Associates 2,152 1,988 1,826 1,076 994 913 339 595 468 Brad Cous Golf Venture, Ltd. 696 558 454 348 279 227 -- -- -- CP Venture LLC -- -- -- -- -- -- 1,898 1,824 2,068 CP Venture Two LLC 19,808 20,878 21,764 2,278 2,401 2,426 181 174 197 Cousins Properties Services LP -- 204 265 -- 153 -- -- 75 3,140 Other -- -- 55 -- -- -- -- -- -- ---------------------------- --------------------------- -------------------------- $110,239 $95,174 $83,867 $47,495 $38,960 $33,128 $36,036 $44,978 $32,538 ============================ =========================== ==========================
- -------------------------------------------------------------------------------- Wildwood Associates - Wildwood Associates was formed in 1985 between the Company and IBM, each as 50% partners. The partnership owns six office buildings totaling 2.1 million rentable square feet, other income-producing commercial properties and additional developable land in Wildwood Office Park ("Wildwood") in Atlanta, Georgia. Wildwood is an office park containing a total of approximately 285 acres, of which approximately 90 acres are owned by Wildwood Associates and an estimated 13 acres are committed to be contributed to Wildwood Associates by the Company; the Company owns the balance of the developable acreage in the office park. The 13 acres of land which are committed to be contributed to Wildwood Associates by the Company are included in Wildwood Associates' financial statements under the caption "Land Committed to be Contributed" and are not included in "Land Held for Investment or Future Development" in the Company's financial statements. All costs associated with the land are borne by Wildwood Associates. Through December 31, 2002, IBM had contributed $46.6 million in cash plus properties having an agreed-upon value of $16.3 million for its one-half interest in Wildwood Associates. The Company has contributed $84,000 in cash plus properties having an agreed-upon value of $54.5 million for its one-half interest in the partnership and is obligated to contribute the aforesaid estimated 13 acres of additional land with an agreed-upon value of $8.3 million. The Company and IBM each lease office space from the partnership at rates comparable to those charged to third parties. The Company's investment as recorded in the Consolidated Balance Sheets, which was a negative investment of $37.6 million at December 31, 2002 due to partnership distributions in excess of contributions, is based upon the Company's historical cost of the properties at the time they were contributed or committed to be contributed to the partnership, whereas its investment as recorded on Wildwood Associates' books ($4.1 million at December 31, 2002) is based on the agreed-upon values at the time the partnership was formed. Charlotte Gateway Village, LLC ("Gateway") - On December 14, 1998, the Company and a wholly-owned subsidiary of Bank of America Corporation formed Gateway for the purpose of developing and owning Gateway Village, a 1.1 million rentable square foot office building complex in downtown Charlotte, North Carolina. Construction of Gateway Village commenced in July 1998. The project, which is 100% leased to Bank of America Corporation with a term of 15 years, became partially operational for financial reporting purposes in November 2000. Gateway's net income or loss and cash distributions are allocated to the members as follows: first to the Company so that it receives a cumulative compounded return equal to 11.46% on its capital contributions, second to a wholly-owned subsidiary of Bank of America Corporation until it has received an amount equal to the aggregate amount distributed to the Company and then 50% to each member. CSC Associates, L.P. ("CSC") - CSC was formed in 1989 between the Company and a wholly-owned subsidiary of Bank of America Corporation, each as 50% partners. CSC owns the 1.3 million rentable square foot Bank of America Plaza in midtown Atlanta, Georgia. CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests. See Note 4 for a discussion of the presentation of certain CSC assets, liabilities, revenues and expenses. Cousins LORET Venture, L.L.C. ("Cousins LORET") - Effective July 31, 1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live Oak Center, a 279,000 rentable square foot office building located in Atlanta, Georgia, which was renovated in 1997. LORET also contributed an adjacent four--acre site on which construction of The Pinnacle, a 424,000 rentable square foot office building, was completed in November 1998. The Company contributed $25 million of cash to Cousins LORET to match the value of LORET's agreed-upon equity. 285 Venture, LLC - In March 1999, the Company and a commingled trust fund advised by J.P. Morgan Investment Management Inc. (the "J.P. Morgan Fund") formed 285 Venture, LLC, each as 50% partners, for the purpose of developing and owning 1155 Perimeter Center West, an approximately 362,000 rentable square foot office building complex in Atlanta, Georgia. The J.P. Morgan Fund contributed the approximately six-acre site upon which 1155 Perimeter Center West was developed. The land had an agreed-upon value of approximately $5.4 million, which the Company matched with a cash contribution. In January 2000, 1155 Perimeter Center West became partially operational for financial reporting purposes. CPI/FSP I, L.P. - In May 2000, CPI/FSP I, L.P., a limited partnership, was formed. 50% of the venture is owned by the Company through a general partnership, Cousins Austin GP, Inc. (1%), and a limited partnership, Cousins Austin, Inc. (49%). The remaining 50% is owned by a general partnership, Fifth Street Properties - Austin, LLC (1%), and a limited partnership, Fifth Street Properties - Austin Investor, LLC (49%), which are both owned by CommonWealth Pacific LLC and CalPERS. CPI/FSP I, L.P. developed Austin Research Park - Buildings III and IV, two approximately 174,000 and 184,000 rentable square foot office buildings, respectively, in Austin, Texas, which became partially operational for financial reporting purposes in June 2001 and September 2001, respectively. Additionally, the venture owns an adjacent pad for future development of an approximately 175,000 rentable square foot office building. Crawford Long - CPI, LLC - In October 1999, the Company formed Crawford Long - CPI, LLC with Emory University, each as 50% partners, for the purpose of developing and owning the Emory Crawford Long Medical Office Tower, an approximately 358,000 rentable square foot medical office building located in midtown Atlanta, Georgia, which became partially operational for financial reporting purposes in February 2002. Ten Peachtree Place Associates ("TPPA") - TPPA is a general partnership between the Company (50%) and a wholly-owned subsidiary of The Coca-Cola Company ("Coca-Cola") (50%). The venture owns Ten Peachtree Place, a 260,000 rentable square foot building located in midtown Atlanta, Georgia. The building was 100% leased to Coca-Cola through November 30, 2001. Additionally, the venture owns an adjacent pad for future development of an approximately 400,000 rentable square foot office building or a 350-unit apartment complex. The TPPA partnership agreement generally provided that each partner is entitled to receive 50% of cash flows from operating activities, net of note principal amortization, through the term of the Coca-Cola lease. After the Coca-Cola lease expired, in accordance with the partnership agreement, each partner must contribute on a 50% basis capital contributions needed for tenant improvements and leasing commissions related to the releasing of the building, as well as to fund any operating deficits. The cash flows from operating activities, net of note principal amortization, will be used first to repay these capital contributions plus 8% interest to each partner on a 50% basis. After these capital contributions plus 8% interest are repaid in full, the Company and its partner are entitled to receive 15% and 85% of the cash flows (including any sales proceeds), respectively, until the two partners have received a combined distribution of $15.3 million. Thereafter, each partner is entitled to receive 50% of cash flows. Temco Associates - Temco Associates was formed in 1991 as a partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 7,500 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period, and the option price of the fee simple land was $1,107 per acre at January 1, 2003, escalating at 6% on January 1 of each succeeding year during the term of the option. During 2002, 2001 and 2000, approximately 1,595, 487 and 734 acres, respectively, of the option related to the fee simple interest was exercised. In 2002, approximately 607 acres were simultaneously sold for gross profits of $1,005,000 and approximately 78 acres were held for sale under three-year options to two third parties. Approximately three acres were sold in 2002 for gross profits of $336,000, which were a component of the 13 acres purchased in 2000 that were being held for sale or future development. Also, in 2002, approximately 281 acres were acquired for additional phases of the Bentwater residential community and approximately 629 acres were acquired and are being held for a future development in Paulding County. In 2001, approximately 359 acres were simultaneously sold for gross profits of $1,902,000 and approximately 128 acres were held for sale under a three-year option to a third party. Approximately two acres were sold in 2001 for gross profits of $291,000, which were a component of the 13 acres purchased in 2000 that were being held for sale or future development. In 2000, approximately 461 acres were simultaneously sold for gross profits of $1,546,000 and approximately 13 acres are being held for sale or future development (of which approximately three and two acres were sold in 2002 and 2001, respectively, as noted above). Also in 2000, approximately 260 acres were acquired for the development of the Bentwater residential community. Approximately 1,669 lots will be developed within Bentwater on an approximate total of 1,290 acres. Temco Associates sold 289, 233 and 219 lots within Bentwater in 2002, 2001 and 2000, respectively. CC-JM II Associates - This joint venture was formed in 1994 between the Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general partners, to develop and own John Marshall-II, a 224,000 rentable square foot office building in suburban Washington, D.C. The building is 100% leased until January 2011 to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus. Brad Cous Golf Venture, Ltd. ("Brad Cous") - Effective January 31, 1998, the Company formed Brad Cous with W.C. Bradley Co., each as 50% partners, for the purpose of developing and owning The Shops at World Golf Village, an approximately 80,000 square foot retail center located adjacent to the PGA Hall of Fame in St. Augustine, Florida. CP Venture LLC, CP Venture Two LLC and CP Venture Three LLC - On November 12, 1998 (the "Closing Date"), the Company entered into a venture arrangement (the "Venture") with The Prudential Insurance Company of America ("Prudential"). On such date the Company contributed its interest in nine properties (the "Properties") to the Venture. At the time of contribution, the Properties were valued by the Company and Prudential based on arm's length negotiations at a total gross value of $283,750,000 subject to mortgages in the principal amount of $53,281,219. The following table details the values allocated to each of the Properties and the mortgages to which certain Properties were subject ($ in thousands): Allocated Value Mortgage Net Value --------- -------- --------- First Union Tower $ 53,000 $ -- $ 53,000 Grandview II 23,000 -- 23,000 100 North Point Center East and 200 North Point Center East 46,050 24,582 21,468 Presbyterian Medical Plaza 8,600 -- 8,600 North Point MarketCenter 56,750 28,699 28,051 Mansell Crossing II 12,350 -- 12,350 Greenbrier MarketCenter 51,200 -- 51,200 Los Altos MarketCenter 32,800 -- 32,800 -------- ------- -------- $283,750 $53,281 $230,469 ======== ======= ======== Under the Venture arrangements, Prudential contributed cash to the Venture equal to the agreed-upon net value of the properties ($230,468,781) at dates specified in the agreements. The structure of the Venture is as follows: CP Venture LLC, the parent entity, owns a 99% interest in each of CP Venture Two LLC ("Property Activity LLC") and CP Venture Three LLC ("Development Activity LLC"). The Company owns a 1% direct interest in Property Activity LLC and Prudential owns a 1% direct interest in Development Activity LLC. The contributed properties are owned and operated by Property Activity LLC. The Company has a 10.6061% interest in CP Venture LLC's 99% interest in Property Activity LLC, which, combined with its 1% direct interest, gives it a net interest of 11.5% in the economics of Property Activity LLC. Prudential has the remaining net interest of 88.5% in the economics of Property Activity LLC. Unless both parties agreed otherwise, Property Activity LLC was not permitted to sell the contributed properties until the end of lock-out periods which was November 2001 for retail properties and November 2002 for office and medical office properties. The cash contributed by Prudential was contributed to Development Activity LLC. To the extent such funds are not yet needed for development activity, Development Activity LLC can temporarily invest such funds; such potential investments may include temporary loans to the Company. The Venture earns interest on the outstanding balance at the same rate as the Company's credit facility. Prudential is entitled to 10.6061% of CP Venture LLC's 99% share of the economics of Development Activity LLC, which, combined with its 1% direct interest, entitles it to an overall net interest of 11.5% in the economics of Development Activity LLC. Prudential first receives a priority current return of 9.5% per annum on its share (11.5%) of the initial capital ($230.469 million) ("Initial Capital") of Development Activity LLC. Prudential also receives a liquidation preference whereby it is first entitled to, subject to capital account limitations, sufficient proceeds to allow it to achieve an overall 11.5% internal rate of return on its share of the Initial Capital of Development Activity LLC. After these preferences to Prudential, the Company has certain preferences, with the residual interests in the development activity being shared according to the interests of the parties. All Prudential priority current returns have been distributed to Prudential during the year. CP Venture LLC appointed the Company to serve as Development Manager and in such capacity to act for it in connection with its ownership of Development Activity LLC. CP Venture LLC also appointed Prudential to serve as Property Manager and in such capacity to act for it in connection with its ownership of Property Activity LLC. Prudential appointed the Company to serve as property manager of the Properties for Property Activity LLC. The Company also serves as Administrative Manager of CP Venture LLC. Property Activity LLC is expected to continue to operate the contributed Properties. Development Activity LLC is expected to develop commercial real estate projects over time, as selected by the Development Manager. Development Activity LLC may also make acquisitions, which are anticipated to be redevelopment or value-added opportunities. Development Activity LLC developed Mira Mesa MarketCenter, a 480,000 square foot retail center in suburban San Diego, California, which became partially operational in April 2000. In December 2000, Development Activity LLC acquired One Georgia Center, an approximately 363,000 rentable square foot office building in midtown Atlanta, Georgia. Development Activity LLC also developed The Avenue Peachtree City, an approximately 169,000 square foot retail center in suburban Atlanta, Georgia, which became partially operational for financial reporting purposes in April 2001. The parties anticipate that some of the projects currently under consideration by the Company will be undertaken by Development Activity LLC, although the Company has no obligation to make any particular opportunity available to Development Activity LLC. For financial reporting purposes, the Properties were deconsolidated and contributed to Property Activity LLC. Both Property Activity LLC and CP Venture LLC are being treated as unconsolidated joint ventures. Development Activity LLC is treated as a consolidated entity in the Company's financial statements as the Company has a controlling financial interest. The Company initially deferred the net gain on the contributed Properties and is recognizing this net gain as Gain on Sale of Investment Properties, Net of Applicable Income Tax Provision in the accompanying Consolidated Statements of Income as capital distributions of cash are made from Development Activity LLC to the Company or when the Properties initially contributed to Property Activity LLC are liquidated by Property Activity LLC. The liquidation of the Properties may be in the form of actual sales of the Properties or in the form of the depreciation of the Properties which have an average remaining life of 26 years. The total net deferred gain on the contributed Properties on the Closing Date was approximately $96.8 million over the cost of the Properties. Including depreciation recapture of $23.8 million, the total net deferred gain on the Closing Date was approximately $120.6 million, which has been reduced by approximately $17.0 million through December 31, 2002, and is reflected as Deferred Gain in the accompanying Consolidated Balance Sheets. Cousins Properties Services LP (formerly Cousins Stone LP) - Cousins Stone LP was formed on June 1, 1999 when CREC II acquired Faison's 50% interest in Faison-Stone. On July 3, 2000, CREC II purchased an additional 25% interest in Cousins Stone LP from RD Stone Interests, Ltd., increasing CREC II's total ownership to 75%. Effective March 1, 2001, CREC II purchased the remaining 25% interest in Cousins Stone LP, bringing its total interest to 100%, and beginning on that date Cousins Stone LP was consolidated with CREC II. Effective August 6, 2001, the name was changed to Cousins Properties Services LP ("CPS"). CPS is a full-service real estate company headquartered in Dallas, Texas, that specializes in third party property management and leasing of Class "A" office properties. Other - This category consists of several other joint ventures including: CL Realty, LLC - In August 2002, CL Realty, LLC was formed between the Company and Lumbermen's Investment Corporation, a subsidiary of Temple-Inland Inc., each as 50% members, for the purpose of developing and investing primarily in residential properties. During 2002, CL Realty, LLC, through two subsidiaries, acquired a 37.5% limited partnership interest in LM Land Holdings, LP ("Land Holdings"). Land Holdings has acquired approximately 1,242 acres of undeveloped land in Fort Bend County, Texas and intends to subdivide and develop the property for sale of commercial tracts and a residential community, Long Meadow Farms. Once certain Equity Funding Conditions, as defined, are met, CL Realty, LLC will have a total capital commitment to Land Holdings of $8 million. At December 31, 2002, $700,000 of that commitment has been contributed to Land Holdings. Cousins-Hines Partnerships - Through the Cousins-Hines partnerships, the Company effectively owns 9.8% of the One Ninety One Peachtree Tower in Atlanta, Georgia, subject to a preference in favor of the majority partner. This 1.2 million rentable square foot office building, which opened in December 1990, was developed by the Company in partnership with the Hines Interests Limited Partnership and the Dutch Institutional Holding Company ("DIHC"). In October 1997, Cornerstone Properties, Inc. purchased DIHC's interest in the partnership. In June 2000, Equity Office Properties Trust acquired Cornerstone Properties, Inc. Because the Company's effective ownership of this building is less than 20%, the Company accounts for its investment using the cost method of accounting, and therefore the above tables do not include the Company's share of One Ninety One Peachtree Tower. Additional Information - The Company recognized $8,037,000, $10,877,000 and $7,955,000 of development, construction, leasing, and management fees from unconsolidated joint ventures in 2002, 2001 and 2000, respectively. See Note 1, Fee Income and Cost Capitalization, for a discussion of the accounting treatment for fees from unconsolidated joint ventures. 6. STOCKHOLDERS' INVESTMENT Stock Dividend: On October 2, 2000, a 3-for-2 stock split effected in the form of a 50% stock dividend was awarded to stockholders of record on September 15, 2000. In conjunction with the stock dividend, 16,259,000 shares of common stock were issued and $16,259,000 was transferred from Additional Paid-In-Capital to Common Stock. All prior period shares outstanding, per share amounts, stock options, SARs and restricted stock ("stock grants") have been restated for the effect of the stock dividend. 1999 Incentive Stock Plan: In May 1999, the stockholders of the Company approved the adoption of the 1999 Incentive Stock Plan (the "1999 Plan"), which covered the issuance of 1,343,288 shares of common stock, all of which shares had been available for use under the 1995 Stock Incentive Plan, the Stock Plan for Outside Directors and the Stock Appreciation Right Plan (collectively, the "Predecessor Plans"). Upon adoption of the 1999 Plan, no additional shares of common stock can be issued under the Predecessor Plans. In May 2002 and May 2001, the stockholders of the Company approved amendments to the 1999 Plan to increase the number of shares of common stock available under the 1999 Plan by 1,100,000 in each year. As of December 31, 2002, 970,363 shares are authorized to be awarded pursuant to the 1999 Plan, which allows awards of stock options, stock grants or SARs. Stock Options - At December 31, 2002, 5,374,945 stock options awarded to key employees and outside directors pursuant to both the 1999 Plan and the Predecessor Plans were outstanding. All stock options have a term of 10 years from the date of grant. Key employee stock options granted prior to December 28, 2000 have a vesting period of five years under both the 1999 Plan and the Predecessor Plans. Options granted on or after December 28, 2000 have a vesting period of four years. Outside director stock options are fully vested on the grant date under the 1999 Plan but had a vesting period of one year under the Predecessor Plans. SARs - The Company issued SARs to certain employees under one of the Predecessor Plans and the CREC Stock Appreciation Plan (the "SAR plans"). Under the CREC Stock Appreciation Plan, no SARs can be granted after January 1, 1999. Included in the Consolidated Statements of Income under the heading "stock appreciation right expense (credit)" are increases or decreases in accrued compensation expense to reflect changes in the market value of the common stock between periods and forfeitures of non-vested SARs of terminated employees. No SARs were outstanding at December 31, 2002. At December 31, 2001, the total amount accrued for SARs outstanding was approximately $318,000. The following is a summary of stock option activity under the 1999 Plan, the Predecessor Plans and the SAR plans (in thousands, except per share amounts):
Number of Weighted Average Shares Exercise Price Per Share --------------------------- -------------------------------- 2002 2001 2000 2002 2001 2000 ---- ---- ---- ---- ---- ---- 1999 Plan and Predecessor Plans - ------------------------------- Outstanding, beginning of year 5,206 4,969 4,469 $20.80 $20.10 $17.98 Granted 1,269 940 1,021 $24.08 $24.93 $27.41 Exercised (786) (157) (316) $15.51 $15.16 $13.33 Forfeited (314) (546) (205) $24.39 $23.14 $20.73 --------------------------- Outstanding, end of year 5,375 5,206 4,969 $22.14 $20.80 $20.10 =========================== Shares exercisable at end of year 2,908 2,935 2,336 $20.22 $18.00 $16.26 =========================== SARs - ---- Outstanding, beginning of year 23 88 130 $10.83 $10.12 $10.03 Exercised (23) (65) (35) $10.83 $ 9.86 $10.05 Forfeited - - (7) N/A N/A $ 8.84 -------------------------- Outstanding, end of year - 23 88 N/A $10.83 $10.12 ========================== Shares exercisable at end of year - 23 88 N/A $10.83 $10.12 ==========================
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The following table provides a breakdown by exercise price range of the number of shares, weighted average exercise price, and remaining contractual lives for all stock options outstanding and exercisable at December 31, 2002 (in thousands, except per share amounts and option life): For Outstanding Options -------------------------------------- Exercise Weighted Weighted Average Price Average Contractual Life Range Outstanding Exercisable Exercise Price (in years) -------- ----------- ----------- -------------- ---------------- 1999 Plan and Predecessor Plans - ------------------------------- $10.50 to $12.99 435 435 $11.25 2.2 $13.00 to $17.50 342 342 $15.33 3.7 $17.51 to $23.45 1,763 1,407 $21.15 5.7 $23.46 to $28.08 2,835 724 $25.25 8.8 --------------------------------------------------------------- Total 5,375 2,908 $22.14 6.9 ===============================================================
- -------------------------------------------------------------------------------- Stock Grants - As indicated above, the 1999 Plan provides for stock grants, which may be subject to specified performance and vesting requirements. In December 2000 and February 2001, the Company awarded 169,777 and 20,000 shares, respectively, of performance accelerated restricted stock ("PARS") to certain key employees. The PARS will become fully vested upon the achievement of certain defined performance requirements, which can be met as early as the end of the calendar year which includes the third anniversary of the grant date. The PARS will vest in any event if the employee is employed on November 14, 2006. The shares were issued on the grant date and recorded in Common Stock and Additional Paid-in-Capital, with the offset recorded in Unearned Compensation, a separate component of Stockholders' Investment, in the accompanying Consolidated Balance Sheets. Unearned Compensation is being amortized into compensation expense beginning January 1, 2001 over six years, which is the current estimate of the time it will take to meet the performance requirements. If this estimate changes, the amortization of the Unearned Compensation will be adjusted accordingly. If a key employee leaves the Company prior to the vesting of the PARS, said employee's unvested rights in the PARS are forfeited and any compensation expense amortized prior to such forfeiture is reversed in the year of forfeiture. Compensation expense recorded related to the PARS was approximately $591,000 and $1,019,000 in 2002 and 2001, respectively. As of December 31, 2002, 155,238 shares of PARS were outstanding. In 1999, a stock grant of 22,185 shares was made subject to specified vesting requirements. Compensation expense related to this stock grant, accrued over the three-year vesting period, was approximately $56,000, $80,000 and $226,000 in 2002, 2001 and 2000, respectively. Shares vested under this grant were 4,437, 5,916 and 7,395 in 2002, 2001 and 2000, respectively. As of December 31, 2002, no shares of this stock grant were outstanding. In 1995, 150,000 shares were awarded subject to specified performance and vesting requirements. The specified performance and vesting requirements were met in 2000, and the 150,000 shares were issued. Outside directors can elect to receive any portion of their director fees in stock, based on 95% of the market price. Outside directors elected to receive 7,120, 4,356 and 4,432 shares of stock in lieu of cash for director fees in 2002, 2001 and 2000, respectively. Stock Repurchase Plan: In November 2001, the Board of Directors of the Company adopted a new stock repurchase plan authorizing the repurchase of up to five million shares of common stock prior to January 1, 2004. During 2002, the Company repurchased 1,776,482 shares of common stock for an aggregate purchase price of approximately $41,891,000 under this plan. The November 2001 plan replaced and superseded the previous stock repurchase plan adopted in February 2001 under which the Company repurchased 527,400 shares of common stock for an aggregate purchase price of approximately $12,475,000. There were no repurchases during 2000. Ownership Limitations: In order to maintain Cousins' qualification as a REIT, Cousins' Articles of Incorporation include certain restrictions on the ownership of more than 3.9% of the Company's common stock. - --------------------------------------------------------------------------------
Distribution of REIT Taxable Income: The following is a reconciliation between dividends declared and dividends applied in 2002, 2001 and 2000 to meet REIT distribution requirements ($ in thousands): 2002 2001 2000 ------- ------- ------- Dividends declared $73,345 $68,595 $60,315 Additional dividends paid deduction due to 5% discount on dividends reinvested -- 730 623 That portion of dividends declared in current year, and paid in current year, which was applied to the prior year distribution requirements (5,656) (3,807) (5,786) That portion of dividends declared in subsequent year, and paid in subsequent year, which will apply to current year -- 5,656 3,807 Dividends in excess of current year REIT distribution requirements (15,806) -- -- ------------------------------- Dividends applied to meet current year REIT distribution requirements $51,883 $71,174 $58,959 ===============================
- -------------------------------------------------------------------------------- Tax Status of Dividends: Dividends in excess of the amount required to meet REIT distribution requirements were paid during 2002 (see Note 7). Since electing to qualify as a REIT in 1987, Cousins has had no accumulated undistributed taxable income. In 2002, the Company designated 22% of the dividend paid December 20, 2002 as 20% capital gain dividends which qualify as 5-year gain. In 2001, the Company designated 76% of the dividend paid May 30, 2001, 1% of the dividend paid August 24, 2001, and 11% of the dividend paid December 21, 2001 as 20% capital gain dividends. In addition, 24% of the dividend paid May 30, 2001 was designated as 25% unrecaptured Section 1250 gain dividends. In 2000, the Company designated 91% of the dividend paid May 30, 2000 as 20% capital gain dividends and 5% as 25% unrecaptured Section 1250 gain dividends. All other dividends paid in 2002, 2001 and 2000 were taxable as ordinary income dividends. In addition, in 2002, an amount calculated as 0.62% of total dividends was an "adjustment attributed to depreciation of tangible property placed in service after 1986" for alternative minimum tax purposes. This amount was passed through to stockholders and must be used as an item of adjustment in determining each stockholder's alternative minimum taxable income. - --------------------------------------------------------------------------------
7. INCOME TAXES In 2002, 2001 and 2000, because Cousins qualified as a REIT and distributed all of its taxable income (see Note 6), it incurred no federal income tax liability. The differences between taxable income as reported on Cousins' tax return (estimated 2002 and actual 2001 and 2000) and Consolidated Net Income as reported herein are as follows ($ in thousands): 2002 2001 2000 ------- ------- ------- Consolidated net income $47,872 $70,815 $62,043 Consolidating adjustments (6,787) (13,694) (24,759) CREC net (income) loss (3,470) (81) 771 CREC II net loss (income) 371 990 (738) ----------------------------- Cousins net income for financial reporting purposes 37,986 58,030 37,317 Adjustments arising from: Sales of investment properties (4,134) (5,729) (3,967) Income from unconsolidated joint ventures (principally depreciation, revenue recognition and operational timing differences) 5,669 4,843 13,120 Rental income recognition (2,959) (1,697) (302) Interest income recognition (1,187) (1,342) (469) Property taxes deferred 758 263 (1) Interest expense 3,580 8,557 8,565 Compensation expense under the 1999 and Predecessor Plans (2,345) (1,475) (2,189) Depreciation 11,669 9,510 8,560 Unearned compensation expense 530 987 -- Amortization 12 (2,308) (1,602) Predevelopment expense 604 (1,114) (341) Capitalized salaries 1,065 2,391 -- Other 635 258 268 ----------------------------- Cousins taxable income $51,883 $71,174 $58,959 =============================
The consolidated provision (benefit) for income taxes is composed of the following ($ in thousands): 2002 2001 2000 ------ ------ ------- CREC and CREC II and their wholly-owned subsidiaries: Currently payable: Federal $ 820 $ -- $ -- State 48 -- -- ---------------------------- 868 -- -- ---------------------------- Adjustments arising from: Income from unconsolidated joint ventures 378 399 (556) Operating loss carryforward (164) (793) 333 Stock appreciation right expense 98 458 741 Residential lot sales, net of cost of sales (90) (169) (1,430) Interest expense (411) (400) (456) Non-qualified stock options 1,671 9 262 Sale of investment property (519) -- -- Other (44) (83) (32) ---------------------------- 919 (579) (1,138) ---------------------------- CREC and CREC II provision (benefit) for income taxes 1,787 (579) (1,138) Cousins provision for state income taxes 24 24 24 Provision applicable to discontinued operations (285) (136) (31) ---------------------------- Consolidated provision (benefit) applicable to income from continuing operations $1,526 $(691) $(1,145) =============================
The net income tax provision (benefit) differs from the amount computed by applying the statutory federal income tax rate to CREC's and CREC II's income (loss) before taxes as follows ($ in thousands): 2002 2001 2000 --------------- --------------- -------------- Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- Federal income tax provision (benefit) $1,598 34% $(490) 34% $ (398) 34% State income tax provision (benefit), net of federal income tax effect 188 4 (57) 4 (81) 4 Other 1 -- (32) 2 (659) 59 ------------------------------------------------------ CREC and CREC II provision (benefit) for income taxes 1,787 38% (579) 40% (1,138) 97% === === === Cousins provision for state income taxes 24 24 24 Provision applicable to discontinued operations (285) (136) (31) ------ ----- ------- Consolidated provision (benefit) applicable to income from continuing operations $1,526 $(691) $(1,145) ====== ===== =======
The components of CREC and CREC II's net deferred tax liability are as follows ($ in thousands): CREC and CREC II ---------------- 2002 2001 ------- ------- Deferred tax assets $ 5,672 $ 5,445 Deferred tax liabilities (7,104) (6,823) ------------------- Net deferred tax liability $(1,432) $(1,378) =================== The tax effect of significant temporary differences representing CREC and CREC II's deferred tax assets and liabilities are as follows ($ in thousands): CREC and CREC II ---------------- 2002 2001 ------- -------- Operating loss carryforward $ 55 $ 734 Income from unconsolidated joint ventures (4,008) (3,629) Residential lot sales, net of cost of sales 2,649 2,559 Interest capitalization (1,131) (1,149) Other 1,003 107 ------------------ Net deferred tax liability $(1,432) $(1,378) ================== - -------------------------------------------------------------------------------- 8. PROPERTY TRANSACTIONS Office Division In February 2002, 55 Second Street, an approximately 379,000 rentable square foot office building in San Francisco, California, became partially operational for financial reporting purposes. Also in February 2002, Emory Crawford Long Medical Office Tower, an approximately 358,000 rentable square foot medical office facility in Atlanta, Georgia, owned by Crawford Long - CPI, LLC (see Note 5), became partially operational for financial reporting purposes. Retail Division In August 2002, the Company purchased 22.17 acres of land for approximately $4,945,000 for the development of The Avenue West Cobb, an approximately 206,000 square foot specialty retail center in suburban Atlanta, Georgia. Construction commenced on this center in September 2002. In October 2002, the Company sold Salem Road Station, an approximately 67,000 square foot retail center in suburban Atlanta, Georgia for $7,379,000, which was approximately $940,000 over the cost of the center. Including depreciation recapture of approximately $380,000 and net of an income tax provision of approximately $146,000, the net gain on this sale was approximately $1,174,000. Also in October 2002, the Company sold two outparcels at Salem Road Station for $548,000, which was approximately $195,000 over the cost of the outparcels. The gain on this sale, net of an income tax provision of approximately $74,000, was approximately $121,000. In December 2002, the Company purchased 11.91 acres of land for approximately $1,911,000 for the development of The Shops of Lake Tuscaloosa, an approximately 70,000 square foot retail center in Tuscaloosa, Alabama. Construction of this center commenced in February 2003. Land Division The Company is currently developing or has developed nine residential communities, eight in suburban Atlanta, Georgia and one in Pine Mountain, Georgia. These nine communities include land on which approximately 2,957 lots are being or were developed, of which 166, 121 and 217 lots were sold in 2002, 2001 and 2000, respectively. Of the nine communities, four containing 1,076 lots were completely sold as of December 31, 2000. Two communities containing 704 lots were completely sold as of December 31, 2002. The three residential communities remaining under development at December 31, 2002 contain approximately 1,177 lots, 146 of which have been sold. In November 1998, Temco Associates began development of the Bentwater residential community, which will consist of approximately 1,669 lots on approximately 1,290 acres (see Note 5). Temco Associates sold 289, 233 and 219 lots in 2002, 2001 and 2000, respectively. In December 2002, the Company sold approximately 5.5 acres of Wildwood land for $2,500,000. The net gain on this sale was approximately $2,143,000. 9. CONSOLIDATED STATEMENTS OF CASH FLOWS -SUPPLEMENTAL INFORMATION Interest paid (net of amounts capitalized) (see Note 4) and income taxes paid (net of refunds) were as follows ($ in thousands): 2002 2001 2000 ------- ------- -------- Interest paid $36,484 $28,271 $ 11,027 Income taxes paid, net of $1,358, $866, and $652 refunded in 2002, 2001 and 2000, respectively $ 681 $ 344 $ 3,141 Significant non-cash financing and investing activities included the following: a. In 2002, 2001 and 2000, approximately $26,836,000, $43,682,000 and $361,617,000, respectively, were transferred from Projects Under Construction to Operating Properties. b. In 2002 and 2000, approximately $942,000 and $1,066,000, respectively, were transferred from Land Held for Investment or Future Development to Residential Lots Under Development. In 2001, approximately $17,860,000 was transferred from Land Held for Investment or Future Development to Projects Under Construction. c. In conjunction with the consolidation of CPS in March 2001 (see Note 5), approximately $3,174,000 was transferred from Investment in Unconsolidated Joint Ventures to Other Assets. d. In 2002, an adjustment of the PARS granted in 2000 (see Note 6) was made and approximately $12,000 of Common Stock and approximately $330,000 of Additional Paid-in-Capital were transferred to Unearned Compensation. In 2001, an adjustment of the PARS granted in 2000 was made and approximately $2,000 of Common Stock and approximately $89,000 of Additional Paid-In-Capital were transferred to Unearned Compensation. In 2000, in conjunction with the award of PARS, approximately $170,000 was recorded as Common Stock, approximately $4,520,000 was recorded as Additional Paid-In-Capital, and approximately $4,690,000 was recorded as Unearned Compensation. In conjunction with the 3-for-2 split effected in the form of a 50% stock dividend on October 2, 2000 (see Note 6), approximately $16,259,000 was transferred from Additional Paid-In-Capital to Common Stock. 10. RENTAL PROPERTY REVENUES The Company's leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and are classified and accounted for as operating leases. At December 31, 2002, future minimum rentals to be received by consolidated entities under existing non-cancelable leases, excluding tenants' current pro rata share of operating expenses, are as follows ($ in thousands): Office and Medical Office Retail Total ---------- -------- -------- 2003 $ 85,736 $ 30,558 $116,294 2004 82,629 30,503 113,132 2005 76,702 28,017 104,719 2006 74,822 24,419 99,241 2007 71,030 22,956 93,986 Subsequent to 2007 325,419 146,272 471,691 ---------------------------------- $716,338 $282,725 $999,063 ================================== The future minimum rentals above for office and medical office include approximately $78.4 million for the Cable & Wireless Internet Services, Inc. ("Cable") lease on 158,000 rentable square feet at 55 Second Street. Effective January 31, 2003, the Company and Cable executed an agreement under which Cable's lease was terminated, conditioned upon the payment to the Company of a termination fee of $20 million. The Company received $10 million of the termination fee in February 2003, with the remaining $10 million due April 1, 2003 from an irrevocable letter of credit held by the Company. 11. REPORTABLE SEGMENTS The Company has three reportable segments: Office Division, Retail Division, and Land Division. The Office Division and Retail Division develop, lease and manage office buildings and retail centers, respectively. The Land Division owns various tracts of strategically located land which are being held for investment or future development. The Land Division also develops single-family residential communities which are parceled into lots and sold to various home builders. The accounting policies of the segments are the same as those described in Significant Accounting Policies (see Note 1). The management of the Company evaluates performance of its reportable segments based on Funds From Operations ("FFO"). The Company calculates its FFO using the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO with certain adjustments. NAREIT defines FFO as net income (computed in accordance with accounting principles generally accepted in the United States), excluding gains or losses from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Company adjusts its FFO to (i) eliminate the recognition of rental revenues on a straight-line basis and (ii) reflect stock appreciation right expense on a cash basis. The Company revised its method of allocating costs to its reportable segments in the third quarter of 2001. Prior period reportable segments have not been restated as it is impractical to do so. The Company's reportable segments are broken down based on what type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The notations (100%) and (JV) used in the following tables indicate wholly-owned and unconsolidated joint ventures, respectively, and all amounts are in thousands. - --------------------------------------------------------------------------------
Office Retail Land Unallcated 2002 Division Division Division and Other Total - ---- -------- -------- -------- --------- ----- Rental property revenues (100%) $130,151 $36,283 $ -- $ 101 $ 166,535 Rental property revenues (JV) 78,155 2,619 -- -- 80,774 Development income, management fees and leasing and other fees (100%) 16,266 1,570 399 -- 18,235 Other income (100%) -- -- 9,126 4,393 13,519 Other income (JV) -- -- 2,040 -- 2,040 ----------------------------------------------------------------- Total revenues 224,572 40,472 11,565 4,494 281,103 ----------------------------------------------------------------- Rental property operating expenses (100%) 41,073 8,851 -- 7 49,931 Rental property operating expenses (JV) 23,673 641 -- -- 24,314 Other expenses (100%) 19,360 6,644 10,234 43,375 79,613 Other expenses (JV) 3,201 65 90 9,937 13,293 Provision for income taxes from operations -- -- -- 1,665 1,665 ----------------------------------------------------------------- Total expenses 87,307 16,201 10,324 54,984 168,816 Gain on sale of undepreciated investment properties -- -- 2,143 -- 2,143 ----------------------------------------------------------------- Consolidated funds from operations 137,265 24,271 3,384 (50,490) 114,430 ----------------------------------------------------------------- Depreciation and amortization (100%) (40,418) (11,836) -- (6) (52,260) Depreciation and amortization (JV) (17,559) (986) -- -- (18,545) Effect of the recognition of rental revenues on a straight-line basis (100%) 2,130 7 -- -- 2,137 Effect of the recognition of rental revenues on a straight-line basis (JV) 8 -- -- -- 8 Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- 318 318 Gain on sale of investment properties, net of applicable income tax provision 1,884 3,401 -- -- 5,285 Extraordinary loss -- -- -- (3,501) (3,501) ----------------------------------------------------------------- Net income $ 83,310 $ 14,857 $ 3,384 $(53,679) $ 47,872 ================================================================= Total assets $866,685 $263,308 $34,135 $ 83,949 $1,248,077 ================================================================= Investment in unconsolidated joint ventures $156,165 $ 16,324 $13,027 $ -- $ 185,516 ================================================================= Capital expenditures $ 56,269 $ 17,200 $14,519 $ -- $ 87,988 =================================================================
Reconciliation to Consolidated Revenues - --------------------------------------- 2002 2001 2000 -------- -------- -------- Rental property revenues (100%) $166,535 $143,089 $111,875 Rental property revenues from discontinued operations (100%) (626) (715) (161) Effect of the recognition of rental revenues on a straight-line basis (100%) 2,137 2,380 2,111 Development income, management fees and leasing and other fees 18,235 19,489 10,700 Residential lot and outparcel sales 9,126 6,682 13,951 Interest and other 4,393 6,061 5,995 ------------------------------------ Total consolidated revenues $199,800 $176,986 $144,471 ====================================
Office Retail Land Unallcated 2001 Division Division Division and Other Total - ---- -------- -------- -------- --------- ----- Rental property revenues (100%) $109,470 $ 33,324 $ - $ 295 $ 143,089 Rental property revenues (JV) 71,242 2,432 - 14 73,688 Development income, management fees and leasing and other fees (100%) 18,229 960 300 - 19,489 Development income, management fees and leasing and other fees (JV) 1,050 - - - 1,050 Other income (100%) - - 6,682 6,061 12,743 Other income (JV) - - 1,745 25 1,770 ----------------------------------------------------------------- Total revenues 199,991 36,716 8,727 6,395 251,829 ----------------------------------------------------------------- Rental property operating expenses (100%) 35,918 9,269 - 39 45,226 Rental property operating expenses (JV) 21,308 598 - 7 21,913 Other expenses (100%) 20,193 8,035 7,977 30,583 66,788 Other expenses (JV) 897 - 25 15,158 16,080 Benefit for income taxes from operations - - - (555) (555) ----------------------------------------------------------------- Total expenses 78,316 17,902 8,002 45,232 149,452 Gain on sale of undepreciated investment properties - - 2,011 - 2,011 Consolidated funds from operations 121,675 18,814 2,736 (38,837) 104,388 ----------------------------------------------------------------- Depreciation and amortization (100%) (32,771) (10,294) - (6) (43,071) Depreciation and amortization (JV) (15,461) (941) - - (16,402) Effect of the recognition of rental revenues on a straight-line basis (100%) 2,380 - - - 2,380 Effect of the recognition of rental revenues on a straight-line basis (JV) 784 - - - 784 Adjustment to reflect stock appreciation right expense on an accrual basis - - - 1,251 1,251 Gain on sale of investment properties, net of applicable income tax provision 2,135 19,341 9 - 21,485 ----------------------------------------------------------------- Net income $ 78,742 $ 26,920 $ 2,745 $(37,592) $ 70,815 ================================================================= Total assets $846,413 $264,348 $23,319 $ 82,549 $1,216,629 ================================================================= Investment in unconsolidated joint ventures $158,207 $ 16,858 $10,332 $ - $ 185,397 ================================================================= Capital expenditures $101,593 $ 24,295 $14,458 $ - $ 140,346 =================================================================
Office Retail Land Unallcated 2000 Division Division Division and Other Total - ---- -------- -------- -------- --------- ----- Rental property revenues (100%) $ 82,158 $ 29,627 $ -- $ 90 $ 111,875 Rental property revenues (JV) 66,677 2,316 -- -- 68,993 Development income, management fees and leasing and other fees (100%) 10,059 400 241 -- 10,700 Development income, management fees and leasing and other fees (JV) 5,247 -- -- -- 5,247 Other income (100%) 1,745 1,825 12,126 4,250 19,946 Other income (JV) -- 71 733 58 862 ----------------------------------------------------------------- Total revenues 165,886 34,239 13,100 4,398 217,623 ----------------------------------------------------------------- Rental property operating expenses (100%) 28,052 7,512 -- (8) 35,556 Rental property operating expenses (JV) 18,595 533 -- -- 19,128 Other expenses (100%) 12,351 7,712 11,278 17,057 48,398 Other expenses (JV) 8,189 136 55 12,035 20,415 Benefit for income taxes from operations -- -- -- (1,114) (1,114) ----------------------------------------------------------------- Total expenses 67,187 15,893 11,333 27,970 122,383 Gain on sale of undepreciated investment properties -- -- 564 -- 564 Cumulative effect of change in accounting principle (566) -- -- -- (566) ----------------------------------------------------------------- Consolidated funds from operations 98,133 18,346 2,331 (23,572) 95,238 ----------------------------------------------------------------- Depreciation and amortization (100%) (23,030) (7,606) -- (4) (30,640) Depreciation and amortization (JV) (14,812) (813) -- -- (15,625) Effect of the recognition of rental revenues on a straight-line basis (100%) 2,111 -- -- -- 2,111 Effect of the recognition of rental revenues on a straight-line basis (JV) (482) -- -- -- (482) Adjustment to reflect stock appreciation right expense on an accrual basis -- -- -- 68 68 Gain on sale of investment properties, net of applicable income tax provision 1,892 9,481 -- -- 11,373 ----------------------------------------------------------------- Net income $63,812 $ 19,408 $ 2,331 $(23,508) $ 62,043 ================================================================= Total assets $767,237 $289,124 $12,296 $ 47,095 $1,115,752 ================================================================= Investment in unconsolidated joint ventures $150,271 $ 16,993 $ 8,207 $ -- $ 175,471 ================================================================= Capital expenditures $146,128 $ 59,803 $10,027 $ -- $ 215,958 =================================================================
INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- To Cousins Properties Incorporated: We have audited the accompanying consolidated balance sheets of Cousins Properties Incorporated (a Georgia corporation) and consolidated entities (the "Company") as of December 31, 2002 and 2001, and the related consolidated statements of income, stockholders' investment and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of CSC Associates, L.P., the Company's investment in which is accounted for by use of the equity method. The Company's equity of $84,133,000 and $86,793,000 in the CSC Associates, L.P. net assets at December 31, 2002 and 2001, respectively, and of $11,466,000, $10,711,000 and $10,613,000 in that partnership's net income for the three years in the period ended December 31, 2002, are included in the accompanying financial statements. The financial statements of CSC Associates, L.P. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such partnership, is based solely on the report of such other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Cousins Properties Incorporated and consolidated entities as of December 31, 2002 and 2001 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the financial statements, in 2000, the Company changed its method of accounting for derivative instruments and hedging activities to conform to Statement of Financial Accounting Standards No. 133 and recorded a cumulative effect of a change in accounting principle on October 1, 2000. In 2002, the Company changed its method of accounting for discontinued operations to conform to Statement of Financial Accounting Standards No. 144. DELOITTE & TOUCHE LLP Atlanta, Georgia February 14, 2003
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA - ------------------------------------------------------------------------------- ($ in thousands, except per share amounts) 2002 2001 2000 1999 1998 ---------- ---------- ---------- -------- -------- Rental property revenues $ 168,046 $ 144,754 $ 113,825 $ 62,480 $ 67,726 Development, management, leasing and other fees 18,235 19,489 10,700 13,899 9,578 Residential lot and outparcel sales 9,126 6,682 13,951 17,857 16,732 Interest and other 4,393 6,061 5,995 3,588 4,275 ----------------------------------------------------------------------- Total revenues 199,800 176,986 144,471 97,824 98,311 ----------------------------------------------------------------------- Income from unconsolidated joint ventures 26,670 22,897 19,452 19,637 18,423 ----------------------------------------------------------------------- Rental property operating expenses 49,015 43,826 33,379 19,087 17,702 Depreciation and amortization 54,248 44,453 32,742 16,859 15,173 Stock appreciation right expense (credit) 29 (276) 468 108 330 Residential lot and outparcel cost of sales 7,309 5,910 11,684 14,897 15,514 Interest expense 37,423 27,610 13,596 600 11,558 General, administrative and other expenses 33,202 31,953 22,578 18,153 15,250 ----------------------------------------------------------------------- Total expenses 181,226 153,476 114,447 69,704 75,527 Provision (benefit) for income taxes from operations 1,526 (691) (1,145) 2,442 (148) Gain on sale of investment properties, net of applicable income tax provision 6,254 23,496 11,937 58,767 3,944 Discontinued operations 1,401 221 51 -- -- Extraordinary loss (3,501) -- -- -- -- Cumulative effect of change in accounting principle -- -- (566) -- -- ----------------------------------------------------------------------- Net income $ 47,872 $ 70,815 $ 62,043 $104,082 $ 45,299 ======================================================================= Basic net income per share $ .97 $ 1.44 $ 1.28 $ 2.16 $ .96 ======================================================================= Diluted net income per share $ .96 $ 1.41 $ 1.25 $ 2.12 $ .94 ======================================================================= Cash dividends declared per share $ 1.48 $ 1.39 $ 1.24 $ 1.12 $ .99 ======================================================================= Total assets $1,248,077 $1,216,629 $1,115,752 $932,925 $752,858 Notes payable 669,792 585,275 485,085 312,257 198,858 Stockholders' investment 408,884 462,673 454,467 437,722 379,865 Shares outstanding at year-end 48,386 49,425 49,210 48,261 47,754
Cousins Properties Incorporated and Consolidated Entities MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations For The Three Years Ended December 31, 2002 General. Historically, the Company's financial results have been significantly affected by sale transactions and the fees generated by, and start-up operations of, major real estate developments, which transactions and developments do not necessarily recur. Accordingly, the Company's historical financial statements may not be indicative of future operating results. The notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in this annual report. Forward-Looking Statements. Certain matters contained in this report are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks. These include, but are not limited to, general and local economic conditions, local real estate conditions, the activity of others developing competitive projects, the cyclical nature of the real estate industry, the financial condition of existing tenants, interest rates, the Company's ability to obtain favorable financing or zoning, the environmental impact, the effects of terrorism and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Form 8-K filed on March 9, 2001. The words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Critical Accounting Policies. A critical accounting policy is one which is both important to the portrayal of a company's financial condition and results of operations and requires significant judgment or complex estimation processes. As the Company is in the business of developing, owning and managing office and retail real estate properties and developing single-family residential communities which are parceled into lots and sold to various home builders, its critical accounting policies relate to cost capitalization, impairment of long-lived assets, residential lot sales profit recognition and valuation of receivables. The Company expenses predevelopment costs incurred on a potential project until it becomes probable that the project will go forward. After a project becomes probable, all subsequently incurred predevelopment costs, as well as interest, real estate taxes and certain internal personnel and associated costs directly related to the project under development are capitalized. If the decision is made to abandon development of a project that had been deemed probable, all previously capitalized costs are expensed. Therefore, a change in the probability of a project could result in the expensing of significant costs incurred for predevelopment activity for projects that are abandoned. Also, a change in the estimated time and cost of construction could adversely impact the return on a project and the amount of value created from the development of a project. As required by accounting principles generally accepted in the United States, the Company periodically evaluates its real estate assets to determine if there has been any impairment in their carrying values and records impairment losses if the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts or if there are other indicators of impairment. The evaluation of real estate investments involves many subjective assumptions dependent upon future economic events that affect the ultimate value of the property. A change in assumptions concerning future economic events from those assumed in prior evaluations could result in an adverse change in the value of a property and cause the recordation of an impairment. At December 31, 2002, the Company did not own any real estate assets that were impaired. In its determination of the gross profit percentages to be applied to its residential lot sales in order to calculate the profits to be recognized on these sales, the Company utilizes several estimates. Gross profit percentages are calculated based on the estimated lot sales prices divided by the estimated costs of the development. The Company must estimate the prices of the lots to be sold, the costs to complete the development of the residential community and the time period over which the lots, once completed, will ultimately be sold. If the Company's estimated lot sales or costs of development, or the assumptions underlying each, were to be revised or be rendered inaccurate, it would affect the gross profit percentages and overall profit recognized on these sales. Receivables are reported net of an allowance for doubtful accounts and may be uncollectible in the future. The Company performs credit reviews and analyses on its tenants and reviews its receivables regularly for potential collection problems in computing the allowance recorded against its receivables. This review process requires the Company to make certain judgments regarding collectibility that are inherently difficult to predict. A change in the judgments made could result in an adjustment to the allowance for doubtful accounts with a corresponding effect to net income. Rental Property Revenues and Operating Expenses. Rental property revenues increased from $113,825,000 in 2000 to $144,754,000 in 2001 and $168,046,000 in 2002. Rental property revenues from the Company's office division increased approximately $20,431,000 in 2002. Three office buildings, 55 Second Street, Cerritos Corporate Center - Phase II and 1900 Duke Street, became partially operational in February 2002, June 2001 and October 2000, respectively. These properties contributed approximately $16,315,000, $1,402,000 and $436,000, respectively, to the 2002 increase. Additionally, rental property revenues from 101 Second Street increased approximately $1,365,000 in 2002, primarily due to the recognition of termination fees paid to effect the early termination of several tenants' leases. In August 2002, the Company entered into a termination agreement with Arthur Andersen which terminated its 148,000 square foot lease at 101 Second Street. The result of the termination agreement with Arthur Andersen did not have a material impact on rental property revenues in 2002. However, there will be no economic benefit to the Company or its rental property revenues from the Arthur Andersen lease in 2003 and beyond. In September 2002, the Company re-leased approximately 88,000 square feet of the former Arthur Andersen space. There is no guarantee that the remainder of the Arthur Andersen space will be re-leased in the near future. In addition, the San Francisco market continues to be a difficult leasing market. Due to these uncertainties, the Company cannot currently estimate the result of its efforts to re-lease the 101 Second Street building and the resulting impact on rental property revenues in 2003 and beyond. Also contributing to the increase in rental property revenues from the Company's office division was an increase of approximately $554,000 from Meridian Mark Plaza, as its average economic occupancy increased from 94% in 2001 to 99% in 2002, and an increase of approximately $443,000 from Inforum, primarily due to lease termination fees received from two tenants. Additionally, rental property revenues increased approximately $483,000 from the 3301 Windy Ridge Parkway Building due to the renewal of the single tenant's lease at a higher rental rate beginning May 2001. The increase in rental property revenues was partially offset by a decrease of approximately $1,178,000 from The Points at Waterview, as its average economic occupancy decreased from 73% in 2001 to 45% in 2002. The Points at Waterview was 82% leased as of December 31, 2002, with rent commencing March 2003 for a new tenant in 98,000 square feet. Rental property revenues from the Company's retail portfolio increased approximately $2,966,000 in 2002. Rental property revenues increased approximately $2,282,000 from The Avenue Peachtree City due both to the property becoming partially operational for financial reporting purposes in April 2001 and to the recognition of a termination fee of approximately $719,000 in 2002. Substantially all of the square feet terminated at The Avenue Peachtree City has been re-leased. An increase in the average economic occupancy of The Avenue of the Peninsula from 75% in 2001 to 80% in 2002 also contributed approximately $1,295,000 to the increase in rental property revenues. Additionally, rental property revenues from Mira Mesa MarketCenter increased approximately $306,000, primarily due to an expansion of the center in March 2002. Rental property revenues decreased approximately $990,000 in 2002 due to the February 2001 sale of Colonial Plaza MarketCenter, which partially offset the increase in rental property revenues. Rental property revenues from the Company's office division increased approximately $27,581,000 in 2001. The December 2000 acquisitions of One Georgia Center and The Points at Waterview increased rental property revenues by approximately $6,442,000 and $3,294,000, respectively, in 2001. Four office buildings, 555 North Point Center East, 101 Second Street, 600 University Park Place and 1900 Duke Street, which became partially operational for financial reporting purposes in February 2000, April 2000, June 2000 and October 2000, respectively, contributed approximately $996,000, $5,143,000, $1,636,000 and $2,534,000, respectively, to the increase. Additionally, rental property revenues from Inforum increased approximately $1,979,000, as its average economic occupancy increased from 87% in 2000 to 97% in 2001. Rental property revenues increased approximately $2,335,000 from Cerritos Corporate Center - Phase II, which became partially operational for financial reporting purposes in June 2001. Rental property revenues increased approximately $816,000 from AT&T Wireless Services Headquarters. Rental property revenues increased approximately $477,000 in 2001 from 333 John Carlyle, as its average economic occupancy increased from 89% in 2000 to 93% in 2001, and approximately $472,000 in 2001 from 615 Peachtree Street, as its average economic occupancy increased from 82% in 2000 to 95% in 2001. Furthermore, rental property revenues from Northside/Alpharetta II increased approximately $507,000 in 2001, as its average economic occupancy increased from 59% in 2000 to 70% in 2001. Rental property revenues from the Company's retail division increased approximately $3,697,000 in 2001. Rental property revenues increased approximately $3,729,000 from Mira Mesa MarketCenter and approximately $3,082,000 from The Avenue of the Peninsula, both of which became partially operational for financial reporting purposes in May 2000. Rental property revenues also increased approximately $1,829,000 in 2001 from The Avenue Peachtree City, which became partially operational for financial reporting purposes in April 2001. Rental property revenues increased approximately $642,000 in 2001 from Presidential MarketCenter, as an additional phase of the center became partially operational for financial reporting purposes in October 2000, and as the average economic occupancy of the original center increased from 90% in 2000 to 95% in 2001. Rental property revenues increased approximately $554,000 from Salem Road Station, which became partially operational for financial reporting purposes in October 2000, and approximately $545,000 from The Avenue East Cobb, which became partially operational for financial reporting purposes in September 1999. The increase in rental property revenues was partially offset by a decrease of approximately $5,914,000 in 2001 from the February 2001 sale of Colonial Plaza MarketCenter and by approximately $595,000 from the March 2000 sale of Laguna Niguel Promenade. Rental property operating expenses increased from $33,379,000 in 2000 to $43,826,000 and $49,015,000 in 2001 and 2002, respectively. The increases in both 2001 and 2002 were due primarily to the aforementioned office buildings and retail centers being leased-up or becoming partially operational for financial reporting purposes, as well as the aforementioned acquisitions of One Georgia Center and The Points at Waterview in December 2000. The increases in rental property operating expenses were partially offset by approximately $500,000 in 2002 from the aforementioned decrease in average economic occupancy at The Points at Waterview and approximately $244,000 and $1,800,000 in 2002 and 2001, respectively, from the aforementioned sale of Colonial Plaza MarketCenter. Development Income. Development income increased from $4,251,000 in 2000 to $6,179,000 in 2001 and then decreased to $4,625,000 in 2002. Development income decreased approximately $1,166,000 in 2002 from CPI/FSP I, L.P., as construction of Austin Research Park - Buildings III and IV was completed. Development income also decreased approximately $727,000 in 2002 from Crawford Long - CPI, LLC, as construction of the Emory Crawford Long Medical Office Tower was substantially completed in February 2002. Additionally, development income decreased approximately $215,000 in 2002 from 285 Venture, LLC, as construction of 1155 Perimeter Center West was completed in 2001. The decrease in development income in 2002 was partially offset by an increase in third party development and advisory services of approximately $687,000. In 2001, development income increased approximately $1,047,000 from CPS. Effective March 1, 2001, CREC II purchased the remaining 25% interest in CPS, at which point the operations of CPS were consolidated, whereas the operations had previously been accounted for using the equity method of accounting and therefore recognized as joint venture income (see Note 5). Development income increased approximately $1,225,000 from three third party developments and approximately $371,000 from the Emory Crawford Long Hospital campus redevelopment and joint venture medical office tower. Tenant construction supervision fees of approximately $433,000 from a tenant at Inforum also contributed to the increase in development income. The increase was partially offset by a decrease in development income of approximately $738,000 from Gateway, as construction of Gateway Village was completed, and a decrease of approximately $691,000 from 285 Venture, LLC, as construction of 1155 Perimeter Center West was completed in 2001. Management Fees. Management fees increased from $4,841,000 in 2000 to $7,966,000 and $9,313,000 in 2001 and 2002, respectively. Approximately $921,000 of the 2002 increase was due to the aforementioned consolidation of CPS. Of this increase, approximately $868,000 was from a new third party contract which CPS obtained in October 2001. Management fees also increased approximately $175,000 in 2002 from Crawford Long - CPI, LLC, due to the aforementioned Emory Crawford Long Medical Office Tower becoming partially operational for financial reporting purposes in February 2002. The 2001 increase was mainly due to the aforementioned consolidation of CPS, which contributed approximately $3,241,000 to the increase. Additionally, management fees increased in 2001 due to lease-up of several properties at certain joint ventures from which management fees are recognized. The increases in 2001 were partially offset by the disposition of the medical office third party management division in October 2000, which partially offset the increases by approximately $552,000. Leasing and Other Fees. Leasing and other fees increased from $1,608,000 in 2000 to $5,344,000 in 2001 and then decreased to $4,297,000 in 2002. The decrease in 2002 is primarily due to a decrease of approximately $1,130,000 from CPI/FSP I, L.P., as leasing fees were recognized for the lease-up of Austin Research Park - Buildings III and IV in 2001. Leasing and other fees from CPS decreased approximately $822,000 due to decreased land sales at Las Colinas. The CPS decrease was partially offset by an increase in leasing and other fees of approximately $533,000 from third party contracts and approximately $454,000 from Ten Peachtree Place Associates, due to the lease-up of the Ten Peachtree Place building. Leasing and other fees increased approximately $3,663,000 in 2001 from the aforementioned consolidation of CPS. The increase in 2001 was partially offset by a decrease in leasing and other fees of approximately $443,000 from the aforementioned disposition of the medical office third party management division in October 2000. Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales decreased from $13,951,000 in 2000 to $6,682,000 in 2001 and then increased to $9,126,000 in 2002. Residential lot sales decreased from $12,126,000 in 2000 to $6,682,000 in 2001 and then increased to $8,579,000 in 2002 due to the sale of 217 residential lots in 2000, 121 in 2001 and 166 in 2002. Additionally, there were three outparcel sales in 2000 totaling $1,825,000 and one in 2002 for $547,000. Residential lot and outparcel cost of sales decreased from $11,684,000 in 2000 to $5,910,000 in 2001 and then increased to $7,309,000 in 2002. Residential lot cost of sales was $10,463,000, $5,910,000 and $6,956,000 in 2000, 2001 and 2002, respectively, due partially to the aforementioned changes in lots sold during the periods and partially to fluctuations in gross profit percentages used to calculate the cost of sales for residential lot sales in certain of the residential developments. Cost of sales of outparcels totaled approximately $1,221,000 and $353,000 in 2000 and 2002, respectively. Interest and Other Income. Interest and other income increased from $5,995,000 in 2000 to $6,061,000 in 2001 and then decreased to $4,393,000 in 2002. These changes are primarily due to the $18.6 million note receivable from Gateway, which was repaid in full in November 2001. The interest rate on this note was floating based on LIBOR, which decreased during 2001, resulting in a decrease in interest income of approximately $341,000 in 2001. Income From Unconsolidated Joint Ventures. (All amounts reflect the Company's share of joint venture income.) Income from unconsolidated joint ventures increased from $19,452,000 in 2000 to $22,897,000 and $26,670,000 in 2001 and 2002, respectively. Income from Wildwood Associates increased from $3,844,000 in 2000 to $5,223,000 and $6,360,000 in 2001 and 2002, respectively. The 2002 increase was primarily due to an increase in income before depreciation, amortization and interest expense of approximately $803,000 from the 3200 Windy Hill Road Building, as its average economic occupancy increased from 99% in 2001 to 100% in 2002 and its tenant mix changed. The increase in 2001 was mainly due to an increase in income before depreciation, amortization and interest expense of approximately $877,000 also from the 3200 Windy Hill Road Building due to the renewal of a significant tenant's lease at a higher rental rate. An increase in income before depreciation, amortization and interest expense of approximately $198,000 from the 2300 Windy Ridge Parkway Building due to an increase in its average economic occupancy from 99% in 2000 to 100% in 2001 also contributed to the 2001 increase. Additionally, interest expense decreased approximately $214,000 in 2001, due to lower debt levels in 2001. The loss from Cousins LORET decreased from $384,000 in 2000 to $54,000 in 2001 and then increased to $729,000 in 2002. The increase in loss in 2002 was primarily due to a reduction in the average economic occupancy of Two Live Oak Center from 98% in 2001 to 89% in 2002 and to an increase of approximately $582,000 in depreciation and amortization expense at Two Live Oak Center. The decrease in the loss in 2001 was mainly due to an increase in average economic occupancy at The Pinnacle from 92% in 2000 to 98% in 2001. Income from Temco Associates increased from $678,000 in 2000 to $1,720,000 in 2001 and $1,949,000 in 2002. During 2002, 2001 and 2000, approximately 607, 359 and 461 acres, respectively, of the option related to the fee simple interest were exercised and simultaneously sold. CREC's share of the gain on these and other tract sales was approximately $668,000, $1,075,000 and $678,000 in 2002, 2001 and 2000, respectively. Additionally, CREC began recognizing profits on residential lot sales at Bentwater in 2001, which contributed approximately $1,281,000 and $645,000 to the increase in 2002 and 2001, respectively. Income from Gateway increased from $620,000 in 2001 to $1,184,000 in 2002. The Company recognizes an 11.46% current preferred return on its equity in Gateway, which increased from $3,200,000 to $10,556,000 in November 2001. Income from Crawford Long - CPI, LLC was $927,000 in 2002, as Emory Crawford Long Medical Office Tower became partially operational for financial reporting purposes in February 2002. Income from Ten Peachtree Place Associates decreased from $169,000 in 2001 to a loss of $854,000 in 2002, as the average economic occupancy of Ten Peachtree Place decreased from 93% in 2001 to 14% in 2002. This property was 100% leased as of December 31, 2002, with rent commencing March 2003 for the primary tenant in 227,000 square feet. Income from CSC Associates, L.P. increased from $10,711,000 in 2001 to $11,466,000 in 2002 primarily due to an increase in rental revenues from a tenant whose increase in rental rate did not require straight-lining under SFAS No. 13. Income from CPI/FSP I, L.P. was approximately $352,000 in 2001 and $2,119,000 in 2002. Austin Research Park - Buildings III and IV became partially operational for financial reporting purposes in June 2001 and September 2001, respectively. Income from CP Venture LLC increased from $611,000 in 2000 to $923,000 in 2001. This increase was due to decreases in depreciation and amortization expense. Income from 285 Venture, LLC increased from $831,000 in 2000 to $2,596,000 in 2001 as 1155 Perimeter Center West became partially operational for financial reporting purposes in January 2000. Income from CPS decreased from $1,649,000 in 2000 to $153,000 in 2001. Effective March 1, 2001, CREC II purchased the remaining 25% interest in Cousins Stone LP, bringing its total interest to 100%, and beginning on that date Cousins Stone LP was consolidated with CREC II. General and Administrative Expenses. General and administrative expenses increased from $18,452,000 in 2000 to $27,010,000 and $27,670,000 in 2001 and 2002, respectively. The increase in 2002 was primarily due to increased salaries and related benefits as a result of the aforementioned consolidation of CPS and new personnel in several business units. Partially offsetting the increase in 2002 was a decrease resulting from the capitalization of additional general and administrative expenses to offset the partial elimination of certain development and leasing fees from joint ventures. The increase in 2001 was also primarily due to the aforementioned consolidation of CPS, as well as a decrease of general and administrative expenses capitalized to projects under development due to a lower level of projects under development in 2001. Depreciation and Amortization. Depreciation and amortization increased from $32,742,000 in 2000 to $44,453,000 and $54,248,000 in 2001 and 2002, respectively. The increases in both 2001 and 2002 were mainly due to the aforementioned office buildings and retail centers becoming operational for financial reporting purposes. The 2002 increase was also due to write-offs of unamortized tenant improvements and leasing commissions related to certain tenants who effected early terminations of their lease obligations. Additionally, the acquisitions of One Georgia Center and The Points at Waterview in December 2000 contributed to the 2001 increase, which was partially offset by the sale of Colonial Plaza MarketCenter in February 2001. Stock Appreciation Right Expense (Credit). Stock appreciation right expense decreased $744,000 from an expense of $468,000 in 2000 to a benefit of $276,000 in 2001 and then increased $305,000 in 2002 to an expense of $29,000. This non-cash item is primarily related to the number of stock appreciation rights outstanding and the Company's stock price. Stock appreciation rights outstanding totaled approximately 23,000 and 88,000 at December 31, 2001 and 2000, respectively; none were outstanding at December 31, 2002. The Company's stock price was $24.36 and $27.9375 per share at December 31, 2001 and 2000, respectively. Interest Expense. Interest expense increased from $13,596,000 in 2000 to $27,610,000 and $37,423,000 in 2001 and 2002, respectively. Interest expense before capitalization increased from $28,881,000 in 2000 to $37,322,000 and $43,357,000 in 2001 and 2002, respectively. Interest expense before capitalization increased in both 2002 and 2001 due to higher average debt levels. The note secured by the Company's interest in CSC Associates, L.P. was refinanced in February 2002, which increased the borrowings under the loan from $80 million to $150 million (see Note 4). The Company completed four non-recourse mortgages in 2001: Presidential MarketCenter in May 2001, 600 University Park Place in July 2001, 333 John Carlyle/1900 Duke Street and 333/555 North Point Center East in November 2001, and three non-recourse mortgages in 2000: 101 Second Street in April 2000, The Avenue East Cobb in July 2000 and Meridian Mark Plaza in August 2000. The amount of interest capitalization (a reduction of interest expense), which changes parallel to the level of projects under development, decreased from $15,285,000 in 2000 to $9,712,000 in 2001 and $5,934,000 in 2002 due to a lower level of projects under development in 2001 and 2002. Partially offsetting the increase in interest expense was a reduction in interest on the credit facility due to a decrease in the average floating rate. Property Taxes on Undeveloped Land. Property taxes on undeveloped land increased from $40,000 in 2000 to $619,000 in 2001 and $675,000 in 2002. Property taxes on undeveloped land were lower in 2000 due to the reversal of estimated amounts accrued for anticipated reassessments of the Company's North Point and Wildwood land holdings. The final reassessments, after appeal, were lower than the anticipated reassessment, and the accrual was reduced. Other Expenses. Other expenses increased from $4,086,000 in 2000 to $4,324,000 and $4,857,000 in 2001 and 2002, respectively. The increase in 2002 was partially due to an increase of approximately $793,000 in predevelopment expense. Additionally, minority interest expense increased approximately $795,000 from 55 Second Street, which became partially operational for financial reporting purposes in February 2002. Partially offsetting these increases in other expenses was the reversal of approximately $1,156,000 of previously recognized minority interest expense at 101 Second Street due to the aforementioned early termination of certain tenants' leases. The increase in 2001 was due to minority interest expense of approximately $1,156,000 from 101 Second Street, which became partially operational for financial reporting purposes in April 2000. Provision (Benefit) for Income Taxes From Operations. The benefit for income taxes from operations decreased from $1,145,000 in 2000 to $691,000 in 2001 to a provision of $1,526,000 in 2002. The increase in the tax provision in 2002 was primarily due to an increase in income before income taxes and gain on sale of investment properties from CREC and its subsidiaries. The increase at CREC and its subsidiaries was primarily due to the October 2002 sale of Salem Road Station and two of its outparcels, as well as increases in income from residential lot sales, net of cost of sales, and a decrease in general and administrative expenses. The increase at CREC and its subsidiaries was partially offset by a decrease in development income and an increase in interest expense. The increase in the provision for income taxes in 2002 was also due to a decrease in the loss before income taxes and gain on sale of investment properties from CREC II and its subsidiaries. This decrease was mainly due to increased income from CPS. The decrease in the benefit in 2001 was primarily due to a decrease in the loss before income taxes and gain on sale of investment properties of approximately $1,953,000 from CREC and its subsidiaries in 2001. This decrease was primarily due to an increase in income from Temco Associates, an increase in income from Salem Road Station, a decrease in interest expense and a decrease in stock appreciation right expense. The decrease in the loss before income taxes and gain on sale of investment properties was partially offset by a decrease in residential lot sales, net of cost of sales, and an increase in general and administrative expenses in 2001. The decrease in benefit for income taxes from operations in 2001 was partially offset by a decrease in income before income taxes and gain on sale of investment properties to a loss from CREC II and its subsidiaries in 2001. The decrease is primarily due to an increase in interest expense and a decrease in income from CPS. Additionally, true-ups in the accruals required for income taxes related to the 1999 tax returns were made for CREC and its subsidiaries and CREC II and its subsidiaries, which increased the 2000 benefit by approximately $548,000 and $208,000, respectively. Gain on Sale of Investment Properties. Gain on sale of investment properties, net of applicable income tax provision, was $11,937,000, $23,496,000 and $6,254,000 in 2000, 2001 and 2002, respectively. The 2002 gain included the following: the December 2002 sale of 5.5 acres of Wildwood land ($2.1 million) and the amortization of net deferred gain from the Prudential transaction ($4.1 million) (see Note 5). The 2001 gain included the following: the February 2001 sale of Colonial Plaza MarketCenter ($17.1 million), the February 2001 disposition of leasehold interests at Summit Green ($0.2 million), the December 2001 sale of 7 acres of Wildwood land ($2.0 million) and the amortization of net deferred gain from the Prudential transaction ($4.2 million) (see Note 5). The 2000 gain included the following: the March 2000 sale of Laguna Niguel Promenade ($7.2 million), the April 2000 sale of 2 acres of North Point land ($0.6 million) and the amortization of net deferred gain from the Prudential transaction ($4.1 million) (see Note 5). Discontinued Operations. The operations and sale of Salem Road Station were reclassified to discontinued operations in accordance with SFAS No. 144 (see Note 1, Recent Accounting Pronouncements). Extraordinary Loss. The Company recognized an extraordinary loss of approximately $3,501,000 in 2002 due to the refinancing of the CSC Associates, L.P. non-recourse mortgage note payable (see Note 4). Cumulative Effect of Change in Accounting Principle. The Company's early adoption of SFAS No. 133, "Accounting for Derivatives," on October 1, 2000 resulted in a reduction in net income of approximately $566,000, which was recorded as a cumulative effect of change in accounting principle in the accompanying Consolidated Statements of Income. The Company owns 248,441 warrants to purchase common stock of Cypress Communications, Inc. which were previously recorded as an asset with an estimated value of approximately $566,000. SFAS No. 133 only affects the Company as it relates to its ownership of warrants to purchase common stock in other companies, which under SFAS No. 133 are considered derivatives and must be marked-to-market each period. - ------------------------------------------------------------------------------- Liquidity and Capital Resources Financial Condition. The Company's adjusted debt (including its pro rata share of unconsolidated joint venture debt) was $844.9 million, or 41% of total market capitalization at December 31, 2002. Adjusted debt is defined as the Company's debt ($669.8 million) and the Company's pro rata share of unconsolidated joint venture debt ($175.1 million) as disclosed in Note 4, excluding the Charlotte Gateway Village, LLC debt ($90.7 million) as it is fully exculpated and fully amortizing debt which is supported by a long-term lease to Bank of America Corporation. As of December 31, 2002, the Company was subject to the following contractual obligations and commitments ($ in thousands):
- -------------------------------------------------------------------------------- Less Than 1-3 4-5 After Total 1 Year Years Years 5 Years -------- --------- -------- -------- -------- Contractual Obligations: Long-term debt (Note 4): Unsecured credit facility $159,157 $ - $159,157 $ - $ - Mortgage debt 510,635 8,274 46,745 56,973 398,643 Share of mortgage debt of unconsolidated joint ventures 265,854 10,318 60,103 50,291 145,142 Operating leases (ground leases) 45,866 689 1,399 1,430 42,348 Operating leases (offices) 1,213 1,162 45 6 - --------------------------------------------------------------------- Total Contractual Obligations $982,725 $ 20,443 $267,449 $108,700 $586,133 ===================================================================== Commitments: Letters of credit $ 4,657 $ 4,657 $ - $ - $ - Performance bonds 555 111 444 - - Estimated development commitments (1) 131,501 131,501 - - - --------------------------------------------------------------------- Total Commitments $136,713 $136,269 $ 444 $ - $ - ===================================================================== (1) Includes the Company's share of unconsolidated joint venture commitments.
- -------------------------------------------------------------------------------- At December 31, 2002, the Company had $159.2 million drawn on its $275 million credit facility. This unsecured credit facility contains customary conditions precedent to borrowing, including compliance with financial covenants such as minimum interest coverage and maximum debt to market capitalization. The interest rate on this facility is equal to LIBOR plus a spread based on the ratio of total debt to total assets. As of December 31, 2002, the spread over LIBOR was 1.15%. This facility also contains customary events of default that could give rise to acceleration and include such items as failure to pay interest or principal and breaches of financial covenants such as maintenance of minimum capitalization and minimum interest coverage. The Company's mortgage debt, and its share of mortgage debt of unconsolidated joint ventures, is primarily non-recourse fixed-rate debt secured by various real estate or joint venture investments. As of December 31, 2002, the weighted average interest rate on this debt was 7.5%. In addition, many of the Company's non-recourse mortgages contain covenants which, if not satisfied, could result in acceleration of the maturity of the debt. The Company has future lease commitments under land leases aggregating approximately $45.9 million over an average remaining term of 57 years. Additionally, the Company has future lease commitments for office space aggregating approximately $1.2 million over an average remaining term of 1.5 years. As of December 31, 2002, the Company had outstanding letters of credit and performance bonds aggregating approximately $5.2 million. These instruments primarily related to guarantees of maintenance and/or performance pertaining to the Company's development projects. The Company has development and acquisition projects in various planning stages. The Company currently intends to finance these projects and projects currently under construction discussed in Note 8, by using its existing credit facility (increasing the credit facility as required), long-term non-recourse financing on the Company's unleveraged projects, joint ventures, project sales and other financings as market conditions warrant. As of December 31, 2002, outstanding commitments for the construction and design of real estate projects, including the Company's share of unconsolidated joint venture commitments, totaled approximately $131.5 million, most of which will be funded in 2003. As a member of various of the unconsolidated joint ventures described in Note 5, the Company may be required to make additional capital contributions from time to time to fund development costs, tenant improvement costs or operating deficits. In September 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") for the offering from time to time of up to $200 million of common stock, warrants to purchase common stock and debt securities, of which approximately $132 million remained available at December 31, 2002. The Company from time to time evaluates opportunities and strategic alternatives, including but not limited to joint ventures, mergers and acquisitions and new private or publicly-owned entities created to hold existing assets and acquire new assets. These alternatives may also include sales of single or multiple assets when the Company perceives opportunities to capture value and redeploy proceeds or distribute proceeds to stockholders. The Company's consideration of these alternatives is part of its ongoing strategic planning process. There can be no assurance that any such alternative, if undertaken and consummated, would not materially adversely affect the Company or the market price of the Company's Common Stock. Cash Flows. Net cash provided by operating activities of continuing operations decreased from $90.4 million in 2000 to $90.2 million in 2001 and then increased to $102.7 million in 2002. Depreciation and amortization increased approximately $9.9 million due to the aforementioned office buildings and retail center becoming partially operational for financial reporting purposes and the write-offs of unamortized tenant improvements and leasing commissions related to certain tenants who effected early terminations of their lease obligations. Changes in other operating assets and liabilities increased approximately $4.0 million and residential lot and outparcel cost of sales increased approximately $1.3 million, also contributing to the increase in net cash provided by operating activities. Income from continuing operations before gain on sale of investment properties decreased approximately $3.4 million, which partially offset the increase in net cash provided by operating activities. In 2001, income from continuing operations before gain on sale of investment properties decreased approximately $3.5 million. Further contributing to the decrease in net cash provided by operating activities was a decrease in residential lot and outparcel cost of sales of approximately $6.1 million. Changes in other operating assets and liabilities decreased approximately $3.0 million. Stock appreciation right expense (credit) decreased approximately $0.7 million in 2001, which also contributed to the decrease in net cash provided by operating activities. Depreciation and amortization increased approximately $12.9 million and amortization of unearned compensation increased approximately $1.0 million, both of which partially offset the decrease in net cash provided by operating activities. Net cash used in investing activities decreased from $217.8 million in 2000 to $117.3 million in 2001 and $83.0 million in 2002. The decrease in net cash used in investing activities in 2002 was primarily due to a decrease of approximately $52.4 million in property acquisition and development expenditures, as a result of the Company having a lower level of projects under development in 2002. Investment in unconsolidated joint ventures decreased approximately $34.5 million, which also contributed to the decrease in net cash used in investing activities. This decrease was primarily due to a decrease in contributions of approximately $15.4 million to CPI/FSP I, L.P., as construction of Austin Research Park - Buildings III and IV was completed in 2001, a decrease in contributions of approximately $13.0 million to Crawford Long - CPI, LLC in 2002, as construction of the Emory Crawford Long Medical Office Tower was substantially completed in February 2002, and a decrease in contributions of approximately $1.1 million to 285 Venture, LLC, as construction of 1155 Perimeter Center West was completed in 2001. Contributions to Gateway also decreased approximately $7.8 million. The decrease in investment in unconsolidated joint ventures was partially offset by an increase in contributions of approximately $4.0 million to Ten Peachtree Place Associates in 2002. The decrease in net cash paid in acquisition of business of approximately $2.1 million, which resulted from the acquisition of the remaining 25% interest in CPS in the first quarter of 2001, and a decrease in change in other assets, net, of approximately $6.8 million, both further contributed to the decrease in net cash used in investing activities. Net cash provided by sales activities decreased approximately $45.9 million due primarily to the sale of Colonial Plaza MarketCenter in February 2001, which partially offset the decrease in net cash used in investing activities. Collection of notes receivable decreased approximately $2.9 million, which also partially offset the decrease in net cash used in investing activities. Further offsetting the decrease in net cash used in investment activities in 2002 was a decrease in distributions in excess of income from unconsolidated joint ventures of approximately $12.7 million, consisting of a decrease in total distributions of approximately $8.9 million and an increase in income of approximately $3.8 million. The decrease in total distributions was primarily due to a decrease of approximately $17.6 million from Gateway, as a result of refinancing Gateway's construction loan in 2001, partially offset by increases in total distributions of approximately $7.0 million from Wildwood Associates and $1.9 million from CPI/FSP I, L.P. In 2001, net cash provided by sales activities increased approximately $30.1 million, which contributed to the decrease in net cash used in investing activities, due primarily to the sale of Colonial Plaza MarketCenter in February 2001. The decrease in net cash used in investing activities was also partially due to a decrease of approximately $75.6 million in property acquisition and development expenditures, as a result of the Company having a lower level of projects under development. Also contributing to the decrease in net cash used in investing activities in 2001 was an increase in distributions in excess of income from unconsolidated joint ventures of approximately $9.0 million, reflecting an increase of approximately $12.4 million in total distributions net of an increase of approximately $3.4 million in income. The increase in total distributions was primarily due to increases of approximately $18.3 million from Gateway, resulting from refinancing its construction loan, $1.9 million from CSC Associates, L.P. and $0.8 million from CPI/FSP I, L.P. Partially offsetting these increases in total distributions were decreases in distributions of approximately $4.5 million from Wildwood Associates, $3.1 million from CPS and $1.8 million from Temco Associates. Partially offsetting the decrease in net cash used in investing activities was an increase of approximately $7.2 million in investment in unconsolidated joint ventures in 2001. Investment in Crawford Long - CPI, LLC increased approximately $13.7 million as a result of development of the Emory Crawford Long joint venture medical office tower and investment in CPI/FSP I, L.P. increased approximately $5.0 million as a result of development of Austin Research Park - Buildings III and IV. Investment in Gateway also increased approximately $7.8 million. Partially offsetting the increase in investment in unconsolidated joint ventures was a decrease in 285 Venture, LLC of approximately $12.8 million, as construction of 1155 Perimeter Center West was completed. Also partially offsetting the increase was a decrease in the investment in CPS of approximately $4.5 million, as the Company purchased the remaining 25% interest in March 2001 (see Note 5). Change in other assets, net, increased approximately $4.8 million, which partially offset the aforementioned decrease in net cash used in investing activities. Net cash paid in acquisition of a business, which resulted from the acquisition of the remaining 25% interest in CPS, further offset the decrease in net cash used in investing activities by approximately $2.1 million. Net cash provided by financing activities decreased from $127.5 million in 2000 to $35.5 million in 2001, and then decreased to net cash used in financing activities of $21.2 million in 2002. The decrease in net cash provided by financing activities in 2002 was primarily attributable to an increase of approximately $67.8 million in repayment of other notes payable and an increase in extraordinary loss of approximately $3.5 million, both due to the refinancing of Bank of America Plaza (see Note 4). Also contributing to the decrease in net cash provided by financing activities to net cash used in financing activities was an increase of $29.4 million of common stock repurchases. An increase in the dividends paid per share to $1.48 in 2002 from $1.39 in 2001 also contributed to the decrease in net cash provided by financing activities as dividends paid increased approximately $4.8 million. Additionally, common stock sold, net of expenses, decreased by approximately $3.4 million. The increase in proceeds from other notes payable of approximately $26.3 million due to the aforementioned refinancing of Bank of America Plaza and an increase of approximately $25.8 million in net amounts drawn on the credit facility partially offset the decrease in net cash provided by financing activities. The decrease in net cash provided by financing activities in 2001 was primarily attributable to an increase in net amounts drawn on the credit facility of $64.1 million and a decrease of $28.0 million in proceeds from other notes payable. The Company completed five financings for a total of $126.5 million in 2001 as compared to three financings for a total of $154.5 million in 2000. An increase in the dividends paid per share to $1.39 in 2001 from $1.24 in 2000 and an increase in the number of shares outstanding also contributed to the decrease in net cash provided by financing activities, as dividends paid increased approximately $8.3 million. The Company repurchased 527,400 shares of its outstanding common stock in September 2001, which contributed approximately $12.5 million to the decrease in net cash provided by financing activities. Common stock sold, net of expenses, increased by approximately $1.4 million and repayment of other notes payable decreased by approximately $19.5 million, due to the repayment in 2000 of the note payable to First Union National Bank, both of which partially offset the decrease in net cash provided by financing activities. Effects of Inflation. The Company attempts to minimize the effects of inflation on income from operating properties by using rents tied to tenants' sales, periodic fixed-rent increases or increases based on cost-of-living adjustments, and/or pass-through of operating cost increases to tenants. Other Matters. The events of September 11, 2001 adversely affected the pricing and availability of property insurance. In particular, premiums increased and terrorism insurance coverage became harder to obtain. The availability of coverage has improved and, at this time, the Company and its unconsolidated joint ventures are fully insured on all of their assets. While the Company's cost of property insurance coverage has increased, management believes the costs are still reasonable and should not have a material impact on the Company's financial condition or results of operations. Quantitative and Qualitative Disclosure about Market Risk The variable rate debt is primarily from the Company's credit facility, which is drawn on as needed (see Note 4), and from a mortgage note at an unconsolidated joint venture, Ten Peachtree Place Associates. Since these rates are floating, the Company is exposed to the impact of interest rate changes. None of the Company's notes receivable have variable interest rates. The Company does not enter into contracts for trading purposes and does not use leveraged instruments. The following table summarizes the Company's market risk associated with notes payable and notes receivable as of December 31, 2002. The information presented below should be read in conjunction with Notes 3 and 4. The table presents principal cash flows and related weighted average interest rates by expected year of maturity. Variable rate represents the floating interest rate calculated at December 31, 2002. - --------------------------------------------------------------------------------
Expected Year of Maturity ----------------------------------------------------------------------------------- Fair 2003 2004 2005 2006 2007 Thereafter Total Value ----------------------------------------------------------------------------------- ($ in thousands) Notes Payable (including share of unconsolidated joint ventures): Fixed Rate $17,492 $ 18,716 $84,875 $18,629 $86,308 $542,767 $768,787 $821,866 Average Interest Rate 7.29% 7.24% 7.58% 6.94% 8.00% 7.34% 7.42% -- Variable Rate $ 1,100 $161,297 $ 1,117 $ 1,148 $ 1,179 $ 1,018 $166,859 $166,859 Average Interest Rate 2.13% 2.83% 2.13% 2.13% 2.13% 2.13% 2.81% -- Notes Receivable: Fixed Rate $26,309 $ -- $ -- $ 12 $ -- $ -- $ 26,321 $ 27,154 Average Interest Rate 10.00% -- -- 8.50% -- -- 10.00% --
Cousins Properties Incorporated and Consolidated Entities MARKET AND DIVIDEND INFORMATION - -------------------------------------------------------------------------------- The high and low sales prices for the Company's common stock and cash dividends declared per share were as follows: 2002 Quarters 2001 Quarters ---------------------------------------- ---------------------------------------- First Second Third Fourth First Second Third Fourth ----- ------ ----- ------ ----- ------ ----- ------ High $27.18 $27.32 $25.02 $24.89 $28.75 $27.65 $27.07 $25.38 Low 23.70 24.20 20.05 20.23 23.50 24.85 23.30 23.70 Dividends Declared .37 .37 .37 .37 .34 .34 .34 .37 Payment Date 2/22/02 5/30/02 8/26/02 12/20/02 2/22/01 5/30/01 8/24/01 12/22/01 The Company's stock trades on the New York Stock Exchange (ticker symbol CUZ). At February 27, 2003, there were 1,137 stockholders of record.
- -------------------------------------------------------------------------------- ABOUT YOUR DIVIDENDS Timing of Dividends - Cousins normally pays regular dividends four times each year in February, May, August and December. Differences Between Net Income and Cash Dividends Declared - Cousins' current intention is to distribute at least 100% of its taxable income and thus incur no corporate income taxes. However, Consolidated Net Income for financial reporting purposes and Cash Dividends Declared will generally not be equal for the following reasons: a. There will continue to be considerable differences between Consolidated Net Income as reported to stockholders (which includes the income of consolidated non-REIT entities that pay corporate income taxes) and Cousins' taxable income. The differences are enumerated in Note 7 of "Notes to Consolidated Financial Statements." b. For purposes of meeting REIT distribution requirements, dividends may be applied to the calendar year before or after the one in which they are declared. The differences between dividends declared in the current year and dividends applied to meet current year REIT distribution requirements are enumerated in Note 6 of "Notes to Consolidated Financial Statements." Capital Gains Dividends - In some years, as it did in 2002, 2001 and 2000, Cousins will have taxable capital gains, and Cousins currently intends to distribute 100% of such gains to stockholders. The Form 1099-DIV sent by Cousins to stockholders of record each January shows total dividends paid (including the capital gains dividends) as well as that which should be reported as a capital gain (see Note 6 of "Notes to Consolidated Financial Statements"). Tax Preference Items and "Differently Treated Items" - Internal Revenue Code Section 59(d) requires that certain corporate tax preference items and "differently treated items" be passed through to a REIT's stockholders and treated as tax preference items and items of adjustment in determining the stockholder's alternative minimum taxable income. The amount of this adjustment is included in Note 6 of "Notes to Consolidated Financial Statements." Tax preference items and adjustments are includable in a stockholder's income only for purposes of computing the alternative minimum tax. These adjustments will not affect a stockholder's tax filing unless that stockholder's alternative minimum tax is higher than that stockholder's regular tax. Stockholders should consult their tax advisors to determine if the adjustment reported by Cousins affects their tax filing. Many stockholders will find that the adjustment reported by Cousins will have no effect on their tax filing unless they have other large sources of alternative minimum tax adjustments or tax preference items.
Cousins Properties Incorporated and Consolidated Entities SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- Selected quarterly information for the two years ended December 31, 2002 ($ in thousands, except per share amounts): Quarters --------------------------------------- First Second Third Fourth ------- ------ ------- ------- 2002: Revenues $49,077 $48,814 $52,357 $49,552 Income from unconsolidated joint ventures 7,030 6,601 6,880 6,159 Gain on sale of investment properties, net of applicable income tax provision 1,029 1,042 1,028 3,155 Income from continuing operations 12,716 12,656 11,929 12,671 Discontinued operations 59 56 81 1,205 Extraordinary loss (3,501) -- -- -- Net income 9,274 12,712 12,010 13,876 Basic income from continuing operations per share .26 .25 .24 .26 Basic net income per share .19 .26 .24 .29 Diluted income from continuing operations per share .25 .25 .24 .26 Diluted net income per share .18 .25 .24 .28 2001: Revenues $43,172 $44,089 $45,180 $44,545 Income from unconsolidated joint ventures 5,505 5,640 5,804 5,948 Gain on sale of investment properties, net of applicable income tax provision 18,345 1,077 1,031 3,043 Income from continuing operations 31,308 12,500 13,324 13,462 Discontinued operations 59 58 63 41 Net income 31,367 12,558 13,387 13,503 Basic income from continuing operations per share .64 .25 .27 .27 Basic net income per share .64 .25 .27 .28 Diluted income from continuing operations per share .62 .25 .26 .27 Diluted net income per share .62 .25 .27 .27
INDEPENDENT AUDITORS Deloitte & Touche LLP COUNSEL King & Spalding LLP Troutman Sanders LLP TRANSFER AGENT AND REGISTRAR Wachovia Bank, N.A. Shareholder Services Group - 1153 1525 West W.T. Harris Blvd., Building 3C3 Charlotte, North Carolina 28262-1153 Telephone Number: 1-800-829-8432 FAX Number: 1-704-590-7618 FORM 10-K AVAILABLE The Company's annual report on Form 10-K and interim reports on Form 10-Q are filed with the Securities and Exchange Commission. Copies without exhibits are available free of charge upon written request to the Company at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683, Attention: Mark A. Russell, Vice President - Chief Financial Analyst and Director of Investor Relations. These items are also posted on the Company's website at www.CousinsProperties.com. INVESTOR RELATIONS CONTACT Mark A. Russell, Vice President - Chief Financial Analyst and Director of Investor Relations Telephone Number: (770) 857-2449 FAX Number: (770) 857-2360 Email Address: markrussell@cousinsproperties.com Cousins Properties Incorporated and Consolidated Entities DIRECTORS T. G. Cousins Chairman of the Board Thomas D. Bell, Jr. Vice Chairman of the Board, President and Chief Executive Officer Richard W. Courts, II Chairman Atlantic Investment Company Lillian C. Giornelli Chairman and Chief Executive Officer The Cousins Foundation, Inc. Terence C. Golden Chairman Bailey Capital Corporation Boone A. Knox Chairman Regions Bank of Central Georgia John J. Mack Chairman and Chief Executive Officer Credit Suisse First Boston Hugh L. McColl, Jr. Retired Chairman and Chief Executive Officer Bank of America Corporation William Porter Payne Partner Gleacher & Co. R. Dary Stone Vice Chairman of the Company Henry C. Goodrich Director Emeritus CORPORATE T. G. Cousins Chairman of the Board Thomas D. Bell, Jr. Vice Chairman of the Board, President and Chief Executive Officer Daniel M. DuPree Vice Chairman of the Company R. Dary Stone Vice Chairman of the Company Tom G. Charlesworth Executive Vice President, Chief Financial Officer and Chief Investment Officer Dan G. Arnold Senior Vice President and Chief Information Officer Lisa M. Borders Senior Vice President James A. Fleming Senior Vice President, General Counsel and Secretary Lawrence B. Gardner Senior Vice President - Human Resources C. Jack Minter Senior Vice President - Director of Investments Michael A. Quinlan Senior Vice President, Chief Accounting Officer, Controller and Assistant Secretary Patricia A. Grimes Vice President - Financial and SEC Reporting and Accounting Policy Karen S. Hughes Vice President - Treasury and Finance Kristin R. Myers Vice President - Taxation and Benefit Plan Compliance Mark A. Russell Vice President - Chief Financial Analyst and Director of Investor Relations OFFICE DIVISION Craig B. Jones President John S. McColl Senior Vice President Michael B. Ablon Senior Vice President - Dallas W. Henry Atkins Senior Vice President - Charlotte Charles E. Cotten Senior Vice President - Dallas Mark P. Dickenson Senior Vice President -Director of Leasing, Client Services, Dallas Walter L. Fish Senior Vice President - Director of Leasing, Atlanta James F. George Senior Vice President - Senior Development Executive Tim Hendricks Senior Vice President - Austin Jack A. LaHue Senior Vice President - Asset Management Roger B. Leithead, Jr. Senior Vice President - Office, Atlanta Dara J. Nicholson Senior Vice President - Property Management, Office C. David Atkins Vice President - Asset Management, Charlotte James D. Dean Vice President - Senior Development Executive, Office Lee Eastwood Vice President - Leasing, Office Molly Faircloth Vice President - Administration, Office John N. Goff Vice President - Development Executive, Charlotte Charles D. McCormick Vice President - Development Executive, Austin Ronald C. Sturgis Vice President - Director of Operations, Office Lloyd P. Thompson, Jr. Vice President - Senior Development Executive John R. Ward Vice President - Asset Management, Atlanta RETAIL DIVISION Joel T. Murphy President William I. Bassett Senior Vice President - Development Alexander A. Chambers Senior Vice President Robert A. Manarino Senior Vice President - Director of Western Region Operations Thomas D. Lenny Senior Vice President - Western Region David C. Nelson Senior Vice President - Director of Asset Management Steve V. Yenser Senior Vice President - Leasing Steve A. Cooper Vice President - Property Management Kevin B. Polston Vice President - Leasing Amy S. Siegal Vice President - Leasing LAND DIVISION* (Cousins Neighborhoods) Bruce E. Smith President Michael J. Quinley Senior Vice President - Development Erling D. Speer Senior Vice President - Development Craig A. Lacey Vice President - Development Deloris Schmidt Vice President - Operations *Officers of Cousins Real Estate Corporation only EX-21 6 ex21-02.txt SUBSIDIARIES EXHIBIT 21 COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES SUBSIDIARIES OF THE REGISTRANT DECEMBER 31, 2002 At December 31, 2002, the Registrant had the following 100% owned subsidiaries: Cousins, Inc.; subsidiary includes Cousins/Daniel, LLC* Cousins Austin GP, Inc. Cousins Austin, Inc. Cousins/Cerritos I, LLC Cousins Properties Waterview LP Cousins Texas GP Inc. Cousins Waterview LLC Cousins Waterview GP LLC Presidential MarketCenter LLC At December 31, 2002, the financial statements of the following entities were consolidated with those of the Registrant in the Consolidated Financial Statements incorporated herein: Cousins Aircraft Associates, LLC (99% owned by Registrant and 1% owned by Cousins Real Estate Corporation) Cousins/Myers Second Street Partners, L.L.C.* Cousins/Myers II, LLC* Cousins Properties Texas LP (76.24% owned by Registrant and 23.76% owned by Cousins Real Estate Corporation) Cousins Real Estate Corporation and subsidiaries (100% of non-voting common stock and 100% of preferred stock owned by Registrant); subsidiaries include Cousins MarketCenters, Inc., New Land Realty, LLC, Cedar Grove Lakes, LLC, CREC Alabama Inc. and Cousins Real Estate Development, Inc. (each 100% owned by Cousins Real Estate Corporation) Cousins Texas LLC (76% owned by Registrant and 24% owned by Cousins Real Estate Corporation) CP Venture Three LLC (88.50% owned by Registrant and 11.50% owned by Prudential) CREC II Inc. and subsidiaries (100% of non-voting common stock and 100% of preferred stock owned by Registrant); subsidiaries include Cousins Properties Services Inc., Cousins Properties Services LP and CS Texas Inc. Perimeter Expo Associates, L.P. (90% owned by Registrant and 10% owned by Cousins MarketCenters, Inc.) Rocky Creek Properties (75% owned by Registrant) * Minority member receives a portion of residual cash flow and capital proceeds after a preferred return to Registrant. At December 31, 2002, the Registrant and its consolidated entities had the following significant unconsolidated subsidiaries which were not 100% owned: 285 Venture, LLC (50% owned by Registrant) Brad Cous Golf Venture, Ltd. (50% owned by Registrant) CC-JM II Associates (50% owned by Registrant) Charlotte Gateway Village, LLC (50% owned by Registrant) C-H Associates, Ltd. (49% owned by Cousins Texas LLC) C-H Leasing Associates (50% owned by Cousins Real Estate Corporation) C-H Management Associates (50% owned by Cousins Real Estate Corporation) CL Realty, LLC (50% owned by Cousins Real Estate Corporation) Cousins LORET Venture, L.L.C. (50% owned by Registrant) CPI/FSP I, L.P. (50% owned by Registrant) CP Venture LLC (50% owned by Registrant) CP Venture Two LLC (11.50% owned by Registrant) Crawford Long - CPI, LLC (50% owned by Registrant) CSC Associates, L.P. (50% owned by Registrant) Green Valley Associates II (50% owned by Registrant) MC Dusseldorf Holding B.V. (10% voting interest owned by Registrant and 40% voting interest owned by Cousins Real Estate Corporation) Ten Peachtree Place Associates (50% owned by Registrant) Temco Associates (50% owned by Cousins Real Estate Corporation) Wildwood Associates (50% owned by Registrant) EX-23 7 ex23a-02.txt CONSENT OF DELOITTE & TOUCHE EXHIBIT 23(a) INDEPENDENT AUDITORS' CONSENT ----------------------------- We consent to the incorporation by reference in Registration Statements Nos. 33-41927, 33-56787, 333-42007, 333-67887, 333-92089 and 333-68010 on Form S-8 and Registration Statements Nos. 33-60350, 333-48841, 333-12031 and 333-46676 on Form S-3 of Cousins Properties Incorporated of our reports dated February 14, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the impact of the adoption of Statements of Financial Accounting Standard No. 133 and No. 144), appearing in and incorporated by reference in the Annual Report on Form 10-K of Cousins Properties Incorporated for the year ended December 31, 2002. DELOITTE & TOUCHE LLP Atlanta, Georgia March 24, 2003 EX-23 8 ex23b-02.txt CONSENT ERNST & YOUNG EXHIBIT 23(b) CONSENT OF INDEPENDENT AUDITORS ------------------------------- We consent to the incorporation by reference in Amendment No. 1 to the Registration Statement (Form S-3 No. 333-12031) and related Prospectus of Cousins Properties Incorporated, in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-60350) and related Prospectus pertaining to the Dividend Reinvestment Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 33-56787) and related Prospectus pertaining to the 1989 Stock Option Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 33-41927) and related Prospectus pertaining to the 1989 Stock Option Plan, 1987 Restricted Stock Plan for Outside Directors and Incentive Stock Option Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 333-67887) and related Prospectus pertaining to the 1995 Stock Incentive Plan of Cousins Properties Incorporated, in the Registration Statement (Form S-8 No. 333-42007) and related Prospectus pertaining to the 1995 Stock Incentive Plan of Cousins Properties Incorporated, in the Registration Statements (Form S-3 No. 333-48841 and No. 333-46676) and related Prospectus pertaining to the Dividend Reinvestment Plan of Cousins Properties Incorporated, and in the Registration Statement (Form S-8 No. 333-92089) and related Prospectus pertaining to the 1999 Incentive Stock Plan of Cousins Properties Incorporated (Form S-8 No. 333-68010) of our report dated February 7, 2003, with respect to the financial statements and schedule of CSC Associates, L.P., included in the Form 10-K of Cousins Properties Incorporated for the year ended December 31, 2002. ERNST & YOUNG LLP Atlanta, Georgia March 24, 2003 EX-99 9 ex99-1y02.txt CERTIFICATION SARBANES OXLEY ACT EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K/A of Cousins Properties Incorporated (the "Corporation") for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, the President, Chief Executive Officer and Vice Chairman of the Board, of the Corporation, certifies that to his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. /s/ Thomas D. Bell, Jr. - ----------------------------------------------------- Thomas D. Bell, Jr. President, Chief Executive Officer and Vice Chairman of the Board March 27, 2003 EX-10 10 ex10bii-02.txt EXHIBIT 10(B)(II) Exhibit 10(b)(ii) COUSINS PROPERTIES INCORPORATED PROFIT-SHARING TRUST AGREEMENT AS EFFECTIVE AS OF January 1, 1991 TABLE OF CONTENTS ----------------- SECTION 1. DEFINITIONS..................................................... 2 SECTION 2. GENERAL..........................................................2 SECTION 3. CONTRIBUTIONS AND TRUST FUND.....................................2 SECTION 4. PLAN SPONSOR ................................................... 4 4.1. Powers and Duties of the Plan Sponsor.........................4 4.2. Liquidity Requirements....................................... 4 4.3. Action by the Plan Sponsor....................................5 SECTION 5. TRUSTEES........................................................ 5 5.1. Investment Powers............................................... 5 5.2. Special Rules for Investment of Fund......................... 7 5.3. Reports, Orders and Bond.... .............................. 9 5.4. Advice or Direction.......................................... 9 SECTION 6. PLAN BENEFIT AND EXPENSE DISBURSEMENTS.......................... 9 SECTION 7. ACCOUNTING BY TRUSTEE.......................................... 10 SECTION 8. EXPENSES....................................................... 11 SECTION 9. RESIGNATION OR REMOVAL OF TRUSTEE.............................. 11 SECTION 10. AMENDMENT AND TERMINATION..................................... 13 10.1. Amendment...................................................... 13 10.2. Termination.................................................... 13 SECTION 11. INDEMNIFICATION............................................... 13 SECTION 12. MISCELLANEOUS................................................. 14 12.1. Headings and References........................................ 14 12.2. Construction................................................... 14 12.3. Spendthrift Clause............................................. 15 12.4. Legally Incompetent............................................ 15 12.5. Benefits Supported Only by Fund................................ 15 12.6. Claims......................................................... 16 12.7. Nonreversion and Exclusive Benefit........................ 16 12.8. Merger or Consolidation................................... 17 12.9. Qualified Domestic Relations Order........................ 17 12.10. Reports.................................................. 18 COUSINS PROPERTIES INCORPORATED PROFIT-SHARING TRUST AGREEMENT ------------------------------ THIS TRUST AGREEMENT, made as of this 1st day of January, 1991, between COUSINS PROPERTIES INCORPORATED, COUSINS REAL ESTATE CORPORATION, COUSINS MANAGEMENT, INC. and Robert P. Hunter, Jr., Vipin L. Patel, and Peter A. Tartikoff as the individual Trustees for this Fund; W I T N E S S E T H: WHEREAS, the Plan Sponsor first adopted the Cousins Properties Incorporated Plan and Trust Agreement ("Plan") effective as of January 1, 1966; and WHEREAS, the Plan Sponsor reserved the right to amend the Plan from time to time; and WHEREAS, the Plan as amended and restated in its entirety effective as of January 1, 1991 provides for multiple separate trust funds as part of the Plan; and WHEREAS, this Trust Agreement is adopted pursuant to the Plan as so amended and restated and establishes one of such separate trust funds, which trust fund shall be a part of the Plan and which trust fund initially shall constitute a full and complete continuation of the Fund as in existence on December 31, 1990. ss. 1. DEFINITIONS ----------- Except as otherwise expressly set forth in this Trust Agreement, all of the terms defined in the Plan shall have the same meaning in this Trust Agreement as in the Plan. ss.2. GENERAL ------- All of the Trustee's rights, powers, duties and responsibilities of any kind or description whatsoever respecting this Fund shall be expressly set forth in this Trust Agreement. The Trustee shall have only such duties with respect to the maintenance, operation and administration of the Plan as are expressly set forth in this-Trust Agreement. No right, power, duty or responsibility of any kind or description whatsoever respecting this Fund or the maintenance, operation or administration of the Plan shall be attributed to the Trustee on account of any ambiguity or inference which might be interpreted by any person to exist in the terms of this Trust Agreement. ss. 3 CONTRIBUTIONS AND TRUST FUND ---------------------------- This Fund shall constitute a full and complete continuation of the Fund as in existence on December 31, 1990. All such assets of such Fund shall be held in trust in this Fund and this Fund shall continue to be a part of the Plan. The Trustee thereafter shall accept the contributions made by, or on behalf of, a Company for the Plan, and such contributions shall be held in trust and shall become part of this Fund when and as accepted by the Trustee. The Trustee shall have no responsibility whatsoever to inquire into or to audit the acts or omissions of any trustee who transfers the assets of the Plan to the Trustee or to make any claim or demand of any kind or description against such a trustee absent a written direction from the Plan Sponsor to do so, and the Trustee shall be indemnified and held harmless by the Plan Sponsor for any act or omission of any such other trustee unless the Trustee has actual knowledge that such act or omission violated ERISA or any other applicable law. The Trustee shall maintain records which shall identify the assets transferred for, and the contributions made for, the Plan and all investment gains and losses, realized and unrealized, on such assets and contributions and all disbursements made for the Plan. The Trustee shall not be responsible for the amount or the collection of any transfers or contributions to this Fund or for the determination of the amount or frequency of any contribution required by the Plan, ERISA or the Code and such responsibilities shall be borne solely by each Company. ss. 4. PLAN SPONSOR ------------ 4.1. Powers and Duties of the Plan Sponsor. The Plan Sponsor shall act on ------------------------------------- its own behalf and on behalf of each Company in connection with the operation and administration of this Fund. The Plan Sponsor shall advise the Trustee of such facts and issue to the Trustee such directions as reasonably may be required by the Trustee in its management of this Fund. The Plan Sponsor shall direct the Trustee as to disbursements from this Fund (which direction may at the Plan Sponsor's discretion be a continuing direction), and the Trustee shall have no responsibility to determine whether disbursements are in accordance with the Plan or otherwise proper or to see to the application of any disbursements made in accordance with any such direction. 4.2. Liquidity Requirements. The Plan Sponsor shall determine anticipated ----------------------- liquidity requirements for the Plan to meet projected benefit payments for each calendar year and, if any adjustment from previous annual liquidity requirements is appropriate, the Plan Sponsor shall appropriately coordinate the Trustee's Fund investment policies with Plan needs. 4.3. Action by the Plan Sponsor. Any action by the Plan Sponsor pursuant to -------------------------- any of the provisions of this Trust Agreement shall be communicated to the Trustee in accordance with such procedures as the Plan Sponsor deems appropriate under the circumstances. ss. 5. TRUSTEE ------- 5.1. Investment Powers. Subject to ss.5.2, the Trustee shall have the sole ----------------- and exclusive power and duty to manage the investments of the assets of this Fund in accordance with ERISA and, in connection with the exercise of such power and the fulfillment of such duty, to do all things and execute such instruments as the Trustee may deem necessary or proper, including the following powers, all of which may be exercised without order of, or report to, any court: (a) To sell, exchange, or otherwise dispose of any property at any time held or acquired under this Fund, at public or private sale, for cash or on terms, without advertisement, including the right to lease for any term notwithstanding the period of the Plan or this Fund, and to grant options to purchase any asset of this Fund. (b) To vote in person or by proxy any corporate stock or other security and to agree to or take any other action in regard to any reorganization, merger, consolidation, liquidation, bankruptcy or other procedure or proceeding affecting any stock, bond, note or other property. (c) To compromise, settle or adjust any claim or demand by or against this Fund and to agree to any rescission or modification of any contract or agreement affecting this Fund. (d) To borrow money, and to secure the same by mortgaging, pledging, or conveying any property of this Fund. (e) To deposit any stock, bond, or other security in any depository or other similar institution and to register any stock, bond or other security in the name of any of his nominees, without the addition of words indicating that such security is held in a fiduciary capacity (but accurate records shall be maintained showing that such security is an asset of this Fund and the Trustee shall be responsible for the acts of such depository or nominee). (f) To hold cash in such amounts as may be in his opinion reasonable for the proper operation of this Fund. (g) To invest all monies in such stocks, bonds, securities, investment company or trust shares, mortgages, notes, choses in action, real estate and improvements on real estate, as the Trustee may select; provided no investment may be made in either "employer securities" or "employer real property" unless (1) such property constitutes "qualifying employer securities" or qualifying employer real property" (as such terms are defined for purposes of ss. 407 of ERISA) and_(2) the cost of such investments in "qualifying employer securities" allocable to this Fund as of any date does not exceed on such date the Company Contribution credited to the Accounts and suspense accounts allocable to this Fund on the date such securities were purchased. (h) To make such other investments as the Trustee in his discretion shall deem best without regard to any state law now or hereafter in force limiting investments of trustees or other fiduciaries. 5.2. Special Rules for Investment of Fund. ------------------------------------ (a) General. The Fund shall be invested up to 100% in the common ------- stock of the Plan Sponsor or any successor to the Plan Sponsor, except to the extent that a Participant who is an Employee exercises his right under ss. 5.2(b) of this Trust Agreement and ss. 8.1(b) of the Plan to direct the investment of his Account through a Brokerage Account. The Trustee, subject to the approval of the Plan Sponsor, shall have the right to employ a bank or brokerage house or other financial institution to take custody of all or any part of the assets of this Fund or to take such other action to provide for the safekeeping of the assets of this Fund as the Trustee deems necessary or appropriate under the circumstances. (b) Brokerage Account. The Trustee, if so directed by the Plan ----------------- Sponsor, shall transfer the assets of a Participant's Account or Beneficiary's Account held by this Fund to a Brokerage Account as of the first day of the calendar month which follows the date the Plan Sponsor directs the Trustee to do so. A Participant or Beneficiary upon the establishment of his Brokerage Account shall be exclusively responsible for the management of the assets of such Brokerage Account in accordance with ss. 8.1(b) of the Plan. All transaction fees, commissions and any annual maintenance fee for a Brokerage Account will be paid directly from such Brokerage Account. The Trustee shall resume the management of a Participant's Brokerage Account or a Beneficiary's Brokerage Account if directed to do so by the Plan Sponsor on the Valuation Date which first follows the date the Participant or Beneficiary converts all of his investments in his Brokerage Account to cash. 5.3. Reports, Orders, and Bond. The Trustee shall not be required to make --------------------------- any inventory or appraisal or report to any court, nor to secure any order of court for the exercise of any power granted to the Trustee under this Trust Agreement and shall not be required to give bond, except as required by ERISA. 5.4. Advice or Direction. The Trustee may from time to time request in -------------------- writing the advice of counsel satisfactory to the Plan Sponsor, including counsel to the Plan Sponsor, on any legal matter, including the interpretation of this Trust Agreement. The Trustee shall not be liable and shall be indemnified and held harmless by the Plan Sponsor for any action taken on the advice of such counsel or at the direction of the Plan Sponsor or for any failure to act if such action can reasonably be taken only after receipt from the Plan Sponsor of specific directions, or for failing to act, pending the receipt of such directions, when such directions are timely requested by the Trustee. ss. 6. PLAN BENEFIT AND EXPENSE DISBURSEMENTS -------------------------------------- No disbursement shall be made from this Fund by the Trustee for purposes of the payment of any Plan benefits or expenses except at the direction of the Plan Sponsor, and the Trustee shall have no duty to inquire into the accuracy of such direction or its propriety in light of the provisions of the Plan, ERISA or the Code. Upon direction (which may be a continuing direction) from the Plan Sponsor as to the name of any person to whom money is to be paid from this Fund and the amount of such payment, the Trustee shall draw a check in the name of the person designated by the Plan Sponsor and deliver such check in such manner and in such amount and at such time as directed by the Plan Sponsor. If the Plan Sponsor shall deem it necessary to withhold any distribution pending compliance with any legal requirements, including the probate of a will, the appointment of a personal representative, the payment of, or provision for, estate or inheritance taxes, or for death duties or otherwise, and so instructs the Trustee, the Trustee shall thereafter take no action pending the delivery of (a) the Plan Sponsor's instructions to make such disbursement notwithstanding such requirements and (b) an agreement in a form satisfactory to the Trustee which protects the Trustee from any liability arising out of noncompliance with such requirements. ss. 7. ACCOUNTING BY TRUSTEE --------------------- After the close of each calendar year and within 60 days after receipt of the Company Contribution, the Trustee shall prepare a written report setting forth all investments, receipts and disbursements and other transactions during such calendar year. Upon the expiration of 90 days from the filing of any of the Trustee's reports with the Plan Sponsor, including a final report in the event of a discharge under ss. 9, the Trustee shall be forever relieved and discharged from any liability or accountability to anyone with respect to the propriety of his actions, except for those transactions to which the Plan Sponsor shall have filed, within such 90-day period, its written inquiry or disapproval with the Trustee, and no one shall have the right to demand or be entitled to any further or different accounting by the Trustee. ss. 8. EXPENSES -------- All expenses of making purchases and sales of Fund assets shall be paid from this Fund. All other expenses of managing the Fund, including any taxes which may be levied or assessed against the Trustee acting on behalf of and on account of the Plan or this Fund, and all other expenses of the Plan allocable to this Fund or of this Fund shall be assessed by the Trustee in accordance with the Plan Sponsor's directions and shall be paid by each Company in accordance with such assessment. ss. 9. RESIGNATION OR REMOVAL OF TRUSTEE --------------------------------- A Trustee may resign at any time by instrument in writing delivered to the Plan Sponsor and, in such event, the Plan Sponsor will, within 60 days after receipt of such resignation, appoint a successor trustee by instrument in writing delivered to the resigning Trustee and to such successor trustee. The Plan Sponsor also at any time may remove after 60 days' written notice a Trustee and appoint a successor trustee or trustees by instrument in writing delivered to the Trustee and to such successor trustee. The Plan Sponsor in any event also shall have the right to postpone indefinitely the appointment of a successor trustee if at least one Trustee remains after any such resignation or removal. In either event, on the appointment of such successor and delivery of the successor's written acceptance of the appointment to the Plan Sponsor and to the retiring Trustee, the retiring Trustee shall promptly turn over to such successor all Fund assets held by the Trustee and (if so requested by the Plan Sponsor) shall make a final accounting to the Plan Sponsor. The successor Trustee shall have no responsibility except to receive such money and property from the retiring Trustee and to hold and administer the same thereafter in accordance with this Trust Agreement and shall not be responsible for any act or omission of the retiring Trustee, and shall not be required to make any claim or demand against the retiring Trustee unless the Plan Sponsor shall in writing request the successor trustee to make a claim of damage against such retiring Trustee within the time limit prescribed after the filing of the Trustee's final report under 7. Any such successor Trustee shall have and may exercise all the rights, powers and duties of the Trustee as fully and to the same extent as if he had originally been named a Trustee. ss. 10. AMENDMENT AND TERMINATION ------------------------- 10.1. Amendment. The Plan Sponsor reserves the right at any time and from --------- time to time to amend this Trust Agreement in writing, provided that no amendment shall be made which would divert any of the assets of this Fund to any purpose other than the exclusive benefit of Participants and Beneficiaries, unless such amendment is necessary to cause the Plan or this Fund to continue to be exempt from income taxes under the Code. Further, no amendment shall increase the duties and responsibilities of the Trustee absent the Trustee's consent to such amendment. 10.2. Termination. In the case of a complete termination of the Plan or a ----------- permanent discontinuance of contributions as described inss.9.2 of the Plan, the Trustee shall liquidate Fund investments as necessary and distribute Accounts to Participants and Beneficiaries as directed by the Plan Sponsor. ss. 11. INDEMNIFICATION --------------- Each Trustee shall (to the extent permissible under applicable law) be indemnified and held harmless by the Plan Sponsor (subject to a right of contribution against each Company) for any expenses, including legal fees, incurred in the defense of any actual or threatened legal action which arises as a result of his appointment as a Trustee, provided that he is not ultimately determined in such action to be liable for a breach of his fiduciary (as distinguished from his co-fiduciary) duty under the Plan. ss. 12. MISCELLANEOUS ------------- 12.1. Headings and References. The headings and subheadings in this Trust ----------------------- Agreement have been inserted for convenience of reference only and are to be ignored in construction of the provisions of this Trust Agreement. All references to sections and subsections shall be to sections and subsections in this Trust Agreement unless otherwise set forth in this Trust Agreement. 12.2. Construction. In the construction of this Trust Agreement, the ------------ masculine shall include the feminine and the singular the plural in all cases where such meanings would be appropriate. This Trust Agreement shall be constructed in accordance with the laws of the State of Georgia to the extent that such laws are not preempted by federal law. This Fund is intended to be exempt from income taxation under Code S 501(a) and state income tax laws as part of a plan described in Code S 401(a) and the provisions of this Trust Agreement shall be construed and interpreted in a manner that will effectuate such intent. 12.3. Spendthrift Clause. Except to the extent permitted by law or S 12.9, ------------------ no Account, benefit, payment or distribution under this Trust Agreement shall be subject to the claim of any creditor of a Participant or Beneficiary, or to any legal process by any creditor of such person and no Participant or Beneficiary shall have any right to alienate, commute, anticipate, or assign (either at law or equity) all or any portion of his Account, benefit, payment or distribution under this Trust Agreement. 12.4. Legally Incompetent. If so directed by the Plan Sponsor, the Trustee ------------------- shall make payment on such direction (i) directly to an incompetent or disabled person, whether because of minority or mental or physical disability, (ii) to the guardian of such person or to the person having custody of such person, or (iii) to any person designated or authorized under any state statute to receive such payments on behalf of such incompetent or disabled person, without further liability either on the part of the Plan Sponsor or the Trustee for the amount of such payment to the person on whose account such payment is made. 12.5. Benefits Supported Only by Fund. Any person having any claim for any ------------------------------- benefit under the Plan or this Fund shall (except to the extent required under ERISA) look solely and exclusively to the assets of this Fund for satisfaction. In no event will a Company, or any of its officers, members of its board of directors or a Trustee in his individual capacity be liable to any person whomsoever for the payment of benefits under the Plan or this Fund. 12.6. Claims. Any payment to a Participant or Beneficiary or to their legal ------ representative, or heirs-at-law, made in accordance with the provisions of the Plan and this Trust Agreement shall to the extent of such payment be in full satisfaction of all claims under the Plan and this Fund against the Trustee and each Company, either of whom may require such person, his legal representative or heirs-at-law, as a condition precedent to such payment, to execute a receipt and release therefore in such form as shall be determined by the Trustee or the Plan Sponsor, as the case may be. 12.7. Nonreversion and Exclusive Benefit. ---------------------------------- (a) General. Except as provided in the Plan and in ss. 12.7(b), ------- no Company shall have any present or prospective right, claim, or interest in this Fund or in any Contribution made to the Trustee, and neither the corpus nor the income of this Fund shall be diverted to or used for any purpose other than the exclusive benefit of Participants and Beneficiaries prior to the satisfaction of all liabilities, if any, with respect to such persons. (b) Return of Contributions. To the extent permitted by the ----------------------- Code and ERISA, the Company Contributions, plus any earnings and less any losses on such contributions, shall be returned by the Trustee to a Company in the event that: (1) A Company Contribution is made by such Company by a mistake of fact, provided such return is effected within one year after the payment of such contribution; or (2) A deduction for a Company Contribution is disallowed under Code ss. 404, in which event such contribution shall be returned to the Company which made such contribution within one year after such disallowance, all contributions being hereby conditioned upon being deductible under Code ss. 404. The Trustee shall have no obligation or responsibility whatsoever to determine whether the return of any such Company Contribution is permissible under the Code or ERISA. 12.8. Merger or Consolidation. In the case of any merger or consolidation ------------------------ of the Plan and this Fund with, or transfer of assets or liabilities of the Plan and this Fund to, any other employee benefit plan, each person for whom an Account is maintained shall be entitled to receive a benefit from such other employee benefit plan, if it is then terminated, which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer, if the Plan and this Fund had been terminated. 12.9. Qualified Domestic Relations Order. The Trustee shall make such ------------------------------------- transfers and distributions as directed by the Plan Sponsor under ss. 10.11 of the Plan in the event the Plan Sponsor or the Trustee receives a domestic relations order which the Plan Sponsor determines to be a "qualified domestic relations order" within the meaning of Code ss. 414(p). 12.10. Reports. The Trustee shall within the time required by law file the ------- reports, if any, required by applicable law respecting this Fund, but shall have no duty or responsibility to file any such reports respecting the Plan. IN WITNESS WHEREOF, each Company has caused this Trust Agreement to be executed by their duly authorized officers and their respective seals to be affixed to this Trust Agreement and each Trustee has signed and sealed this Trust Agreement all as of the date set forth on the first page of this Plan. COUSINS PROPERTIES INCORPORATED (CORPORATE SEAL) By: /s/ Peter A. Tatikoff --------------------- Senior Vice President COUSINS REAL ESTATE CORPORATION (CORPORATE SEAL) By: /s/ Peter A. Tatikoff --------------------- Senior Vice President COUSINS MANAGEMENT, INC. (CORPORATE SEAL) By: /s/ Peter A. Tatikoff --------------------- Senior Vice President /s/ Robert P. Hunter, Jr. (SEAL) ------------------------- Robert P. Hunter, Jr. as a Trustee /s/ Vipin L. Patel (SEAL) ---------------------------- Vipin L. Patel, as a Trustee /s/ Peter A. Tartikoff (SEAL) ---------------------------- Peter A. Tartikoff-, as a Trustee EX-99 11 ex99-2y02.txt CERTIFICATION SARBANES OXLEY ACT EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K/A of Cousins Properties Incorporated (the "Corporation") for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, the Executive Vice President, Chief Financial Officer and Chief Investment Officer of the Corporation, certifies that to his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. /s/ Tom G. Charlesworth - -------------------------------------------------------------- Tom G. Charlesworth Executive Vice President, Chief Financial Officer and Chief Investment Officer March 27, 2003 -----END PRIVACY-ENHANCED MESSAGE-----