Exhibit 10.4

 

HCP, INC.

2006 PERFORMANCE INCENTIVE PLAN

[20    ] NONQUALIFIED STOCK OPTION AGREEMENT

 

THIS [20    ] NONQUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is dated as
of [                              ] (the “Award Date”) by and between HCP, Inc.,
a Maryland corporation (the “Corporation”), and [                              ]
(the “Grantee”).

 

W I T N E S S E T H

 

WHEREAS, pursuant to the HCP, Inc. 2006 Performance Incentive Plan, as amended
and/or restated from time to time (the “Plan”), the Corporation hereby grants to
the Grantee, effective as of the date hereof, a nonqualified stock option, upon
the terms and conditions set forth herein and in the Plan.

 

NOW THEREFORE, in consideration of services rendered and to be rendered by the
Grantee, and the mutual promises made herein and the mutual benefits to be
derived therefrom, the parties agree as follows:

 

1.             Defined Terms.  Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Plan.

 

2.             Grant.  Subject to the terms of this Agreement, the Corporation
hereby grants to the Grantee a nonqualified stock option (the “Option”) to
purchase [                ] shares of the Corporation’s Common Stock at a price
of $[                ] per share (the “Exercise Price”).  The number of shares
and Exercise Price per share of the Option are subject to adjustment as provided
in Section 7.1 of the Plan.  The Option is subject to all of the terms and
conditions set forth in this Agreement and is further subject to all of the
terms and conditions of the Plan, as it may be amended from time to time, and
any rules adopted by the Administrator, as such rules are in effect from time to
time.

 

3.             Vesting; Limits on Exercise; Incentive Stock Option Status.

 

(a)           Vesting.  The Option shall vest and become exercisable as to 25%
of the total number of shares of Common Stock subject to the Option (subject to
adjustment under Section 7.1 of the Plan) on each of the first, second, third
and fourth anniversaries of the Award Date.  The Option may be exercised only to
the extent the Option is vested and exercisable.

 

(b)           Limits on Exercise.  The following limits shall apply with respect
to the Option:

 

·              Cumulative Exercisability.  To the extent that the Option is
vested and exercisable, the Grantee has the right to exercise the Option (to the
extent not previously exercised), and such right shall continue, until the
expiration or earlier termination of the Option.

 

·              No Fractional Shares.  Fractional share interests shall be
disregarded, but may be cumulated.

 

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·              Minimum Exercise.  No fewer than 100 shares of Common Stock
(subject to adjustment under Section 7.1 of the Plan) may be purchased at any
one time, unless the number purchased is the total number at the time
exercisable under the Option.

 

(c)           Nonqualified Stock Option.  The Option is a nonqualified stock
option and is not, and shall not be, an incentive stock option within the
meaning of Section 422 of the Code.

 

4.                                      Continuance of Employment/Service
Required; No Employment/Service Commitment.

 

The vesting schedule applicable to the Option requires continued employment or
service through each applicable vesting date as a condition to the vesting of
the applicable installment of the Option and the rights and benefits under this
Agreement.  Employment or service for only a portion of the vesting period, even
if a substantial portion, will not entitle the Grantee to any proportionate
vesting or avoid or mitigate a termination of rights and benefits upon or
following a termination of employment or services as provided in Section 6 below
or under the Plan.

 

Nothing contained in this Agreement or the Plan constitutes a continued
employment or service commitment by the Corporation or any of its Subsidiaries,
affects the Grantee’s status, if he or she is an employee, as an employee at
will who is subject to termination without cause, confers upon the Grantee any
right to remain employed by or in service to the Corporation or any Subsidiary,
interferes in any way with the right of the Corporation or any Subsidiary at any
time to terminate such employment or service, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Grantee’s other
compensation.

 

5.             Method of Exercise of Option.

 

The Option shall be exercisable by the delivery to the Secretary of the
Corporation (or such other person as the Administrator may require pursuant to
such administrative exercise procedures as the Administrator may implement from
time to time) of:

 

·                                          a written notice stating the number
of shares of Common Stock to be purchased pursuant to the Option or by the
completion of such other administrative exercise procedures as the Administrator
may require from time to time,

 

·                                          payment in full for the Exercise
Price of the shares to be purchased in cash, check or by electronic funds
transfer to the Corporation;

 

·                                          any written statements or agreements
required pursuant to Section 8.1 of the Plan; and

 

·                                          satisfaction of the tax withholding
provisions of Section 8.5 of the Plan.

 

The Administrator also may, but is not required to, authorize a non-cash payment
alternative by one or more of the following methods: (a) notice and third party
payment in such manner as may be authorized by the Administrator, or (b) subject
to such procedures as the Administrator may adopt, a “cashless exercise” with a
third party who provides simultaneous

 

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financing for the purposes of (or who otherwise facilitates) the exercise of the
Option.  Unless otherwise provided by the Administrator and in accordance with
such procedures as the Administrator may impose, the Grantee may elect in
connection with an exercise of the Option (on his/her exercise notice to the
Corporation (or its delegate)) to satisfy the Exercise Price of the shares to be
purchased and/or the minimum amount of any tax withholding obligations of the
Corporation or its Subsidiaries arising in connection with the exercise by a
reduction in the number shares of Common Stock otherwise deliverable by the
Corporation to the Grantee in connection with such exercise, in which case the
number of shares withheld (or immediately reacquired in connection with such
exercise, as the case may be) by the Corporation shall be the number of whole
shares that have a fair market value as of the date of such exercise (with the
“fair market value” of such shares determined in accordance with the applicable
provisions of the Plan) necessary to satisfy such Exercise Price and/or
withholding obligation, as applicable.

 

6.             Early Termination of Option.

 

(a)           Expiration Date.  Subject to adjustment under Section 7.1 of the
Plan and subject to earlier termination as provided below in this Section 6, the
Option will terminate on the day before the tenth (10th) anniversary of the
Award Date (the “Expiration Date”).

 

(b)           Possible Termination of Option upon Change in Control.  The Option
is subject to termination in connection with a Change in Control Event or
certain corporate events as provided in Section 7.2 of the Plan.

 

(c)           Termination of Option upon a Termination of Grantee’s Employment
or Services.  Subject to earlier termination on the Expiration Date of the
Option or pursuant to Section 6(b) above, if the Grantee ceases to be employed
by or ceases to provide services to the Corporation or a Subsidiary, the
following rules shall apply (the last day that the Grantee is employed by or
provides services to the Corporation or a Subsidiary is referred to as the
Grantee’s “Severance Date”):

 

·              other than as expressly provided below in this Section 6(c),
(a) the Grantee will have until the date that is 8 months after his or her
Severance Date to exercise the Option (or portion thereof) to the extent that it
was vested on the Severance Date, (b) the Option, to the extent not vested on
the Severance Date, shall terminate on the Severance Date, and (c) the Option,
to the extent exercisable for the 8-month period following the Severance Date
and not exercised during such period, shall terminate at the close of business
on the last day of the 8-month period; provided, however, that in the event of
the Grantee’s death or Total Disability (as defined below) at any time during
the 8-month period, the Grantee (or his or her beneficiary or personal
representative, as the case may be) will have until the date that is 12 months
after the date of the Grantee’s death or Total Disability to exercise the
Option, and the Option, to the extent exercisable for the 12-month period and
not exercised during such period, shall terminate at the close of business on
the last day of the 12-month period;

 

·              if the Grantee’s employment or services are terminated by the
Grantee for any reason or by the Corporation for Cause (as defined below),
(a) the Grantee will have until the date that is 3 months after his or her
Severance Date to exercise the Option (or portion thereof) to the extent that it
was vested on the Severance Date, (b) the Option, to the extent not vested on
the Severance Date, shall terminate on the Severance Date, and (c) the Option,
to the extent exercisable for the 3-month period following the Severance Date
and not exercised during such period, shall terminate at the close of business
on the last day of the 3-month period;

 

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·              if the termination of the Grantee’s employment or services is the
result of the Grantee’s death or Total Disability, (a) the Option will
immediately become fully vested as of the Severance Date, (b) the Grantee (or
his or her beneficiary or personal representative, as the case may be) will have
until the date that is 3 years after the Grantee’s Severance Date to exercise
the Option, and (c) the Option, to the extent exercisable for the 3-year period
following the Severance Date and not exercised during such period, shall
terminate at the close of business on the last day of the 3-year period;

 

·              if the termination of the Grantee’s employment or services is the
result of the Grantee’s Retirement (as defined below), (a) the Option will
immediately become fully vested as of the Severance Date, (b) the Grantee will
have until the date that is 3 years after the Grantee’s Severance Date to
exercise the Option, and (c) the Option, to the extent exercisable for the
3-year period following the Severance Date and not exercised during such period,
shall terminate at the close of business on the last day of the 3-year period;
provided, however, that in the event of the Grantee’s death or Total Disability
at any time during the 3-year period, the Grantee (or his or her beneficiary or
personal representative, as the case may be) will have until the date that is
the later of (i) 12 months after the date of the Grantee’s death or Total
Disability or (ii) 3 years after the Grantee’s Severance Date to exercise the
Option, and the Option, to the extent exercisable for the period ending on such
date and not exercised during such period, shall terminate at the close of
business on such date.

 

For purposes of the Option, “Total Disability” means a “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise
determined by the Administrator).  For purposes of the Option, “Retirement”
means the Grantee (1) has attained age 65 and completed at least five (5) full
years of service as an employee of the Corporation and its Subsidiaries and/or a
member of the Board, or (2) has attained age 60 and completed at least fifteen
(15) full years of service as an employee of the Corporation and its
Subsidiaries and/or a member of the Board.

 

For purposes of the Option, “Cause” means that the Grantee:

 

(1)           has been negligent in the discharge of his or her duties to the
Corporation or any of its Subsidiaries, has refused to perform stated or
assigned duties or is incompetent in or (other than by reason of a disability or
analogous condition) incapable of performing those duties;

 

(2)           has been dishonest or committed or engaged in an act of theft,
embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure
or use of inside information, customer lists, trade secrets or other
confidential information; has breached a fiduciary duty, or willfully and
materially violated any other duty, law, rule, regulation or policy of the
Corporation, any of its Subsidiaries or any affiliate of the Corporation or any
of its Subsidiaries; or has been convicted of a felony or misdemeanor (other
than minor traffic violations or similar offenses);

 

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(3)           has materially breached any of the provisions of any agreement
with the Corporation, any of its Subsidiaries or any affiliate of the
Corporation or any of its Subsidiaries; or

 

(4)           has engaged in unfair competition with, or otherwise acted
intentionally in a manner injurious to the reputation, business or assets of,
the Corporation, any of its Subsidiaries or any affiliate of the Corporation or
any of its Subsidiaries; has improperly induced a vendor or customer to break or
terminate any contract with the Corporation, any of its Subsidiaries or any
affiliate of the Corporation or any of its Subsidiaries; or has induced a
principal for whom the Corporation, any of its Subsidiaries or any affiliate of
the Corporation or any of its Subsidiaries acts as agent to terminate such
agency relationship.

 

Notwithstanding the foregoing, the Grantee shall be entitled to any accelerated
vesting with respect to the Option, and any applicable periods in which to
exercise the Option following the Severance Date, in connection with the
Grantee’s severance provided for in the circumstances in, and subject to, the
express terms of any written employment agreement entered into between the
Grantee and Corporation or any of its Subsidiaries and that is in effect on the
Severance Date.

 

In all events the Option (and any post-termination exercise period provided
above in this Section 6(c) or in any written employment agreement as
contemplated by the preceding paragraph) is subject to earlier termination on
the Expiration Date of the Option or as contemplated by Section 6(b).  The
Administrator shall be the sole judge of whether the Grantee continues to render
employment or services for purposes of this Agreement.

 

7.             Non-Transferability.  The Option and any other rights of the
Grantee under this Agreement or the Plan are nontransferable and exercisable
only by the Grantee, except as set forth in Section 5.7 of the Plan.

 

8.             Notices.  Any notice to be given under the terms of this
Agreement or the Plan shall be in writing and addressed to the Corporation at
its principal office to the attention of the Secretary, and to the Grantee at
the address last reflected on the Corporation’s payroll records, or at such
other address as either party may hereafter designate in writing to the other. 
Any such notice shall be delivered in person or shall be enclosed in a properly
sealed envelope addressed as aforesaid, registered or certified, and deposited
(postage and registry or certification fee prepaid) in a post office or branch
post office regularly maintained by the United States Government.  Any such
notice shall be given only when received, but if the Grantee is no longer
employed by the Corporation or a Subsidiary, shall be deemed to have been duly
given five (5) business days after the date mailed in accordance with the
foregoing provisions of this Section 8.

 

9.             Plan.  The Option and all rights of the Grantee under this
Agreement are subject to the terms and conditions of the Plan, incorporated
herein by this reference.  The Grantee agrees to be bound by the terms of the
Plan and this Agreement.  The Grantee acknowledges having read and understanding
the Plan, the Prospectus for the Plan and this Agreement.  Unless otherwise
expressly provided in other sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Board or the Administrator do not
(and shall not be deemed to) create any rights in the Grantee unless such rights
are expressly set forth herein or are otherwise in the sole discretion of the
Board or the Administrator so conferred by appropriate action of the Board or
the Administrator under the Plan after the date hereof.

 

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10.          Entire Agreement.  This Agreement and the Plan together constitute
the entire agreement and supersede all prior understandings and agreements,
written or oral, of the parties hereto with respect to the subject matter
hereof.  The Plan and this Agreement may be amended pursuant to Section 8.6 of
the Plan.  Such amendment must be in writing and signed by the Corporation.  The
Corporation may, however, unilaterally waive any provision hereof in writing to
the extent such waiver does not adversely affect the interests of the Grantee
hereunder, but no such waiver shall operate as or be construed to be a
subsequent waiver of the same provision or a waiver of any other provision
hereof.  The Grantee acknowledges receipt of a copy of this Agreement, the Plan
and the Prospectus for the Plan.

 

11.          Governing Law.  This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland without regard
to conflict of law principles thereunder.

 

12.          Effect of this Agreement.  Subject to the Corporation’s right to
terminate the Option pursuant to Section 7.2 of the Plan, this Agreement shall
be assumed by, be binding upon and inure to the benefit of any successor or
successors to the Corporation.

 

13.          Limitation on Grantee’s Rights.  Participation in the Plan confers
no rights or interests other than as herein provided.  This Agreement creates
only a contractual obligation on the part of the Corporation as to amounts
payable and shall not be construed as creating a trust.  Neither the Plan nor
any underlying program, in and of itself, has any assets.  The Grantee shall
have only the rights of a general unsecured creditor of the Corporation with
respect to amounts credited and benefits payable, if any, with respect to the
Option, and rights no greater than the right to receive the Common Stock as a
general unsecured creditor with respect to the Option, as and when exercisable
and actually exercised in accordance with the terms hereof.  The Option has been
granted to the Grantee in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to the Grantee.

 

14.          Counterparts.  This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

 

15.          Section Headings.  The section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.

 

16.          Clawback Policy.  The Option is subject to the terms of the
Corporation’s recoupment, clawback or similar policy as it may be in effect from
time to time, as well as any similar provisions of applicable law, any of which
could in certain circumstances require forfeiture of the Option and repayment or
forfeiture of any shares of Common Stock or other cash or property received with
respect to the Option (including any value received from a disposition of the
shares acquired upon exercise of the Option).

 

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THE GRANTEE’S ACCEPTANCE OF THE OPTION THROUGH THE ELECTRONIC STOCK PLAN AWARD
RECORDKEEPING SYSTEM MAINTAINED BY THE CORPORATION OR ITS DESIGNEE CONSTITUTES
THE GRANTEE’S AGREEMENT TO THE TERMS AND CONDITIONS HEREOF, AND THAT THE OPTION
IS GRANTED UNDER AND GOVERNED BY THE TERMS AND CONDITIONS OF THE PLAN AND THIS
AGREEMENT.

 

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