EXHIBIT 10.7

 

HCP, INC.

2014 PERFORMANCE INCENTIVE PLAN

NEO ANNUAL LTIP OPTION AGREEMENT

 

THIS NEO ANNUAL LTIP OPTION AGREEMENT (this “Agreement”) is dated as of
[              ], 20       (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, the Compensation Committee has determined that, based on the
achievement of pre-established performance goals with respect to 20      , the
Participant is eligible to receive the nonqualified stock option, as described
below, and

 

WHEREAS, pursuant to the HCP, Inc. 2014 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.  One third (1/3rd) of the total
number of shares of Common Stock subject to the Option shall vest immediately on
the Award Date. The remainder of the Option shall vest and become exercisable as
to one third (1/3rd) 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 and second 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:

 

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(i)                                     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.

 

(ii)                                  No Fractional Shares.  Fractional share
interests shall be disregarded, but may be cumulated.

 

(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)                                 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,

 

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

 

(c)                                  any written statements or agreements
required pursuant to Section 8.1 of the Plan; and

 

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(d)                                 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 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.  Notwithstanding any provision of any employment agreement or the
HCP, Inc. Change in Control Severance Plan (or successor plan) to the contrary,
the Option is subject to termination in connection with a Change in Control
Event or certain corporate events as provided in Sections 7.2 and 7.3 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”):

 

(i)                                     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

 

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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;

 

(ii)                                  other than as expressly provided below in
this Section 6(c), if the Grantee’s employment or services are terminated by the
Grantee for any reason, (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;

 

(iii)                               if the Grantee’s employment or services are
terminated by the Corporation for Cause (as defined below), all Options (whether
vested or unvested) shall be forfeited and terminate on the Severance Date;

 

(iv)                              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;

 

(v)                                 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

 

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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, that, as of the date of termination of the Grantee’s employment or
services, 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, except as otherwise provided in any
written employment agreement entered into between the Grantee and Corporation,
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);

 

(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

 

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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.  Except as set
forth in Section 5.7 of the Plan, 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, shares of Common Stock
delivered in respect of the first tranche of the Option which vests immediately
on the Award Date may not be sold, assigned, transferred, pledged or otherwise
disposed of, alienated or encumbered, either voluntarily or involuntarily, for a
period of one (1) year following the Award Date.

 

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.

 

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

 

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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).

 

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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