Document:

Exhibit 10.11

 

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of April 24,
2008 by and between HCP, Inc. (formerly known as Health Care Property
Investors, Inc.), a Maryland corporation (together with its successors and
assigns, “Corporation”), and JAMES F. FLAHERTY III (“Officer”).

 

RECITALS

 

WHEREAS, Corporation and
Officer entered into that certain Employment Agreement dated as of October 26,
2005 (the “Prior Employment Agreement”);

 

 WHEREAS, Corporation and Officer desire to
amend and restate the Prior Employment Agreement upon the terms set forth in
this Agreement; and

 

WHEREAS, 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, on
May 4, 2007, the Board approved Officer’s service on the University of
Notre Dame Board of Trustees.

 

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 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:

 

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(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 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.

 

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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 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 Effective Date, 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 

 

5

 

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 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 not later than the next regularly scheduled
payroll date 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
in accordance with Section 3(b) or if the Date of Termination is
later than such date, within sixty (60) days following the Date of Termination
with such payment date within such time period within Corporation’s sole
discretion; and

 

(C)           any reimbursement due to Officer pursuant to the terms
of Section 3(c)(iv) for expenses incurred under that subsection 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 subject to the time limitations of Section 3(c)(iv); 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.

 

(xi)           “Effective Date” shall mean October 26, 2005, the
date that Corporation and Officer entered in to the Prior Employment Agreement.

 

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(xii)          “Code” shall mean the Internal Revenue Code of 1986,
as the same may be amended from time to time.

 

(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 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.

 

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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 from the Effective Date through January 25,
2007, and a base salary at an annualized rate of $600,000.00 from January 26,
2007 through the end of the Employment Period (“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, 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, 2006 Performance Incentive Plan and
any successor plan or any other equity or long-term incentive plan of
Corporation.  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.  The provision of the annual physical exam to
or for Officer pursuant to this Section 3(c)(i) in one taxable year
shall not affect the provision of such

 

8

 

annual physical exam to
or for Officer in any other taxable year. 
Any reimbursement to Officer of the cost of any annual physical exam
under this Section 3(c)(i) shall be paid to Officer on or before the
last day of Officer’s taxable year following the taxable year in which the
expense was incurred.  The right to the
annual physical exams under this Section 3(c)(i) may not be
liquidated or exchanged for any other benefit.

 

(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 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 any amendments or
modifications thereto) and the Indemnification Agreement entered into by and
between Corporation and Officer on or about the Effective Date, including any
amendments or modifications thereto (the “Indemnification Agreement”)
promptly upon receiving copies of the invoices for such fees and expenses.  The payment of the legal fees and other
expenses provided to or for Officer pursuant to this Section 3(c)(iv) in
one taxable year shall not affect the amount of the payment of such legal fees
and other expenses provided to or for Officer in any other taxable year.  Any reimbursement to Officer of legal fees or
expenses under this Section 3(c)(iv) shall be paid to Officer on or
before the last day of Officer’s taxable year following the taxable year in
which the expense was incurred.  The
right to payment of legal fees and expenses under this Section 3(c)(iv) may
not be liquidated or exchanged for any other benefit.

 

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, 

 

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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 that
Officer’s annual bonus for the year 2004 was $1 million).

 

(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 by Officer
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 

 

10

 

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)(iii) 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. To
the extent that the foregoing medical and dental benefits are taxable to
Officer, any medical or dental reimbursement payments shall be paid to Officer
on or before the last day of Officer’s taxable year following the taxable year
in which the expense was incurred and the payment of any tax-gross up payments
shall be paid to Officer on or before the last day of the end of Officer’s
taxable year following the taxable year in which Officer (or the Corporation)
pays or remits the related taxes.  The
medical and dental benefits and payment of term life insurance premiums
described herein are not subject to liquidation or exchange for another
benefit.  The amount of the foregoing
benefits that the Officer receives in one taxable year shall not affect the
amount of the foregoing benefits that the Officer receives in any other taxable
year.

 

(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).

 

(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.

 

11

 

(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.

 

(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;

 

12

 

(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 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;

 

13

 

(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 but in all events
within thirty (30) days of Corporation exhausting such remedies;

 

(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 gives 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, 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 

 

14

 

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;

 

(G)           Notwithstanding anything to the contrary in this Section 4(b)(viii),
any payment under this Section 4(b)(viii) shall be paid to Officer
promptly but in no event later than the last day of the end of Officer’s
taxable year following the taxable year in which Officer (or the Corporation)
pays or remits the related taxes. 
Additionally, to the extent Officer is entitled to the reimbursement of
expenses incurred due to a tax audit or litigation addressing the existence or
amount of a tax liability, such reimbursement shall be made to Officer on or
before the last day of Officer’s taxable year following the taxable year in
which the taxes that are the subject of the audit or litigation are paid or, if
no such taxes are paid, on or before the last day of the taxable year following
the taxable year in which the audit is completed or there is a final and
nonappealable settlement or other resolution of the litigation.

 

(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.

 

15

 

(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 amount set forth in Section 4(b)(ii) above
shall be used to determine Officer’s annual bonus for the year 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.  To the extent that the foregoing medical and
dental benefits are taxable to Officer, any medical or dental reimbursement
payments shall be paid to Officer on or before the last day of Officer’s
taxable year following the taxable year in which the expense was incurred and
the payment of any tax gross-up payments shall be paid to Officer on or before
the last day of the end of Officer’s taxable year following the taxable year in
which Officer pays the related taxes. 
The medical and dental benefits and payment of term life insurance
premiums described herein are not subject to liquidation or exchange for
another benefit.  The amount of the
foregoing benefits that the Officer receives in one taxable year shall not
affect the amount of the foregoing benefits that the Officer receives in any
other taxable year.

 

(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.

 

16

 

(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 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, with the payment date within such time period within Corporation’s
sole discretion, provided that the Date of Termination occurs on the same date
as Officer’s “separation from service” (within the meaning of Section 409A
of the Code) from Corporation and its subsidiaries, otherwise such amounts
shall be paid upon or within five (5) days following the date that Officer
incurs such a separation from service, with the payment date within such time
period within Corporation’s sole discretion.

 

17

 

(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 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 

 

18

 

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.

 

(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 (as defined below), 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.

 

19

 

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 effective as
of July 22, 2004 (the “VCC Agreement”) continues in effect in accordance
with its terms.  Any reimbursement to
Officer of monthly club dues and other charges under this Section 6(b) shall
be paid to Officer promptly but in no event later than the last day of Officer’s
taxable year following the taxable year in which the expense was incurred.  The right to reimbursement of monthly club
dues and other charges under this Section 6(b) may not be liquidated
or exchanged for any other benefit.  The
reimbursement of monthly club dues and other charges provided to Officer
pursuant to this Section 6(b) in one year shall not affect the amount
of monthly club dues and other charges that may be reimbursed for Officer in
any other taxable year.

 

(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 

 

20

 

acknowledgement of
receipt is obtained by the overnight courier), to the party concerned at the
address indicated below:

 

	
  If to Corporation:

  	
   

  	
  HCP, Inc.

  
	
   

  	
   

  	
  3760 Kilroy Airport Way,
  Suite 300

  
	
   

  	
   

  	
  Long Beach, California
  90806

  
	
   

  	
   

  	
  Attention: Chairman of the
  Board

  
	
   

  	
   

  	
   

  
	
  copy to:

  	
   

  	
  HCP, 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.

 

(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 

 

21

 

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
the Corporation fails to pay to Officer amounts Officer reasonably determines
in good faith are due to him under Section 4(b) or 4(c) and an
arbitration is 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; provided, however, that in all events the Corporation shall not
advance the Advancement Amount to Officer prior to the date specified in Section 4(e) (after
application of Section 6(n), if applicable).  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 from the commencement of the arbitration to
the date of such payment; provided that no such payment shall result in an
acceleration of any payment or benefits received unless Officer agrees in
writing and such acceleration complies with Final Treasury Regulation
1.409A-3(j)(4)(xiv).  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 

 

22

 

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. 
If such legal fees are not reimbursed in connection with a bona fide
legal claim exempt Section 409A pursuant to Final Treasury Regulation
1.409-1(b)(11) then (i) the legal fees provided or advanced to or for
Officer pursuant to this Section 6(h) in one taxable year shall not
affect the amount of legal fees provided or advanced to or for Officer in any
other taxable year, (ii) any reimbursement to Officer of legal fees under
this Section 6(h) shall be paid to Officer on or before the last day
of Officer’s taxable year following the taxable year in which the expense was
incurred and (iii) the right to advancement, reimbursement or payment of
legal fees under this Section 6(h) may not be liquidated or exchanged
for any other benefit.

 

(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 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 

 

23

 

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, 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.

 

(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.  If Officer is a “specified
employee” as determined pursuant to Section 409A of the Code as of the
date of Officer’s “separation from service” (within the meaning of Section 409A
of the Code) and if any payment or benefit provided for in this Agreement or
otherwise both (x) constitutes a “deferral of compensation” within the
meaning of Section 409A and (y) cannot be paid or provided in the
manner otherwise provided without 

 

24

 

subjecting Officer to “additional
tax”, interest or penalties under Section 409A, then any such payment or
benefit that is payable during the first six months following Officer’s “separation
from service” shall be paid or provided to Officer in a cash lump-sum, with
interest at LIBOR, on the first business day of the seventh calendar month
following the month in which Officer’s “separation from service” occurs.  In addition, references to payments to be
paid “promptly following the Date of Termination” shall mean as soon as
practicable but in all events no later than two and one-half months after the
Date of Termination with the payment date within such time period with
Corporation’s sole discretion.

 

(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.

 

25

 

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

 

	
   

  	
  HCP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ EDWARD J. HENNING

  
	
   

  	
   

  	
  Edward J. Henning

  
	
   

  	
   

  	
  Executive Vice President, General Counsel, 

  Chief Administrative Officer and Corporate 

  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/ JAMES F. FLAHERTY III

  
	
   

  	
   

  	
  James F. Flaherty III

  

 

26Exhibit 10.17

 

[CEO FIVE YEAR INSTALLMENT
VESTING]

 

HEALTH CARE PROPERTY INVESTORS,
INC.

2006
PERFORMANCE INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT
AGREEMENT

 

James F. Flaherty III[                            ],
Grantee:

 

As of
the [            ] day of [              
2007] (the “Grant Date”), HCP, Inc.
(formerly known as Health Care Property Investors, Inc.), a Maryland
corporation (the “Company”), pursuant to the Health Care Property
Investors, Inc. 2006 Performance 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 7.1 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 Performance.  Your
Units will be paid only to the extent your Units are not forfeited pursuant to
this Section I and only to the extent such non-forfeited Units vest
pursuant to this Section I or Section II below.  Your Units are subject to forfeiture if the
Company’s Funds From Operations Per Share for the 2007 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 non-recurring charges incurred by the
Company with respect to the Performance Period for (i) material strategic
or financing transactions approved by the Board of Directors and (ii) impairments.  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. 
The Committee’s determination regarding whether the Company has attained
the performance goals (the “Committee Determination”) shall be made no
later than the March 15 following the end of the Performance Period.  Your Units shall not be deemed vested
pursuant to any other provision of this Agreement earlier than the date that
the Committee makes such determination, as required by Section 162(m) of
the Code and the regulations promulgated thereunder.  Any Units forfeited pursuant to this Section I(a) shall
be deemed to have been forfeited as of the last day of the Performance Period.

 

1

 

(b)                                 Forfeiture
of Units Upon Termination of Employment. 
Except as provided in Section I(c), if at any time during the
Performance Period your employment with the Company is terminated, 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.

 

(c)                                  Certain
Terminations during the Performance Period. 
This Section I(c) applies in the event your employment with
the Company is terminated as a result of (i) your death, Disability or
Retirement, (ii) a Termination Other Than For Cause, (iii) a
Termination For Good Reason, or (iv) a Termination Upon a Change in
Control (including a Covered Resignation). 
In the event of any such termination 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.  In
such a case, any Units not so forfeited pursuant to subsection (a) shall
fully vest as of the date of the Committee Determination.  For purposes of this Agreement, the terms “Covered
Resignation,” “Disability,” “Termination Other Than For Cause,”
“Termination For Good Reason,” and “Termination Upon a Change in
Control” shall have the meanings ascribed to such terms in your Employment
Agreement with the Company dated October 26, 2005 (the “Employment
Agreement”).  Such meanings shall
continue to apply for purposes of this Agreement notwithstanding any
termination of the “Employment Period” (as such term is defined in the
Employment Agreement) in accordance with the Employment Agreement.

 

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.)

 

	
  Tranche

  	
   

  	
  Percentage of Non Forfeited

  Units that Vest

  	
   

  	
  Vesting Date

  
	
  1

  	
   

  	
  20%

  	
   

  	
  1st Anniversary of Grant Date

  
	
  2

  	
   

  	
  20%

  	
   

  	
  2nd Anniversary of Grant Date

  
	
  3

  	
   

  	
  20%

  	
   

  	
  3rd Anniversary of Grant Date

  
	
  4

  	
   

  	
  20%

  	
   

  	
  4th Anniversary of Grant Date

  
	
  5

  	
   

  	
  20%

  	
   

  	
  5th Anniversary of Grant Date

  

 

The vesting schedule requires continued employment
through each applicable Vesting Date as a condition to vesting of the
applicable Tranche and the corresponding rights and benefits under this
Agreement.  Unless otherwise expressly
provided herein with respect to accelerated vesting of the Units under certain
circumstances, employment for only a portion of a 

 

2

 

vesting period, even if a substantial portion, will
not entitle you to any proportionate vesting or avoid or mitigate a termination
of rights and benefits upon or following a termination of employment as
provided in this Agreement.

 

(b)                                 Acceleration
on Certain Terminations Following Performance Period.  If at any time following the completion of
the Performance Period and prior to the date your Units become fully vested in
accordance with Section II(a), your employment with the Company is
terminated as a result of (i) your death, Disability or Retirement, (ii) a
Termination Other Than For Cause (iii) a Termination For Good Reason, or (iv) a
Termination Upon a Change in Control (including a Covered Resignation), your
then outstanding Units (to the extent not previously forfeited and otherwise
unvested) shall fully vest immediately upon such termination of employment.

 

(c)                                  No
Acceleration or Vesting Upon Other Terminations.  Except as otherwise provided in the Plan, if
at any time your employment with the Company is terminated (i) by the
Company, or (ii) by you, under any circumstances (other than as a result
of your death, Disability, Retirement, a Termination Other Than For Cause, a
Termination For Good Reason, or a Termination Upon a Change in Control,
including a Covered Resignation), any of your Units that remain outstanding and
otherwise unvested at the time of such termination of employment shall be
automatically forfeited and cancelled in full, effective as of such termination
of employment.

 

(d)                                 Employment
Termination Date.  If the Employment
Period is in effect, the date of your termination of employment for purposes of
this Agreement shall be no earlier than the “Date of Termination,” as
such term is defined in the Employment Agreement.  If the Employment Period is not then in
effect, the date of termination of your termination of employment for purposes
of this Agreement shall be your actual date of termination of employment.

 

III.                                 Timing
and Form of Payment.

 

(a)                                  Distribution
Date.  Unless you elect otherwise on
or before the Grant Date, the distribution date (the “Distribution Date”)
for your Units that become vested pursuant to this Agreement will be the date
that such Units vest; provided that in no event shall the Distribution Date
occur earlier than the date of the Committee Determination.  Distribution of your vested Units will be
made by the Company in shares of Common Stock (on a one-to-one basis) on or as
soon as practicable after the Distribution Date with respect to such vested
Units, but in no event later than two and one-half (2 1⁄2) months after the year
in which such Units became vested.  You
will only receive distributions in respect of your vested Units and will have
no right to distribution of your unvested Units unless and until such Units
vest (and are not otherwise forfeited pursuant to Section I(a)).  Once a vested Unit has been paid pursuant to
this Agreement, you will have no further rights with respect to that Unit.  You may, however, 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 as provided in Section IV(b), provided that
such election complies with this Section IV.  You may change your Distribution Election
with respect to each Tranche (set forth in Section II(a) above) up to
three times without the approval of the Committee, provided such Distribution
Election is 

 

3

 

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.  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, the new Distribution Date must be at least five years after the
then-existing Distribution Date with respect to such Units, and the election
must otherwise be consistent with the “subsequent election” rules of Section 409A(a)(4)(C) of
the Code so as to prevent application of the penalty and interest provisions of
Section 409A(a)(1)(B) of the Code. 
Your Distribution Date with respect to any portion of your Units may not
be prior to the earlier of the Vesting Date for such vested Units or the date
of the Committee Determination. 
Distribution Elections may only be made by delivering a written election
to the Company care of its General Counsel in the form attached as Exhibit B
hereto.

 

(b)                                 Form of
Distribution.  Unless you elect
otherwise on or before the Grant Date, distribution of your vested Units with
respect to any Tranche will be made in a lump sum on or as soon as administratively
practicable after your Distribution Date, but in no event later than two and
one-half (2 1⁄2) months after the year in which such Units became vested.  You may, however, elect to have vested Units
with respect to any Tranche distributed in the form of two or more annual
installments over a fixed number of years, provided that each installment
payment must be for a minimum of 1,000 shares of Common Stock.  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 or within 90 days after the Distribution Date with
respect to such Tranche and subsequent installments will be paid on or within
90 days after each of the anniversaries of the Distribution Date with respect
to such Tranche during your elected installment period, with each such payment
date during such time period within the Company’s sole discretion.  You may change an election you make pursuant
to this Section IV(b) (or you may make an initial election in the
event that you did not elect a form of payment at the time of your award and,
accordingly, your Units were subject to the lump sum default payment rule) by
filing a new written election with the Committee; provided that you must also
elect a later Distribution Date pursuant to Section IV(a) as to any
Units that are subject to such election and in no event may such an election
result in an acceleration of distributions within the meaning of Section 409A
of the Code so as to prevent application of the penalty and interest provisions
of Section 409A(a)(1)(B) of the Code. 
Distribution Elections may only be made by delivering a written election
to the Company care of its General Counsel in the form attached as Exhibit B
hereto.

 

(c)                                  Hardship
Distribution.  If you experience an
Unforeseeable Emergency (as defined below) you may elect to receive immediate
distribution of some or all or your vested Units upon such Unforeseeable
Emergency.  Distribution upon an
Unforeseeable Emergency shall be made no later than thirty (30) days following
written notice to the Company care of its General Counsel of the Unforeseeable Emergency.
 For purposes of this Agreement, an “Unforeseeable
Emergency” shall mean a severe financial hardship resulting from (i) an
illness or accident of you, your spouse, or your dependent (as defined in Section 152(a) of
the Code without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)), (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 Unforeseeable Emergency to the extent that such Unforeseeable Emergency is or
may be relieved through reimbursement or compensation 

 

4

 

by insurance or otherwise or by liquidation of your
assets (to the extent such liquidation would not itself cause a severe
financial hardship).  Any distribution of
your vested Units as a result of an Unforeseeable Emergency shall be limited to
the amount reasonably necessary to relieve the Unforeseeable Emergency (which
may include amounts necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the distribution).

 

IV.                                 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 or within 30 days after 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.

 

V.                                     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 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.

 

VI.                                 Withholding.  Subject to Section 8.1 of the Plan and
such rules and procedures as the Committee may impose, upon any
distribution of shares of Common Stock in respect of your Units, the Company
shall automatically reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of whole shares, valued at their
then fair market value (with the “fair
market value” of such shares determined in accordance with the applicable
provisions of the Plan), to satisfy any withholding obligations of the
Company or its Subsidiaries with respect to such distribution of shares at the
minimum applicable withholding rates; provided, however, that the foregoing
provision shall not apply in the event that you have made other provision in
advance of the date of such distribution for the satisfaction of such
withholding obligations.  In the event
that the Company cannot legally satisfy such withholding obligations by such
reduction of shares, or in the event of a cash payment or any other withholding
event in respect of your Units, the Company (or a Subsidiary) shall be entitled
to require a cash payment by you or on your behalf and/or to deduct from other
compensation payable to you any sums required by federal, state or local tax
law to be withheld with respect to such distribution or payment.

 

5

 

VII.                             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.

 

VIII.                         Notices.  Any notices provided for in this Agreement or
the Plan, including a Distribution 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.

 

IX.                                Plan.  The provisions of the Plan 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 this Agreement shall control.

 

X.                                    Entire
Agreement.  This Agreement, together
with 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, except the definition of “Distribution Date” in this Agreement
shall always control.

 

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

 

XII.                            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 Maryland, without regard to
conflicts of law provisions thereof.

 

XIII.                        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.

 

XIV.                        Construction.  To the extent that this Agreement is subject
to Section 409A of the Code, you and the Company agree to cooperate and
work together in good faith to timely amend this Agreement to prevent
application of the penalty and interest provisions of Section 409A(a)(1)(B) of
the Code.  In the event that you and the
Company do not agree as to the necessity, timing or nature of a particular
amendment intended to prevent application of the penalty and interest
provisions of Section 409A(a)(1)(B) of the Code, reasonable deference
will be given to your reasonable interpretation of such provisions.  Notwithstanding anything to the contrary
contained in this Agreement or the Plan, in the event that you are to receive a
payment hereunder in connection with your termination of employment (other than
due to your death) which constitutes a “deferral of compensation” pursuant to Section 409A
of the Code at a time when you are a “specified employee” (within the meaning
of Section 409A of the Code), the Company shall delay the making of such
payment to a date that is not earlier than the first to occur of six months and
one day after your “separation from service” (within the meaning of
Section 409A of the Code) or the date of your death.

 

[Remainder of
page intentionally left blank]

 

6

 

	
  Very truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HCP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Accepted and Agreed,

  	
   

  	
   

  
	
  effective as of the date first written above.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name: James F. Flaherty III

  	
   

  	
   

  
					

 

7

 

[CEO FIVE YEAR INSTALLMENT
VESTING]

 

EXHIBIT A

 

PERFORMANCE GOALS

 

	
  Funds From Operations
  Per Share

  	
   

  	
  Aggregate Percentage Forfeited

  	
   

  
	
  [$     ]
  or greater

  	
   

  	
  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

  	
  %

  

 

A-1

 

[CEO FIVE YEAR INSTALLMENT
VESTING]

 

EXHIBIT B

 

HEALTH CARE PROPERTY INVESTORS,
INC.

2006 PERFORMANCE 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 Units on [                ,
2007] under the Health Care Property Investors, Inc. 2006 Performance
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 Units that vest will be the vesting date of such Units; provided that in
no event shall the Distribution Date occur earlier than the date of the
Committee Determination with respect to such Units.  You may elect a new Distribution Date with
respect to some or all of the Tranches by completing the information request
below.  Please note
that, subject to the restrictions set forth below and in the Agreement, 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, 2011),

 

·                                          You
may elect that your Distribution Date will be the date of your death or
termination of employment, or

 

·                                          You
may elect a Distribution Date that is the earlier of two dates/events (e.g.,
the earlier of January 1, 2011, or termination of your employment).

 

If you do
not elect a Distribution Date on or before the Grant Date, you will be deemed
to have elected distribution of your vested Units on or as soon as administratively
practical after the applicable vesting date of your Units, but in no event
later 

than two
and one-half (2 1⁄2) months after the year in which such Units became vested.  If, after the Grant Date, you want to change the
Distribution Date with respect to any of your vested Units, your new election must
be made at least one year prior to the then-existing Distribution Date, the new
Distribution Date you elect must be at least five years after the
then-existing Distribution Date, and the change must otherwise satisfy the “subsequent
election” rules of Section 409A(a)(4)(C) of the Code.  If your election to defer your Distribution
Date is not timely, it will not be valid.

 

B-1

 

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.

 

	
  Tranche

  	
   

  	
  Vesting Date

  	
   

  	
  Distribution Date*

  
	
  1

  	
   

  	
  1st
  Anniversary of Grant Date

  	
   

  	
   

  
	
  2

  	
   

  	
  2nd Anniversary of Grant Date

  	
   

  	
   

  
	
  3

  	
   

  	
  3rd Anniversary of Grant Date

  	
   

  	
   

  
	
  4

  	
   

  	
  4th Anniversary of Grant Date

  	
   

  	
   

  
	
  5

  	
   

  	
  5th Anniversary of Grant Date

  	
   

  	
   

  

 

*  Specify “Vesting Date” if
you desire payment of the vested Units on or as soon as administratively
practical after the vesting date of the Units. 
Otherwise, indicate the Distribution Date you elect.  In all events your election is subject to the
rules stated above (including, without limitation, the 5-year deferral
requirement set forth above if you are electing a change after the Grant Date).

 

Form of Payment

 

Distribution of all of your vested Units underlying a
Tranche will be made in shares of Common Stock in a lump sum on or as soon as
practicable after the Distribution Date with respect to such Units, but in no
event later than two and one-half (2 1⁄2) months after the year in which such
Units became vested.  For example, all of
your vested Units under Tranche 1 will be distributed to you on or as soon as
practicable after the Vesting Date with respect to Tranche 1 (unless you elect a
later Distribution Date as provided above). 
You may, however, elect at the time of your award to have vested Units
with respect to any Tranche distributed in the form of two or more annual
installments over a fixed number of years. 
For example, if you elect to have your vested Units underlying Tranche 1
distributed in five installments, your vested Units will be distributed to you
in five equal payments on or as soon as practicable after 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 have any or all of your vested Units underlying a Tranche distributed
in installments, 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 (otherwise, the number of installments
you elected will be reduced by the Company to produce a distribution of at
least 1,000 shares of Common Stock per installment).  If you would like to change a form of
distribution election you have made 

 

B-2

 

(or if you
would like to make an initial form of distribution election in the event that
you did not make such an election at the time of the award), your election must
be made at least one year prior to the then-existing Distribution Date, and you
must elect a new Distribution Date that is at least five years after the
then-existing Distribution Date.  If your
election to defer your Distribution Date is not timely, it will not be valid.  Furthermore, if you are changing an existing
form of distribution election, your election change cannot result in an
acceleration (within the meaning of Section 409A of the Code) of payments,
and the change must otherwise satisfy the “subsequent election” rules of Section 409A(a)(4)(C) of
the Code.

 

	
  Tranche

  	
   

  	
  Vesting Date

  	
   

  	
  Number of Installments 

  (Shares of Common Stock per 

  Installment)

  
	
  1

  	
   

  	
  1st
  Anniversary of Grant Date

  	
   

  	
        (    )

  
	
  2

  	
   

  	
  2nd Anniversary of Grant Date

  	
   

  	
       (    )

  
	
  3

  	
   

  	
  3rd Anniversary of Grant Date

  	
   

  	
       (    )

  
	
  4

  	
   

  	
  4th Anniversary of Grant Date

  	
   

  	
       (    )

  
	
  5

  	
   

  	
  5th Anniversary of Grant Date

  	
   

  	
       (    )

  

 

B-3

 

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:

  	
   

  	
   

  	
   

  
	
  (Please
  print)

  	
  Last

  	
  First

  	
  Middle Initial

  
	
   

  
	
  Sex:

  	
   

  	
   

  	
  Relationship to Participant:

  	
   

  
	
   

  
	
  Social Security No.:

  	
   

  	
   

  	
  Date of Birth:

  	
   

  
	
   

  
	
  Address:

  	
   

  
	
   

  
	
  City:

  	
   

  	
   

  	
  State:

  	
   

  	
   

  	
  Zip Code:

  	
   

  
																				

 

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

 

	
   

  	
   

  	
   

  
	
  Signature: 
  James F. Flaherty III

  	
   

  	
  Date Signed

  

 

B-4

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