EXHIBIT 10.34

 

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT

 

James F. Flaherty III, Grantee:

 

On the          day of                  (the “Grant Date”), Health Care Property
Investors, Inc., a Maryland corporation (the “Company”), pursuant to the Health
Care Property Investors, Inc. 2000 Stock Incentive Plan, as amended and/or
restated from time to time (the “Plan”), has granted to you, the Grantee named
above,                  performance restricted stock units (the “Units”) with
respect to                  shares of Common Stock on the terms and conditions
set forth in this Performance Restricted Stock Unit Agreement (this “Agreement”)
and the Plan. The Units are subject to adjustment as provided in Section 11(a)
of the Plan. Capitalized terms not defined herein shall have the meanings
assigned to such terms in the Plan. The Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”) is the administrator of
the Plan for purposes of your Units.

 

I. Forfeiture of Units.

 

(a) Forfeiture Based Upon Company Performances. Your Units are subject to
forfeiture if the Company’s Funds From Operations Per Share for the 2004
calendar year (the “Performance Period”) is less than $            . If the
Company’s Funds From Operations Per Share for the Performance Period is less
than $            , the aggregate percentage of Units that you will forfeit will
be determined in accordance with Exhibit A hereto. For purposes of this
Agreement, “Funds From Operations Per Share” means the Company’s funds from
operations per share during the Performance Period, as prescribed by the
National Association of Real Estate Investment Trusts (NAREIT) as in effect on
the first day of the Performance Period, and shall be calculated on a fully
diluted basis using the weighted average of diluted shares of Common Stock
outstanding during the Performance Period. Funds From Operations Per Share shall
be calculated before taking into account any charges incurred by the Company
with respect to the Performance Period for (i) amounts paid in connection with
the settlement of disputes with employees or former employees regarding their
employment or former employment with the Company or the payment of severance
benefits and (ii) impairment. The determination as to whether the Company has
attained the performance goals with respect to the Performance Period shall be
made by the Committee acting in good faith and based upon the Company’s audited
financial statements. The Committee’s determination regarding whether the
Company has attained the performance goals shall be made no later than 120 days
following the end of the Performance Period. Your Units shall not vest in
accordance with Section 2 unless and until the Company has achieved the
performance goals with respect to the Performance Period, as required by Section
162(m) of the Code and the regulations promulgated thereunder.

 

(b) Termination due to Retirement during the Performance Period. Your Units will
remain outstanding during the remainder of the Performance Period and will be
subject to forfeiture in the manner set forth in subsection (a) upon completion
of the Performance Period if, prior to the completion of the Performance Period,
your employment with the Company is terminated as a result of your Retirement.
In the event of any such termination during the Performance Period, any Units
not forfeited pursuant to subsection (a) shall fully vest as of the first day
following the completion of the Performance Period.

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(c) Termination Other Than For Cause under Employment Agreement during the
Performance Period. Your Units will remain outstanding during the remainder of
the Performance Period and will be subject to forfeiture in the manner set forth
in subsection (a) upon completion of the Performance Period if, prior to the
completion of the Performance Period, your employment with the Company is
“Terminated Other Than For Cause” as defined in, and otherwise pursuant to the
terms of, your Employment Agreement with the Company dated October 8, 2002, as
the same may be amended or restated from time to time and any successor
agreement (the “Employment Agreement”). In the event of any such termination
during the Performance Period, any Units not forfeited pursuant to subsection
(a) shall fully vest as of the first day following the completion of the
Performance Period.

 

(d) Change in Control during the Performance Period.

 

(i) Your Units will remain outstanding during the remainder of the Performance
Period and will be subject to forfeiture in the manner set forth in subsection
(a) in the event of a Change in Control occurring during the Performance Period.
In such event, any Units not forfeited pursuant to subsection (a) shall be
deemed restricted stock under your Employment Agreement and shall fully vest as
of the first day following the completion of the Performance Period.

 

(ii) Notwithstanding the foregoing, the Committee may, in its sole and absolute
discretion, take action to fully vest your Units immediately prior to, and
subject to the consummation of, a Change in Control occurring during the
Performance Period. Any Units that become vested in accordance with this
subsection (d)(ii) shall not be subject to forfeiture in the manner set forth in
subsection (a).

 

(e) Forfeiture of Units Upon Other Terminations. If at any time during the
Performance Period, your employment with the Company is terminated (i) by the
Company, or (ii) by you, excluding any Termination Other Than For Cause pursuant
to your Employment Agreement, or any termination by reason of your Retirement,
death or Disability, or any termination that occurs upon or after a Change in
Control, all of your Units shall be automatically forfeited and cancelled in
full effective as of such termination of employment and this Agreement shall be
null and void and of no further force and effect

 

II. Vesting.

 

(a) Vesting of Non-Forfeited Units. You will have no further rights with respect
to any Units that are forfeited in accordance with Section I. Subject to the
terms and conditions of this Agreement, your Units that (i) are not forfeited in
accordance with Section I and (ii) do not otherwise vest in accordance with
Section I, if any, shall vest in accordance with the following schedule, subject
to your continuous service to the Company until the applicable vesting date.
(Vesting amounts pursuant to the following schedule are cumulative.)

 

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Tranche

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Percentage of Non Forfeited

Units that vest

(number of Units)

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Vesting Date

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1

  20% (Maximum of             )   1st Anniversary of Grant Date

2

  20% (Maximum of             )   2nd Anniversary of Grant Date

3

  20% (Maximum of             )   3rd Anniversary of Grant Date

4

  20% (Maximum of             )   4th Anniversary of Grant Date

5

  20% (Maximum of             )   5th Anniversary of Grant Date

 

(b) Termination for death or Disability. If at any time during the Performance
Period or following the completion of the Performance Period, your employment
with the Company is terminated as a result of your death or Disability, your
Units shall fully vest immediately upon such termination of employment. For the
avoidance of doubt, any Units that become vested in accordance with this
subsection (b) during the Performance Period shall not be subject to the
forfeiture provisions of Section I(a).

 

(c) Termination Other Than For Cause or by reason of Retirement following the
Performance Period. If at any time following the completion of the Performance
Period, your employment with the Company is (i) Terminated Other Than For Cause
pursuant to your Employment Agreement, or (iii) terminated as a result of your
Retirement, your unvested Units shall fully vest immediately upon such
termination of employment.

 

(d) Acceleration Upon Failure to Offer Employment Agreement on Substantially
Similar Terms. Notwithstanding anything herein to the contrary, your unvested
Units shall fully vest upon the expiration of your Employment Agreement on
October 8, 2005 in the event the Company fails to offer you an extension of your
employment agreement prior to such expiration on substantially the same terms
and conditions as then in existence.

 

(e) No Acceleration or Vesting Upon Other Terminations. If at any time following
the completion of the Performance Period, your employment with the Company is
terminated (i) by the Company, or (ii) by you, excluding any Termination Other
Than For Cause pursuant to your Employment Agreement, or any termination by
reason of your Retirement, death or Disability, or any termination that occurs
upon or after a Change in Control, your unvested Units shall be automatically
forfeited and cancelled in full effective as of such termination of employment.

 

III. Change in Control following the Performance Period.

 

(a) In the event of a Change in Control at any time following the completion of
the Performance Period, your Units shall be deemed to be “restricted stock”
under your Employment Agreement and your Units shall vest fully upon such Change
in Control as provided in your Employment Agreement.

 

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(b) Notwithstanding the foregoing, in the event of a pending or threatened
takeover bid or tender offer at any time following the completion of the
Performance Period and pursuant to which 10% or more of the outstanding
securities of the Company is acquired, whether or not deemed a tender offer
under applicable state or Federal laws, or in the event that any person makes
any filing under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934
with respect to the Company, the Committee may in its sole discretion:

 

(i) Make the Units fully vested; or

 

(ii) Make any other reasonable adjustments or amendments to the Units or
substitute new units on substantially similar terms.

 

IV. Timing and Form of Payment.

 

(a) Unless you elect otherwise, the distribution date (the “Distribution Date”)
for your vested Units will be the Vesting Date with respect to such vested
Units. Distribution of your vested Units will be made by the Company in shares
of Common Stock (on a one-to-one basis) on the Distribution Date with respect to
such vested Units. You will only receive distributions in respect of your vested
Units and will have no right to distribution of your unvested Units. You may
elect (a “Distribution Election”) to (A) defer your Distribution Date with
respect to some or all of your vested Units and/or (B) have your vested Units
distributed to you in annual installments over a fixed number of years selected
by you; provided that each installment payment must be for a minimum of 1,000
shares of Common Stock. You may make up to three Distribution Elections with
respect to each Tranche (set forth in Section II(a) above) without the approval
of the Committee, provided such Distribution Election is made in a timely
manner. Any Distribution Elections with respect to a Tranche in addition to the
three provided in the preceding sentence may only be made with the approval of
the Committee, in its sole discretion. If you elect to have some or all of your
vested Units underlying a Tranche distributed in annual installments, the first
installment will be paid on the Distribution Date with respect to such Tranche
and subsequent installments will be paid on each of the anniversaries of the
Distribution Date with respect to such Tranche during your elected installment
period. In order for a Distribution Election to be valid, it must be made at
least one year prior to the then-existing Distribution Date with respect to the
Units subject to such Distribution Election and the new Distribution Date must
be at least one year after the then-existing Distribution Date with respect to
such Units. Your Distribution Date with respect to any portion of your Units may
not be prior to the Vesting Date for such vested Units. Distribution Elections
may only be made by delivering a written election to the Committee in the form
attached as Exhibit B hereto.

 

(b) Accelerated Distributions. At any time prior to the Distribution Date with
respect to any or all of your vested Units, you may elect an immediate
distribution (the “Accelerated Distribution”) of such vested Units by delivering
a written election to the Committee in the form attached as Exhibit B hereto;
provided, however, that if you make such election, you will forfeit 10% of the
Units that would otherwise be distributed to you pursuant to the Accelerated
Distribution.

 

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(c) Hardship Distribution. If you experience an Unforeseen Financial Emergency
(as defined below) you may elect to receive immediate distribution of some or
all or your vested Units upon such Unforeseen Financial Emergency. Distribution
upon an Unforeseen Financial Emergency shall be made no later than thirty (30)
days following written notice to the Committee of the Unforeseen Financial
Emergency. For purposes of this Agreement, an “Unforeseen Financial Emergency”
shall mean an unforeseeable emergency which constitutes a severe financial
hardship resulting from any one or more of the following: (i) your or any of
your dependent’s (as defined in Section 152(a) of the Code) sudden and
unexpected illness or accident, (ii) loss of your property due to casualty; or
(iii) any other similar extraordinary and unforeseeable circumstances arising as
a result of events beyond your control, all as reasonably determined by the
Committee in good faith. No distribution shall be made in respect of an
Unforeseen Financial Emergency unless such Unforeseen Financial Emergency is not
otherwise relievable by liquidation of your assets (to the extent such
liquidation does not itself cause an Unforeseen Financial Emergency) or through
reimbursement or compensation by insurance or otherwise. Any distribution of
your vested Units as a result of an Unforeseen Financial Emergency shall be
limited to the amount reasonably necessary to relieve the Unforeseen Financial
Emergency (which may include amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to result from the
distribution).

 

(d) Distribution Upon Adverse Judgment. Notwithstanding anything to the contrary
in this Section IV, your vested Units shall be become immediately distributable
to you if (A) the Internal Revenue Service (the “IRS”) successfully challenges,
in a court of competent jurisdiction, any deferral election made by you in
accordance with subsection (a) with respect to such Units, and (B) as a result
of which, you have a taxable event with respect to such Units. Such distribution
shall be made no later than thirty (30) days following the final judgment of a
court of competent jurisdiction upholding the position of the IRS with respect
to the taxation of such Units.

 

V. Dividend Equivalent Rights. During such time as each Unit remains outstanding
and prior to the distribution of such Unit in accordance with Section IV, you
will have the right to receive, in cash, with respect to such Unit, the amount
of any cash dividend paid on a share of Common Stock (a “Dividend Equivalent
Right”). You will have a Dividend Equivalent Right with respect to each Unit
that is outstanding on the record date of such dividend. Dividend Equivalent
Rights will be paid to you at the same time dividends are paid to stockholders
of the Company. Dividend Equivalent Rights will not be paid to you with respect
to any Units that are forfeited pursuant to Sections I and II, effective as of
the date such Units are forfeited. You will have no Dividend Equivalent Rights
as of the record date of any such cash dividend in respect of any Units that
have been paid in Common Stock; provided that you are the record holder of such
Common Stock on or before such record date.

 

VI. Transferability. No benefit payable under, or interest in, the Units or this
Agreement shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and no such benefit or interest shall be, in any manner,
liable for, or subject to, your or your beneficiary’s debts, contracts,
liabilities or torts; provided, however, nothing in this Section VI shall
prevent transfer

 

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of your Units by will or by applicable laws of descent and distribution. You may
designate a beneficiary to receive distribution of your vested Units upon your
death by submitting a written beneficiary designation to the Committee in the
form attached hereto as Exhibit B. You may revoke a beneficiary designation by
submitting a new beneficiary designation.

 

VII. Withholding. You will be required to pay in cash or deduction from other
compensation payable to you by the Company any sums required by federal, state
or local tax law to be withheld with respect to the issuance, vesting or payment
of Units and the payment of Dividend Equivalent Rights. At your election and in
satisfaction of the foregoing requirement, the Company will withhold shares of
Common Stock underlying the Units and otherwise issuable in accordance with
paragraph 2, in the manner prescribed by, and subject to the limitations of,
Section 12 of the Plan, in satisfaction of such withholding obligations.

 

VIII. No Contract for Employment. This Agreement is not an employment or service
contract and nothing in this Agreement shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ or service of
the Company, or of the Company to continue your employment or service with the
Company.

 

IX. Notices. Any notices provided for in this Agreement or the Plan, including a
Deferral Election, shall be given in writing and shall be deemed effectively
given upon receipt if delivered by hand or, in the case of notices delivered by
United States mail, five (5) days after deposit in the United States mail,
postage prepaid, addressed, as applicable, to the Company or if to you, at such
address as is currently maintained in the Company’s records or at such other
address as you hereafter designate by written notice to the Company.

 

X. Plan. This Agreement is subject to all the provisions of the Plan and their
provisions are hereby made a part of this Agreement. In the event of any
conflict between the provisions of this Agreement and those of the Plan, the
provisions of the Plan shall control.

 

XI. Entire Agreement. This Agreement and the Employment Agreement contains the
entire understanding of the parties in respect of the Units and supersedes upon
its effectiveness all other prior agreements and understandings between the
parties with respect to the Units. In the event of any discrepancy between this
Agreement and the Employment Agreement, the Employment agreement shall control.

 

XII. Amendment. This Agreement may be amended by the Committee; provided,
however that no such amendment shall, without your consent, alter, terminate,
impair or adversely affect your rights under this Agreement.

 

XIII. Governing Law. This Agreement shall be construed and interpreted, and the
rights of the parties shall be determined, in accordance with the laws of the
State of California, without regard to conflicts of law provisions thereof.

 

XIV. Tax Consequences. You may be subject to adverse tax consequences as a
result of the issuance, vesting and/or distribution of your Units. YOU ARE
ENCOURAGED TO CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR UNITS AND
SUBSEQUENT DISTRIBUTION OF COMMON STOCK.

 

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Very truly yours,

 

HEALTH CARE PROPERTY INVESTORS, INC.

By:

 

 

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Name:

  Michael D. McKee

Title:

  Director

And:

 

 

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Name:

  Edward J. Henning

Title:

  Senior Vice President, General Counsel and Corporate Secretary

 

Accepted and Agreed,

effective as of the date first written above.

 

By:

 

 

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Name:

  James F. Flaherty III

 

7

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EXHIBIT A

 

PERFORMANCE GOALS

 

Funds From Operations Per Share

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Aggregate Percentage Forfeited
(Number of Units Forfeited)

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                        $             or greater

   0% (0)

Equal to or greater than $             but less than $            

   2% (            )

Equal to or greater than $             but less than $            

   4% (            )

Equal to or greater than $             but less than $            

   6% (            )

Equal to or greater than $             but less than $            

   8% (            )

Equal to or greater than $             but less than $            

   10% (            )

Equal to or greater than $             but less than $            

   12% (            )

Equal to or greater than $             but less than $            

   14% (            )

Equal to or greater than $             but less than $            

   16% (            )

Equal to or greater than $             but less than $            

   18% (            )

Equal to or greater than $             but less than $            

   20% (            )

Equal to or greater than $             but less than $            

   22% (            )

Equal to or greater than $             but less than $            

   24% (            )

Equal to or greater than $             but less than $            

   26% (            )

Equal to or greater than $             but less than $            

   28% (            )

Equal to or greater than $             but less than $            

   30% (            )

Equal to or greater than $             but less than $            

   32% (            )

Equal to or greater than $             but less than $            

   34% (            )

Equal to or greater than $             but less than $            

   36% (            )

Equal to or greater than $             but less than $            

   38% (            )

Equal to or greater than $             but less than $            

   40% (            )

Equal to or greater than $             but less than $            

   50% (            )

Equal to or greater than $             but less than $            

   60% (            )

Equal to or greater than $             but less than $            

   70% (            )

Equal to or greater than $             but less than $            

   80% (            )

Equal to or greater than $             but less than $            

   90% (            )

Equal to or greater than $             but less than $            

   100% (            )

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EXHIBIT B

 

HEALTH CARE PROPERTY INVESTORS, INC.

2000 STOCK INCENTIVE PLAN

 

RESTRICTED STOCK UNITS

DISTRIBUTION ELECTION AND BENEFICIARY DESIGNATION FORM

 

Name: James F. Flaherty III

   Social Security No.:                                     

 

In connection with your award of Performance Restricted Stock Unit on
                     under the Health Care Property Investors, Inc. 2000 Stock
Incentive Plan, as amended and/or restated from time to time (the “Plan”), you
have the option of selecting the timing and form of payment of the shares of
Common Stock underlying your vested Units.

 

Please complete this election form and return it to Edward J. Henning, the
Company’s General Counsel and Corporate Secretary.

 

Deferral of Distribution Date

 

Unless you elect otherwise, the Distribution Date for your vested Units will be
the Vesting Date with respect to such vested Units. You may elect a new
Distribution Date with respect to some or all of the Tranches by completing the
deferral election grid below. Please note that your new Distribution Date with
respect to a Tranche can take any of the following forms:

 

  •   You may elect a date certain for your Distribution Date (e.g., January 1,
2010),

 

  •   You may elect a specific event as your Distribution Date (e.g.,termination
of employment, age 65, death, etc.), or

 

  •   You may elect a Distribution Date that is the earlier of two dates/events
(e.g., the earlier of January 1, 2010, or termination of your employment).

 

In order for an election to defer the Distribution Date with respect to any of
your vested Units to be valid it must be made at least one year prior to the
then-existing Distribution Date and the new Distribution Date must be no earlier
than at least one year after the then-existing Distribution Date. If your
election to defer your Distribution Date is not timely, it will not be valid.

 

You acknowledge and understand that by electing a new Distribution Date with
respect to one or more of the Tranches, you are hereby revoking the
then-existing Distribution Date with respect to such Tranche(s). You further
acknowledge and agree that the distribution of the shares of Common Stock
underlying your Units may coincide with a period during which you are prohibited
from selling, disposing or otherwise transferring such shares pursuant to the
Company’s Insider Trading Policy, or by law, and therefore, you may not be able
to sell, dispose or otherwise transfer such shares to pay any sums required by
federal, state or local tax law to be withheld with respect to the issuance of
such shares.

 

9

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Tranche

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Number of Units subject

to Tranche

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Vesting Date

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New Distribution Date

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1

  Maximum of              Units        

2

  Maximum of              Units        

3

  Maximum of              Units        

4

  Maximum of              Units        

5

  Maximum of              Units        

 

Form of Payment

 

Distribution of all of your vested Units underlying a Tranche will be made in
shares of Common Stock on the Distribution Date with respect to such Units. For
example, all of your vested Units under Tranche 1 will be distributed to you on
the Vesting Date with respect to Tranche 1 (unless you elect to defer your
Distribution Date as provided above). You may, however, elect to stagger
distribution of your vested Units underlying one or more of the Tranches in the
form of two or more annual installments. For example, if you elect to stagger
distribution of your vested Units underlying Tranche 1 in five equal
installments, your vested Units will be distributed to you in five equal
payments on the Distribution Date with respect to Tranche 1 and each of the
first four anniversaries of the Distribution Date for Tranche 1.

 

If you elect to stagger distribution of any or all of your vested Units
underlying a Tranche, you must elect a number of equal annual installments which
will result in a distribution of at least 1,000 shares of Common Stock per
installment with respect to such Tranche. Any election to change your form of
distribution with respect to any vested Units must be made at least one year
prior to the Distribution Date for such Units. If your election is not timely,
it will not be valid.

 

10

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Tranche

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Number of Units subject

to Tranche

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Distribution Date

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Number of

Installments

(number of shares

of Common Stock

per Installment)

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1

  Maximum of              Units                (        )

2

  Maximum of              Units                (        )

3

  Maximum of              Units                (        )

4

  Maximum of              Units                (        )

5

  Maximum of              Units                (        )

 

Beneficiary Designation

 

I hereby designate the following individual as beneficiary to receive
distribution of my vested Units, if any, in the event of my death. Distribution
of such vested Units will be in the form, and on the Distribution Date(s), in
effect with respect to such vested Units as of the date of my death.

 

Beneficiary Information

 

Name:

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(Please print)    Last       First         Middle Initial Sex:

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   Relationship to Participant:  

 

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Social Security No.:   

 

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  Date of Birth:   

 

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Address:

 

 

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City:

 

 

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State:

 

 

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   Zip Code:   

 

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Please retain a copy of this Distribution Election Form for your records.

 

 

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Signature: James F. Flaherty III   Date Signed

 

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