HIGHWOODS PROPERTIES, INC. 2005 SHAREHOLDER VALUE PLAN

Exhibit 10.7

HIGHWOODS PROPERTIES, INC.

2005 SHAREHOLDER VALUE PLAN

Section 1. General Purpose of the Plan: Definitions

The name of the plan is the Highwoods Properties, Inc. 2005 Shareholder Value Plan (the “Plan”). The purpose of the Plan is to further align the interests of the officers of Highwoods Properties, Inc. (the “Company”) and its Subsidiaries upon whose judgement, initiative and efforts the Company largely depends for the successful conduct of its business with those of the Company and its shareholders. The Plan provides that those officers selected by the Committee shall be allowed to participate in a long term incentive plan which rewards them only upon the Company’s achieving shareholder returns at or above that of the Company’s peers, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

The following terms shall be defined as set forth below:

“Act” means the Securities Exchange Act of 1934, as amended.

“Agreement” shall mean the written agreement, substantially in the form of Exhibit B attached hereto, evidencing an SVP Award hereunder between the Company and the recipient of such SVP Award.

“Board” means the Board of Directors of the Company.

“Cause” means and shall be limited to a vote of the Board resolving that the Participant should be dismissed as a result of (i) any material breach by the Participant of any agreement to which the Participant and the Company are parties, (ii) any act (other than voluntary termination of employment by the participant) or omission to act by the Participant which may have a material and adverse effect on the business of the Company or any Subsidiary or on the Participant’s ability to perform services for the Company or any Subsidiary, including, without limitation, the commission of any crime (other than ordinary traffic violations), or (iii) any material misconduct or neglect of duties by the Participant in connection with the business or affairs of the Company or any Subsidiary.

“Change of control” is defined in Section 9.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

“Committee” means the Board or any Committee of the Board referred to in Section 2.

“Disability” means disability as set forth in Section 22(e)(3) of the Code.

“Fair Market Value” means the last reported sale price at which a share of common stock in a given company is traded on any given date or, if no such shares are traded on such date, on the next most recent date on which such shares were traded, as reflected on the New York Stock Exchange or, if applicable, any other national stock exchange on which such shares are traded.

“Non-Employee Director” means a director who is qualified as such under Rule 16b-3(b)(3) promulgated under the Act or any successor definition under the Act.

“Participant” shall mean any of the employees selected by the Committee to participate in the Plan and who executes an Agreement.

“Peer Group” shall mean that list of companies as determined from time to time by the Committee and as listed on Exhibit C attached hereto. The component members of the Peer Group may be changed from time to time in the reasonable discretion of the Committee.

“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met during the applicable Plan Period as a condition to the holder’s receipt of an SVP Award. The Committee may, in its reasonable discretion, amend or adjust the Performance Measures or other terms and conditions of an outstanding SVP Award in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles. If the Committee consists solely of “outside directors” (within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder) and the Committee desires that compensation payable pursuant to any SVP Award subject to Performance Measures shall be “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, the Performance Measures (i) shall be established by the Committee no later than the end of the first quarter of the Plan Period, as applicable (or such other time permitted pursuant to Treasury Regulations promulgated under Section 162(m) of the Code or otherwise permitted by the Internal Revenue Service) and (ii) shall satisfy all other applicable requirements imposed under Treasury Regulations promulgated under Section 162(m) of the Code, including the requirement that such Performance Measures be stated in terms of an objective formula or standard.

“Plan Period” shall mean any period designated by the Committee for which the Performance Measures shall be calculated, but generally, shall refer to the three (3) year period beginning on each January 1.

“Restricted Share” means a Share, as defined below, subject to the terms, conditions and provisions hereof.

“Share” or “Shares” means one or more, respectively, of the Company’s shares of common stock, par value $.01 per share, subject to adjustments pursuant to Section 3.

“Shareholder Return” shall mean as to the common stock of any applicable company the percentage determined by dividing (x) the fair Market Value of a share of such stock at the end of the Plan Period plus all dividends or distributions paid with respect to such share during the Plan Period and assuming reinvestment in such shares of all such dividends or distributions, adjusted to give effect to Section 3 of the Plan, by (y) the Fair Market Value of a share of stock of the applicable company on its last trading day immediately preceding the first day of the Plan Period.

“Shareholder Value Plan Award” or “SVP Award” shall mean a right stated as a grant of Restricted Shares as provided hereby, contingent upon the attainment of specified Shareholder Returns of the Company as compared to Shareholder Returns of the Peer Group within the Plan Period.

“Subsidiary” means Highwoods Realty Limited Partnership and any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities, beginning with the Company, if each of the corporations or entities (other than the last corporation or entity in the unbroken chain) owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

Section 2. Administration of Plan: Committee Authority to Select Participants and Determine SVP Awards

(a) Committee. The Plan shall be administered by the Compensation and Governance Committee of the Board.

(b) Powers of Committee. The Committee shall have the power and authority to grant SVP Awards consistent with the terms of the Plan, including the power and authority:

(i) to select Participants to whom SVP Awards may be granted from time to time;

(ii) to determine the time or times of a grant of an SVP Award;

(iii) to determine and modify the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any SVP Award, which terms and conditions may differ among individual SVP Awards and Participants, and to approve the form of written instruments evidencing the SVP Awards;

(iv) to accelerate the vesting of all or any portion of any SVP Award;

(v) to extend the period in which an SVP Award may be settled; and

(vi) to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any SVP Awards (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Committee shall be binding on all persons, including the Company and Plan Participants.

Section 3. Mergers; Substitutions

In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or similar dividend affecting either the Company or a company included in the Peer Group, the terms of the Plan shall be appropriately adjusted by the Committee. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive.

Section 4. Eligibility

Participants in the Plan will be such full or part-time officers of the Company and its Subsidiaries who are responsible for or contribute to the management, growth, or profitability of the Company and its Subsidiaries and who are selected from time to time by the Committee, in its sole discretion.

Section 5. Shareholder Value Plan Awards

(a) Shareholder Value Plan Awards. The Committee may, in its discretion, grant SVP Awards to such eligible persons as may be selected by the Committee.

(b) Terms of SVP Awards. SVP Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall in its discretion deem advisable:

(a) At the date of grant of an SVP Award, each SVP Award shall be stated in terms of a grant of specific number of Shares. Such Shares shall be non-transferable during the term of the applicable Plan Period.

(b) The settlement value of an SVP Award (the “Value”) shall be based upon the relative percentage of Shareholder Return for a Share compared to the Shareholder Return of the shares in the Peer Group. The Value shall be determined as follows:

If the Company’s Shareholder Return for the Plan Period divided by the Shareholder Return of the Peer Group (such result being termed the “Index Ratio” and expressed in percentage points) as of the measurement date equals or exceeds 100, then the Value of an SVP Award will be equal to the number of Restricted Shares in the SVP Award times the sum of .5 plus .025 for each percentage point that the Index Ratio exceeds 100. In no event, however, shall the Value of an SVP Award exceed 3 times the Fair Market Value of the Shares in the Award. If the Index Ratio is less than 100, then an SVP Award shall have a Value equal to $0.

An example of the computation of the Value of an SVP Award is attached at Exhibit A.

(v) Settlement of Vested SVP Awards. SVP Awards shall be settled in Shares. The Settlement Date shall be established by the Company so long as such Settlement Date occurs not later than 120 days following the expiration of the applicable Plan Period. Except to the extent otherwise provided in the Agreement relating to an SVP Award, in the event of a Change of Control the provisions of Section 9 shall apply.

(c) Termination of Employment or Service.

(d) Status as a Shareholder. Subject to the provisions hereof and of any applicable Agreement, the Employee receiving a grant of Restricted Shares hereby shall thereafter be a stockholder with respect to all of such Shares and shall have the rights of a stockholder with respect to such Shares, including the right to vote and the right to receive dividends and other distributions (other than liquidating or special distributions which shall not be payable with respect to Restricted Shares) paid with respect to such Shares . All Shares received by Participant as a result of any dividend on Restricted Shares, or as a result of any stock split-up, stock distribution or combination of shares affecting Restricted Shares, shall be subject to the restrictions set forth herein.

Section 6. Tax Withholding

Each Participant shall, not later than the date as of which the Value of an SVP Award or amounts received hereunder first becomes includable in the gross income of the Participant for federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any federal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Committee in its discretion may require that the Company withhold from the Shares to be issued pursuant to the vesting of an SVP Award a number of Shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.

Section 7. Transfer, Leave of Absence, Etc.

For purposes of the Plan, the following events shall not be deemed a termination of employment:

(a) a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or

(b) an approved leave of absence for military service or sickness, or for any other purposes approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.

Section 8. Amendments and Termination

The Board may, at any time, amend or discontinue the Plan and the Committee may, at any time, amend or cancel any outstanding SVP Award for the purpose of satisfying changes in law without the consent of any Participant. No amendment, however, may impair the rights of a holder of an outstanding SVP Award without the consent of such holder.

Section 9. Change of Control Provisions

Upon the occurrence of a Change of Control as defined in this Section 9:

(a) The Plan Period for SVP Awards will expire, the Performance Measures will be computed through the date of such Change of Control, the Value shall be determined and pro rated to reflect the portion of the Plan Period completed prior to the date of the Change of Control and the applicable SVP Award shall be settled on the date of such Change in Control.

(b) “Change of Control” shall mean the occurrence of any one of the following events:

(i) any “person,” as such term is used in Section 13(d) and 14(d) of the Act (other than the Company, any of its Subsidiaries, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan of the Company or any of its Subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 40% or more of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board of Directors (“Voting Securities”) or (B) the then outstanding Shares (in either such case other than as a result of acquisition of securities directly from the Company); or

(ii) persons who, as of January 1, 2005, constitute the Company’s Board of Directors (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to May 1, 2005 whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall, for purposes of this Plan, be considered an Incumbent Director; or

(iii) the stockholders of the Company shall approve (A) any consolidation or merger of the Company or any Subsidiary where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 50% of the voting shares of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by an party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of Shares or other voting securities outstanding, increases (x) the proportionate number of Shares beneficially owned by any person to 40% or more of the Shares then outstanding or (y) the proportionate voting power represented by the voting securities beneficially owned by any person to 40% or more of the combined voting power of all then outstanding voting securities; provided, however, that if any person referred to in clause (x) or (y) of this sentence shall thereafter become the beneficial owner of any additional Shares or other voting securities (other than pursuant to a stock split, stock dividend, or similar transaction), then a “Change of Control” shall be deemed to have occurred for purposes of the foregoing clause (i).

Section 10. Effective Date of Plan

The effective date of the Plan is January 1, 2005.

Section 11. Governing Law

This Plan shall be governed by North Carolina law except to the extent such law is preempted by federal law.

Section 13. Interpretation

It is the intent of the Board that benefits payable under the Plan are not taxable until such benefits are vested under the terms of the Plan. This Plan shall be interpreted at all times by the Committee in its sole discretion in such a manner so as to avoid any inconsistency or failure to meet the provisions of Section 409A of the Internal Revenue Code and the regulations thereto. No distribution of benefits hereunder may be made except in accordance with the requirements of Section 409A and in the event of any conflict between the terms hereof and the provisions thereof, the provisions of Section 409A shall control. To the extent that a distribution hereunder is delayed by this interpretive provision, the Company shall cause such distribution to made at the earliest possible time in compliance with Section 409A.

EXHIBIT A

SHAREHOLDER VALUE PLAN

Determination of Settlement Value – Example

Highwoods:

Peer Group:

Since the Index Ratio exceeds 1.00, the Value of an SVP Award is equal to one times the sum of .5 + (.025 times the Index Ratio in percentage points less 100), or

Exhibit C

Peer Group

Arden Realty, Inc.

Brandywine Realty Trust

CarrAmerica Realty Corp.

CRT Properties, Inc.

Duke Realty Corp.

Equity Office Properties Trust

Kilroy Realty Corp.

Liberty Property Trust

Mack-Cali Realty Corp.

Parkway Properties, Inc.

Prentiss Properties Trust