EXHIBIT 10.13


 


EMPLOYMENT
AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as
of October 26, 2005 (the “Effective Date”) by and between HEALTH CARE
PROPERTY INVESTORS, INC., a Maryland corporation (together with its successors
and assigns, “Corporation”), and JAMES F. FLAHERTY III (“Officer”).


 


RECITALS


 


A.            Corporation and Officer desire
to enter into a new employment agreement upon the terms set forth in this
Agreement; and


 


B.            Corporation desires to continue
to employ Officer as its Chief Executive Officer and President, and Officer is
willing to accept such employment by Corporation, on the terms and subject to
the conditions set forth in this Agreement.


 


NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:


 


AGREEMENT


 


THE PARTIES AGREE AS FOLLOWS:


 


1.             Duties.  During the Employment Period (as defined
below), Officer agrees to be employed by and to serve Corporation as its Chief
Executive Officer and President. 
Corporation agrees to employ and retain Officer in such capacities.  Officer shall report to Corporation’s Board
of Directors (the “Board”) and at all times during the Employment Period shall
have powers and duties commensurate with the positions of Chief Executive
Officer and President of a company the size and nature of the Corporation.  Officer shall devote substantially all of Officer’s
business time, energy, and skill to the performance of Officer’s duties for
Corporation and shall hold no other employment. 
Nothing herein shall preclude Officer from serving on (and receiving
compensation for) boards of directors of other for-profit business entities as
the Board approves in writing, which approval shall not be unreasonably
withheld or engaging in a reasonable level of charitable activities and
community affairs, including serving on charitable, community or educational
boards or from managing his personal and family investments provided that such
activities do not materially interfere with the effective discharge of his
duties and responsibilities to Corporation. 
For purposes of clarity, the Board has approved Officer’s service on the
board of directors of Quest Diagnostics.


 


2.             Term of Employment.


 


(a)           Definitions.  For purposes of this Agreement the following
terms shall have the following meanings:


 


(i)            “Termination For Cause”
shall mean termination by the Board of Officer’s employment with Corporation by
reason of Officer’s: (A) willful and


 


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continued failure to
substantially perform his duties with Corporation after a written demand for
substantial performance is delivered to Officer by the Board, which demand, based
on a good faith determination of the Board after reasonable inquiry,
specifically identifies the manner in which the Board believes that Officer has
not substantially performed his duties (except for any such failure resulting
from his incapacity due to physical or mental illness or any such actual or
anticipated failure after Officer’s issuance of a Notice of Termination (as
defined in Section 2(a)(viii)) either (1) for Good Reason (as defined
in Section 2(a)(iii), or (2) in connection with a Covered Resignation
(as defined in Section 2(a)(iv)), (B) willful and continued failure
to substantially follow and comply with the specific and lawful directives of
the Board, as reasonably determined by the Board after a written demand for
substantial performance is delivered to Officer by the Board, which demand,
based on a good faith determination of the Board after reasonable inquiry,
specifically identifies the manner in which the Board believes that Officer has
not substantially performed his duties (except for any such failure resulting
from Officer’s incapacity due to physical or mental illness or any such actual
or anticipated failure after his issuance of a Notice of Termination for Good
Reason or in connection with a Covered Resignation), (C) willful commission
of an act of fraud or dishonesty resulting in material economic or financial
injury to Corporation, or (D) willful engagement in illegal conduct or
gross misconduct, in each case which is materially and demonstrably injurious
to Corporation; provided, however, that Officer’s employment shall not be
deemed to have been terminated in a Termination For Cause if such termination
took place as a result of any act or omission believed by Officer in good faith
to have been in the best interests of Corporation.  Notwithstanding the foregoing, Officer shall
not be deemed to have been terminated in a Termination for Cause unless and
until there shall have been delivered to Officer a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board (after reasonable
notice to Officer and an opportunity for Officer, together with Officer’s
counsel, to be heard before the Board, and after the reasonable opportunity to
cure contemplated by clause (A) or (B) above in the case of a
termination pursuant to either such clause), finding that in the Board’s good
faith opinion Officer had engaged in conduct set forth above in this Section 2(a)(i) and
specifying the particulars thereof in reasonable detail.


 


(ii)           “Termination Other Than For Cause” shall mean
termination by Corporation of Officer’s employment hereunder other than (A) a
Termination For Cause, (B) a termination due to Officer’s Disability, or (C) in
circumstances where a Termination Upon a Change in Control is applicable.


 


(iii)          “Termination For Good Reason” shall mean termination
by Officer of his employment hereunder for Good Reason, other than in
circumstances where a Termination Upon a Change in Control is applicable.  “Good Reason” shall mean, without
Officer’s express written consent (except in the case of Section 2(a)(iii)(G)),
the occurrence of any of the following circumstances unless, in the case of
Sections 2(a)(iii)(A), (B), (D), (E), (F), (G), (H) or (I), such
circumstances are fully corrected (provided such circumstances are capable of
correction) within 30 days after a written demand for substantial performance
is delivered to Corporation by Officer:


 


(A)          the assignment to Officer of any duties inconsistent with
Officer’s duties pursuant to Section 1, the failure to elect or reelect
Officer as Chief


 


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Executive Officer and President of Corporation and as a member of the
Board, or the removal by Corporation or the Board of Officer from any such
position, or any other action by Corporation that results in a material
diminution in Officer’s position, authority, duties or responsibilities as
Chief Executive Officer and President of Corporation;


 


(B)           a change in the reporting structure such that Officer
reports to someone other than the Board;


 


(C)           Corporation’s reduction of Officer’s rate of Base Salary or
Target Bonus as in effect on the Effective Date or as the same may be increased
from time to time;


 


(D)          the relocation of Corporation’s offices at which Officer is
principally employed as of the Effective Date (“Officer’s Principal Location”)
to a location more than thirty (30) miles from such location, or Corporation’s
requiring Officer to be based anywhere other than Officer’s Principal Location,
except for required travel on Corporation’s business to an extent substantially
consistent with Officer’s business travel obligations prior to the Effective
Date;


 


(E)           Corporation’s failure to pay to Officer any portion of
Officer’s current compensation or to pay to Officer any portion of an
installment of deferred compensation due under any deferred compensation
program of Corporation, including any deferred performance award, within seven (7) days
of the date such compensation is due;


 


(F)           a material reduction in Officer’s level of participation in
any of Corporation’s short and/or long-term incentive compensation plans,
employee benefit or retirement plans, or policies, practices or arrangements in
which Officer participated in during the Employment Period; provided, however,
except as set forth in clause (C) above, that reductions in the levels of
participation in any such plan, policy, practice or arrangement shall not be
deemed to be “Good Reason” if Officer’s reduced level of participation in each
such plan, policy, practice or arrangement remains substantially consistent
(both in terms of the amount of benefits provided and the level of Officer’s
participation relative to other participants as existed prior to the reduction)
with the level of participation of Corporation’s other senior executive
officers in each such plan, policy, practice or arrangement;


 


(G)           Corporation’s failure to obtain the assumption in writing of
its obligation to perform this Agreement by any successor to all or
substantially all of the business assets of Corporation within 15 days after a
merger, consolidation, sale or similar transaction (without regard to whether
or not Officer consented to such transaction); or


 


(H)          any purported termination of Officer’s employment that is
not effected pursuant to a Notice of Termination satisfying the requirements of
Section 2(a)(viii) hereof (and, if applicable, the requirements of Section 2(a)(i) hereof),
which purported termination shall not be effective for purposes of this
Agreement.


 


Officer’s right to terminate Officer’s employment
pursuant to this Section 2(a)(iii) shall not be affected by Officer’s
incapacity due to physical or mental illness. 
Officer’s continued employment shall not constitute consent to, or a
waiver of rights with respect to, any


 


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circumstance
constituting Good Reason hereunder. 
After a Change in Control, any good faith determination by Officer that
Good Reason exists as to circumstances arising upon, after or in connection
with such Change in Control shall be presumed correct and shall be binding upon
Corporation.


 


(iv)          “Covered Resignation” shall mean a termination by
Officer of Officer’s employment with Corporation by Officer providing a Notice
of Termination within the thirty (30) day period following the first
anniversary of the occurrence of a Change in Control.


 


(v)           “Voluntary Termination” shall mean termination by
Officer of Officer’s employment by Corporation other than (i) a Termination
For Good Reason, (ii) a termination pursuant to a Covered Resignation, or (iii) a
termination by reason of Officer’s death or Disability.


 


(vi)          “Termination Upon a Change in Control” shall mean (A) a
termination by Officer of Officer’s employment with Corporation (1) pursuant
to a Covered Resignation, or (2) for Good Reason at any time by delivering
upon or within the two-year period following a Change in Control a Notice of
Termination to Corporation, or (B) a termination by Corporation of Officer’s
employment, other than a Termination For Cause or upon Disability, at any time
by delivering upon or within the two-year period following a Change in Control
a Notice of Termination to Officer; in each case other than a termination by
reason of Officer’s death.


 


(vii)         “Change in Control” shall be deemed to occur if:


 


(A)          any Person (as defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is
or becomes the Beneficial Owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Corporation
representing 25% or more of the combined voting power of Corporation’s then
outstanding securities entitled to vote generally in the election of directors
(“Outstanding Corporation Voting Securities”); provided, however, that
for purposes of this subsection (A), the following shall not constitute a
Change in Control: (1) any acquisition by Corporation or any corporation controlled by Corporation,
(2) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Corporation or any corporation controlled by
Corporation, or (3) any acquisition by a Person of 25% of the Outstanding
Corporation Voting Securities as a result of an acquisition of common stock of
Corporation by Corporation which, by reducing the number of shares of common
stock of Corporation outstanding, increases the proportionate number of shares
beneficially owned by such Person to 25% or more of the Outstanding Corporation
Voting Securities; provided, however, that if a Person shall become the
beneficial owner of 25% or more of the Outstanding Corporation Voting
Securities by reason of a share acquisition by Corporation as described above
and shall, after such share acquisition by Corporation, become the beneficial
owner of any additional shares of common stock of Corporation, then such
acquisition of additional shares shall constitute a Change in Control;


 


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(B)           during any period of not more than two consecutive years
commencing after the execution of this Agreement, individuals who at the
beginning of such period constitute the Board, together with any new
director(s) whose election by the Board or nomination for election by
Corporation’s stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved in the manner set forth in this clause (B) (which
shall not include any director designated by a person who has entered into an
agreement with Corporation to effect a transaction described in Sections
2(a)(vii)(A), (C) or (D)), cease for any reason to constitute at least a
majority of the Board;


 


(C)           the consummation by Corporation of a merger or consolidation,
or a sale or other disposition of all or substantially all of the assets of
Corporation (“Business Combination”), except for a merger or
consolidation which would result in the beneficial owners of the Outstanding
Corporation Voting Securities immediately prior thereto continuing to beneficially
own (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 66-2/3% of the combined voting
power of the then-outstanding voting securities of the corporation resulting
from such Business Combination (including, without limitation, a corporation
that, as a result of such transaction, owns Corporation or all or substantially
all of Corporation’s assets either directly or through one or more
subsidiaries) in substantially the same proportion as their ownership
immediately prior to such Business Combination; provided, however, that a
merger or consolidation effected to implement a recapitalization of Corporation
(or similar transaction) in which no Person acquires beneficial ownership of more
than 25% of the Outstanding Corporation Voting Securities shall not constitute
a Change in Control except as otherwise provided above in clause (A); or


 


(D)          the stockholders of Corporation approve a plan of complete
liquidation of Corporation or an agreement for the sale or disposition by
Corporation of all or substantially all of Corporation’s business assets.


 


(viii)        “Notice of Termination” shall mean a notice that
indicates the specific termination provision in this Agreement relied upon and
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of Officer’s employment under the provision so indicated.  The Notice of Termination shall also set
forth the applicable Date of Termination (which date shall be consistent with Section 2(ix) hereof).


 


(ix)           “Date of Termination” shall mean (A) if Officer’s
employment is terminated due to Officer’s death, the date of Officer’s death; (B) if
Officer’s employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that Officer shall not have returned
to the full-time performance of Officer’s duties during such thirty (30)-day
period), and (C) if Officer’s employment is terminated pursuant to Section 2(a)(i),
Section 2(a)(ii), Section 2(a)(iii) or Section 2(a)(iv) or
for any other reason (other than death or Disability (as defined in Section 2(c)),
the date specified in the Notice of Termination (which shall not be less than
thirty (30) days from the date such Notice of Termination is given, except that
in the case of a Termination for Cause the Date of Termination may be as early
as the date such Notice of Termination is given, and in the case of a termination
for Good Reason or in connection with a Covered Resignation the Date of
Termination shall not be less than sixty (60) days from the date such Notice of
Termination is given, and in all cases


 


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the Date of
Termination shall not be more than ninety (90) days from the date such Notice
of Termination is given).


 


(x)            “Accrued and Other
Obligations” shall mean:


 


(A)          any Base Salary that had accrued, but had not been paid (including
accrued and unpaid vacation time), as of the Date of Termination, which will be
paid upon or promptly following the Date of Termination; and


 


(B)           any bonus payable pursuant to Section 3(b) with
respect to any fiscal year (if Officer was employed by Corporation on the last
day of that fiscal year) that had not previously been paid, which will be paid
upon or promptly following the Date of Termination or, if later, at the same
time bonuses are paid by Corporation generally to other executives with respect
to such fiscal year; and


 


(C)           any reimbursement due to Officer pursuant to Section 3(c)(iv) for
expenses incurred by Officer prior to the Date of Termination, which will be
paid upon or promptly following the Date of Termination or, if later, promptly
following Officer’s request for reimbursement of such expenses and submission
of receipts and other appropriate documentation thereof in accordance with
Corporation’s usual policies; and


 


(D)          any vested deferred compensation, including, without
limitation, any deferred and vested performance award, any stock units or other
equity-based awards that were vested and subject to a deferral election by
Officer as of the Date of Termination, and any pension plan, profit sharing
plan, and supplemental retirement plan benefits of Officer that were accrued
and vested as of the Date of Termination; which, in each case, will be paid in
accordance with the terms and conditions of the applicable plan, program, award
or agreement; and


 


(E)           any rights, payments or benefits under any other applicable
plans, programs, policies or arrangements of Corporation in which Officer
participated as of the Date of Termination (or if the basis for Good Reason is
pursuant to Section 2(a)(iii)(F), the plan, program, policy or arrangement
in which Officer participated in immediately prior to the action giving rise to
Good Reason), including, without limitation, any equity or long-term incentive
plan or pursuant to any then-outstanding equity awards granted by Corporation
to Officer, to the full extent of Officer’s rights under any such plans,
policies, arrangements or agreements.


 


(b)           Basic Term.  The term of employment hereunder shall
commence on the Effective Date and continue for a continuous period of three (3) years,
subject to earlier termination as provided in this Section 2 (the “Employment
Period”).  Thereafter, unless either
party provides written notice to the other of its intent not to extend the
Employment Period at least sixty (60) days prior to each anniversary of the
Effective Date, the Employment Period shall be extended for an additional year,
so that at all times the Employment Period shall be for a period of at least three
(3) years, unless earlier terminated as provided in this Agreement;
provided, further, that if a Change in Control occurs during the Employment
Period, the term of this Agreement shall continue in effect for a period of not
less than thirty-six (36) months beyond


 


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the month in which such Change in Control occurred.  A determination by either party not to renew
the Employment Period in accordance herewith and delivery of a notice of such
non-renewal shall not be deemed a breach of this Agreement.  The Employment Period shall terminate at Corporation’s
regular close of business on the Date of Termination (or, if the Date of
Termination is not a regular business day, at 6:00 p.m. Pacific Time on
the Date of Termination).


 


(c)           Termination by Corporation.  Corporation may terminate Officer’s
employment hereunder (i) for Cause (but only in accordance with Section 2(a)(i) and
only after the requisite Board vote has been obtained), or (ii) without
Cause, or (iii) in the event of Officer’s Disability.  For purposes of this Agreement, the term “Disability”
shall mean a physical or mental impairment which renders Officer unable to
perform the essential functions of his position, even with reasonable
accommodation which does not impose an undue hardship on Corporation, for a
period of at least six (6) months. 
Except as provided below, the determination of whether a Disability
exists shall be made by a medical doctor selected by Corporation and
Officer.  If the parties cannot agree on
a medical doctor, each party shall select a medical doctor and the two doctors
shall select a third medical doctor who shall be the approved medical doctor
for this purpose.


 


(d)           Termination by Officer.  Officer may terminate his employment
hereunder at any time (i) for Good Reason (subject to Corporation’s
opportunity to cure, if applicable, the circumstance(s) giving rise to Good
Reason in the time period set forth in Section 2(a)(iii)), or (ii) pursuant
to a Covered Resignation, or (iii) pursuant to a Voluntary Termination or
upon thirty (30) days’ written Notice of Termination to Corporation, in the event
of Officer’s Disability.


 


(e)           Termination by Death.  Officer’s employment hereunder shall
terminate upon Officer’s death.


 


(f)            Terminations in General.  Any termination of Officer’s employment
pursuant to Section 2(c), 2(d) or 2(e) shall not be deemed to be
a breach of this Agreement.  Any
termination of Officer’s employment pursuant to Section 2(c), 2(d) or
due to Officer’s Disability shall be communicated by the terminating party by a
Notice of Termination.


 


3.             Salary, Benefits and Bonus Compensation.


 


(a)           Base Salary.  During the Employment Period, Corporation
agrees to pay to Officer a base salary at an annualized rate of $575,000.00 per
annum (“Base Salary”) payable in accordance with Corporation’s regular payroll
practices in effect from time to time, but not less frequently than monthly
installments.  Officer’s Base Salary and
other incentives shall be reviewed annually by the Compensation Committee of
the Board (the “Compensation Committee”), which may increase (but not decrease)
Officer’s Base Salary and grant such other incentives as it, in its sole
discretion, determines appropriate. 
After any such increase in Base Salary, the term “Base Salary” shall
refer to the increased amount.


 


(b)           Bonuses.  Officer shall be eligible to receive a bonus
for each year (or portion thereof) during the Employment Period and any
extensions thereof, provided that,


 


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except as otherwise provided herein, Officer has remained employed by
Corporation for the entire year.  Officer’s
target bonus opportunity for any particular year (“Target Bonus”) shall equal
two hundred percent (200%) of Officer’s Base Salary in effect for that
year.  The amount of bonus payable to
Officer for any particular year will be determined by the Compensation
Committee, in its sole discretion, taking into account the performance of the
Corporation and Officer for that particular year.  All such bonuses shall be payable within 45
days after the end of the year to which such bonus relates.


 


(c)           Additional Benefits.  During the Employment Period, Officer shall
be entitled to the following employee and fringe benefits:


 


(i)            Officer Benefits.  Officer shall be eligible to participate in
such of Corporation’s benefits and deferred compensation plans as are now
generally available or later made generally available to executive officers of
Corporation on a basis no less favorable than provided to such other executive
officers, including, without limitation, profit sharing plans, annual physical
examination, dental and medical plans, personal catastrophe and disability
insurance, and retirement plans.  Officer
shall be eligible to participate in Corporation’s 2000 Stock Incentive Plan and
any successor plan or any other equity or long-term incentive plan of
Corporation.  On the Effective Date,
Corporation also agrees to grant Officer a restricted stock unit award in the
form attached hereto as Exhibit A. 
Notwithstanding anything else contained herein to the contrary, during
the Employment Period in no event shall Officer be eligible to participate in
or receive benefits under any severance plan, program, policy, arrangement or
agreement of Corporation other than this Agreement.  Section 4(b)(viii) of this
Agreement shall apply in the event that any payment, entitlement, benefit or
distribution to Officer or for Officer’s benefit during the Employment Period
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise and whether pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, restricted stock, restricted stock unit, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing) would
be subject to the excise tax imposed by Section 4999 of the Code or to any
similar tax imposed by federal, state or local law or any interest or penalties
imposed with respect to such excise or other similar tax.


 


(ii)           Vacation.  Officer shall be entitled to five (5) weeks
of vacation during each year during the Employment Period, prorated for partial
years.  Upon Officer’s completion of
fifteen (15) years of service to Corporation, Officer’s vacation accrual rate
shall increase to six (6) weeks per year effective on and after such date.


 


(iii)          Life Insurance.  During the Employment Period, Corporation
shall at its expense procure and keep in effect term life insurance on the life
of Officer, payable to such beneficiaries as Officer may from time to time
designate, in the aggregate amount of $2,000,000.  Such policy shall be owned by Officer or by a
member of his immediate family.


 


(iv)          Reimbursement for Expenses.  During the Employment Period, Corporation
shall reimburse Officer for reasonable and properly documented (in accordance
with the Corporation’s policies as in effect from time to time) out-of-pocket
business


 


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and/or entertainment
expenses incurred by Officer in connection with his duties under this
Agreement.  In addition, Corporation
shall promptly pay Officer’s legal fees and other expenses incurred in the
negotiation and preparation of this Agreement (including its Exhibits) and the
Indemnification Agreement to be entered into by and between Corporation and
Officer on or about the date of this Agreement (the “Indemnification
Agreement”) promptly upon receiving copies of the invoices for such fees
and expenses.


 


4.             Severance Compensation.  If Officer’s employment by Corporation is
terminated during the Employment Period for any reason by Corporation or
Officer, or upon or following the Employment Period in the absence of a
successor employment agreement by and between Officer and Corporation to the
contrary, Corporation shall have no further obligation to provide to Officer,
and Officer shall have no further right to receive or obtain from Corporation,
any severance payments or benefits except:


 


(a)           Accrued and Other Obligations.  Corporation shall pay Officer (or, in the
event of his death, Officer’s estate) the Accrued and Other Obligations,
subject to tax withholding and other authorized deductions.  Officer shall also be entitled to any amounts
or advances required by Section 6(h)(iii) or pursuant to the
Indemnification Agreement or any similar successor indemnification agreement by
and between Officer and Corporation.  If
Officer’s employment by Corporation terminates after (but not during) the
Employment Period, Officer shall be eligible for participation in any severance
program, plan or policy then in effect on the same terms and conditions generally
applicable to Corporation’s senior executives (other than as provided in
individual employment agreements) or, if the program, plan or policy is of
general applicability, to Corporation’s employees generally.  For purposes of clarity, this Section 4(a) does
not require a duplication of any Accrued or Other Obligation, reimbursement or
other payment or benefit, otherwise payable in the circumstances pursuant to
any other applicable plan, program, policy, arrangement or award.


 


(b)           Termination Upon a Change in
Control.  If, during the Employment Period (but not
following the expiration of the Employment Period), Officer’s employment is
terminated in a Termination Upon a Change in Control, Corporation shall pay or
provide Officer (in addition to the payments and entitlements in Section 4(a))
the following benefits, subject to tax withholding and other authorized
deductions:


 


(i)            Corporation shall pay Officer,
at the time specified in Section 4(e), a lump sum cash amount equal to
Officer’s Target Bonus for the year in which the Date of Termination occurs,
pro-rated based on the number of days in such year that had elapsed as of the
Date of Termination.


 


(ii)           Corporation shall pay to Officer, at the time specified in Section 4(e),
a lump sum cash severance payment equal to the sum of (x) three (3) times
Officer’s Base Salary (at the greater of the highest annualized rate in effect in
the year preceding the Date of Termination or the year in which the Date of
Termination occurs), plus (y) three (3) times the greater of Officer’s
Target Bonus for the year in which the Date of Termination occurs or the
highest annual bonus received by Officer in the three (3) years
immediately prior to the Change in Control (for purposes of the foregoing
clause, Corporation and Officer hereby agree


 


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that Officer’s
annual bonuses for the years 2002, 2003 and 2004 were $100,000, $1 million, and
$1 million, respectively).


 


(iii)          For a period of three (3) years following the Date of
Termination, Corporation shall continue to provide Officer and Officer’s
eligible family members, based on the cost sharing arrangement between Officer and
Corporation on the date of the Change in Control, with medical and dental
health benefits at least equal in the aggregate to those which would have been
provided to Officer and Officer’s eligible family members if Officer’s
employment had not been terminated or, if more favorable to Officer, as in
effect generally at any time thereafter; provided, however, that if Officer
becomes re-employed with another employer and he and his dependents are
eligible to receive medical and dental health benefits under another employer’s
plans, Corporation’s obligations under this Section 4(b)(iii) shall
be reduced to the extent comparable benefits with respect to Officer and his
dependents are actually received by Officer following Officer’s termination,
and any such benefits actually received by Officer shall be reported to
Corporation.  In the event Officer and
his dependents are or become ineligible under the terms of such benefit plans
or programs to continue to be so covered through the end of the three-year
period following the Date of Termination, in such event, Corporation shall
provide Officer and his dependents with substantially equivalent coverage
through other sources or shall provide Officer with a lump sum payment in such
amount that, after all taxes on that amount, shall be equal to the cost to
Officer of providing Officer such benefit coverage until the end of such
period.  The lump sum payment shall be
determined on a present value basis using the interest rate provided in Section 1274(b)(2)(B) of
the Internal Revenue Code of 1986, as amended (the “Code”) on the Date of
Termination (the “Interest Rate”).  In
addition, during the three-year period following the Date of Termination,
Corporation shall continue to pay the premiums for the term life insurance policy
described in Section 3(c) above.  At the end of the three-year period following
the Date of Termination, Officer, Officer’s spouse and Officer’s dependents
shall be entitled to continuation coverage pursuant to Section 4980B of
the Code, Sections 601-608 of the Employee Retirement Income Security Act of
1974, as amended, and under any other applicable law, to the extent required by
such laws, as if Officer had then terminated employment with Corporation.


 


(iv)          Officer shall be fully vested in Officer’s accrued benefits
under any qualified or nonqualified pension, profit sharing, deferred
compensation or supplemental plans maintained by Corporation for Officer’s
benefit, except to the extent the acceleration of vesting of such benefits
would violate any applicable law or require Corporation to accelerate the
vesting of the accrued benefits of all participants in such plan or plans, in
which case Corporation shall pay Officer a payment at the time such benefit
would have otherwise been paid pursuant to the applicable plan in an amount
equal to the value of such accrued benefits that would have become vested but
for the application of the preceding clause, plus Corporation shall pay Officer
at the time specified in Section 4(e) an amount equal to the present
value (calculated using the Interest Rate) of the amounts Corporation would
have contributed to Officer’s account under Corporation’s 401(k) plan as a
matching contribution had Officer remained employed by Corporation for three (3) years
after Officer’s Date of Termination and had Officer made the maximum elected
deferral contributions (based on the 401(k) contribution formula and plan
limits in effect on the Date of Termination).


 


10





















 


(v)           Officer shall be entitled to accelerated vesting as of the
Date of Termination of any then-outstanding awards granted to Officer under
Corporation’s stock and other equity and long-term incentive plans (to the
extent such awards have not previously become vested).  Any stock options that are then vested
(including any that become vested pursuant to the preceding sentence) and that
are granted to Officer on or after the Effective Date shall, notwithstanding
any provision of any applicable plan or award agreement, remain exercisable
until the later of (x) three (3) years after the Date of Termination or
(y) the date specified in the applicable plan or award agreement; provided in
no event shall any stock option be exercisable beyond its original expiration
date.  Notwithstanding the foregoing two
sentences, any equity-based awards that are subject to forfeiture and/or
vesting requirements based on the satisfaction of performance-based criteria, to
the extent that such awards are outstanding as of the Date of Termination, shall
continue to be governed by the provisions of the applicable award agreement in
the circumstances; provided, however, that to the extent that any such
then-outstanding equity-based awards are subject to forfeiture and/or vesting
requirements based on the passage of time, such awards shall be fully
accelerated with respect to such time-based forfeiture and/or vesting
provisions.


 


(vi)          Corporation shall furnish Officer for six (6) years
following the Date of Termination (without reference to whether the Employment
Period continues in effect) with directors’ and officers’ liability insurance
insuring Officer against insurable events which occur or have occurred while
Officer was a director or officer of Corporation, such insurance to have policy
limits aggregating not less than the amount in effect immediately prior to the
Change in Control, and otherwise to be in substantially the same form and to
contain substantially the same terms, conditions and exceptions as the
liability issuance policies provided for officers and directors of Corporation
in force from time to time, provided, however, that such terms, conditions and
exceptions shall not be, in the aggregate, materially less favorable to Officer
than those in effect on the Effective Date; provided, further, that if the
aggregate annual premiums for such insurance at any time during such period
exceed one hundred and fifty percent (150%) of the per annum rate of premium
currently paid by Corporation for such insurance, then Corporation shall
provide the maximum coverage that will then be available at an annual premium
equal to one hundred and fifty percent (150%) of such rate.


 


(vii)         In any situation where under applicable law Corporation has
the power to indemnify (or advance expenses to) Officer in respect of any
judgments, fines, settlements, loss; cost or expense (including attorneys’
fees) of any nature related to or arising out of Officer’s activities as an
agent, employee, officer or director of Corporation or in any other capacity on
behalf of or at the request of Corporation, Corporation shall promptly on
written request, indemnify (and advance expenses to) Officer to the fullest
extent permitted by applicable law, including but not limited to making such
findings and determinations and taking any and all such actions as Corporation
may, under applicable law, be permitted to have the discretion to take so as to
effectuate such indemnification or advancement. 
Such agreement by Corporation shall not be deemed to impair any other
obligation of Corporation respecting Officer’s indemnification (or advancement
of expenses) otherwise arising out of this or any other agreement or promise of
Corporation or under any corporate governance document of Corporation or under
statute or applicable law.


 


11





















 


(viii)        (A)          Anything in this Agreement to
the contrary notwithstanding, if it shall be determined that any payment,
entitlement, benefit or distribution to Officer or for Officer’s benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise and whether pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, restricted stock, restricted stock unit, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing) (the “Payments”)
would be subject to the excise tax imposed by Section 4999 of the Code or
to any similar tax imposed by federal, state or local law or any interest or
penalties imposed with respect to such excise or other similar tax (such tax or
taxes, together with any such interest or penalties, are collectively referred
to as the “Excise Tax”), then Officer shall, be entitled to receive from
Corporation an additional payment (the “Gross-Up Payment”) in an amount
such that the net amount of the Payments and the Gross-Up Payment retained by
Officer after the calculation and deduction of all Excise Taxes (including any
interest or penalties imposed with respect to such taxes) on the Payment and
all federal, state and local income tax, employment tax and Excise Tax
(including any interest or penalties imposed with respect to such taxes) on the
Gross-Up Payment provided for in this Section 4(b)(viii), and taking into
account any lost or reduced tax deductions on account of the Gross-Up Payment,
shall be equal to the Payments;


 


(B)   All
determinations required to be made under this Section 4(b)(viii), including
whether and when the Gross-Up Payment is required and the amount of such
Gross-Up Payment, and the assumptions to be utilized in arriving at such
determinations shall be made by the Accountants (as defined below) which shall
provide Officer and Corporation with detailed supporting calculations with
respect to such Gross-Up Payment within fifteen (15) business days of the
receipt of notice from Officer or Corporation that Officer has received or will
receive a Payment.  For purposes of
making the determinations and calculations required herein; the Accountants may
make reasonable assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning the application
of Section 280G and 4999 of the Code, provided that the Accountant’s
determinations must be made on the basis of “substantial authority” (within the
meaning of Section 6662 of the Code). 
For the purposes of this Section 4(b)(viii), the “Accountants”
shall mean Corporation’s independent certified public accountants serving
immediately prior to the Change in Control to the extent they may lawfully
perform such services.  In the event that
the Accountants are prohibited from providing such services or are also serving
as accountant or auditor for the individual, entity or group effecting the
Change in Control, Officer shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accountants hereunder).  All fees and expenses of the Accountants
shall be borne solely by Corporation.


 


(C)   For
the purposes of determining whether any of the Payments will be subject to the
Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute
payments” within the meaning of Section 280G of the Code, and all “parachute
payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of
the Code) shall be treated as subject to the Excise Tax, unless and except to
the extent that in the opinion of the Accountants such Payments (in whole or in
part) either do not constitute “parachute payments” or represent reasonable
compensation for services actually rendered (within the


 


12





















 


meaning of Section 280G(b)(4) of
the Code) in excess of the “base amount,” or such “parachute payments” are
otherwise not subject to such Excise Tax. 
For purposes of determining the amount of the Gross-Up Payment, Officer
shall be deemed to pay Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the Gross-Up
Payment is to be made and to pay any applicable state and local income taxes at
the highest applicable marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in Federal
income taxes which could be obtained from the deduction of such state or local
taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of Officer’s adjusted gross income); and to
have otherwise allowable deductions for Federal, state and local income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in Officer’s adjusted gross income.  To the extent practicable, any Gross-Up
Payment with respect to any Payment shall be paid by Corporation at the time
Officer is entitled to receive the Payments and in no event will any Gross-Up
Payment be paid later than five days after the receipt by Officer of the
Accountant’s determination.  Any
determination by the Accountants shall be binding upon Corporation and Officer.


 


(D)  As
a result of uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accountants hereunder, it is
possible that the Gross-Up Payment made will have been an amount less than
Corporation should have paid pursuant to this Section 4(b)(viii) (the
“Underpayment”).  In the event
that Corporation exhausts its remedies pursuant to Section 4(b)(viii)(F) and
Officer is required to make a payment of any Excise Tax, the Underpayment shall
be promptly paid by Corporation to or for Officer’s benefit;


 


(E)   Officer
and Corporation shall each provide the Accountants access to and copies of any
books, records and documents in the possession of Corporation or Officer, as
the case may be, reasonably requested by the Accountants, and otherwise
cooperate with the Accountants in connection with the preparation and issuance
of the determination contemplated by this Section 4(b)(viii); and


 


(F)   Officer
shall notify Corporation in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by Corporation of the
Gross-Up Payment.  Such notification
shall be given as soon as practicable after Officer is informed in writing of
such claim and shall apprise Corporation of the nature of such claim and the
date on which such claim is requested to be paid.  Officer shall not pay such claim prior to the
expiration of the 30-day period following the date on which Officer give such
notice to Corporation (or such shorter period ending on the date that any
payment of taxes, interest and/or penalties with respect to such claim is
due).  If Corporation notifies Officer in
writing prior to the expiration of such period that it desires to contest such
claim, Officer shall:


 


•              give
Corporation any information reasonably requested by Corporation relating to
such claim;


 


•              take
such action in connection with contesting such claim as Corporation shall
reasonably request in writing from time to time, including, without limitation,


 


13





















 


accepting
legal representation with respect to such claim by an attorney reasonably
selected by Corporation;


 


•              cooperate
with Corporation in good faith in order to effectively contest such claim; and


 


•              permit
Corporation to participate in any proceedings relating to such claims;
provided, however, that Corporation shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify Officer for and hold Officer harmless
from, on an after-tax basis, any Excise Tax or income tax or other tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of all related costs and expenses.  Without limiting the foregoing provisions of
this Section 4(b)(viii), Corporation shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Officer to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and Officer agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Corporation shall
determine; provided, however, that if Corporation directs Officer to pay such
claim and sue for a refund, Corporation shall make such payment on behalf of
Officer, and shall indemnify Officer for and hold Officer harmless from, on an
after-tax basis, any Excise Tax or income or other tax (including interest or
penalties with respect thereto) imposed with respect to such payment or with
respect to any imputed income in connection with such payment, but shall be
entitled to any refund received by or on behalf of Officer because of the claim
Corporation has directed him to pay; provided, further, that any extension of
the statute of limitations relating to the payment of taxes for the taxable
year of Officer with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. 
Furthermore, Corporation’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
Officer shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority;


 


(c)           Termination Other Than For Cause
or Termination For Good Reason.  If, during the
Employment Period (but not following the expiration of the Employment Period),
Officer’s employment is terminated by Corporation in a Termination Other Than For
Cause or by Officer in a Termination For Good Reason, Officer shall be entitled
to the benefits provided below (in addition to the payments and entitlements in
Section 4(a)), subject to tax withholding and other authorized deductions:


 


(i)            Corporation shall pay Officer,
at the time specified in Section 4(e), a lump sum cash amount equal to
Officer’s Target Bonus for the year in which the Date of Termination occurs,
pro-rated based on the number of days in such year that had elapsed as of the
Date of Termination.


 


14





















 


(ii)           Corporation shall pay to Officer, at the time specified in Section 4(e),
a lump sum cash severance payment equal to the sum of (x) two (2) times
Officer’s Base Salary (at the greater of the highest annualized rate in effect
in the year preceding the Date of Termination or the year in which the Date of
Termination occurs), plus (y) two (2) times the greater of Officer’s
Target Bonus for the year in which the Date of Termination occurs or the
highest annual bonus received by Officer in the three (3) years
immediately prior to the year in which the Date of Termination occurs (for purposes
of the foregoing clause, the amounts set forth in Section 4(b)(ii) above
shall be used to determine Officer’s annual bonuses for the years 2002, 2003
and 2004).


 


(iii)          Officer shall be entitled to accelerated vesting as of the
Date of Termination of any then-outstanding awards granted to Officer under
Corporation’s stock and other equity and long-term incentive plans (to the
extent such awards have not previously become vested).  Any stock options that are then vested
(including any that become vested pursuant to the preceding sentence) and that are
granted to Officer on or after the Effective Date shall, notwithstanding any
provision of any applicable plan or award agreement, remain exercisable until
the later of (x) three (3) years after the Date of Termination or (y) the
date specified in the applicable plan or award agreement; provided in no event
shall any stock option be exercisable beyond its original expiration date.  Notwithstanding the foregoing two sentences,
any equity-based awards that are subject to forfeiture and/or vesting
requirements based on the satisfaction of performance-based criteria, to the
extent that such awards are outstanding as of the Date of Termination, shall
continue to be governed by the provisions of the applicable award agreement in
the circumstances; provided, however, that to the extent that any such
then-outstanding equity-based awards are subject to forfeiture and/or vesting
requirements based on the passage of time, such awards shall be fully
accelerated with respect to such time-based forfeiture and/or vesting
provisions.


 


(iv)          Officer and his family members shall be entitled to
continuation of medical and dental benefits on the same basis as provided in Section 4(b)(iii),
except the maximum time period for such coverage shall be two years following
the Date of Termination.  In addition,
during the two-year period following the Date of Termination, Corporation shall
continue to pay the premiums for the term life insurance policy described in Section 3(c) above.


 


(v)           Section 4(b)(viii) of this Agreement shall apply
in the event that any payment, entitlement, benefit or distribution to Officer
or for Officer’s benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise and whether
pursuant to or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, restricted stock,
restricted stock unit, stock appreciation right or similar right, or the lapse
or termination of any restriction on or the vesting or exercisability of any of
the foregoing) would be subject to the excise tax imposed by Section 4999
of the Code or to any similar tax imposed by federal, state or local law or any
interest or penalties imposed with respect to such excise or other similar tax.


 


(d)           Termination Upon Death or
Disability.  If, during the Employment Period (but not
following the expiration of the Employment Period), Officer’s employment is
terminated due to his death or Disability, Officer (or Officer’s estate) shall
be entitled to the


 


15





















 


benefits provided below (in addition to the payments and entitlements
in Section 4(a)), subject to tax withholding and other authorized deductions:


 


(i)            Corporation shall pay Officer
(or Officer’s estate), at the time specified in Section 4(e), a lump sum
cash amount equal to Officer’s Target Bonus for the year in which the Date of
Termination occurs, pro-rated based on the number of days in such year that had
elapsed as of the Date of Termination.


 


(ii)           Officer (or Officer’s estate) shall be entitled to
accelerated vesting as of the Date of Termination of any then-outstanding
awards granted to Officer under Corporation’s stock and other equity and
long-term incentive plans (to the extent such awards have not previously become
vested).  Any stock options that are then
vested (including any that become vested pursuant to the preceding sentence)
and that are granted to Officer on or after the Effective Date shall,
notwithstanding any provision of any applicable plan or award agreement, remain
exercisable until the later of (x) three (3) years after the Date of
Termination or (y) the date specified in the applicable plan or award
agreement; provided in no event shall any stock option be exercisable beyond
its original expiration date.  Notwithstanding
the foregoing two sentences, any equity-based awards that are subject to
forfeiture and/or vesting requirements based on the satisfaction of
performance-based criteria, to the extent that such awards are outstanding as
of the Date of Termination, shall continue to be governed by the provisions of
the applicable award agreement in the circumstances; provided, however, that to
the extent that any such then-outstanding equity-based awards are subject to
forfeiture and/or vesting requirements based on the passage of time, such
awards shall be fully accelerated with respect to such time-based forfeiture
and/or vesting provisions.


 


(iii)          Officer and his family members shall be entitled to
continuation of medical and dental benefits on the same basis as provided in Section 4(b)(iii),
except the maximum time period for such coverage shall be one year following
the Date of Termination.


 


(e)           Timing of Payments.  Subject to Section 6(n), the payments
provided for, as applicable, in Sections 4(b)(i), (ii) and (iv) (to
the extent provided therein) or Sections 4(c)(i) and (ii) or Section 4(d)(i) shall
be made not later than the fifth (5th) day following the Date of
Termination.


 


(f)            No Mitigation.  Officer shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise nor, except as provided in Section 4(b)(iii) or
Section 4(c)(iv), shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by Officer as the
result of employment by another employer or self-employment, by retirement
benefits or by offset against any claim or amount claimed to be owed by Officer
to Corporation, or otherwise.


 


(g)           Exclusive Remedy.  Officer agrees that the payments, benefits
and entitlements contemplated by this Section 4 (and any applicable
acceleration of vesting of an equity-based award in accordance with the terms
of such award) shall, if such payments, benefits or entitlements are actually
made or provided and such accelerated vesting and any other equity provision is
actually effected (including with respect to delivery of shares and the


 


16





















 


post-termination exercise period for options) as contemplated by the
applicable provisions of this Section 4 depending upon the circumstances
in which the termination occurs, constitute the sole and exclusive remedy for such
termination of his employment, and, provided such payments, benefits or
entitlements are actually made as set forth herein, Officer covenants not to
assert or pursue any other remedies, at law or in equity, with respect to such
termination of employment.  This Section 4(g) does
not in any way limit any right of either party to contest the characterization
of a termination of employment (for example, and without limitation, the right
of Officer to contest whether Corporation had Cause to terminate Officer’s
employment in a purported Termination For Cause) and, if successful, to receive
the payments, benefits or entitlements due for such a termination in accordance
with the terms hereof.


 


5.             Covenants.


 


(a)           Confidentiality.  Officer hereby agrees that Officer shall not
at any time (whether during or after Officer’s employment with Corporation),
directly or indirectly, other than in the course of Officer’s duties hereunder,
disclose or make available to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever, any Confidential Information
(as defined below); provided, however, that this Section 5(a) shall
not apply when (i) disclosure is required by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof) with actual or apparent jurisdiction to order Officer to
disclose or make available such information (provided, however, that Officer
shall promptly notify Corporation in writing upon receiving a request for such
information), or (ii) with respect to any other litigation, arbitration or
mediation involving this Agreement or any other agreement between Officer and
Corporation, including but not limited to enforcement of such agreements.  Officer agrees that, upon termination of
Officer’s employment with Corporation, all Confidential Information in Officer’s
possession that is in written or other tangible form (together with all copies
or duplicates thereof, including computer files) shall be returned to
Corporation and shall not be retained by Officer or furnished to any third
party, in any form except as provided herein; provided, however, that Officer
shall not be obligated to treat as confidential, or return to Corporation
copies of any Confidential Information that (a) was publicly known at the
time of disclosure to Officer, (b) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any other
duty owed to Corporation by Officer, or (c) is lawfully disclosed to
Officer by a third party.  As used in
this Agreement, the term “Confidential Information” means: information
disclosed to Officer or known by Officer as a consequence of or through Officer’s
relationship with Corporation, about the customers, employees, business
methods, public relations methods, organization, procedures or finances,
including, without limitation, information of or relating to customer lists, of
Corporation and its affiliates.  Anything
elsewhere to the contrary notwithstanding, Officer shall be entitled to retain (i) papers
and other materials of a personal nature, including, but not limited to,
photographs, correspondence, personal diaries, calendars and Rolodexes,
personal files and phone books, (ii) information showing his compensation
or relating to reimbursement of expenses, (iii) information that Officer
reasonably believes may be needed for tax purposes, (iv) copies of plans,
programs and agreements relating to his compensation, or employment or
termination thereof, with Corporation and (v) minutes, presentation
materials and personal notes from any meeting of the Board, or any committee
thereof, while Officer was a member of the Board or such committee.


 


17





















 


(b)           Noncompetition.  Officer acknowledges and agrees that Officer’s
services pursuant to this Agreement are unique and extraordinary, and that
Officer will have access to and control of Confidential Information of
Corporation which is vital to the success of Corporation’s business.  Officer further acknowledges that because of
Officer’s knowledge of Corporation’s Confidential Information it is unlikely
that Officer could work for a competitor of Corporation without divulging such
Confidential Information.  Officer
further acknowledges that the business of Corporation is national in scope and
cannot be confined to any particular geographic area of the United States.  For the foregoing reasons, and in
consideration for the benefits offered by Corporation under this Agreement,
Officer hereby agrees that during the Employment Period, Officer shall not
accept employment nor engage as a consultant with a competitor of Corporation
in the real estate investment trust industry.


 


(c)           Non-Solicitation.


 


(i)            Officer promises and agrees that
during the Employment Period and for a period of one (1) year thereafter,
Officer will not, directly or indirectly, individually or as a consultant to,
or as an employee, officer, stockholder, director or other owner or participant
in any business, influence or attempt to influence customers, vendors,
suppliers, joint venturers, associates, consultants, agents, or partners of any
entity within the Company Group, either directly or indirectly, to divert their
business away from the Company Group, to any individual, partnership, firm,
corporation or other entity then in competition with the business of any entity
within the Company Group, and he will not otherwise materially interfere with
any business relationship of any entity within the Company Group.  For
purposes of this Agreement, “Company Group” means Corporation and its
subsidiaries.


 


(ii)           Officer promises and agrees that during the Employment
Period and for a period of one (1) year thereafter, Officer will not,
directly or indirectly, individually or as a consultant to, or as an employee,
officer, stockholder, director or other owner of or participant in any
business, solicit (or assist in soliciting) any person who is then, or at any
time within six (6) months prior thereto was, an employee of an entity
within the Company Group who earned annually $25,000 or more as an employee of
such entity during the last six (6) months of his or her own employment to
work for (as an employee, consultant or otherwise) any business, individual,
partnership, firm, corporation, or other entity whether or not engaged in
competitive business with any entity in the Company Group.


 


6.             Miscellaneous.


 


(a)           Payment Obligations.  Corporation’s obligation to pay Officer the
compensation and to make the arrangements provided herein shall be
unconditional, and Officer shall have no obligation whatsoever to mitigate
damages hereunder.


 


(b)           Business Clubs.  Officer may designate up to two dining clubs,
country clubs, athletic clubs, or similar organizations in which Officer has
membership interests (in addition to his membership in Virginia Country Club in
Long Beach, California), and for the Employment Period, Corporation shall
reimburse Officer for the monthly dues and for all charges for use of such
clubs or organizations for business purposes on behalf of Corporation.  The “Agreement Concerning Club Membership” by
and between Officer and Corporation


 


18





















 


effective as of July 22, 2004 (the “VCC Agreement”) continues in
effect in accordance with its terms.


 


(c)           Waiver.  The waiver of the breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof. 
Any waiver to be effective must be in writing, specifically referring to
the provision being waived and signed by the party against whom the waiver is
being enforced.


 


(d)           Entire Agreement; Modifications.  Except as otherwise provided herein, this
Agreement, together with the Non-Integrated Agreements, represents the entire
understanding among the parties with respect to the subject matter hereof, and
this Agreement and the Non-Integrated Agreements supersede any and all prior
understandings, agreements, plans and negotiations, whether written or oral,
with respect to the subject matter hereof, including without limitation, any
understandings, agreements or obligations respecting any past or future
compensation, bonuses, reimbursements or other payments to Officer from
Corporation (provided that in no event does this Agreement or any of the Non-Integrated
Agreements supersede Officer’s outstanding equity award agreements).  All modifications to the Agreement must be in
writing and signed by the party against whom enforcement of such modification
is sought.  The “Non-Integrated
Agreements” are the following: (i) the VCC Agreement, (ii) Corporation’s
Insider Trading Policy in effect as of the Effective Date which has been
acknowledged by Officer, and (iii) the Indemnification Agreement.


 


(e)           Notices.  All notices and other communications under
this Agreement shall be in writing and shall be given (i) when personally
delivered to the recipient (provided a written acknowledgement of receipt is
obtained), (ii) three days after mailing by first class mail, postage
pre-paid, certified or registered with return receipt requested or (iii) one
day after being sent by a nationally recognized overnight courier (provided
that a written acknowledgement of receipt is obtained by the overnight
courier), to the party concerned at the address indicated below:


 


	
  If to
  Corporation:

  	
  Health Care
  Property Investors, Inc.

  
	
   

  	
  3760 Kilroy
  Airport Way, Suite 300

  
	
   

  	
  Long Beach,
  California 90806

  
	
   

  	
  Attention:
  Chairman of the Board

  
	
   

  	
   

  
	
  copy to:

  	
  Health Care
  Property Investors, Inc.

  
	
   

  	
  3760 Kilroy
  Airport Way, Suite 300

  
	
   

  	
  Long Beach,
  California 90806

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  
	
  If to
  Officer:

  	
  To most
  recent home address in Corporation’s records.

  



 


Any party may change such party’s address for notices
by notice duly given pursuant to this Section 6(e).


 


(f)            Headings.  The Section headings herein are intended
for reference and shall not by themselves determine the construction or
interpretation of this Agreement.


 


19





















 


(g)           Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents, without reference to principles of conflicts of law.


 


(h)           Arbitration; Dispute Resolution,
etc.


 


(i)            Arbitration Procedure.  Any disagreement, dispute, controversy or
claim arising out of or relating to this Agreement or the interpretation of
this Agreement or any arrangements relating to this Agreement or contemplated
in this Agreement or the breach, termination or invalidity thereof, or any
other dispute between Officer and Corporation arising out of or related to
Officer’s employment by Corporation (each of the foregoing, a “Dispute”), shall
be settled by final and binding arbitration administered by the JAMS/Endispute
in Los Angeles, California in accordance with its then existing JAMS/Endispute
Arbitration Rules and Procedures for Employment Disputes.  In the event of such an arbitration
proceeding, Officer and Corporation shall select a mutually acceptable neutral
arbitrator from among the JAMS/Endispute panel of arbitrators.  In the event Officer and Corporation cannot
agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an
arbitrator.  Neither Officer nor
Corporation nor the arbitrator shall disclose the existence, content, or
results of any arbitration hereunder without the prior written consent of all
parties.  Except as provided herein, the
Federal Arbitration Act shall govern the interpretation, enforcement and all
proceedings under this Section 6(h)(i). 
The arbitrator shall apply the substantive law (and the law of remedies,
if applicable) of the state of California, or federal law, or both, as
applicable and the arbitrator is without jurisdiction to apply any different
substantive law.  The arbitrator shall
have the authority to entertain a motion to dismiss and/or a motion for summary
judgment by any party and shall apply the standards governing such motions under
the Federal Rules of Civil Procedure. 
The arbitrator shall render an award and a written, reasoned opinion in
support thereof.  Judgment upon the award
may be entered in any court having jurisdiction thereof.  Corporation shall pay all fees and expenses
of the Arbitrator regardless of the result and shall provide all witnesses and
evidence reasonably required by Officer to present Officer’s case.  For purposes of this Section 6(h),
references to “this Agreement” shall include its Exhibits.


 


(ii)           Advance of Payment.  In the event of any arbitration brought in
good faith which involves a determination as to whether Officer is entitled to
the benefits contemplated by Section 4(b) or 4(c), Corporation shall
advance the Advancement Amount to Officer within thirty (30) days after
Corporation receives from Officer a written agreement (in a form reasonably
acceptable to Corporation) pursuant to which Officer agrees that if the
arbitration is not resolved in Officer’s favor, Officer shall promptly repay to
Corporation the entire Advancement Amount plus interest at the Interest Rate,
compounded quarterly (but subject to offset for any amounts and/or entitlements
that the arbitrator deems Officer is entitled to under this Agreement) and in
all cases provided that, in the opinion of counsel to Corporation, such
arrangement will not violate any provision of law applicable to
Corporation.  In the event that the
arbitrator determines that Officer is entitled to the benefits contemplated by Section 4(b) or
4(c), then the Corporation shall promptly pay to Officer the net additional
amount due (the total payment contemplated by Section 4(b) or 4(c),
as applicable, less the Advancement Amount) together with interest at the
Interest Rate, compounded quarterly


 


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from the
commencement of the arbitration to the date of such payment.  In no event shall Officer be entitled to the
benefits contemplated by Section 4(b) and the benefits contemplated
by Section 4(c).  In the event there
is a dispute as to whether Officer is entitled to the benefits provided by Section 4(b),
the “Advancement Amount” is equal to fifty percent (50%) of the amount
of Corporation’s obligations pursuant to Section 4(b)(i) and Section 4(b)(ii) (calculated
assuming that Officer was entitled to the benefits set forth therein).   In the event there is a dispute as to
whether Officer is entitled to the benefits provided by Section 4(c), and
assuming Section 4(b) reasonably does not apply, the “Advancement
Amount” is equal to fifty percent (50%) of the amount of Corporation’s
obligations pursuant to Section 4(c)(i) and Section 4(c)(ii) (calculated
assuming that Officer was entitled to the benefits set forth therein).  Corporation and Officer agree that it would
not be in good faith for Corporation to dispute any good-faith determination by
Officer that Good Reason exists as to circumstances arising upon, after or in
connection with a Change in Control.


 


(iii)          Legal Fees.  In addition to all other amounts payable to
Officer under this Agreement, Corporation shall pay to Officer all reasonable legal
fees and expenses incurred by Officer in connection with any Dispute arising
out of or relating to this Agreement or the interpretation thereof (including,
without limitation, all such fees and expenses, if any, incurred in contesting
or disputing any termination of Officer’s employment or in seeking to obtain or
enforce any right or benefit provided by this Agreement, or in connection with
any tax audit or proceeding to the extent attributable to the application of Section 4999
of the Code to any payment or benefit provided hereunder), regardless of the
outcome of such proceeding; provided, however, that in the event Officer
commences such action, Officer shall not be entitled to recover such fees and
costs if the arbitrator determines that Officer brought the claim in bad faith
or the claim was frivolous.  Any attorney’s
fees incurred by Officer shall be paid by Corporation in advance of the final
disposition of such action or challenge, as such fees and expenses are
incurred; provided, however, that any award against Officer shall require him
to repay such amounts, net of any income taxes paid or payable by Officer with
respect to such amounts, if such amounts are incurred in connection with an
action commenced by Officer if it is ultimately determined by the court that
Officer brought, such action in bad faith or the claim was frivolous.  Notwithstanding the foregoing, any payment
pursuant to this Section 6(h)(iii) is subject to compliance with Section 2-418
of the Maryland General Corporation Law.


 


(i)            Severability.  Should a court or other body of competent
jurisdiction, or an arbitrator selected pursuant to Section 6(h),
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted (but in no
event beyond the scope and/or time period contemplated by this Agreement)
rather than voided, if possible, taking into account the intent of the parties
when they entered into this Agreement and all other provisions of this
Agreement shall be deemed valid and enforceable to the extent possible.


 


(j)            Survival of Corporation’s
Obligations.  Corporation’s obligations hereunder shall not
be terminated by reason of any liquidation, dissolution, bankruptcy, cessation
of business, or similar event relating to Corporation.  This Agreement shall not be terminated by any
merger or consolidation or other reorganization of Corporation, including a
sale, transfer or other disposition of all or substantially all of Corporation’s
assets.  In the event any merger,
consolidation or reorganization of Corporation, or a sale of all or
substantially all of the business


 


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assets of Corporation, this Agreement shall be binding upon and inure
to the benefit of the surviving or resulting corporation or person or the
successor to all or substantially all of the business assets of Corporation, as
applicable.  This Agreement shall be
binding upon and inure to the benefit of the executors, administrators, heirs,
successors and assigns of the parties; provided, however, that except as herein
expressly provided, this Agreement shall not be assignable either by
Corporation (except to an affiliate of Corporation in which event Corporation
shall remain liable if the affiliate fails to meet any obligations to make
payments or provide benefits or otherwise) or by Officer.  Officer shall be entitled, to the extent
permitted under any applicable law or any Corporation plan, policy, program, arrangement
or agreement, to select or change a beneficiary or beneficiaries to receive any
compensation or benefit payable or provided to Officer pursuant to this
Agreement following Officer’s death by giving Corporation written notice
thereof.  In the event of Officer’s death
or a judicial determination of his incompetence, references in this Agreement
to Officer shall be deemed, where appropriate, to refer to his beneficiary,
estate or legal representative, as the case may be and, in all events, in the
case of Officer’s death any payments or benefits due to Officer that remain
unpaid or outstanding hereunder shall be paid or provided to his designated
beneficiary or, in the absence of such designation, his estate.


 


(k)           Survivorship.  The terms of this Agreement to the extent
necessary to carry out the intentions of the parties underlying their
respective rights and obligations shall survive any termination of the
Employment Period.  For this purpose, the
parties intend that the following provisions of this Agreement shall survive
any termination or expiration of the Employment Period to the extent necessary
to carry out the intentions of the parties as embodied in this Agreement:  Sections 2(a), 4 and 5, and this Section 6.   This Agreement shall continue in effect
until there are no further rights or obligations of the parties outstanding
hereunder and shall not be terminated by either party without the express
written consent of both parties.


 


(l)            Representations and Warranties.  Corporation represents and warrants to
Officer that (i) execution, delivery and performance of this Agreement by
Corporation has been fully and validly authorized by all necessary corporate
action, (ii) the officer signing this Agreement on behalf of Corporation
is duly authorized to do so, (iii) the execution, delivery and performance
of this Agreement does not violate any applicable law, regulation, order,
judgment or decree or any agreement, plan or corporate governance document to
which Corporation is a party or by which it is bound and (iv) upon
execution and delivery of this Agreement by the parties, it shall be a valid
and binding obligation of Corporation, enforceable against it in accordance
with its terms.  Officer hereby
represents to Corporation that execution, delivery and performance of this
Agreement by Officer and the performance by Officer of Officer’s duties
hereunder shall not constitute a breach of, or otherwise contravene, the terms
of any other agreement to which Officer is a party or otherwise bound (other
than any agreement with Corporation).


 


(m)          Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or
limit Officer’s continuing or future participation in, or entitlements under,
any benefit, bonus, incentive or other plan or program of Corporation or any of
its subsidiaries or affiliates and for which Officer may qualify, nor shall
anything herein limit or reduce such rights as Officer may have under any other
agreement with Corporation or its subsidiaries or affiliates, provided that in
no event shall Officer be entitled to duplication of payments or benefits.


 


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(n)           Code Section 409A.  To the extent that this Agreement or any
plan, program or award of Corporation in which Officer participates or which
has been or is granted by Corporation to Officer, as applicable, is subject to Section 409A
of the Code, Corporation and Officer agree to cooperate and work together in
good faith to timely amend each such plan, program or award to comply with Section 409A
of the Code.  In the event that Officer
and Corporation do not agree as to the necessity, timing or nature of a
particular amendment intended to satisfy Section 409A of the Code,
reasonable deference will be given to Officer’s reasonable interpretation of
such provisions.  In the event that
Officer is subject to any payment or benefit at a time when he is a “specified
employee” (within the meaning of Section 409A), Corporation shall delay
the making of such payment or benefit to a date which is six months after the
date of Officer’s “separation from service” (within the meaning of Section 409A)
(or, if earlier, the date of Officer’s death) to the extent reasonably
necessary to satisfy Section 409A of the Code.  In addition, references to payments to be paid
“promptly following the Date of Termination” shall mean no later than two and
one-half months after the Date of Termination.


 


(o)           Counterparts.  This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.


 


(p)           Withholdings.  All compensation and benefits to Officer
hereunder shall be reduced by all federal, state, local and other withholdings
and similar taxes and withholdings required by applicable law.


 


(q)           Undertakings.  Corporation agrees that with respect to any
undertaking required by Officer in connection with any advancement of expenses
or other amounts, whether pursuant to the Bylaws of Corporation, the
Indemnification Agreement (or any successor agreement), applicable law or
otherwise, and whether or not Officer is employed by Corporation on such date,
such undertaking shall condition repayment upon its being ultimately determined
by a court having jurisdiction in the matter in a final adjudication from which
there is no further right of appeal that Officer is not entitled to be
indemnified against such expenses or other amounts by Corporation.  To the extent any such undertaking does not
condition repayment in this manner, such undertaking shall be interpreted
consistent with this paragraph.


 


(r)            Inconsistencies.  In the event of any inconsistency between any
provision of this Agreement and any provision of any equity award granted by
Corporation or the Indemnification Agreement, the provision most favorable to
Officer shall govern.


 


(s)           Legal Counsel; Mutual Drafting.  Each party recognizes that this is a legally
binding contract and acknowledges and agrees that they have had the opportunity
to consult with legal counsel of their choice. 
Each party has cooperated in the drafting, negotiation and preparation
of this Agreement.  Hence, in any
construction to be made of this Agreement, the same shall not be construed
against either party on the basis of that party being the drafter of such
language.  Officer agrees and acknowledges
that he has read and understands this Agreement, is entering into it freely and
voluntarily, and has been advised to seek counsel prior to entering into this
Agreement and has had ample opportunity to do so.


 


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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


 


	
   

  	
  HEALTH CARE
  PROPERTY INVESTORS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward
  J. Henning

  	
   

  
	
   

  	
   

  	
  Edward J.
  Henning

  Senior Vice President, General Counsel and

  Corporate Secretary

  
	
   

  	
   

  
	
   

  	
  /s/ James F.
  Flaherty III

  	
   

  
	
   

  	
  James F.
  Flaherty III

  



 


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EXHIBIT A


 


RESTRICTED STOCK UNIT AGREEMENT