Exhibit 10.12
October 16, 2000
Health Care Property Investors, Inc. (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel. In connection with this, the
Corporation's Board of Directors (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control of
the Corporation may exist and that the uncertainty and questions that it may
raise among management could result in the departure or distraction of
management personnel to the detriment of the Corporation and its shareholders.
The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management, including
yourself, to their assigned duties without the distraction arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in its employ, the Corporation hereby
agrees that after this letter agreement (this "Agreement") has been fully
executed, you shall receive the severance benefits set forth in Section 5 of
this Agreement in the event your employment with the Corporation is terminated
under the circumstances described in Section 4 of this Agreement subsequent to a
Change in Control (as defined in Section 2). Upon the full execution of this
Agreement, any prior severance agreement between you and the Corporation shall
terminate and be of no further effect.
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1. Term of Agreement. This Agreement shall commence on the date
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hereof and shall continue in effect through December 31, 2003; provided,
however, that commencing on January 1, 2001 and on each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Corporation
shall have given notice that it does not wish to extend this Agreement;
provided, further, that if a Change in Control (as defined in Section 2), occurs
during the original or any extended term of this Agreement, 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.
2. Change in Control.
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No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control. For purposes of this Agreement, a 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 the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities
("Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a Change in
Control: (i) any acquisition by the Corporation or any corporation controlled by
the Corporation, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation, or (iii) any acquisition by a Person of 25% of the
Outstanding Corporation Voting Securities as a result of an acquisition of
common stock of the Corporation by the Corporation which, by reducing the number
of shares of common stock of the 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 the
Corporation as described above and shall, after such share acquisition by the
Corporation, become the beneficial owner of any additional shares of common
stock of the Corporation, then such acquisition shall constitute a Change in
Control.
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with
Corporation to effect a transaction described in Sections 2(a), (c) or (d))
whose election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (K) 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
(hereinafter referred to as "Continuing Directors"), cease for any reason to
constitute at least a majority thereof;
(c) the consummation by the Corporation of a merger or consolidation
of Corporation with any other corporation (or other entity), other than a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 66-K% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person
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acquires more than 25% of the combined voting power of the Corporation's then
outstanding securities shall not constitute a Change in Control; or
(d) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all of the Corporation's assets.
3. Accelerated Vesting Upon a Change in Control.
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(a) Restricted Stock. Notwithstanding any provisions of the
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Corporation's stock option plans, incentive plans, or other similar plans, the
restricted period with respect to any restricted stock granted to you thereunder
shall lapse and such shares shall be distributed to you immediately prior to the
Change in Control, unless it would adversely affect the Corporation's ability to
use pooling of interest accounting in a Change in Control transaction in which
such accounting is intended to be used.
(b) Stock Options. All outstanding options ("Options"), if any,
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granted to you under any of the Corporation's stock option plans, incentive
plans, or other similar plans (or options substituted therefor covering the
stock of a successor corporation) shall become fully vested and exercisable
immediately prior to the Change in Control as to all shares of stock covered
thereby, unless it would adversely affect the Corporation's ability to use
pooling of interest accounting in a Change in Control transaction in which such
accounting is intended to be used.
4. Termination Following Change in Control.
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(a) General. During the term of this Agreement, if any of the events
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described in Section 2 constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 5(c) upon the subsequent
termination of your employment, provided that such termination occurs during the
term of this Agreement and within the two (2) year period immediately following
the date of such Change in Control, unless such termination is (i) because of
your death, Disability (as defined in Section 4(b)) or pursuant to late, normal
or early retirement under a pension plan (which may include a defined benefit
plan or a defined contribution plan) sponsored by the Corporation, but only if
such retirement occurs prior to a termination by the Corporation without Cause
or by you for Good Reason (as defined in Section 4(d)), (ii) by the Corporation
for Cause (as defined in Section 4(c)), or (iii) by you other than for Good
Reason. In the event that you are entitled to such benefits, such benefits
shall be paid notwithstanding the subsequent expiration of the term of this
Agreement.
(b) Disability. If, as a result of your incapacity due to physical
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or mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive months, and within
thirty (30) days after written notice of
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termination is given you shall not have returned to the full-time performance of
your duties, your employment may be terminated for "Disability."
(c) Cause. Termination by the Corporation of your employment for
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"Cause" shall mean termination (i) upon your willful and continued failure to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after your issuance of a Notice of
Termination (as defined in Section 4(f)) for Good Reason, after a written demand
for substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) upon your willful and continued
failure to substantially follow and comply with the specific and lawful
directives of the Board, as reasonably determined by the Board (other than any
such failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a Notice of
Termination for Good Reason), after a written demand for substantial performance
is delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially performed
your duties, (iii) upon your willful commission of an act of fraud or dishonesty
resulting in material economic or financial injury to the Corporation, or (iv)
upon your willful engagement in illegal conduct or gross misconduct, in each
case which is materially and demonstrably injurious to the Corporation. For
purposes of this Section 4(c), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 4(c)(i), (ii) or (iv) hereof unless and until there shall
have been delivered to you 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 you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in this Section 4(c) and
specifying the particulars thereof in reasonable detail.
(d) Good Reason. You shall be entitled to terminate your
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employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of any of the following circumstances unless, in the case of Sections
4(d)(i), (v), (vi), or (vii), such circumstances are fully corrected (provided
such circumstances are capable of correction) prior to the Date of Termination
(as defined in Section 4(g)) specified in the Notice of Termination given in
respect thereof:
(i) the assignment to you of any duties inconsistent with
the position in the Corporation that you held immediately prior to the
Change in Control, a significant adverse alteration in the nature or status
of your responsibilities or the conditions of your employment from those in
effect immediately prior to such Change in Control, or any other action by
the Corporation that results in a material diminution in your position,
authority, duties or responsibilities;
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(ii) the Corporation's reduction of your annual base salary as
in effect on the date hereof or as the same may be increased from time to
time;
(iii) the relocation of the Corporation's offices at which you
are principally employed immediately prior to the date of the Change in
Control (your "Principal Location") to a location more than thirty (30)
miles from such location, or the Corporation's requiring you, without your
written consent, to be based anywhere other than your Principal Location,
except for required travel on the Corporation's business to an extent
substantially consistent with your present business travel obligations;
(iv) the Corporation's failure to pay to you any portion of
your current compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(v) the Corporation's failure to continue in effect any
material compensation or benefit plan in which you participate immediately
prior to the Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with respect to
such plan, or the Corporation's failure to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed at the time of the Change in Control;
(vi) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
(vii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 4(f) hereof (and, if applicable, the requirements of Section 4(c)
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 4(d) shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder. Any good faith
determination by you that Good Reason exists shall be presumed correct and shall
be binding upon the Corporation.
(e) Voluntary Termination. You shall be entitled to voluntarily
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terminate your employment for any reason or no reason at any time after a Change
in Control.
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(f) Notice of Termination. Any purported termination of your
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employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(g) Date of Termination, Etc. "Date of Termination" shall mean (a)
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if your employment is terminated due to your death, the date of your death; (b)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the full-
time performance of your duties during such thirty (30)-day period), and (c) if
your employment is terminated pursuant to Section 4(c), Section 4(d) or Section
4(e) or for any other reason (other than death or Disability), the date
specified in the Notice of Termination (which, in the case of a termination for
Cause shall not be less than thirty (30) days from the date such Notice of
Termination is given, and in the case of a termination for Good Reason shall not
be less than fifteen (15) nor more than sixty (60) days from the date such
Notice of Termination is given). Notwithstanding anything to the contrary
contained in this Section 4(g), if within fifteen (15) days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, then the Date
of Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, or otherwise; provided,
however, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
5. Compensation Upon Termination or During Disability Following
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A Change in Control.
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Following a Change in Control during the term of this Agreement, you
shall be entitled to the benefits described below during a period of disability,
or upon termination of your employment, as the case may be, provided that such
period or termination occurs during the term of this Agreement and within the
two (2) year period immediately following the date of such Change in Control.
The benefits to which you are entitled, subject to the terms and conditions of
this Agreement, are:
(a) During any period during which you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to
you under the Corporation's disability plan or program or other similar plan
during such period, until this Agreement is terminated pursuant to Section 4(b)
hereof. Thereafter, or in the event your employment is terminated by reason of
your death, your
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benefits shall be determined under the Corporation's retirement, insurance and
other compensation programs then in effect in accordance with the terms of such
programs.
(b) If your employment shall be terminated by the Corporation for
Cause or by you other than for Good Reason , the Corporation shall pay you (i)
your full base salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, (ii) the unpaid portion, if
any, of any annual bonus, plus an amount equal to your annual bonus, pro rated
from January 1 of the termination year through the Date of Termination, and
(iii) all other amounts to which you are entitled under any compensation plan of
the Corporation at the time such payments are due, and the Corporation shall
have no further obligations to you under this Agreement.
(c) If your employment by the Corporation shall be terminated by you
for Good Reason or by the Corporation other than for Cause or Disability, then
you shall be entitled to the benefits provided below:
(i) the Corporation shall pay to you (1) your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 5(d), (2) the unpaid portion, if any, of any
annual bonus, plus an amount equal to your annual bonus, pro rated
from January 1 of the termination year through the Date of
Termination, and (2) all other amounts to which you are entitled under
any compensation plan of the Corporation at the time such payments are
due;
(ii) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall
pay as severance pay to you, at the time specified in Section 5(d), a
lump sum severance payment equal to the sum of three (3) times your
annual base salary as in effect as of the Date of Termination or
immediately prior to the Change in Control, whichever is greater, and
three (3) times your targeted annual bonus as in effect as of the Date
of Termination or the highest annual bonus received by you in the
three (3) years immediately prior to the Change in Control, whichever
is greater;
(iii) for a period of three (3) years, the Corporation
shall continue to provide you and your eligible family members, based
on the cost sharing arrangement between you and the Corporation on the
date of the Change in Control, with medical and dental health benefits
at least equal to those which would have been provided to you and them
if your employment had not been terminated or, if more favorable to
you, as in effect generally at any time thereafter, provided, however,
that if you become re-employed with another employer and are eligible
to receive medical and dental health benefits under another employer's
plans, the Corporation's obligations under this Section
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5(c)(iii) shall be reduced to the extent comparable benefits are
actually received by you during the twelve (12) month period following
your termination, and any such benefits actually received by you shall
be reported to the Corporation. In the event you are ineligible under
the terms of such benefit plans or programs to continue to be so
covered, in such event, the Corporation shall provide you with
substantially equivalent coverage through other sources or will
provide you with a lump sum payment in such amount that, after all
taxes on that amount, shall be equal to the cost to you of providing
yourself such benefit coverage. At the termination of the benefits
coverage under the second preceding sentence, you, your spouse and
your dependents shall be entitled to continuation coverage pursuant to
section 4980B of the Internal Revenue Code of 1986, as amended (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 you had terminated employment with
the Corporation on the date such benefits coverage terminates. The
lump sum shall be determined on a present value basis using the
interest rate provided in section 1274(b)(2)(B) of the Code on the
Date of Termination.
(iv) you shall be fully vested in your accrued benefits
under any qualified or nonqualified pension, profit sharing, deferred
compensation or supplemental plans maintained by the Corporation for
your benefit, except to that the extent the acceleration of vesting of
such benefits would violate any applicable law or require the
Corporation to accelerate the vesting of the accrued benefits of all
participants in such plan or plans, in which case the Corporation may
elect to pay you a lump sum payment at the time specified in Section
5(d) in an amount equal to the value of such unvested accrued benefits
in lieu of accelerating the vesting of your benefits, plus the
Corporation shall pay you an amount equal to the amount the
Corporation would have contributed to your account under the
Corporations 401(k) plan as a matching contribution had you remained
employed by the Corporation for three (3) years after your Date of
Termination and had you made the maximum elected deferral
contributions.
(v) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the
term of this Agreement continues in effect) with directors' and
officers' liability insurance insuring you against insurable events
which occur or have occurred while you were a director or officer of
the 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 the
Corporation in force from time to time, provided, however, that such
terms, conditions and exceptions shall not be, in the aggregate,
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materially less favorable to you than those in effect on the date
hereof; 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 the Corporation for such insurance, then the 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;
(vi) in any situation where under applicable law the
Corporation has the power to indemnify (or advance expenses to) you in
respect of any judgments, fines, settlements, loss, cost or expense
(including attorneys' fees) of any nature related to or arising out of
your activities as an agent, employee, officer or director of the
Corporation or in any other capacity on behalf of or at the request of
the Corporation, the Corporation shall promptly on written request,
indemnify (and advance expenses to) you 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 the
Corporation may, under applicable law, be permitted to have the
discretion to take so as to effectuate such indemnification or
advancement. Such agreement by the Corporation shall not be deemed to
impair any other obligation of the Corporation respecting your
indemnification otherwise arising out of this or any other agreement
or promise of the Corporation or under any statute;
(vii) (1) anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or
distribution to you or for your benefit (whether paid or payable or
distributed or distributable) pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, 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 by reason of being "contingent
on a change in the ownership or control" of the Corporation, within
the meaning of Section 280G of the Code or to any similar tax imposed
by state or local law, or any interest or penalties with respect to
such excise tax (such tax or taxes, together with any such interest or
penalties, are collectively referred to as the "Excise Tax"), then you
shall be entitled to receive from the 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 you 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 5(c)(vii),
and taking
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into account any lost or reduced tax deductions on account of the
Gross-Up Payment, shall be equal to the Payments;
(2) all determinations required to be made under this
Section 5(c)(vii), 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 you and the
Corporation with detailed supporting calculations with respect to such
Gross-Up Payment within fifteen (15) business days of the receipt of
notice from you or the Corporation that there you have 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 5(c)(vii), the "Accountants" shall mean the
Corporation's independent certified public accountants serving
immediately prior to the Change in Control. In the event that the
Accountants are also serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, you 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 the Corporation.
(3) 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 you 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
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taxes if paid in such year (determined without regard to limitations
on deductions based upon the amount of your 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 your adjusted gross
income. To the extent practicable, any Gross-Up Payment with respect
to any Payment shall be paid by the Corporation at the time you are
entitled to receive the Payments and in no event will any Gross-Up
Payment be paid later than five days after the receipt by you of the
Accountant's determination. Any determination by the Accountants shall
be binding upon the Corporation and you.
(4) 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 the Corporation should have
paid pursuant to this Section 5(c)(vii) (the "Underpayment"). In the
event that the Corporation exhausts its remedies pursuant to Section
5(c)(vii)(3) and you are required to make a payment of any Excise Tax,
the Underpayment shall be promptly paid by the Corporation to or for
your benefit;
(5) you and the Corporation shall each provide the
Accountants access to and copies of any books, records and documents
in the possession of the Corporation or you, 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 5(c)(vii); and
(6) you shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment. Such
notification shall be given as soon as practicable after you are
informed in writing of such claim and shall apprise the Corporation of
the nature of such claim and the date on which such claim is requested
to be paid. You shall not pay such claim prior to the expiration of
the 30-day period following the date on which you give such notice to
the 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 the Corporation notifies you in writing prior to the
expiration of such period that it desires to contest such claim, you
shall:
(A) give the Corporation any information reasonably
requested by the Corporation relating to such claim;
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(B) take such action in connection with contesting
such claim as the 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 the Corporation;
(C) cooperate with the Corporation in good faith in
order to effectively contest such claim; and
(D) permit the Corporation to participate in any
proceedings relating to such claims;
provided, however, that the Corporation shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify you for
and hold you harmless from, on an after-tax basis, any Excise Tax or
income 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 5(c)(vii), the Corporation shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct you to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
you agree 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 the Corporation shall determine;
provided, however, that if the Corporation directs you to pay such
claim and sue for a refund, the Corporation shall advance the amount
of such payment to you, on an interest-free basis, and shall indemnify
you for and hold you harmless from, on an after-tax basis, any Excise
Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance (including as a result of
any forgiveness by the Corporation of such advance); provided,
further, that any extension of the statute of limitations relating to
the payment of taxes for the taxable year of you with respect to which
such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Corporation's control of the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you 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;
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(d) The payments provided for in Sections 5(c)(i), (ii) and (iii)
shall be made not later than the fifth day following the Date of Termination;
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation shall pay to you on such day
an estimate, as determined in good faith by the Corporation, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
day after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Corporation to you, payable on the fifth
day after demand by the Corporation (together with interest at the rate provided
in section 1274(b)(2)(B) of the Code).
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 5 by seeking other employment or otherwise nor,
except as provided in Section 5(c)(iii), shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.
6. Successors; Binding Agreement.
-----------------------------
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to terminate your employment
and receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Unless expressly provided
otherwise, "Corporation" as used herein shall mean the Corporation as defined in
this Agreement and any successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
13
7. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Confidentiality, Noncompetition and Non-Solicitation Covenants.
--------------------------------------------------------------
(a) Confidentiality. You hereby agree that commencing on the Date of
---------------
Termination, you shall not, directly or indirectly, 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). You agree
that, upon termination of your employment with the Corporation, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to the Corporation and shall not be retained by you or furnished to
any third party, in any form except as provided herein; provided, however, that
you shall not be obligated to treat as confidential, or return to the
Corporation copies of any Confidential Information that (i) was publicly known
at the time of disclosure to you, (ii) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any other
duty owed to the Corporation by any person or entity, or (iii) is lawfully
disclosed to you by a third party. As used in this Agreement, the term
"Confidential Information" means: information disclosed to you or known by you
as a consequence of or through your relationship with the Corporation, about the
customers, employees, business methods, public relations methods, organization,
procedures or finances, including, without limitation, information of or
relating to customer lists, of the Corporation and its affiliates.
(b) Noncompetition. You acknowledge and agree that your services
--------------
pursuant to this Agreement are unique and extraordinary, and that you will have
access to and control of Confidential Information of the Corporation which is
vital to the success of the Corporation's business. You further acknowledge that
because of your knowledge of the Corporation's Confidential Information it is
unlikely that you could work for a competitor of the Corporation without
divulging such confidential information. You further acknowledge that the
business of the 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 the Corporation under this
Agreement, you hereby agree that (i) during the term of this Agreement and for a
twelve (12) month period, commencing with your Date of Termination
(collectively, the "Covenant Period"), you shall not accept employment nor
engage as a consultant with a competitor of the Corporation in the health care
real estate investment trust industry (a "Competitor") if such position would be
comparable to a position you held at any time with the
14
Corporation and where you cannot satisfy the Corporation, in its reasonable
judgement, that the new employer is prepared to and takes adequate steps to
preclude and prevent inevitable disclosure of the Corporation's Confidential
Information and (ii) that eligibility for severance payments and other benefits
under this Agreement are contingent upon your agreement and compliance with the
covenant as stated above in clause (i) of this Section 8(b). No further payments
nor eligibility for benefits continuation will be available to your as of the
date you commence employment/consulting in violation of these covenants. It is a
specific condition of the Agreement that if you commence employment or engage as
a consultant with a Competitor if such position would be comparable to a
position you held at any time with the Corporation, you shall advise Competitor
in writing of your obligations pursuant to this Agreement and specifically
disclose all covenants contained in this Section 8. It is also a specific
condition of this Agreement that so long as you are receiving any payments or
benefits under this Agreement with respect to any type of termination, you shall
be obligated to immediately notify the Corporation as to the specifics of the
new position that you are planning to commence as an employee or consultant for
a Competitor, and take affirmative steps to assure the Corporation that you will
not divulge any of the Corporation's Confidential Information in your new
employment or consulting arrangement.
(c) Non-Solicitation. You hereby agree that, for the period
----------------
commencing on the Date of Termination and terminating on the first anniversary
thereof, you shall not, either on your own account or jointly with or as a
manager, agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation,
directly or indirectly solicit or attempt to solicit away from the Corporation
any of its officers or employees or offer employment to any person who, on or
during the six (6) months immediately preceding the date of such solicitation or
offer, is or was an officer or employee of the Corporation; provided, however,
that a general advertisement to which an employee of the Corporation responds
shall in no event be deemed to result in a breach of this Section 8(c).
9. Governing Law; Venue. The validity, interpretation, construction
--------------------
and performance of this Agreement shall be governed on a non-exclusive basis by
the laws of the State of California without giving effect to its conflicts of
laws rules. For purposes of jurisdiction and venue, the Corporation hereby
consents to jurisdiction and venue in any suit, action or proceeding with
respect to this Agreement in any court of competent jurisdiction in the state in
which you reside at the commencement of such suit, action or proceeding and
waives any objection, challenge or dispute as to such jurisdiction or venue
being proper.
10. Joint and Several Liability. Any successors or assigns shall be
---------------------------
jointly and severally liable with the Corporation under this Agreement.
11. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party
15
hereto at any time of any breach by the other party hereto of or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. Any obligations of the
Corporation under Sections 5 and 6 shall survive the expiration of the term of
this Agreement. The section headings contained in this Agreement are for
convenience only, and shall not affect the interpretation of this Agreement.
12. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
14. Arbitration; Dispute Resolution, Etc.
------------------------------------
(a) 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 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, you and the Corporation shall select a mutually acceptable neutral
arbitrator from among the JAMS/Endispute panel of arbitrators. In the event you
and the Corporation cannot agree on an arbitrator, the Administrator of
JAMS/Endispute will appoint an arbitrator. Neither you nor the 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 14. The arbitrator shall
apply the substantive law (and the law of remedies, if applicable) of the state
of California, or federal law, or both, as applicable and the arbitrator is
without jurisdiction to apply any different substantive law. The arbitrator
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. The arbitrator shall render
an award and a written, reasoned opinion in support thereof. Judgment upon the
award may be entered in any court having jurisdiction
16
thereof. The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence reasonably
required by you to present your case.
(b) Compensation During Dispute, Etc. Your compensation during any
--------------------------------
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute") arising out of or relating to this Agreement or the
interpretation of this Agreement shall be as follows:
If there is a termination by the Corporation followed by a Dispute as
to whether you are entitled to the payments and other benefits provided under
this Agreement, then, during the period of that Dispute the Corporation shall
pay you fifty percent (50%) of the amount specified in Sections 5(c)(i) and
5(c)(ii) hereof, and the Corporation shall provide you with the other benefits
provided in Section 5(c) of this Agreement, if, but only if, you agree in
writing that if the Dispute is resolved against you, you shall promptly refund
to the Corporation all payments you receive under Sections 5(c)(i) and 5(c)(ii)
of this Agreement plus interest at the rate provided in Section 1274(d) of the
Code, compounded quarterly. If the Dispute is resolved in your favor, promptly
after resolution of the dispute the Corporation shall pay you the sum that was
withheld during the period of the Dispute plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly.
(c) Legal Fees. In addition to all other amounts payable to you under
----------
this Agreement, the Corporation shall pay to you all legal fees and expenses
incurred by you 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 your employment or in seeking to obtain or enforce any right or
benefit provided by this Agreement, or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder), regardless of the outcome of
such proceeding; provided, however, that in the event you commence such action,
you shall not be entitled to recover such fees and costs if the court determines
that you brought the claim in bad faith or the claim was frivolous. Any
attorney's fees incurred by you shall be paid by the Corporation in advance of
the final disposition of such action or challenge, as such fees and expenses are
incurred; provided, however, that you agree to repay such amounts, net of any
income taxes paid or payable by you with respect to such amounts, if such
amounts are incurred in connection with an action commenced by you if it is
ultimately determined by the court that you brought such action in bad faith or
the claim was frivolous.
15. At-Will Employment. Nothing in the foregoing diminishes or
------------------
alters the Corporation's policy of at-will employment for all employees, where
both the Corporation and you may terminate the employment relationship at any
time and for any reason, with or without cause or notice.
17
16. Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including, without limitation, any prior severance agreements, is hereby
terminated and cancelled. Any of your rights hereunder shall be in addition to
any rights you may otherwise have under benefit plans or agreements of the
Corporation to which you are a party or in which you are a participant,
including, but not limited to, any Corporation sponsored employee benefit plans
and stock options plans. Provisions of this Agreement shall not in any way
abrogate your rights under such other plans and agreements.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which shall then constitute our agreement on this subject.
Sincerely,
HEALTH CARE PROPERTY INVESTORS, INC.
By:______________________________
Kenneth B. Roath
Chairman, President and
Chief Executive Officer
Agreed to this 16/th/ day
of October, 2000.
___________________________
18
October 16, 2000
Health Care Property Investors, Inc. (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel. In connection with this, the
Corporation's Board of Directors (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control of
the Corporation may exist and that the uncertainty and questions that it may
raise among management could result in the departure or distraction of
management personnel to the detriment of the Corporation and its shareholders.
The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management, including
yourself, to their assigned duties without the distraction arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in its employ, the Corporation hereby
agrees that after this letter agreement (this "Agreement") has been fully
executed, you shall receive the severance benefits set forth in Section 5 of
this Agreement in the event your employment with the Corporation is terminated
under the circumstances described in Section 4 of this Agreement subsequent to a
Change in Control (as defined in Section 2). Upon the full execution of this
Agreement, any prior severance agreement between you and the Corporation shall
terminate and be of no further effect.
----------------------------
17. Term of Agreement. This Agreement shall commence on the date
-----------------
hereof and shall continue in effect through December 31, 2003; provided,
however, that commencing on January 1, 2001 and on each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Corporation
shall have given notice that it does not wish to extend this Agreement;
provided, further, that if a Change in Control (as defined in Section 2), occurs
during the original or any extended term of this Agreement, 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.
18. Change in Control.
-----------------
No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control. For purposes of this Agreement, a Change in
Control shall be deemed to occur if:
19
(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 the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities
("Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a Change in
Control: (i) any acquisition by the Corporation or any corporation controlled by
the Corporation, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation, or (iii) any acquisition by a Person of 25% of the
Outstanding Corporation Voting Securities as a result of an acquisition of
common stock of the Corporation by the Corporation which, by reducing the number
of shares of common stock of the 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 the
Corporation as described above and shall, after such share acquisition by the
Corporation, become the beneficial owner of any additional shares of common
stock of the Corporation, then such acquisition shall constitute a Change in
Control.
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with
Corporation to effect a transaction described in Sections 2(a), (c) or (d))
whose election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (K) 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
(hereinafter referred to as "Continuing Directors"), cease for any reason to
constitute at least a majority thereof;
(c) the consummation by the Corporation of a merger or consolidation
of Corporation with any other corporation (or other entity), other than a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 66-K% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person acquires more than 25% of the combined
voting power of the Corporation's then outstanding securities shall not
constitute a Change in Control; or
20
(d) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all of the Corporation's assets.
19. Accelerated Vesting Upon a Change in Control.
--------------------------------------------
(a) Restricted Stock. Notwithstanding any provisions of the
----------------
Corporation's stock option plans, incentive plans, or other similar plans, the
restricted period with respect to any restricted stock granted to you thereunder
shall lapse and such shares shall be distributed to you immediately prior to the
Change in Control, unless it would adversely affect the Corporation's ability to
use pooling of interest accounting in a Change in Control transaction in which
such accounting is intended to be used.
(b) Stock Options. All outstanding options ("Options"), if any,
-------------
granted to you under any of the Corporation's stock option plans, incentive
plans, or other similar plans (or options substituted therefor covering the
stock of a successor corporation) shall become fully vested and exercisable
immediately prior to the Change in Control as to all shares of stock covered
thereby, unless it would adversely affect the Corporation's ability to use
pooling of interest accounting in a Change in Control transaction in which such
accounting is intended to be used.
20. Termination Following Change in Control.
---------------------------------------
(a) General. During the term of this Agreement, if any of the events
-------
described in Section 2 constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 5(c) upon the subsequent
termination of your employment, provided that such termination occurs during the
term of this Agreement and within the two (2) year period immediately following
the date of such Change in Control, unless such termination is (i) because of
your death, Disability (as defined in Section 4(b)) or pursuant to late, normal
or early retirement under a pension plan (which may include a defined benefit
plan or a defined contribution plan) sponsored by the Corporation, but only if
such retirement occurs prior to a termination by the Corporation without Cause
or by you for Good Reason (as defined in Section 4(d)), (ii) by the Corporation
for Cause (as defined in Section 4(c)), or (iii) by you other than for Good
Reason. In the event that you are entitled to such benefits, such benefits shall
be paid notwithstanding the subsequent expiration of the term of this Agreement.
(b) Disability. If, as a result of your incapacity due to physical or
----------
mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive months, and within
thirty (30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
21
(c) Cause. Termination by the Corporation of your employment for
-----
"Cause" shall mean termination (i) upon your willful and continued failure to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after your issuance of a Notice of
Termination (as defined in Section 4(f)) for Good Reason, after a written demand
for substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) upon your willful and continued
failure to substantially follow and comply with the specific and lawful
directives of the Board, as reasonably determined by the Board (other than any
such failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a Notice of
Termination for Good Reason), after a written demand for substantial performance
is delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially performed
your duties, (iii) upon your willful commission of an act of fraud or dishonesty
resulting in material economic or financial injury to the Corporation, or (iv)
upon your willful engagement in illegal conduct or gross misconduct, in each
case which is materially and demonstrably injurious to the Corporation. For
purposes of this Section 4(c), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 4(c)(i), (ii) or (iv) hereof unless and until there shall
have been delivered to you 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 you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in this Section 4(c) and
specifying the particulars thereof in reasonable detail.
(d) Good Reason. You shall be entitled to terminate your employment
-----------
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in Control
of any of the following circumstances unless, in the case of Sections 4(d)(i),
(v), (vi), or (vii), such circumstances are fully corrected (provided such
circumstances are capable of correction) prior to the Date of Termination (as
defined in Section 4(g)) specified in the Notice of Termination given in respect
thereof:
(i) the assignment to you of any duties inconsistent with the
position in the Corporation that you held immediately prior to the Change
in Control, a significant adverse alteration in the nature or status of
your responsibilities or the conditions of your employment from those in
effect immediately prior to such Change in Control, or any other action by
the Corporation that results in a material diminution in your position,
authority, duties or responsibilities;
(ii) the Corporation's reduction of your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time;
22
(iii) the relocation of the Corporation's offices at which you
are principally employed immediately prior to the date of the Change in
Control (your "Principal Location") to a location more than thirty (30)
miles from such location, or the Corporation's requiring you, without your
written consent, to be based anywhere other than your Principal Location,
except for required travel on the Corporation's business to an extent
substantially consistent with your present business travel obligations;
(iv) the Corporation's failure to pay to you any portion of your
current compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(v) the Corporation's failure to continue in effect any
material compensation or benefit plan in which you participate immediately
prior to the Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with respect to
such plan, or the Corporation's failure to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed at the time of the Change in Control;
(vi) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
(vii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 4(f) hereof (and, if applicable, the requirements of Section 4(c)
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 4(d) shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder. Any good faith
determination by you that Good Reason exists shall be presumed correct and shall
be binding upon the Corporation.
(e) Voluntary Termination. You shall be entitled to voluntarily
---------------------
terminate your employment for any reason or no reason at any time after a Change
in Control.
(f) Notice of Termination. Any purported termination of your
---------------------
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall
23
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(g) Date of Termination, Etc. "Date of Termination" shall mean (a) if
------------------------
your employment is terminated due to your death, the date of your death; (b) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30)-day period), and (c) if your
employment is terminated pursuant to Section 4(c), Section 4(d) or Section 4(e)
or for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination for Cause shall
not be less than thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason shall not be less than
fifteen (15) nor more than sixty (60) days from the date such Notice of
Termination is given). Notwithstanding anything to the contrary contained in
this Section 4(g), if within fifteen (15) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, or otherwise; provided, however,
that the Date of Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
21. Compensation Upon Termination or During Disability Following A
--------------------------------------------------------------
Change in Control.
-----------------
Following a Change in Control during the term of this Agreement, you
shall be entitled to the benefits described below during a period of disability,
or upon termination of your employment, as the case may be, provided that such
period or termination occurs during the term of this Agreement and within the
two (2) year period immediately following the date of such Change in Control.
The benefits to which you are entitled, subject to the terms and conditions of
this Agreement, are:
(a) During any period during which you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to
you under the Corporation's disability plan or program or other similar plan
during such period, until this Agreement is terminated pursuant to Section 4(b)
hereof. Thereafter, or in the event your employment is terminated by reason of
your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
24
(b) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason , the Corporation shall pay you
(i) your full base salary, when due, through the Date of Termination at the rate
in effect at the time Notice of Termination is given, (ii) the unpaid portion,
if any, of any annual bonus, plus an amount equal to your annual bonus, pro
rated from January 1 of the termination year through the Date of Termination,
and (iii) all other amounts to which you are entitled under any compensation
plan of the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(c) If your employment by the Corporation shall be terminated by
you for Good Reason or by the Corporation other than for Cause or Disability,
then you shall be entitled to the benefits provided below:
(i) the Corporation shall pay to you (1) your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 5(d), (2) the unpaid portion, if any, of any
annual bonus, plus an amount equal to your annual bonus, pro rated
from January 1 of the termination year through the Date of
Termination, and (2) all other amounts to which you are entitled under
any compensation plan of the Corporation at the time such payments are
due;
(ii) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall
pay as severance pay to you, at the time specified in Section 5(d), a
lump sum severance payment equal to the sum of two and a half (2.5)
times your annual base salary as in effect as of the Date of
Termination or immediately prior to the Change in Control, whichever
is greater, and two and a half (2.5) times your targeted annual bonus
as in effect as of the Date of Termination or the highest annual bonus
received by you in the three (3) years immediately prior to the Change
in Control, whichever is greater;
(iii) for a period of two and a half (2.5) years, the
Corporation shall continue to provide you and your eligible family
members, based on the cost sharing arrangement between you and the
Corporation on the date of the Change in Control, with medical and
dental health benefits at least equal to those which would have been
provided to you and them if your employment had not been terminated
or, if more favorable to you, as in effect generally at any time
thereafter, provided, however, that if you become re-employed with
another employer and are eligible to receive medical and dental health
benefits under another employer's plans, the Corporation's obligations
under this Section 5(c)(iii) shall be reduced to the extent comparable
benefits are actually received by you during the twelve (12) month
period following your termination, and any such benefits actually
received by you shall be reported to the Corporation. In the
25
event you are ineligible under the terms of such benefit plans or
programs to continue to be so covered, in such event, the Corporation
shall provide you with substantially equivalent coverage through other
sources or will provide you with a lump sum payment in such amount
that, after all taxes on that amount, shall be equal to the cost to
you of providing yourself such benefit coverage. At the termination of
the benefits coverage under the second preceding sentence, you, your
spouse and your dependents shall be entitled to continuation coverage
pursuant to section 4980B of the Internal Revenue Code of 1986, as
amended (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 you had
terminated employment with the Corporation on the date such benefits
coverage terminates. The lump sum shall be determined on a present
value basis using the interest rate provided in section 1274(b)(2)(B)
of the Code on the Date of Termination.
(iv) you shall be fully vested in your accrued benefits
under any qualified or nonqualified pension, profit sharing, deferred
compensation or supplemental plans maintained by the Corporation for
your benefit, except to that the extent the acceleration of vesting of
such benefits would violate any applicable law or require the
Corporation to accelerate the vesting of the accrued benefits of all
participants in such plan or plans, in which case the Corporation may
elect to pay you a lump sum payment at the time specified in Section
5(d) in an amount equal to the value of such unvested accrued benefits
in lieu of accelerating the vesting of your benefits, plus the
Corporation shall pay you an amount equal to the amount the
Corporation would have contributed to your account under the
Corporations 401(k) plan as a matching contribution had you remained
employed by the Corporation for two and a half (2.5) years after your
Date of Termination and had you made the maximum elected deferral
contributions.
(v) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the
term of this Agreement continues in effect) with directors' and
officers' liability insurance insuring you against insurable events
which occur or have occurred while you were a director or officer of
the 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 the
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 you than those in effect on the date
hereof; 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
26
rate of premium currently paid by the Corporation for such insurance,
then the 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;
(vi) in any situation where under applicable law the
Corporation has the power to indemnify (or advance expenses to) you in
respect of any judgments, fines, settlements, loss, cost or expense
(including attorneys' fees) of any nature related to or arising out of
your activities as an agent, employee, officer or director of the
Corporation or in any other capacity on behalf of or at the request of
the Corporation, the Corporation shall promptly on written request,
indemnify (and advance expenses to) you 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 the
Corporation may, under applicable law, be permitted to have the
discretion to take so as to effectuate such indemnification or
advancement. Such agreement by the Corporation shall not be deemed to
impair any other obligation of the Corporation respecting your
indemnification otherwise arising out of this or any other agreement
or promise of the Corporation or under any statute;
(vii) (1) anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or
distribution to you or for your benefit (whether paid or payable or
distributed or distributable) pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock
option, 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 by reason of being "contingent
on a change in the ownership or control" of the Corporation, within
the meaning of Section 280G of the Code or to any similar tax imposed
by state or local law, or any interest or penalties with respect to
such excise tax (such tax or taxes, together with any such interest or
penalties, are collectively referred to as the "Excise Tax"), then you
shall be entitled to receive from the 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 you 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 5(c)(vii),
and taking into account any lost or reduced tax deductions on account
of the Gross-Up Payment, shall be equal to the Payments;
27
(2) all determinations required to be made under this
Section 5(c)(vii), 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 you and the
Corporation with detailed supporting calculations with respect to such
Gross-Up Payment within fifteen (15) business days of the receipt of
notice from you or the Corporation that there you have 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 5(c)(vii), the "Accountants" shall mean the
Corporation's independent certified public accountants serving
immediately prior to the Change in Control. In the event that the
Accountants are also serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, you 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 the Corporation.
(3) 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 you 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 your
adjusted gross income); and to have otherwise allowable deductions for
Federal, state and local income tax purposes at least
28
equal to those disallowed because of the inclusion of the Gross-Up
Payment in your adjusted gross income. To the extent practicable, any
Gross-Up Payment with respect to any Payment shall be paid by the
Corporation at the time you are entitled to receive the Payments and
in no event will any Gross-Up Payment be paid later than five days
after the receipt by you of the Accountant's determination. Any
determination by the Accountants shall be binding upon the Corporation
and you.
(4) 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 the Corporation should have
paid pursuant to this Section 5(c)(vii) (the "Underpayment"). In the
event that the Corporation exhausts its remedies pursuant to Section
5(c)(vii)(3) and you are required to make a payment of any Excise Tax,
the Underpayment shall be promptly paid by the Corporation to or for
your benefit;
(5) you and the Corporation shall each provide the
Accountants access to and copies of any books, records and documents
in the possession of the Corporation or you, 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 5(c)(vii); and
(6) you shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment. Such
notification shall be given as soon as practicable after you are
informed in writing of such claim and shall apprise the Corporation of
the nature of such claim and the date on which such claim is requested
to be paid. You shall not pay such claim prior to the expiration of
the 30-day period following the date on which you give such notice to
the 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 the Corporation notifies you in writing prior to the
expiration of such period that it desires to contest such claim, you
shall:
(A) give the Corporation any information
reasonably requested by the Corporation relating to such claim;
(B) take such action in connection with
contesting such claim as the Corporation shall reasonably request
in writing from time to time, including, without limitation,
accepting legal
29
representation with respect to such claim by an attorney
reasonably selected by the Corporation;
(C) cooperate with the Corporation in good faith
in order to effectively contest such claim; and
(D) permit the Corporation to participate in any
proceedings relating to such claims;
provided, however, that the Corporation shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify you for
and hold you harmless from, on an after-tax basis, any Excise Tax or
income 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 5(c)(vii), the Corporation shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct you to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
you agree 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 the Corporation shall determine;
provided, however, that if the Corporation directs you to pay such
claim and sue for a refund, the Corporation shall advance the amount
of such payment to you, on an interest-free basis, and shall indemnify
you for and hold you harmless from, on an after-tax basis, any Excise
Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance (including as a result of
any forgiveness by the Corporation of such advance); provided,
further, that any extension of the statute of limitations relating to
the payment of taxes for the taxable year of you with respect to which
such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Corporation's control of the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you 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;
(d) The payments provided for in Sections 5(c)(i), (ii) and
(iii) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Corporation shall pay to you on
such day an estimate, as determined in good faith by the
30
Corporation, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Corporation to you, payable on the fifth day after demand by the Corporation
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code).
(e) You shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise
nor, except as provided in Section 5(c)(iii), shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.
22. Successors; Binding Agreement.
-----------------------------
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to terminate your employment
and receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Unless expressly provided
otherwise, "Corporation" as used herein shall mean the Corporation as defined in
this Agreement and any successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
23. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first
31
page of this Agreement, provided that all notices to the Corporation shall be
directed to the attention of the Board with a copy to the Secretary of the
Corporation, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
24. Confidentiality, Noncompetition and Non-Solicitation Covenants.
--------------------------------------------------------------
(a) Confidentiality. You hereby agree that commencing on the Date of
---------------
Termination, you shall not, directly or indirectly, 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). You agree
that, upon termination of your employment with the Corporation, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to the Corporation and shall not be retained by you or furnished to
any third party, in any form except as provided herein; provided, however, that
you shall not be obligated to treat as confidential, or return to the
Corporation copies of any Confidential Information that (i) was publicly known
at the time of disclosure to you, (ii) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any other
duty owed to the Corporation by any person or entity, or (iii) is lawfully
disclosed to you by a third party. As used in this Agreement, the term
"Confidential Information" means: information disclosed to you or known by you
as a consequence of or through your relationship with the Corporation, about the
customers, employees, business methods, public relations methods, organization,
procedures or finances, including, without limitation, information of or
relating to customer lists, of the Corporation and its affiliates.
(b) Noncompetition. You acknowledge and agree that your services
--------------
pursuant to this Agreement are unique and extraordinary, and that you will have
access to and control of Confidential Information of the Corporation which is
vital to the success of the Corporation's business. You further acknowledge that
because of your knowledge of the Corporation's Confidential Information it is
unlikely that you could work for a competitor of the Corporation without
divulging such confidential information. You further acknowledge that the
business of the 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 the Corporation under this
Agreement, you hereby agree that (i) during the term of this Agreement and for a
twelve (12) month period, commencing with your Date of Termination
(collectively, the "Covenant Period"), you shall not accept employment nor
engage as a consultant with a competitor of the Corporation in the health care
real estate investment trust industry (a "Competitor") if such position would be
comparable to a position you held at any time with the Corporation and where you
cannot satisfy the Corporation, in its reasonable judgement, that the new
employer is prepared to and takes adequate steps to preclude and prevent
inevitable disclosure of the Corporation's Confidential Information and (ii)
that eligibility for severance payments and other benefits under this Agreement
are contingent upon your agreement and
32
compliance with the covenant as stated above in clause (i) of this Section 8(b).
No further payments nor eligibility for benefits continuation will be available
to your as of the date you commence employment/consulting in violation of these
covenants. It is a specific condition of the Agreement that if you commence
employment or engage as a consultant with a Competitor if such position would be
comparable to a position you held at any time with the Corporation, you shall
advise Competitor in writing of your obligations pursuant to this Agreement and
specifically disclose all covenants contained in this Section 8. It is also a
specific condition of this Agreement that so long as you are receiving any
payments or benefits under this Agreement with respect to any type of
termination, you shall be obligated to immediately notify the Corporation as to
the specifics of the new position that you are planning to commence as an
employee or consultant for a Competitor, and take affirmative steps to assure
the Corporation that you will not divulge any of the Corporation's Confidential
Information in your new employment or consulting arrangement.
(c) Non-Solicitation. You hereby agree that, for the period
----------------
commencing on the Date of Termination and terminating on the first anniversary
thereof, you shall not, either on your own account or jointly with or as a
manager, agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation,
directly or indirectly solicit or attempt to solicit away from the Corporation
any of its officers or employees or offer employment to any person who, on or
during the six (6) months immediately preceding the date of such solicitation or
offer, is or was an officer or employee of the Corporation; provided, however,
that a general advertisement to which an employee of the Corporation responds
shall in no event be deemed to result in a breach of this Section 8(c).
25. Governing Law; Venue. The validity, interpretation, construction
--------------------
and performance of this Agreement shall be governed on a non-exclusive basis by
the laws of the State of California without giving effect to its conflicts of
laws rules. For purposes of jurisdiction and venue, the Corporation hereby
consents to jurisdiction and venue in any suit, action or proceeding with
respect to this Agreement in any court of competent jurisdiction in the state in
which you reside at the commencement of such suit, action or proceeding and
waives any objection, challenge or dispute as to such jurisdiction or venue
being proper.
26. Joint and Several Liability. Any successors or assigns shall be
---------------------------
jointly and severally liable with the Corporation under this Agreement.
27. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject
33
matter hereof have been made by either party which are not expressly set forth
in this Agreement. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. Any obligations of the Corporation
under Sections 5 and 6 shall survive the expiration of the term of this
Agreement. The section headings contained in this Agreement are for convenience
only, and shall not affect the interpretation of this Agreement.
28. Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
29. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
30. Arbitration; Dispute Resolution, Etc.
------------------------------------
(a) 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 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, you and the Corporation shall select a mutually acceptable neutral
arbitrator from among the JAMS/Endispute panel of arbitrators. In the event you
and the Corporation cannot agree on an arbitrator, the Administrator of
JAMS/Endispute will appoint an arbitrator. Neither you nor the 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 14. The arbitrator shall
apply the substantive law (and the law of remedies, if applicable) of the state
of California, or federal law, or both, as applicable and the arbitrator is
without jurisdiction to apply any different substantive law. The arbitrator
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. The arbitrator shall render
an award and a written, reasoned opinion in support thereof. Judgment upon the
award may be entered in any court having jurisdiction thereof. The Corporation
shall pay all fees and expenses of the Arbitrator regardless of the result and
shall provide all witnesses and evidence reasonably required by you to present
your case.
(b) Compensation During Dispute, Etc. Your compensation during any
--------------------------------
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute")
34
arising out of or relating to this Agreement or the interpretation of this
Agreement shall be as follows:
If there is a termination by the Corporation followed by a Dispute as
to whether you are entitled to the payments and other benefits provided under
this Agreement, then, during the period of that Dispute the Corporation shall
pay you fifty percent (50%) of the amount specified in Sections 5(c)(i) and
5(c)(ii) hereof, and the Corporation shall provide you with the other benefits
provided in Section 5(c) of this Agreement, if, but only if, you agree in
writing that if the Dispute is resolved against you, you shall promptly refund
to the Corporation all payments you receive under Sections 5(c)(i) and 5(c)(ii)
of this Agreement plus interest at the rate provided in Section 1274(d) of the
Code, compounded quarterly. If the Dispute is resolved in your favor, promptly
after resolution of the dispute the Corporation shall pay you the sum that was
withheld during the period of the Dispute plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly.
(c) Legal Fees. In addition to all other amounts payable to you under
----------
this Agreement, the Corporation shall pay to you all legal fees and expenses
incurred by you 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 your employment or in seeking to obtain or enforce any right or
benefit provided by this Agreement, or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder), regardless of the outcome of
such proceeding; provided, however, that in the event you commence such action,
you shall not be entitled to recover such fees and costs if the court determines
that you brought the claim in bad faith or the claim was frivolous. Any
attorney's fees incurred by you shall be paid by the Corporation in advance of
the final disposition of such action or challenge, as such fees and expenses are
incurred; provided, however, that you agree to repay such amounts, net of any
income taxes paid or payable by you with respect to such amounts, if such
amounts are incurred in connection with an action commenced by you if it is
ultimately determined by the court that you brought such action in bad faith or
the claim was frivolous.
31. At-Will Employment. Nothing in the foregoing diminishes or alters
------------------
the Corporation's policy of at-will employment for all employees, where both the
Corporation and you may terminate the employment relationship at any time and
for any reason, with or without cause or notice.
32. Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including,
35
without limitation, any prior severance agreements, is hereby terminated and
cancelled. Any of your rights hereunder shall be in addition to any rights you
may otherwise have under benefit plans or agreements of the Corporation to which
you are a party or in which you are a participant, including, but not limited
to, any Corporation sponsored employee benefit plans and stock options plans.
Provisions of this Agreement shall not in any way abrogate your rights under
such other plans and agreements.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which shall then constitute our agreement on this subject.
Sincerely,
HEALTH CARE PROPERTY INVESTORS, INC.
By:______________________________
Kenneth B. Roath
Chairman, President and
Chief Executive Officer
Agreed to this 16/th/ day
of October, 2000.
___________________________
36
October 16, 2000
Health Care Property Investors, Inc. (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel. In connection with this, the
Corporation's Board of Directors (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control of
the Corporation may exist and that the uncertainty and questions that it may
raise among management could result in the departure or distraction of
management personnel to the detriment of the Corporation and its shareholders.
The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management, including
yourself, to their assigned duties without the distraction arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in its employ, the Corporation hereby
agrees that after this letter agreement (this "Agreement") has been fully
executed, you shall receive the severance benefits set forth in Section 5 of
this Agreement in the event your employment with the Corporation is terminated
under the circumstances described in Section 4 of this Agreement subsequent to a
Change in Control (as defined in Section 2). Upon the full execution of this
Agreement, any prior severance agreement between you and the Corporation shall
terminate and be of no further effect.
----------------------------
33. Term of Agreement. This Agreement shall commence on the date
-----------------
hereof and shall continue in effect through December 31, 2003; provided,
however, that commencing on January 1, 2001 and on each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Corporation
shall have given notice that it does not wish to extend this Agreement;
provided, further, that if a Change in Control (as defined in Section 2), occurs
during the original or any extended term of this Agreement, 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.
34. Change in Control. No benefits shall be payable under Section 4
-----------------
of this Agreement unless there has been a Change in Control. For purposes of
this Agreement, a Change in Control shall be deemed to occur if:
37
(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 the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities
("Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a Change in
Control: (i) any acquisition by the Corporation or any corporation controlled by
the Corporation, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation, or (iii) any acquisition by a Person of 25% of the
Outstanding Corporation Voting Securities as a result of an acquisition of
common stock of the Corporation by the Corporation which, by reducing the number
of shares of common stock of the 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 the
Corporation as described above and shall, after such share acquisition by the
Corporation, become the beneficial owner of any additional shares of common
stock of the Corporation, then such acquisition shall constitute a Change in
Control.
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with
Corporation to effect a transaction described in Sections 2(a), (c) or (d))
whose election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (K) 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
(hereinafter referred to as "Continuing Directors"), cease for any reason to
constitute at least a majority thereof;
(c) the consummation by the Corporation of a merger or
consolidation of Corporation with any other corporation (or other entity), other
than a merger or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 66-K% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person acquires more than 25% of the combined
voting power of the Corporation's then outstanding securities shall not
constitute a Change in Control; or
38
(d) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all of the Corporation's assets.
35. Accelerated Vesting Upon a Change in Control.
--------------------------------------------
(a) Restricted Stock. Notwithstanding any provisions of the
-----------------
Corporation's stock option plans, incentive plans, or other similar plans, the
restricted period with respect to any restricted stock granted to you thereunder
shall lapse and such shares shall be distributed to you immediately prior to the
Change in Control, unless it would adversely affect the Corporation's ability to
use pooling of interest accounting in a Change in Control transaction in which
such accounting is intended to be used.
(b) Stock Options. All outstanding options ("Options"), if any,
--------------
granted to you under any of the Corporation's stock option plans, incentive
plans, or other similar plans (or options substituted therefor covering the
stock of a successor corporation) shall become fully vested and exercisable
immediately prior to the Change in Control as to all shares of stock covered
thereby, unless it would adversely affect the Corporation's ability to use
pooling of interest accounting in a Change in Control transaction in which such
accounting is intended to be used.
36. Termination Following Change in Control.
---------------------------------------
(a) General. During the term of this Agreement, if any of the events
-------
described in Section 2 constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 5(c) upon the subsequent
termination of your employment, provided that such termination occurs during the
term of this Agreement and within the two (2) year period immediately following
the date of such Change in Control, unless such termination is (i) because of
your death, Disability (as defined in Section 4(b)) or pursuant to late, normal
or early retirement under a pension plan (which may include a defined benefit
plan or a defined contribution plan) sponsored by the Corporation, but only if
such retirement occurs prior to a termination by the Corporation without Cause
or by you for Good Reason (as defined in Section 4(d)), (ii) by the Corporation
for Cause (as defined in Section 4(c)), or (iii) by you other than for Good
Reason. In the event that you are entitled to such benefits, such benefits
shall be paid notwithstanding the subsequent expiration of the term of this
Agreement.
(b) Disability. If, as a result of your incapacity due to physical or
----------
mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive months, and within
thirty (30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
39
(c) Cause. Termination by the Corporation of your employment for
-----
"Cause" shall mean termination (i) upon your willful and continued failure to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after your issuance of a Notice of
Termination (as defined in Section 4(f)) for Good Reason, after a written demand
for substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) upon your willful and continued
failure to substantially follow and comply with the specific and lawful
directives of the Board, as reasonably determined by the Board (other than any
such failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a Notice of
Termination for Good Reason), after a written demand for substantial performance
is delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially performed
your duties, (iii) upon your willful commission of an act of fraud or dishonesty
resulting in material economic or financial injury to the Corporation, or (iv)
upon your willful engagement in illegal conduct or gross misconduct, in each
case which is materially and demonstrably injurious to the Corporation. For
purposes of this Section 4(c), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 4(c)(i), (ii) or (iv) hereof unless and until there shall
have been delivered to you 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 you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in this Section 4(c) and
specifying the particulars thereof in reasonable detail.
(d) Good Reason. You shall be entitled to terminate your employment
-----------
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in Control
of any of the following circumstances unless, in the case of Sections 4(d)(i),
(v), (vi), or (vii), such circumstances are fully corrected (provided such
circumstances are capable of correction) prior to the Date of Termination (as
defined in Section 4(g)) specified in the Notice of Termination given in respect
thereof:
(i) the assignment to you of any duties inconsistent with the
position in the Corporation that you held immediately prior to the Change
in Control, a significant adverse alteration in the nature or status of
your responsibilities or the conditions of your employment from those in
effect immediately prior to such Change in Control, or any other action by
the Corporation that results in a material diminution in your position,
authority, duties or responsibilities;
(ii) the Corporation's reduction of your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time;
40
(iii) the relocation of the Corporation's offices at which you
are principally employed immediately prior to the date of the Change in
Control (your "Principal Location") to a location more than thirty (30)
miles from such location, or the Corporation's requiring you, without your
written consent, to be based anywhere other than your Principal Location,
except for required travel on the Corporation's business to an extent
substantially consistent with your present business travel obligations;
(iv) the Corporation's failure to pay to you any portion of
your current compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Corporation within seven (7) days of the date such compensation is due;
(v) the Corporation's failure to continue in effect any
material compensation or benefit plan in which you participate immediately
prior to the Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with respect to
such plan, or the Corporation's failure to continue your participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed at the time of the Change in Control;
(vi) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
(vii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 4(f) hereof (and, if applicable, the requirements of Section 4(c)
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 4(d) shall not
be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder. Any good faith
determination by you that Good Reason exists shall be presumed correct and shall
be binding upon the Corporation.
(e) Voluntary Termination. You shall be entitled to voluntarily
---------------------
terminate your employment for any reason or no reason at any time after a Change
in Control.
(f) Notice of Termination. Any purported termination of your
---------------------
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that shall
41
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(g) Date of Termination, Etc. "Date of Termination" shall mean (a) if
------------------------
your employment is terminated due to your death, the date of your death; (b) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30)-day period), and (c) if your
employment is terminated pursuant to Section 4(c), Section 4(d) or Section 4(e)
or for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination for Cause shall
not be less than thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason shall not be less than
fifteen (15) nor more than sixty (60) days from the date such Notice of
Termination is given). Notwithstanding anything to the contrary contained in
this Section 4(g), if within fifteen (15) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, or otherwise; provided, however,
that the Date of Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
5. Compensation Upon Termination or During Disability Following
------------------------------------------------------------
A Change in Control.
-------------------
Following a Change in Control during the term of this Agreement, you
shall be entitled to the benefits described below during a period of disability,
or upon termination of your employment, as the case may be, provided that such
period or termination occurs during the term of this Agreement and within the
two (2) year period immediately following the date of such Change in Control.
The benefits to which you are entitled, subject to the terms and conditions of
this Agreement, are:
(a) During any period during which you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to
you under the Corporation's disability plan or program or other similar plan
during such period, until this Agreement is terminated pursuant to Section 4(b)
hereof. Thereafter, or in the event your employment is terminated by reason of
your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
42
(b) If your employment shall be terminated by the Corporation for
Cause or by you other than for Good Reason , the Corporation shall pay you (i)
your full base salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, (ii) the unpaid portion, if
any, of any annual bonus, plus an amount equal to your annual bonus, pro rated
from January 1 of the termination year through the Date of Termination, and
(iii) all other amounts to which you are entitled under any compensation plan of
the Corporation at the time such payments are due, and the Corporation shall
have no further obligations to you under this Agreement.
(c) If your employment by the Corporation shall be terminated by you
for Good Reason or by the Corporation other than for Cause or Disability, then
you shall be entitled to the benefits provided below:
(i) the Corporation shall pay to you (1) your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 5(d), (2) the unpaid portion, if any, of any
annual bonus, plus an amount equal to your annual bonus, pro rated
from January 1 of the termination year through the Date of
Termination, and (2) all other amounts to which you are entitled under
any compensation plan of the Corporation at the time such payments are
due;
(ii) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as
severance pay to you, at the time specified in Section 5(d), a lump
sum severance payment equal to the sum of three (3) times your annual
base salary as in effect as of the Date of Termination or immediately
prior to the Change in Control, whichever is greater, and three (3)
times your targeted annual bonus as in effect as of the Date of
Termination or the highest annual bonus received by you in the three
(3) years immediately prior to the Change in Control, whichever is
greater;
(iii) for a period of three (3) years, the Corporation shall
continue to provide you and your eligible family members, based on the
cost sharing arrangement between you and the Corporation on the date
of the Change in Control, with medical and dental health benefits at
least equal to those which would have been provided to you and them if
your employment had not been terminated or, if more favorable to you,
as in effect generally at any time thereafter, provided, however, that
if you become re-employed with another employer and are eligible to
receive medical and dental health benefits under another employer's
plans, the Corporation's obligations under this Section 5(c)(iii)
shall be reduced to the extent comparable benefits are actually
received by you during the twelve (12) month period following your
termination, and any
43
such benefits actually received by you shall be reported to the
Corporation. In the event you are ineligible under the terms of such
benefit plans or programs to continue to be so covered, in such event,
the Corporation shall provide you with substantially equivalent
coverage through other sources or will provide you with a lump sum
payment in such amount that, after all taxes on that amount, shall be
equal to the cost to you of providing yourself such benefit coverage.
At the termination of the benefits coverage under the second preceding
sentence, you, your spouse and your dependents shall be entitled to
continuation coverage pursuant to section 4980B of the Internal
Revenue Code of 1986, as amended (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
you had terminated employment with the Corporation on the date such
benefits coverage terminates. The lump sum shall be determined on a
present value basis using the interest rate provided in section
1274(b)(2)(B) of the Code on the Date of Termination.
(iv) you shall be fully vested in your accrued benefits under
any qualified or nonqualified pension, profit sharing, deferred
compensation or supplemental plans maintained by the Corporation for
your benefit, except to that the extent the acceleration of vesting of
such benefits would violate any applicable law or require the
Corporation to accelerate the vesting of the accrued benefits of all
participants in such plan or plans, in which case the Corporation may
elect to pay you a lump sum payment at the time specified in Section
5(d) in an amount equal to the value of such unvested accrued benefits
in lieu of accelerating the vesting of your benefits, plus the
Corporation shall pay you an amount equal to the amount the
Corporation would have contributed to your account under the
Corporations 401(k) plan as a matching contribution had you remained
employed by the Corporation for three (3) years after your Date of
Termination and had you made the maximum elected deferral
contributions.
(v) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the
term of this Agreement continues in effect) with directors' and
officers' liability insurance insuring you against insurable events
which occur or have occurred while you were a director or officer of
the 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 the
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 you than those in effect on the date
hereof; provided, further, that if the aggregate annual premiums for
such insurance at any time
44
during such period exceed one hundred and fifty percent (150%) of the
per annum rate of premium currently paid by the Corporation for such
insurance, then the 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;
(vi) in any situation where under applicable law the
Corporation has the power to indemnify (or advance expenses to) you in
respect of any judgments, fines, settlements, loss, cost or expense
(including attorneys' fees) of any nature related to or arising out of
your activities as an agent, employee, officer or director of the
Corporation or in any other capacity on behalf of or at the request of
the Corporation, the Corporation shall promptly on written request,
indemnify (and advance expenses to) you 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 the
Corporation may, under applicable law, be permitted to have the
discretion to take so as to effectuate such indemnification or
advancement. Such agreement by the Corporation shall not be deemed to
impair any other obligation of the Corporation respecting your
indemnification otherwise arising out of this or any other agreement
or promise of the Corporation or under any statute;
(vii) if by reason of section 280G of the Code any payment
or benefit received or to be received by you in connection with a
Change in Control or the termination of your employment (whether
payable pursuant to the terms of this Agreement ("Contract Payments")
or any other plan, arrangements or agreement with the Corporation or
an Affiliate (as defined below) (collectively with the Contract
Payments, "Total Payments") would not be deductible (in whole or part)
by the Corporation, an Affiliate or other person making such payment
or providing such benefit, then the Severance Payment shall be reduced
(to zero if necessary) and, if the Severance Payment is reduced to
zero, other Contract Payments shall be reduced (to zero if necessary)
and, if Contract Payments are reduced to zero, other Total Payments
shall be reduced (to zero if necessary) until no portion of the Total
Payments is not deductible by reason of section 280G of the Code. For
purposes of this limitation, (a) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively waived in
writing prior to the date of payment of the Severance Payment shall be
taken into account; (b) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code (without regard to subsection (A)(ii) thereof);
(c) the Severance Payment (and, thereafter, other Contract Payments
and other Total Payments) shall be reduced only to the extent
necessary so that the Total Payments in their entirety constitute
reasonable compensation for services actually
45
rendered within the meaning of section 280G(b)(4) of the Code, in the
opinion of the tax counsel referred to in clause (b), and (d) the
value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the
Corporation's independent auditors in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of this
Section 5(c)(vii), the term "Affiliate" means the Corporation's
successors, any Person whose actions result in a Change in Control or
any corporation affiliated (or which, as a result of the completion of
the transactions causing a Change in Control shall become affiliated)
with the Corporation within the meaning of section 1504 of the Code.
(d) The payments provided for in Sections 5(c)(i), (ii) and
(iii) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Corporation shall pay to you on
such day an estimate, as determined in good faith by the Corporation, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Corporation to you, payable on
the fifth day after demand by the Corporation (together with interest at the
rate provided in section 1274(b)(2)(B) of the Code).
(e) You shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise
nor, except as provided in Section 5(c)(iii), shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.
38. Successors; Binding Agreement.
-----------------------------
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to terminate your employment
and receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be
46
deemed the Date of Termination. Unless expressly provided otherwise,
"Corporation" as used herein shall mean the Corporation as defined in this
Agreement and any successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
39. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
40. Confidentiality, Noncompetition and Non-Solicitation Covenants.
--------------------------------------------------------------
(a) Confidentiality. You hereby agree that commencing on the Date of
---------------
Termination, you shall not, directly or indirectly, 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). You agree
that, upon termination of your employment with the Corporation, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to the Corporation and shall not be retained by you or furnished to
any third party, in any form except as provided herein; provided, however, that
you shall not be obligated to treat as confidential, or return to the
Corporation copies of any Confidential Information that (i) was publicly known
at the time of disclosure to you, (ii) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any other
duty owed to the Corporation by any person or entity, or (iii) is lawfully
disclosed to you by a third party. As used in this Agreement, the term
"Confidential Information" means: information disclosed to you or known by you
as a consequence of or through your relationship with the Corporation, about the
customers, employees, business methods, public relations methods, organization,
procedures or finances, including, without limitation, information of or
relating to customer lists, of the Corporation and its affiliates.
(b) Noncompetition. You acknowledge and agree that your services
--------------
pursuant to this Agreement are unique and extraordinary, and that you will have
access to and control of
47
Confidential Information of the Corporation which is vital to the success of the
Corporation's business. You further acknowledge that because of your knowledge
of the Corporation's Confidential Information it is unlikely that you could work
for a competitor of the Corporation without divulging such confidential
information. You further acknowledge that the business of the 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 the Corporation under this Agreement, you hereby agree that
(i) during the term of this Agreement and for a twelve (12) month period,
commencing with your Date of Termination (collectively, the "Covenant Period"),
you shall not accept employment nor engage as a consultant with a competitor of
the Corporation in the health care real estate investment trust industry (a
"Competitor") if such position would be comparable to a position you held at any
time with the Corporation and where you cannot satisfy the Corporation, in its
reasonable judgement, that the new employer is prepared to and takes adequate
steps to preclude and prevent inevitable disclosure of the Corporation's
Confidential Information and (ii) that eligibility for severance payments and
other benefits under this Agreement are contingent upon your agreement and
compliance with the covenant as stated above in clause (i) of this Section 8(b).
No further payments nor eligibility for benefits continuation will be available
to your as of the date you commence employment/consulting in violation of these
covenants. It is a specific condition of the Agreement that if you commence
employment or engage as a consultant with a Competitor if such position would be
comparable to a position you held at any time with the Corporation, you shall
advise Competitor in writing of your obligations pursuant to this Agreement and
specifically disclose all covenants contained in this Section 8. It is also a
specific condition of this Agreement that so long as you are receiving any
payments or benefits under this Agreement with respect to any type of
termination, you shall be obligated to immediately notify the Corporation as to
the specifics of the new position that you are planning to commence as an
employee or consultant for a Competitor, and take affirmative steps to assure
the Corporation that you will not divulge any of the Corporation's Confidential
Information in your new employment or consulting arrangement.
(c) Non-Solicitation. You hereby agree that, for the period
----------------
commencing on the Date of Termination and terminating on the first anniversary
thereof, you shall not, either on your own account or jointly with or as a
manager, agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation,
directly or indirectly solicit or attempt to solicit away from the Corporation
any of its officers or employees or offer employment to any person who, on or
during the six (6) months immediately preceding the date of such solicitation or
offer, is or was an officer or employee of the Corporation; provided, however,
that a general advertisement to which an employee of the Corporation responds
shall in no event be deemed to result in a breach of this Section 8(c).
41. Governing Law; Venue. The validity, interpretation, construction
--------------------
and performance of this Agreement shall be governed on a non-exclusive basis by
the laws of the State of California without giving effect to its conflicts of
laws rules. For purposes of
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jurisdiction and venue, the Corporation hereby consents to jurisdiction and
venue in any suit, action or proceeding with respect to this Agreement in any
court of competent jurisdiction in the state in which you reside at the
commencement of such suit, action or proceeding and waives any objection,
challenge or dispute as to such jurisdiction or venue being proper.
42. Joint and Several Liability. Any successors or assigns shall be
---------------------------
jointly and severally liable with the Corporation under this Agreement.
43. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. Any obligations of the Corporation under Sections 5 and 6 shall survive the
expiration of the term of this Agreement. The section headings contained in this
Agreement are for convenience only, and shall not affect the interpretation of
this Agreement.
44. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
45. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
46. Arbitration; Dispute Resolution, Etc.
------------------------------------
(a) 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 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, you and the Corporation shall select a mutually acceptable neutral
arbitrator from among the JAMS/Endispute panel of arbitrators. In the event you
and the Corporation cannot agree on an arbitrator, the Administrator of
JAMS/Endispute will appoint an
49
arbitrator. Neither you nor the 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 14. The arbitrator shall apply the substantive law (and the
law of remedies, if applicable) of the state of California, or federal law, or
both, as applicable and the arbitrator is without jurisdiction to apply any
different substantive law. The arbitrator shall have the authority to entertain
a motion to dismiss and/or a motion for summary judgment by any party and shall
apply the standards governing such motions under the Federal Rules of Civil
Procedure. The arbitrator shall render an award and a written, reasoned opinion
in support thereof. Judgment upon the award may be entered in any court having
jurisdiction thereof. The Corporation shall pay all fees and expenses of the
Arbitrator regardless of the result and shall provide all witnesses and evidence
reasonably required by you to present your case.
(b) Compensation During Dispute, Etc. Your compensation during any
--------------------------------
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute") arising out of or relating to this Agreement or the
interpretation of this Agreement shall be as follows:
If there is a termination by the Corporation followed by a Dispute as
to whether you are entitled to the payments and other benefits provided under
this Agreement, then, during the period of that Dispute the Corporation shall
pay you fifty percent (50%) of the amount specified in Sections 5(c)(i) and
5(c)(ii) hereof, and the Corporation shall provide you with the other benefits
provided in Section 5(c) of this Agreement, if, but only if, you agree in
writing that if the Dispute is resolved against you, you shall promptly refund
to the Corporation all payments you receive under Sections 5(c)(i) and 5(c)(ii)
of this Agreement plus interest at the rate provided in Section 1274(d) of the
Code, compounded quarterly. If the Dispute is resolved in your favor, promptly
after resolution of the dispute the Corporation shall pay you the sum that was
withheld during the period of the Dispute plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly.
(c) Legal Fees. In addition to all other amounts payable to you
----------
under this Agreement, the Corporation shall pay to you all legal fees and
expenses incurred by you 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 your employment or in seeking to obtain or enforce
any right or benefit provided by this Agreement, or in connection with any tax
audit or proceeding to the extent attributable to the application of section
4999 of the Code to any payment or benefit provided hereunder), regardless of
the outcome of such proceeding; provided,
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however, that in the event you commence such action, you shall not be entitled
to recover such fees and costs if the court determines that you brought the
claim in bad faith or the claim was frivolous. Any attorney's fees incurred by
you shall be paid by the Corporation in advance of the final disposition of such
action or challenge, as such fees and expenses are incurred; provided, however,
that you agree to repay such amounts, net of any income taxes paid or payable by
you with respect to such amounts, if such amounts are incurred in connection
with an action commenced by you if it is ultimately determined by the court that
you brought such action in bad faith or the claim was frivolous.
47. At-Will Employment. Nothing in the foregoing diminishes or
------------------
alters the Corporation's policy of at-will employment for all employees, where
both the Corporation and you may terminate the employment relationship at any
time and for any reason, with or without cause or notice.
48. Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including, without limitation, any prior severance agreements, is hereby
terminated and cancelled. Any of your rights hereunder shall be in addition to
any rights you may otherwise have under benefit plans or agreements of the
Corporation to which you are a party or in which you are a participant,
including, but not limited to, any Corporation sponsored employee benefit plans
and stock options plans. Provisions of this Agreement shall not in any way
abrogate your rights under such other plans and agreements.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which shall then constitute our agreement on this subject.
Sincerely,
HEALTH CARE PROPERTY INVESTORS, INC.
By:______________________________
Kenneth B. Roath
Chairman, President and
Chief Executive Officer
Agreed to this 16/th/ day
of October, 2000.
___________________________
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